Chairperson, the 2013-14 Division of Revenue Bill allows for a budget allocation of R413,1 billion to national departments, R388,5 billion to provinces and R77 billion to local governments.
Alignment of the Budget itself to achieve its goals set out in the National Development Plan and the greater emphasis on infrastructure development and expenditure is welcomed, although the Congress of South African Trade Unions, Cosatu, is against this.
As we know, service delivery mainly takes place at local government level, and the increased allocation to local government over the Medium-Term Expenditure Framework, MTEF, period from 8,9% this year to 9,2% of the Budget in 2015-16 is a step in the right direction. The municipal infrastructure grant, which is estimated to be R13,882 billion this year, increases to R15,448 billion in the 2015-16 financial year.
I welcome the new grant, the municipal water infrastructure grant, which receives an allocation of R603 million in the 2013-14 financial year, increasing to R2,672 billion in the 2015-16 financial year. This new grant will be administered by the Department of Water Affairs and will go to 24 district municipalities. The Department of Water Affairs unfortunately has a history of seriously underspending their budgets, and close monitoring of expenditure by National Treasury will be required. Regrettably, the grant makes no specific provision for improvements to sanitation, an area where serious backlogs still exist.
The ability of local government to actually spend the increased funds allocated to them in the Division of Revenue Bill is unfortunately also questionable. This is particularly true of rural municipalities, where 56% of such rural municipalities that received equitable share allocations obtained a disclaimer from the Auditor-General. The Financial and Fiscal Commission, in their comments about the new equitable share formula which will distribute additional resources to poorer rural municipalities as per the Division of Revenue Bill before us today, expresses grave concerns about the ability of these poorer municipalities to actually spend the funds, unless there is serious intervention and assistance by national and provincial governments.
In a local government Budget analysis report to Parliament it is found that the ability of local governments to spend their approved budgets had deteriorated by 25,6% in the 2011-12 financial year when compared to the previous financial year. A total of 166 out of a total of 286 municipalities underspent against their total adjusted budgets by more than 15%. The report also found that a large number of municipalities that underspent against their budgets in fact had no cash in the bank equivalent to the level of underspending reported by them, which means that they did not accumulate funds in the bank because of the underspending, but that their budgets were simply unfunded.
Of particular importance is the ability of municipalities to spend their capital budgets as well as conditional grants as it is in these two areas where service delivery and job creation and infrastructure development take place. Unfortunately, municipalities generally failed dismally in this respect as well.
In aggregate municipalities underspent on their adjusted capital budgets for 2011-12 by 32,3%. Municipalities in Mpumalanga fared particularly poorly and collectively underspent on their capital budgets by 54,4%. In terms of rand value the lowest underspending of capital budgets occurred in North West and the Western Cape, of course. When considering the country as a whole, 203 of the 286 municipalities underspent against their adjusted capital budgets by more than 15% and 82 of these municipalities underspent by more than 50%.
In respect of conditional grants, total underspending against amounts transferred to municipalities in respect of the 2011-12 financial year amounted to R5,1 billion or 25,4% of funds transferred. One hundred and sixty-one of the 286 municipalities countrywide underspent on conditional grants, with 125 of them underspending by more than 15%.
In respect of municipal infrastructure grants, municipalities on aggregate underspent by 15,8% during the 2011-12 financial year. A large proportion of municipal infrastructure grants have now also been moved to the municipal water infrastructure grant to be administered by the Department of Water Affairs which, as I have said, is likely to lead to a deteriorating spending pattern, given the spending history of the Department of Water Affairs.
Whilst the proposed increases in allocations to municipalities are therefore generally welcomed, there is serious concern about the ability of municipalities to actually expend the funds allocated. If we want to redress the injustice of the past, promote service delivery, reduce infrastructure backlogs and create jobs serious attention will have to be given to improving the capacity of municipalities by way of interventions by national and provincial government. The question is whether government is serious about improved planning, better oversight and better management for local government. The current track record seems to suggest the opposite.
The Bill before us tells us where our taxes are going. There is often an outcry for heavier taxation from certain quarters such as Cosatu. We should, however, continuously strive to raise taxes wisely and use the revenue raised effectively. The wise words of Winston Churchill therefore come to mind when he said, and I quote:
For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.
I thank you.