Chairperson, Minister, comrades and friends, there is plenty of talk, of course, about the need to change the current local government model within Co-operative Governance and Traditional Affairs, Cogta, other organs of state, the media and the public. This has intensified with the local government elections. And so it should; so it should.
Most of us agree that there should be changes to the model. What we may disagree about are what exactly these changes should be and at what pace they should be effected? What we may also disagree about is the extent to which, if at all, the Constitution should be changed. But if any new model decided on consensually is to work, a fundamental aspect would have to be a new local government financial system.
It is on this and other financial issues that I'll focus. At the outset, though, we need to be clear. Of course, municipal councillors and officials must take their fair share of blame for the inadequacies of local government, but so too must provincial governments and national government. We have not assisted local government effectively.
Moreover, some of the key issues that municipalities have to respond to are more structural in nature and far more the responsibility of national government. These would include the slowdown in the economy, high unemployment, population changes, in-migration to urban municipalities, the high number of indigent residents, increases in the cost of bulk services and aspects of climate change that the chairperson referred to. Municipalities, it seems to us, bear too much of a burden for what are mainly the challenges of national government.
We are not a federal state; we're a unitary state with some federal features. Fundamentally, we forged our own unique co-operative governance system in which there are three interrelated and interdependent, if distinct, spheres. Given the structural challenges confronted by the country as a whole and the nature of our three-tier government system, ultimately the inadequacies of local government are a reflection of the failures of the co-operative governance system as a whole.
All three spheres of government have to work far more effectively together to ensure that local government significantly improves service delivery and development. Part of this entails - it seems to us - shaping a new local government financial system in which national government assists local government with both more funds and with developing the capacity to more effectively spend those funds.
So, what are some of the challenges of the current local government financial system? Before I begin to deal with this, may I take an opportunity, on behalf of the Minister and myself, to welcome to this debate various important statutory organisations that fall within our portfolio. We have the chairperson and other representatives of the national house. We have Mr Mahlangu, the Chairperson of the Municipal Demarcation Board, and his team and others. Most especially, we welcome the SA Local Government Association and, in particular, the outgoing chairperson and deputy chair who are here, Mr Masondo and Mr Mlaba. We congratulate them on the very good work they have done for the SA Local Government Association. [Applause.]
I should point out to them that this prohibition on serving more than two terms has less to do with me than the chairperson of the committee at the moment, who was part of the White Paper process. I was just there implementing the model that they thought out.
A key premise, I must add, of the current financial model is actually wrong. Mr Masondo must be saying, "Why now; now that we're going out, you are raising these issues?" We have. But you'll notice the majority party this very weekend - we are very pleased to see. It may be coincidental that the Acting Minister is a very important member of the national executive committee. He has been saying many of the things that this portfolio committee has been raising when I chaired it and what the current chair has been raising.
But a key problem is the presumption that municipalities can raise 95% of their own revenue. This was the case before 1994 when municipalities had much smaller boundaries, which mostly excluded the African majority and had limited service delivery roles. I hope the Minister of Finance is listening somewhere. This cannot apply to the new municipalities with their larger boundaries, significantly larger number of residents and expanded developmental role.
Clearly, local government needs to be allocated more funds from the national Budget. But this, in itself, would obviously not solve the problems. Local government will have to be assisted - notice, Mrs Kilian - with capacity to spend its funds more productively and effectively. Many municipalities don't have sufficiently qualified people, we all know, to manage their funds effectively. Poorer municipalities, of course, are unable to pay for the technical skills that they need.
We accept that in the 2009-10 financial year, municipalities were unable to spend 17,1% of their capital expenditure. We concede, too, in our local government state of our municipalities report that some municipalities of course also mismanage their funds, using them unproductively or for purposes not suited to service delivery and development goals.
In addition, we accept that municipalities also need to raise more of the revenue due to them, especially from those who can afford to pay. By December 2010 municipal debt had reached R62,3 billion. Instructively, DA - may I point out to Mr Lorimer - businesses owe R3,1 billion: your constituency to municipalities. [Interjections.]
National and provincial departments are our constituencies. We are taking this to the Professional Cost Consultants, PCC, to actually ensure that government departments pay what they, in fact, owe. Some municipalities, especially in the rural areas, are technically unviable. They do not have a minimum economic, financial or revenue base. The majority of the people living in these municipalities are indigent. These municipalities depend substantially on intergovernmental transfers to survive.
Then there are the unfunded mandates. Municipalities fulfil provincial functions like libraries, aspects of health and social services, and homes for the elderly, the disabled and abused women. Municipalities get no or little money for this from the provinces. District municipalities, of course, are seriously hampered by the withdrawal of the regional services levy from businesses, which has not yet been adequately replaced.
But despite its huge responsibilities, local government at present gets only 8,7% of national revenue. While this represents a significant increase from the 4,7% of the budget local government received in 2006, it is still by no means enough. There are inadequacies in the formula used to decide the equitable share allocation to local government as well as how this share is distributed amongst municipalities. So there are these and other challenges. What then do we do?
The first most fundamental aspect is to acknowledge that even if municipalities, Mrs Kilian, were to raise all the funds due to them and effectively spend all their money, they would still not be able to properly fulfil their expanded responsibilities. The answer is not to constrict national allocations to local government, Minister Gordhan, but to allocate adequate funding and capacity-building so that funds are used more productively as part of the extra budget that's allocated. A part of that should be allocated to programmes to build the capacity of municipalities to spend more effectively.
These extra funds can be allocated incrementally and at different times to different municipalities as their capacities develop. The funding approach would also be more consistent with what is emerging within Cogta in our Output 1 of Outcome 9: a more differentiated model.
There needs to be an expeditious, quick and significant overhaul of the current intergovernmental fiscal system, including the formula for the equitable share: the allocation of money from the national Budget to each sphere of government. There also needs to be a review of the formula used to distribute the equitable share. The formula needs to take far more directly into account the specific spatial development plans, extent of indigent residents, capacity to raise revenue and cost of providing services of each municipality.
Obviously, we have acknowledged that there are certain unviable municipalities. Cogta is working with the provincial cogtas. Already, at this stage, the MECs have identified them. In the Eastern Cape there are eight, Mpumalanga six, in the Northern Cape 13, and in KwaZulu-Natal 14 - municipalities that may be considered as unviable. As Cogta we are working on a common set of criteria to decide what constitutes "unviability". Once the process has been sufficiently advanced, we hope to take these proposals to the independent Municipal Demarcation Board.
It may well be that we need different approaches for different municipalities. Some can be settled with financial and capacity support; others may have to be incorporated into adjoining municipalities. But that won't solve the problem. We will have to give capacity, resources and so on for the absorbing municipalities to manage to function more effectively.
The financial and other capacity-building programmes of municipalities need to be intensified. Cogta is working with National Treasury, the Auditor-General's office, the SA Local Government Association and other institutions to ensure this. The different aspects include co-operation with National Treasury and the University of the Witwatersrand to provide a certificate programme in managing development for municipal finance. Another aspect is co-operation with the SA Institute of Chartered Accountants on the local government accounting certificate targeted at municipal officials below accountants, such as debtors' control clerks, tender staff, cashiers, bank reconciliation administrators and others. Thirdly, an advanced certificate at National Qualification Framework Level 4 is being piloted for learners who have already completed the certificate. Currently, there are 110 learners in this regard.
Of course the Local Government: Municipal Systems Bill, which seeks to professionalise the administration of municipalities, including providing for minimum qualifications for senior managers, will also assist in this regard. So too will the role of the private sector assist through the "Business Adopt-a-Municipality" campaign and in other ways.
As part of the local government turnaround strategy, Cogta is in the process of developing a revenue enhancement programme to support municipalities to improve revenue collection. The revenue enhancement programme seeks, amongst other things, to ensure for example, firstly, that municipalities have credit control and debt collection policies that have been through a public consultation process; secondly, promote efficient and effective customer relations management; thirdly, support municipalities to develop billing systems with accurate property data and customer information, better metering infrastructure and more effective billing and financial information systems; fourthly, ensure that municipalities improve customer-care management by responding timeously to queries; fifthly, provide guidance to assist municipalities to write off irrecoverable debt; and, sixthly, implement a code of conduct to ensure that officials and councillors are not in arrears of municipal bills.
As government, as I said, we are taking to the PCC and through Cabinet a programme to ensure that more of the departments that owe municipalities pay up.
On improving audits, Operation Clean Audit, as the Minister has said, has led to 103 municipalities now having established municipal public accounts committees. There has certainly been progress. There isn't time for me to cover this. I know, Chairperson, that members are extremely interested, and I'll put it on the website and they can go through over every word that the Minister and I have offered. So I will skip that part.
We are seeking to strengthen the municipal public accounts committees; strengthen the capacity of internal audits and audit committees; implement municipal audit remedial action plans to address audit findings; and recruit and retain critical skills. Skills are yet another issue.
On the special purpose vehicle, the department is in the final stages of completing the process. We have been engaging with the Development Bank of Southern Africa, DBSA, and National Treasury. We as Cogta will take over the funding that applies to the technical infrastructure, but the funding that applies to financial management will remain with National Treasury.
Part of the special purpose vehicle, SPV, seeks to address many of the issues - the extremely negative points that Mr Lorimer made. That's why we have the Local Government Turnaround Strategy, the LGTAS, which you committed yourself to, Mr Lorimer. But the SPV will address Mrs Kilian's, Mr Narend Singh's and other people's problems.
What are we seeking to do? We are seeking to support comprehensive infrastructure planning at municipal level and so on. You can find that there.
Finally, you cannot improve the financial situation or the management capacity of municipalities without accelerating and consolidating the Local Government Turnaround Strategy.
I want to finally conclude by saying: Mr Lorimer, you are so wrong about me. I represent, as the Communist Party, the vanguard of the proletariat internationally. [Applause.] The fact that I speak English as my first language does not qualify me to be a Minister. My chances, if there were any, are now completely dashed, Mr Narend Singh, by especially you because you are not in a party that anyone will take seriously. As a vanguard party, we are even stronger than you, with more than 121 000 members. Ask the Chairperson here.
But, let me say, friends, whatever our views, we have just emerged from the most remarkable elections in this country since 1994. The 57,54% poll is the highest for local government elections in very difficult circumstances since 2005. It goes against the universal trend, which we should all, including Cope that is collapsing, acknowledge. [Laughter.] But if people were enthusiastic, comrades and friends, they are even more determined that their conditions must improve.
We are all under pressure, more than ever before. We simply have to work more actively with communities to significantly accelerate service delivery and development. These elections have given us all new impetus, whichever party we come from. So let us ... Thank you. [Time expired.] [Laughter.]