DCOG’s Comments regarding underperformance of Rural Household Infrastructure Grant

1. DCOG’s Comments regarding underperformance of Rural Household Infrastructure Grant Standing Committee on Appropriations Friday, 17 August 2012

2. Outline of the presentation • Introduction • Current Grants by sector • Challenges of multiple grants administered by individual sectors • Principles to guide the grant system • Comparison of the water and sanitation grant between 2001 and 2007 vs impact made • Proposals

3. Introduction • Over the period 2004 to date there are various sector grants that have been introduced most of which have a bearing in the municipal space • Some of these grants have been seen to have the same purpose but very fragmented in their application • The table below illustrate some of the grants administered in different sectors is

4. Grants per sector

5. Grants per sector

6. Grants per sector

7. Rationale for RHIG while there is MIG not clear • The introduction of new grants that are administered by Sector Departments and with similar roles negate collaborative efforts • This includes grants such as RBIG, neighborhood, rural sanitation, rural transport, incentive grants, etc. • New sector administered grants cause sectors to concentrate on the grants they are managing, • Sector department’s role in local government cannot be limited to the administration of grants. • Sector departments determines sector policies and perform regulatory functions. This will includes setting of norms and standards • Municipalities should be strengthened and supported to deal with their mandate • The support should include resourcing this sphere so that it delivers services. Disintegrating funding resources does not assist the sector to realize its mandate

8. Challenges • Multiple grants requires multiple reporting system and municipalities suffer the most • There is disjuncture on coordination regarding the roles of national transferring officers • Each grant will have the different norms and standards thus further confusing municipalities • Some of these not coordinated with municipal planning

9. Principles that should guide changing the grant system • What were the reforms that have happened over the last 10 years? • Challenges that have been identified fully understood by all (The common understanding amongst stakeholders should initially be found to avoid different interpretations) • The time taken to adapt to the new system • Lessons learned from other grants systems, both positive and negative • Have sectors fully performed their monitoring role regarding their norms and standards • The introduction of grant(s) should be done with care and should consider systems that need to be introduced to implement same

10. Introduction of RHIG • Rural households infrastructure Grant was introduced on assumption that rural infrastructure is not adequately funded- this is true, the problem is what must be done for the grant to perform optimally? • For example MIG was introduced as funding biased towards rural households to address RDP service level standards • Furthermore, the grant was introduced on assumption that municipalities have not been progressing regarding rural backlog eradication • However, comparing Census 2001 and 2007 community survey, it is clear that municipalities have addressed 48 percent of water backlogs while they have addressed 71 percent of sanitation backlogs. • The following table provides comparison of census 2001 and 2007 community household survey

11. Comparison of Census 2001 and 2007 Community Survey – Rural Municipalities

12. NEW GRANTS ARE COSTLY DUE TO TIME IT TAKES BEFORE THE GRANT CAN PERFORM • RHIG was introduced at the time when MIG was maturing- was the timing right? • This is a very important principle, particularly when considering changes to infrastructure programmes such as MIG. • The MIG programme was implemented gradually to municipalities depending on various capacities. • It was fully given to all municipalities in the 2007/08 financial year by incorporating all the low capacity municipalities • New infrastructure programmes may take a minimum of three-years before they perform. • Government needs a lot of financial resources to service delivery activities. Changes that may need further capacity funding e.g. programme management funding for the new implementation system should be avoided with all costs.

13. WAYFORWARD REGARDING THE RHIG • The 2014/15 baseline allocation for RHIG is incorporated within the MIG • This is the appropriate solution since MIG has matured systems for the funds to be spent • However, consideration may need to be made not to allocate the rural infrastructure through the MIG formula • The funds should be allocated separately and be added to those municipalities that are experiencing huge backlogs • RHIG should therefore be prioritised for the 21 district municipalities that are Water Services Authorities outside the MIG formula. • This initiative is proposed as part of the differentiated approach in financing rural municipalities. • MISA (introduced as a government component) will offer best solution as it has taken over from Siyenzamanje from DBSA without introducing new systems