Madam Chair, greetings also to the Minister of Finance. The division of revenue should, in terms of the South African Constitution, seek to strengthen provinces and municipalities so that they have the ability to provide basic services and perform the functions allocated to them. It should therefore seek to promote the improvement of the living environments and livelihoods of all constituencies by means of making provision to meet their developmental and other needs. The President, in his state of the nation address, assured our people that, and I quote:
We have instituted a turnaround strategy for local government, focusing on, amongst others, strengthening of basic administrative systems, financial management and customer care.
Over the medium to long term, all of us will have to work together with municipalities to achieve the strategic outcomes of establishing a responsive, accountable, effective and efficient local government, particularly following the local government elections.
The new term of local government will have to focus on supporting and contributing to government's five priorities. Municipalities are important stakeholders in achieving the priorities of job creation, health, rural development and crime prevention.
The Minister of Finance reported on the recovery and growth in the economy of about 3,1% last year and expressed the anticipation of continued growth of about 3,6% in the current financial year.
It is appreciated that the government, through its budgets, continues in its moves to accelerate the pace of employment creation in order to focus on economic policy. It is aimed at introducing a youth employment subsidy and a jobs fund; encouraging small enterprise development; expanding investment in skills and education and improving the capacity and effectiveness of municipal development planning, including combating crime and corruption and promoting a service-orientated Public Service administration.
It is noted that the municipal infrastructure grant that the metros received was combined with a top slicing of the human settlements development grant, to provide provinces with the opportunity to create a new grant for the metros - the urban settlements development grant.
The consolidation and ring-fencing of the funding of cities are welcomed. It lays a foundation for the devolvement of housing and public transport functions to cities and the integration of other grants to form a proper fiscal instrument in support of urban, built-environment projects.
While this important policy intervention is welcomed, we hope that future policy developments concentrate on finding similar funding solutions for rural areas in our country. We hope that the next Division of Revenue Bill will address the funding and capacity issues in undercapacitated and unviable municipalities, to allow them to ensure sustainable service delivery areas, without compromising the ability of large municipalities and metros to develop economically and provide an enabling environment for job creation.
We also note that the Minister took back unspent monies from eight provinces, which we believe was the correct thing to do. I am not sure who the ninth province is, but I trust that Minister Winde will most probably be able to help me with that name.
Local government received R34,1 billion in the 2011-12 financial year. It goes up to R37,5 billion in 2012-13, and R40 billion in 2013-14 of equitable share, which is an upwards revision to the baselines. It is noted, with appreciation, that the equitable share makes provision to sustain basic service delivery and revisions towards strengthening governance and administration in smaller municipalities. Government also provided R8,6 billion in 2011-12, R9 billion in 2012-13 and R9,6 billion in 2013-14, as the metros' share of the general fuel levy. Salga understands that two municipalities will become metros following these local government elections. It has to be included in these allocations. The allocations will have to be increased as the distribution from the share of the general fuel levy will go to more municipalities. We trust that the Minister of Finance hears our plea.
Salga acknowledges the increased national transfers to local government for infrastructure which amount to R29,5 billion, R33,1 billion and R35,5 billion for each of the Medium-Term Expenditure Framework, MTEF years, including over and above municipal services infrastructure and funding for other municipal disasters. However, I need to point out that the refund on disasters is not covered by the costs that the municipalities have to bear to sort out those disasters. We hope that legislation will be addressed to make it possible to get a 100% refund.
Salga believes that the role of national and provincial government is to support and monitor provincial outcomes of municipal infrastructure investments. The efforts of these spheres of government should focus on improving the capacity, efficiency, effectiveness, sustainability and accountability of the local government sphere and on making integrated development plans the primary mechanisms for intergovernmental co- ordination.
Good municipal governance is built upon an effective interface between councillors and officials, strong links between financial and technical support functions and appropriate organisational structure, with the right people in the right positions or, in other words, fit for purpose.
It is appreciated that local government continues to give funds for capacity-building initiatives. The increase in the financial management grant to R1,4 billion of the MTEF for the modernisation of financial management and building of an in-house capacity in municipalities is noted with appreciation. However, as identified in the turnaround strategy, more attention will have to be paid to building the required technical and professional capacity of municipalities.
Salga recommended to the 2010 Budget Forum that a fiscal framework review of local government be undertaken. This review should focus on revisiting local government's share of nationally raised revenue and reforms to the equitable share formula. The conditional grants should take into consideration the ever-increasing demands for basic services, patterns of population migration and growth as well as the bulk prices of municipal services and the development responsibilities of local government.
A revised fiscal regime for local government has to consider the differentiated needs of urban and rural areas alike. The input requested the Minister of Finance to establish an independent commission to undertake the review of the local government fiscal framework in consultation with stakeholders.
While it is important to engage government on improving intergovernmental fiscal transfers, we acknowledge that municipalities need to continue to improve revenue collection and billing as well as to explore new sources of revenue in order to address service delivery challenges and promote economic growth.
In conclusion, Salga supports the 2011 Division of Revenue Bill.