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COMMENTS ON LOCAL GOVERNMENT BUDGETS AND EXPENDITURE REVIEW

COMMENTS ON LOCAL GOVERNMENT BUDGETS AND EXPENDITURE REVIEW. DEPARTMENT OF PROVINCIAL AND LOCAL GOVERNMENT (dplg). 11 NOVEMBER 2008. FINANCING ISSUES.

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COMMENTS ON LOCAL GOVERNMENT BUDGETS AND EXPENDITURE REVIEW

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  1. COMMENTS ON LOCAL GOVERNMENT BUDGETS AND EXPENDITURE REVIEW DEPARTMENT OF PROVINCIAL AND LOCAL GOVERNMENT (dplg) 11 NOVEMBER 2008

  2. FINANCING ISSUES • Declining user charges in revenue generation as national transfers increase – This should be looked at carefully considering growing levels of poverty and indigents • Underpricing of services should not be an issue – consideration should be given to collection challenges leading into increasing consumer debt (60% associated to residents) - Pricing correctly might also mean an increase in consumer debt • LG Transfers – Review implicates MSIG as worst performer based only on the March and not appreciating the entire municipal financial year • Role of National Treasury to be part of the collaboration to improve grant performance and curb fragmentation

  3. FINANCING ISSUES • The following need to be considered in trying to understand leveraging private sector funding • is it true that slow delivery regarding the municipal infrastructure as a result of insufficient funding • The amount of money that is available in the system (municipal own funs, grants, municipal cash investments) need to be understood to get a good feel of the challenges facing local government infrastructure delivery

  4. FINANCING ISSUES • The following need to be considered in trying to understand leveraging private sector funding • Municipal borrowing is a decision of the municipal council. How do we encourage municipal councils to borrow money. This should done in the context of having noted decline in municipal own funding to infrastructure • In general what we are saying is that funding may not be an issue and therefore we may need to spend time addressing the real challenges that affect service delivery.

  5. FINANCING ISSUES • The following need to be considered in trying to understand leveraging private sector funding • We also need to understand why municipalities have not been considering other service delivery mechanism that are effective and efficient • Outsourcing delivery of infrastructure through PPP’s and other mechanism • This we feel may deal with other issues such as repairs and maintenance of infrastructure and relieve municipalities in terms of operational budget challenges

  6. FINANCING ISSUES • The following need to be considered in trying to understand leveraging private sector funding • Conclusion that growth in conditional grants to fund capital projects reduces appetite to explore alternative financing should appreciate the criticalness of financial management in relation to creditworthiness • Are the elements of financial viability and management in place – relationship should be extended to the existence of opportunities of local economic development – increasing level of debts does not encourage borrowing • The analysis will be useful if juxtaposed to creditworthiness criteria used for alternative financing (borrowing and other mechanisms)

  7. SERVICE DELIVERY • One key area important to consider is the application of grants aimed to facilitate transfer of water schemes in relation to operations and maintenance – • Role of DWAF in the analysis of budgets against the O&M Allocations is critical

  8. SERVICE DELIVERY • Through MIG over R30 bln has been transferred to municipalities since 2004 • The next MTEF provides over R50 bln (including DWAF bulk) • We are talking over R80 bln grant funding to municipalities (excluding municipal own funding) • But service delivery has been very slow even with this huge budgets • We are talking to NT through the proposed differentiated approach to look at effective ways of dealing with legacy backlogs

  9. CONSIDERATIONS • MFMA – CFO Vacancies analysis should be taken to the next level that enable understanding of issues behind CFOs not being appointed within reasonable timeframes • Mechanisms for response and support must be analysed beyond training, guidelines and tools (Consideration must be on Hands-On and Technical Assistance) • Personnel – the high no of vacant posts should be analysed based on the efficiency and appropriateness of organograms to match service delivery and municipal powers/functions

  10. CONCLUSION • The process of compiling the LG Budget and Expenditure Review should be reinforced through consultation with departments affected by each chapter. • NT should identify relevant players in different chapter areas to formulate focus groups to analyse and input on the chapters.

  11. Thank you

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