By Thebe Mabanga
South Africa’s municipalities will know by October whether they will receive a larger share of nationally raised revenue. For now, however, they must settle for R178 billion, less than 10% of the national budget presented by Enoch Godongwana, the Minister of Finance.
The allocation comprises R103 billion in equitable share and R57.7 billion in conditional grants.
Municipalities also receive R16.8 billion from the general fuel levy.
Currently, municipalities receive 9.4% of nationally raised revenue, compared with 41.4% allocated to provinces and 49.3% to national departments.
Letsepa Pakkies, Director for Local Government Fiscal Framework at the National Treasury, told Inside Metros that by October, most likely during the Medium-Term Budget Policy Statement (MTBPS), Treasury will unveil an updated funding model for local government, including whether its share of nationally raised revenue will increase.
Edgar Sishi, Deputy Director-General in the Budget Office, said the equitable share allocation across the three spheres of government is informed by constitutionally mandated service delivery responsibilities.
The Budget Review reveals that municipal debt to Eskom has ballooned from about R40 billion five years ago to R120 billion.
A total of 71 municipalities participating in the Municipal Debt Relief Programme owed Eskom R85 billion at the end of last year. Of these, only 15 have consistently met their targets.
Others have been forced to enter into Distribution Agency Agreements (DAAs), whereby Eskom takes over the electricity distribution function from defaulting municipalities.
Eskom is seeking expanded powers to formalise such takeovers, which would require amendments to Section 78 of the Municipal Systems Act.
Municipalities that refuse to enter into DAAs become liable for their debt, placing their assets and bank accounts at risk.
Godongwana cited the City of Johannesburg as an example, noting that the city collects R9 billion for water services, but because the revenue flows into a central account, insufficient funds are reinvested into maintenance.
At an earlier press briefing, Godongwana warned that “government will not stand by as spectators” while Johannesburg sinks deeper into financial distress.
“At some point, we will have to go into the City of Joburg,” he said.
Government has allocated R27 billion as an incentive for municipalities to shift to a utility model for water and electricity sales.
The Budget Review notes that the municipal sector is undergoing three key reforms: legislative, governance (including financial), and technological.
The legislative reform involves a review of the Municipal Financial Management Act, which will soon be released for public comment.
On governance, government is strengthening its capacity to intervene administratively.
Godongwana revealed that 29 municipalities are required to implement financial turnaround plans in terms of Section 139 of the Constitution.
Government is also using Section 216 of the Constitution to block transfers to municipalities that fail to curb irregular expenditure.
A key technological reform is the Smart Meters Grant Programme, allocated R2.5 billion over the medium-term expenditure framework (MTEF).
In 71 debt-stressed municipalities, more than 139,000 smart meters have already been installed, with a further 96,400 planned for the next budget cycle.
INSIDE METROS
