Salga asks for 80% increase from national budget for municipalities

The South African Local Government Association (Salga) has proposed an 80% increase in the equitable share municipalities get from government.

This would increase local government’s share of the national budget from the current 10% to 18%.

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“Our research shows that municipalities are responsible for 46% of the functions set out in the Constitution, yet they receive only 9-10% of the national budget,” according to Salga spokesperson Motalatale Modiba.

He was speaking on Wednesday (28 October) during a discussion hosted by the National Press Club and Unisa ahead of the municipal elections.

“Even 18% would still not be enough, but it would be a step forward.”

Dickson Masemola, Deputy Minister of Cooperative Governance and Traditional Affairs (Cogta), said Cogta and National Treasury are reviewing the municipal funding model and aim to publish their recommendations before the end of the year.

He speaking at the same event, and did not expand on the specifics of Salga’s request.

Professor Dirk Kotzé, a political analyst at Unisa, says there has so far been resistance within government to increasing municipalities’ allocations.

In his view, it is impossible to run a municipality successfully on the current allocations, making fiscal reform welcome news.

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Slicing the cake

In its recent Medium-Term Budget Policy Statement, National Treasury said that under current plans for government spending over the next three years:

National government will receive 47.4%;
Provinces 42.6%; and
Municipalities 10%.

Treasury acknowledges that municipalities and provinces are under growing pressure due to population growth and urbanisation.

These necessitate greater investment in infrastructure for schools, clinics, water and sanitation systems, as well as higher tariffs charged by bulk suppliers such as Eskom and water boards.

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However, it makes its position clear: “Government’s review of municipal funding has identified two distinct problems.

“In day-to-day operations, the main problem is poor spending choices: too much is spent on overheads and administration while maintenance, repairs and basic services are shortchanged.

“By contrast, long-term infrastructure is hampered by a shortage of funds to replace ageing pipes, substations and treatment plants.

“Electricity and water tariffs are set too low to cover the full costs of maintenance and bulk supplies.”

Read: Using borehole water? Why you could still pay municipal charges

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Asked by the media whether this means struggling consumers should brace themselves for even higher tariffs, Treasury appeared to soften its position, pointing out that municipalities could achieve savings by operating more efficiently.

Guidelines to help ensure stable coalitions …

Masemola said Cogta will publish guidelines next week for forming municipal coalitions following the elections on Wednesday (4 November).

This comes against a backdrop of widespread political instability in municipalities where no party holds a majority and tiny parties often have the final say over who holds power.

This scenario is expected to persist or even worsen after the election as the ANC, which has dominated many councils for years, loses support.

But where is the municipal reform bill?

Kotzé expressed disappointment that a bill proposing, among other things, an electoral threshold for smaller parties had not been finalised in time for the election, blaming parliament for the delay.

Other proposals in the bill include limiting the number of motions of no confidence that can be brought in a council to remove a mayor, and requiring coalition agreements to be written down and made public so voters know what politicians have agreed to.

Masemola observed that there is now time to get these reforms right before the next municipal election in 2031.

In response, Kotzé argued that the legislation should be enacted as soon as possible because the issues extend beyond coalition formation. Limiting motions of no confidence, for example, could already be valuable before then.

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Kotzé also lamented that political parties have not been discussing the wide range of reforms under way to improve municipal functioning during their election campaigns.

“It is currently a negative discourse that offers no hope,” he said. “Political parties are focusing more on seeing who can exploit the existing gaps the most.”

Kotzé also warned against placing too much emphasis on urban areas as drivers of economic growth.

“Growth is too centralised,” he said, citing the example of training colleges that once served as anchors of economic activity in small towns but were later closed, with damaging consequences for communities that lost residents with skills and disposable income.

What municipalities need to focus on

Leon Claassen, managing executive of Ratings Afrika, which has published an index of the financial sustainability of individual municipalities for the past 11 years, said the average score had declined from 40 out of 100 to 27 over that period.

“Most municipalities are in financial distress,” he said.

According to Claassen, his annual analyses of the audited financial statements of more than 100 municipalities show that two factors are critical to their success:

Whether sound management directs the municipality towards meeting residents’ needs, regardless of the political leadership; and
Infrastructure, “because without it, you cannot deliver services”.

Read: Western Cape municipalities are pulling away from the rest of the country – Ratings Afrika

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