PRESENTATION TO THE SELECT COMMITTEE ON LOCAL GOVERNMENT AND ADMINISTRATION

Mr Mbulelo Sigaba Acting Chief Financial Officer

07 May 2007

• To highlight the budget allocation for the department.

• To inform the portfolio committee on how the policy priorities are funded.

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PURPOSE

• The department continues to explore efficient options for financing local government. The ultimate goal is to ensure that each municipality has a sufficient base to execute its constitutional mandate. The Local Government Equitable Share (LGES) was reviewed in 2004 with the revised formula fully implemented in 2007/08.

• The current focus of the review is to assess the impact and implementation of the new property rates legislation, the alignment between the functional and fiscal division of powers and functions between Category B (local) and Category C (district) municipalities and restructuring of the electricity distribution industry.

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BACKGROUND

 Expenditure per PROGRAMM 2006/07 2007/08 2008/09 2009/10

  Adjusted Medium-term estimates

  appro- MTEF Baseline

  priation    

1. Administration 119,788 130,569 136,876 141,683

2. Governance, Policy and Research 36,239 30,649 32,181 36,096

3. Urban and Rural Development 8,460 11,280 11,844 12,395

4. Systems and Capacity Building 107,301 126,176 137,405 151,121

5. F B S and Infrastructure 37,870 42,053 44,156 47,794

6. Local Government Transfers 25,014,088 28,424,184 32,027,857 38,774,373

7. Fiscal Transfers 68,542 79,264 87,627 98,651

Total 25,392,288 28,844,175 32,477,946 39,262,113

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EXPENDITURE PER PROGRAMME

• Strong emphasis is placed on strengthening local government’s ability to deliver basic services over the medium term and on the expansion and upgrading of key infrastructure.

• Investment in stadiums, public transport and communication systems to ensure a successful 2010 FIFA World Cup.

• Stepping up investment in the built environment in the form of housing, electricity, water, sanitation and community facilities.

• Contributing to improved economic efficiency through investment in roads and skills development.

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KEY SPENDING AREAS

• Local government equitable share grows by 11% in real terms– Increased funding for free basic services to poor households– Improving governance and administrative systems

• R45,7bn Capital transfers to municipalities include:– R24,7bn for infrastructure to roll out basic municipal services– R7.8bn for construction and upgrading of 10 stadiums for 2010.– R6.7bn to host cities for infrastructure around the stadiums & for public transport and

systems improvement.– R1,4bn to ease pressure on bulk systems for water supply and sanitation– R1,4bn to roll out electricity infrastructure in municipalities– R3,7bn for neighbourhood development partnership grant to fund improvements to

settlements

• Capacity-building and restructuring in municipalities is prioritised– Focus on planning, budgeting, financial management and technical skills R807.7m– Siyenza Manje programme led by DBSA R741.3m

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LOCAL GOVERNMENT PRIORITIES

Economic Classification  2006/07 2007/08 2008/09 2009/10

  Adjusted Medium-term estimates

Current Payments 318 754 352 077 375 451 400 991

Compensation of Employees 118 294 149 295 156 758 164 597

Goods and Services (of which:) 200 460 202 782 218 693 236 394

Communication 7 511 7 564 8 037 8 354

Consultants 75 652 78 784 87 694 101 219

Operating leases 36 884 24 270 25 303 25 909

Travel and Subsistence 28 616 27 205 29 025 30 644

Transfers and Subsidies 25 065 918 28 486 832 32 096 935 38 855 262

Municipalities 25 014 200 28 425 779 32 029 553 38 776 240

Agencies 49 724 56 572 62 597 74 119

Other 1 994 4 481 4 785 4 903

Capital Assets 7 616 5 266 5 560 5 860

TOTAL 25 392 288 28 844 175 32 477 946 39 262 113

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ECONOMIC CLASSIFICATION

Local Government Transfers  2006/07 2007/08 2008/09 2009/10

  Adjusted Medium-term estimates

  appro- MTEF Baseline

  priation    

Equitable Share (LGES) 18,057,940 20,675,620 23,774,767 29,444,144

Municipal Systems Improvement Grant (MSIG)

200,000 200,000 200,000 200,000

Municipal Infrastructure Grant (MIG)

6,756,148 7,548,564 8,053,090 9,130,230

Total 25,014,088 28,424,184 32,027,857 38,774,374

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LOCAL GOVERNMENT TRANSFERS

• LGES is meant to boost the ability of municipalities to fund the provision of free basic services to poor households and to improve governance and administrative systems

• MIG is a conditional grant meant to augment municipal own resources and places municipalities in a better position to provide infrastructure for rolling out basic services , alleviating poverty, address backlogs and regional disparities in municipal infrastructure. The grant also seeks to stimulate local economic development and job creation through labour-based infrastructure methods as prescribed by the expanded public works programme.

• MSIG is meant to focus on stabilising municipal and governance systems, planning and implementation management support centres, reviewing intergrated development plans and implementing the Municipal Systems Act.

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PURPOSE OF THE GRANTS

Fiscal Transfers   2007/08 2008/09 2009/10

  Adjusted Medium-term estimates

  appro- MTEF Baseline

  priation    

SA Local Government Association 19,494 20,461 22,058 23,466

Municipal Demarcation Board 16,827 20,664 22,043 30,260

Municipal Infrastructure Inv. Unit - - - -

South African Cities Network 1,590 4,400 4,700 4,815

CRL Commission* 13,403 15,447 18,496 20,393

Commission on Trads** 8,470 9,598 10,957 9,890

National House of Traditional Leaders 8,758 8,694 9,373 9,827

Total of subprogrammes 68,542 79,264 87,627 98,651

* Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities

** Commission on Traditional Leadership Disputes and Claims

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FISCAL TRANSFERS

2006/07 AND 2007/08 EQUITABLE SHARE

2006/07RSC

replacement grant

39%

Equitable Share61%

2007/08

Equitable Share61%

RSC replaceme

nt grant39%

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11,058

7,000

12,630

8,045

0%

20%

40%

60%

80%

100%

RSC replacement grant 7,000 8,045

Equitable Share 11,058 12,630

2006/07 2007/08

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2006/07 AND 2007/08 EQUITABLE SHARE (RSC Portion)

Water and sanitation

47%(R3.5bn)

Social institutions and micro-enterprises

infrastructure4%(R324m)

Nodal municipalities4%(R324m)

Public municipal service

infrastructure12%(R972m)

Roads15%(R1.1bn)

other5%

Eradication of Bucket System

13%(R1bn)

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2007/08 MIG ALLOCATIONS

PROVINCE2007/2008

(R'000)%Shar

e

2008/2009(R'000

)%Shar

e2009/2010

(R'000)%Shar

e

EASTERN CAPE 1,412,883 19 1,539,906 19 1,756,783 19

FREE STATE 1,055,304 14 550,587 7 628,131 7

GAUTENG 998,855 13 1,224,516 15 1,396,974 15

KWAZULU-NATAL 1,420,910 19 1,755,276 22 2,002,486 22

LIMPOPO 921,648 12 1,139,726 14 1,260,314 14

MPUMALANGA 520,129 7 647,643 8 721,743 8

NORTHERN CAPE 146,846 2 138,374 2 157,862 2

NORTH WEST 721,801 10 662,731 8 756,068 8

WESTERN CAPE 350,186 5 394,332 5 449,869 5

TOTALS 7,548,562 100 8,053,091 100 9,130,230 100

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MUNICIPAL INFRASTRUCTURE GRANT: PER PROVINCE

0

50

100

150

200

250

300

Beneficiaries 88 187 283

2004/05 2005/06 2006/07

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BENEFICIARIES OF MIG

Thank You!!

Enkosi!!

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