KwaZulu-Natal Legislature, Pietermaritzburg:  22nd October 2009

Madam Speaker

The Hon. MEC’s report shows that virtually every municipality in this province is grossly underperforming, failing to deliver on its mandate, and wasting significant amounts of public money. More than half of the municipalities in each of the 10 districts of KwaZulu-Natal are in financial trouble. The lack of skills, poor financial management, flawed procurement and political interference in the running of municipalities directly translate into declining delivery of services.

At least in principle, there is an easy solution to these challenges – the accounting officers in the municipalities that receive qualified audit opinions should be held accountable. The Municipal Managers, the Mayors, the Chief Financial Officers and the relevant section 57 managers must all be held accountable. Accountability means consequences, and action needs to be taken against those individuals who have not properly managed public money. Part of the problem is that maladministration is almost never acted upon, even though the legal framework for doing so is in place. It is never easy to cut through the local vested interests. The IFP has recently taken action against political heads and officials in Nongoma and Indaka and, if necessary, we will intervene elsewhere.

Hand in hand with immunity from accountability go political appointments. They are an aberration which has seen political loyalty and factional interests trump merit and expertise in the appointment of people to the civil service.

The combination of these two factors has resulted in a situation in which those people who abuse the public office for personal gain are protected from consequences. The message this sends to the public is that corruption is tolerated and excused. The guilty are routinely allowed to continue in their positions and often are even rewarded with promotion. At best they are simply redeployed, often to other spheres of government.

Another contributing factor to the malaise in our municipalities - and one that is growing ever more serious - is the total debt of R7.6 billion currently owed to municipalities, by both government departments and residents. In addition, there is a long list of state institutions other than government departments that do not pay their utility accounts. The finance portfolio committee has made a commitment to categorise the debt owed to municipalities by our government departments and appeal to the relevant MECs to ease their financial distress.

Some of the blame for the sky-rocketing municipal debt rests with municipalities themselves. At the heart of the problem is the lack of proper billing and debt management systems. One third of the municipalities in this province raise less than 15 percent of their own revenue while one tenth of the municipalities raise less than 5 percent of own revenue. And yes, there are municipalities that collect close to zero in own revenue. Many of them have not set their rates or identified their ratepayers.

The lack of capacity to generate own revenue means that the majority of municipalities rely for survival on national government grants, often to pay for their own administration. Naturally, the ever increasing debt has implications for the cash flow of municipalities. The result is a hand-to-mouth existence when they should be delivering basic services and developing new and maintaining old infrastructure. Precariously, almost one third of the municipalities delegated to the provincial Treasury still use overdraft facilities. Not only was this practice phased out by Treasury in July last year but it makes the municipalities incur further expenses in interest.

Equally problematic and related to the lack of municipal capacity is the continued under-spending by various municipalities, mainly in capital expenditure which is key to economic development. This tendency is impacting negatively on service delivery. The Hon. MEC’s report illustrated this point by observing that although municipalities spend the bulk of their capital budgets on water, there are still more than 400 000 households without access to piped water.

Madam Speaker, the long and short of this assessment is that the financial viability of the entire local government sphere is at stake. The municipalities in KwaZulu-Natal need leadership and support and they are looking to the provincial Department of Local Government and Treasury to provide it. The department has given the struggling municipalities some assurance that the outcome of the recently undertaken local government assessment programme was meant to assist municipalities rather than dismantle them.

The provincial Treasury has gone a long way towards assisting municipalities in achieving financial stability through its Municipal Support Programme. However, the MSP itself is now under strain due to the 7.5 percent cut in Treasury’s budget. Reportedly the cutback will result in the reduction in the number of municipalities assisted by the Municipal Support Programme from 15 to 6.

Since November 2007 the Provincial Treasury has lent support to 9 municipalities through the MSP. This support has had a significant effect on the 2007/08 audit opinions of the municipalities supported by the programme. We are interested to know to what extent the budget reduction will affect Treasury’s aftercare in some of these municipalities designed to ensure the sustainability of the improvements instituted by the MSP.

On the whole, the economic recession and related budget cuts are bad news for those municipalities that depend on support and assistance from the provincial government. The economic slowdown will put additional pressure on finding solutions for the high vacancy rates in finance, career planning and competency building in municipalities. But these difficult times can also inspire new creative solutions to the challenges faced by our municipalities and we in the IFP believe that they are more likely to originate on the ground than with the government.

I thank you.

Contact:
Roman Liptak

078 302 0929