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"The economic downturn has impacted negatively on the municipal fiscal base in terms of revenue streams and financial resources to fund capital programmes and operational demands," Nkomfe said at the Municipal Finance Indaba in Boksburg.
He said municipalities were reducing their spending on services as a result of the recession, and that this would ultimately lead to poor service delivery.
"The demand for social benefits has risen and, adversely, the tax revenue of the local authorities is shrinking."
A rise in electricity tariffs would also affect municipalities, forcing them to take money from other services to pay for the recent increase in electricity prices, he said.
"The National Energy Regulator of SA tariff increases have put an extra strain on the affordability levels of consumers in meeting their monthly household in addition to the tough economic climate [caused] by the global recession," Nkomfe said.
"Because electricity is, by far, the subsidiser of other services in most municipalities, the higher-than-inflation increase in tariffs last year and in the next two years is likely to shift the cash revenue from other services to electricity as an essential service."
Nkomfe said the focus of the 2010/11 municipal budget would be on basic education, employment, housing and service delivery.
- Sapa
