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Inefficient councils red-carded

A complete overhaul of South Africa’s municipalities is on the cards. That will not only include a review of the way local government is funded but also include a “major review” of the respective powers and functions of the three tiers of government. However, the key question is whether President Jacob Zuma’s administration has the courage to implement what’s really required to turn municipal government – especially financial management – around.

While the recent local election campaign forced Government leaders to again address increasing public frustrations about local government and while it’s prompted much promise about what’s going to be done, Deputy Minister of Co-operative Governance & Traditional Affairs Yunus Carrim is frank about the fact that local government isn’t only failing to meet its constitutional mandate but is simply not financially viable.

In an interview Carrim says one of the main obstacles facing local government was an inadequate funding model. “With the 1996 Constitution, 1998 Local Government White Paper and the legislation that defines the current local government system, municipalities have been given a much more expanded mandate. They have more powers and functions without the commensurate funds and other resources.

According to the current equitable share formula, municipalities currently get 9% of the national Budget. Though they also receive other conditional grants, ultimately municipalities are expected to raise around 95% of their own revenue. “The allocations are simply not enough for them to effectively fulfil their role. Also, with the high unemployment rate, many people simply can’t pay for services. Local government bears a disproportionate cost for what’s a national problem,” says Carrim. He also stresses local government as a whole is owed R54bn by services users, with a significant part of that owed by both national and provincial government.

But Carrim says the review will not only include the funding model but also aim to bring about a more “integrated co-operative government” where “national and provincial government become far more active in local government – not to erode its powers but to strengthen them”. While that is likely to mean that municipalities will be allocated powers based on what they’re capable of delivering, it will inevitably require far more efficiency and monitoring from provincial and/or national government which, Carrim acknowledges, is currently inadequate.

However, the reality is the proposed review isn’t going to happen this year. Its details are going to be hammered out at the ANC’s 2012 conference before the issue is thrown open for public debate.

Meanwhile, Charles Simkins, vice-president of St Augustine’s College and research Fellow at the Helen Suzman Foundation, says Government has been pumping substantially more money into local government over the past decade. Municipalities received a 970% increase in funding between 2000 and 2011, which is why the National Treasury is reluctant to keep throwing money at the problem. Simkins says money may not be the main problem, especially considering how a small municipality such as Pongola, in KwaZulu-Natal, is doing well despite its small R100m/year budget.

Two reports on local government, which paint a drab picture of financial controls in municipalities countrywide, also suggest addressing deficient management and inadequate accountability is more key than cash. The auditor general’s latest report on the state of SA’s 283 municipalities hasn’t officially been released to the public, but leaked copies of it reveal only seven received clean audits. The report recommends national Government takes control of a third of SA’s municipalities to deal with weak financial controls and management. Compared with the 2008/2009 financial year – when 13% of all qualified municipal audits were based on unauthorised, irregular and wasteful expenditure – for 2009/2010 that rose to 63%.

A total bill of R5bn in unauthorised expenditure was incurred by 107 municipalities and two municipal entities. Of that, R1,1bn has been written off. Furthermore, 168 local councils and 22 municipal entities spent a total of R4,1bn irregularly. Of that irregular expenditure, R440m was reported and R3,7bn unearthed by auditors.

The latest municipal financial sustainability index (MFSI), compiled by governance ratings agency Ratings Afrika, also homes in on poor financial management. The MFSI, which analyses and ranks 50 municipalities according to their financial sustainability, allocates points out of 100. That means a score of more than 75 is indicative of a municipality doing reasonably well. A municipality scoring below 75 for three or more consecutive years is cause for concern; while a score of less than 35 should sound alarm bells. In the latest (2010) MFSI the average index points for the 50 municipalities analysed dropped from 62 in 2007 to 48 last year. The number of municipalities scoring more than 80 declined from nine to five over the past four years. Furthermore, those that scored 35 or less increased from three to 15.

While Simkins agrees with Carrim that municipalities need to be professionalised, the reality is business interests and politics underpin the system. Many councillors enter politics only for what business they can get out of it, which is why Simkins contends one of the biggest municipal challenges is the issue of tenders.

Apart from monitoring exactly what contractors are delivering – for example, to ensure the bridges they build don’t collapse after a few months – companies in which councillors have business interests shouldn’t be allowed to tender for municipal business. Simkins says any violation of that principle should result in severe penalties.

That’s exactly what happened to changes to the Municipal Systems Act (MSA), which were specifically designed to limit the effects of cadre deployment in municipal administrations. The changes – which prohibit senior municipal managers from holding political office – are also aimed at limiting the opportunities for unskilled people being given top council jobs (where they can influence administrative decisions, including tender allocation) just because of their political connections. The changes also ban any official found guilty of fraud or corruption taking a job in any other municipality for 10 years.

The Bill, which has been passed by the National Assembly, now just needs approval by the National Council of Provinces before being signed into law. However, the Bill has come under such fire from the Cosatu-aligned South African Municipal Workers’ Union that Zuma has backed down and – despite his election promise to drive municipal reform – he’s agreed not to sign the Bill into law until “consensus” has been reached.

While Zuma’s statement is likely to have taken his Cabinet by surprise, it was essentially an act of personal political preservation. That begs fundamental questions about how far reforms to SA’s municipal structures and procurement system will go.
 
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