The big issue behind the leak of the Treasury letter to the City of Tshwane and other municipalities is not that local authorities are not disbursing grants and subsidies at a fast enough pace.
The big story is that the central government has been overspending on Eskom bailouts and salary increases.
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The result is a huge budget deficit, which the central government is trying to close by cutting local government funding. I urge the Chancellor of the Exchequer to think carefully before this week's Budget speech.
Two weeks ago, National Treasury warned the City of Tshwane that around R630-million in unspent grants and subsidies were at risk of being forfeited.
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Before the city could respond, the letter was leaked to the media, giving several ANC politicians ammunition against the only metro in Gauteng not governed by the ANC coalition.
Gauteng Premier Panyaza Lesufi even threatened to intervene in Tshwane based on the letter.
Not just Tshwane
It later emerged that similar letters had been sent to municipalities across the country, including two other metros in Gauteng. Allocations to local governments are always subject to annual review, but never before have the intended clawbacks been this large. Mr Ekurhuleni will forfeit approximately R600 million, while Mr Johannesburg will forfeit a whopping R1 billion.
Of course, municipalities must improve their capital investments. The City is working hard to meet Cape Town's spending standards and has committed more than 90% of its grants and subsidies as of mid-year. This must be done without excessive, irregular, useless and wasteful expenditure, as in Cape Town. It's a waste to pay your bills without having strict management systems in place to ensure you get value for money.
But something else is happening here. The Finance Minister's budget speech and the huge budget deficit we have to deal with this week.
To close the deficit, the national government is considering cutting off funding to local governments. The mid-year budget has already cut municipal funding by R3.6 billion, and there is a risk that ministers will seek more funding.
Two factors contributing to budget deficits have little to do with local governments.
- reliance on bailouts of Eskom and other unreformed state-owned enterprises (SOEs); In the five years to 2023, state-owned enterprises have received a R233.6 billion bailout. Unlike state-owned enterprises, troubled local governments cannot receive bailouts.
- Last year, salaries of national and local civil servants increased by 7.5%. Ironically, we cut deep into the city that made the unpopular but necessary decision not to give raises.
Funding cuts for local governments are not limited to cuts in grants and grants, such as those for upgrading sewage treatment plants and electrical substations, funding public housing and bus rapid transit contracts. It could also take the form of further cuts to our fair share, the funds that fund free basic services for the poor. This would have devastating consequences.
National policy and government failure
Municipal and regional consumers have already absorbed the worst shocks from national policies and government failures.
Load shedding would destroy municipal infrastructure and disconnect paying consumers from the grid. In the vacuum left by the South African Police Service (SAPS), local authorities are having to hire expensive private security firms to deal with cable theft and thwart sophisticated criminal attacks on service infrastructure.
The country's laws make it easier to grab land and take over buildings, but make it harder to secure legal evictions.
Police cannot act quickly enough on complaints of trespassing, people facing court-ordered evictions must be provided with alternative accommodation, and even some civil evictions Today, municipalities are expected to pay for it.
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Land grabbing results in the creation of informal settlements, often on floodplains and other uninhabitable locations. This increases demand for the provision of basic services by local governments. Illegal water and electricity connections have proliferated because these services cannot be provided fast enough.
Once again, the SAPS does not have the capacity to address the scope of illicit activities, including gangs profiting from the collection of rents to facilitate land grabbing. The bill would be reflected in local government lump sum service accounts, which would blame local governments for failing to control rationing losses.
“Priority” procurement
While mismanagement and poor planning within local governments can be blamed for poor service delivery, local governments are forced to spend funds according to so-called preferential procurement rules.
These rules are detailed by Congress and have the effect of narrowing the market for goods and services available to local governments.
The “preferences” in preferential procurement are aimed at a small, politically connected elite whose sole focus is winning government bids.
At best, preferential procurement leads to price gouging, meaning municipalities have to pay more to get less compared to what is available in the private sector. At worst, preferential procurement results in the appointment of service providers or contractors who are unable to perform the services, leading to litigation and project shutdowns.
fair?
On the other hand, people are flowing into Gauteng and our cities in the hope of enjoying better services and life prospects. They often oppose immigration laws to do so.
Tshwane's current population is 4 million. However, the number of accounts registered with local governments is less than 1 million.
And our “fair” share, meant to make up the difference, is calculated based on old census and community survey numbers.
We join the City of Cape Town's call against cuts to local government funding, including cuts to the fair share paid to local governments. There are legal and policy reforms that can generate significant savings for local governments, and the consequences of these decisions will be more easily endured than stripping local governments bare.
Mr Cilliers Brink is the Executive Mayor of the City of Tshwane.