Yes, Salga in the Free State - that is the Mayor of Mangaung. So, you know, the chances that he could be available are quite remote. In any case, we will see what we can do about that. Thank you, Mr Chair.
Chairperson, the Division of Revenue Bill should, in terms of our Constitution, seek to strengthen the ability of provinces and municipalities to provide basic services and perform the functions allocated to them. It should thereby seek to progressively improve the living conditions and standards of all our constituents by means of providing for their developmental and other needs. The 2012 Division of Revenue Bill and local government allocations present a further opportunity to accelerate the attainment of universal access to municipal services.
The Minister of Finance reported on the slowdown in economic growth of about 2,7% in the last fiscal year and expressed the anticipation of a recovery to about 3% in the 2012-13 financial year. Salga is appreciative of the difficult economic situation that the country finds itself in and the impact that has on the revenue streams of government. In fact, local government revenue is also directly affected by the downturn in the economic cycle. We therefore welcome the overall sentiment of the 2012 Budget, which seeks to protect allocations to local government but also calls for fiscal restraint and efficient and effective spending in the three spheres of government.
With regard to the Division of Revenue Bill, it is noted that the Expanded Public Works Programme incentive grant to municipalities has been reviewed and Salga supports this, because the grant's focus areas are aligned to the mandate of local government. We do, however, call on national government to simplify the reporting system for this and other conditional grants to local government. Local government has to continuously bear the cost of compliance with national policies, which erodes already limited revenue sources for basic service delivery.
We note the funding through in-kind transfers for municipal projects where local capacity is lacking. While this funding is indeed welcomed, there is a need for improved co-operation with receiving municipalities on the size of allocations and how this money will be spent by national departments and implementing agents. It is envisaged that the consultation processes should involve Salga.
This Budget sets out a tight fiscal framework within which national revenue is divided between national, provincial and local government. It is noted that in the vertical division of revenue process, local government is allocated R77 billion or 8,8% of nationally raised revenue in 2012-13.
We are aware of the huge challenges that some municipalities face in spending their annual allocations, especially infrastructure grants. However, we are confident that in working together with national government on interventions such as the Municipal Infrastructure Support Agency of the Department for Co-operative Governance and Traditional Affairs positive impacts can be made.
Regarding equity share allocations, local government receives R37,9 billion in 2012-13, R40,6 billion in 2013-14 and R43,6 billion in 2014-15 of equitable share, which is an upwards revision to the baselines by R2,2 billion over the next three years. It is noted that the equitable share makes provision to sustain basic service delivery and further revisions towards strengthening governance and administration in smaller municipalities.
Government also provided R9 billion in 2012-13 as the metros' share of the general fuel levy that has now been fully phased in. Salga has been processing a national conference resolution to apply for a local business tax for economic infrastructure and services, and a process of engagement with key stakeholders has already commenced. Further consultation will be held with National Treasury ahead of our application.
Salga is of the view that local government allocations in this Budget do not fully consider some fundamental issues affecting local government at the moment. Firstly, the steep increases in the prices of bulk services such as electricity and water impact on the sustainability of basic service provision by local government. If this trend continues, more and more residents will fall outside the affordability net, further compromising revenue management in local government. National allocations to local government should take this into consideration and increases should be in excess of annual inflation.
Secondly, many municipalities continue to carry the burden of unfunded or underfunded mandates for services rendered on behalf of provincial government. In addition, the fiscal impact on local government of national legislation as well as demarcation processes is not always fully comprehended. The Administrative Adjudication of Road Traffic Offences, Aarto, and the incorporation of the former Metsweding District Municipality into the City of Tshwane are cases in point.
Finally, in this regard, we are involved in a task team with National Treasury on reviewing the local government equitable share based on the new census data. We have stated for some time now that such a review will require proper costing of basic services and sustainable funding for smaller and rural municipalities that have limited rates and service income. We are therefore of the opinion that Parliament will need to consider a baseline revision of the vertical division of revenue, which is currently at about 8%.
With regard to the conditional grants, Salga notes the conditional grant allocations to local government amounting to R30,4 billion in 2012-13, R33,7 billion in 2013-14 and R36,9 billion in 2014-15. It is duly noted that additional funding of R5,4 billion has been allocated to fast-track the upgrading of informal settlements in large cities; provision of bulk infrastructure; solid waste management in rural municipalities; and electricity demand-side management.
A number of changes were made to local government conditional grants, such as the creation of the infrastructure skills development grant, which we support. There are, however, a number of changes made to the baseline allocations of existing conditional grants that are not adequately explained in the Budget documentation.
Salga is of the view that instead of cutting certain grants due to underspending, like the neighbourhood development and partnership grant for township renewal, national government should rather amend its implementation policies and raise awareness of the existence of the different grants available to municipalities. Another example is the policy decision to incorporate the rural household infrastructure grant into the municipal infrastructure grant, which is going to change the flow of funding. [Time expired.]