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SALGA calls for National Treasury to expedite review of the Local Government Fiscal Framework in light of the Budget Speech



Posted: 23 February 2024

The South African Local Government Association (SALGA) has welcomed the Budget Speech delivered by the Minister of Finance Enoch Godongwana on Tuesday, 21 February 2024, with a mixture of sentiments. Despite local government's significant responsibility, encompassing 46% of duties as outlined in the Constitution of the Republic and its vital role in advancing socio-economic growth and democracy, it continues to grapple with underfunding from the national fiscus.

While SALGA appreciates the R8.4 billion increase in allocations to local government, this allocation remains inadequate. South African local governments receive a portion of the national fiscus through grants allocated to them by the national government. The White Paper of 1998 presumed that local government would be capable of generating 90% of its revenue, a presumption which hasn't materialized.

Practically, the Division of Revenue Bill which was tabled with the budget in Parliament means that only 9.7% is allocated to Local Government compared to 42.4% to Provinces and 47% to National Government from the fiscus.

Currently, municipalities can cover 60% of their expenditures on their own (2018-2022 National Treasury financial data), this indicates a shortfall in the funding for Local Government to achieve its mandate to deliver services and the developmental objective.

SALGA Chairperson: Municipal Finance and Fiscal Policy Working Group Cllr Lesetja Dikgale says: "Inadequate funding of local government undermines the notion of developmental local government and therefore SALGA reiterates its calls for a review of the Local Government Fiscal Framework. Inadequate municipal funding and limited budgets have a direct correlation to the prevailing challenges confronting many of South Africa's municipalities, especially those small and remote municipalities.

SALGA cannot overlook the impending decrease of R3.258 billion in conditional grants (both direct and indirect) for the 2024/25 financial year. While SALGA recognizes the government's efforts towards fiscal consolidation through spending controls, it firmly opposes these reductions in grants, foreseeing their detrimental impact on local government's ability to deliver services, advance local economic development, and attract investment. These cuts exacerbate the existing underfunding challenges faced by local government.

SALGA is acutely aware of the tough economic conditions that the country finds itself in and supports the fiscal strategies employed by the government to ease the economic pressure the country is experiencing however there should be stringent management of debt as Municipalities are highly impacted by these external factors and decisions.

Furthermore, SALGA acknowledges the inefficiencies in municipalities in spending the grants, failure to use grants on time results from various internal and external factors such as slow supply chain processes, objections raised by competing suppliers after work has been allocated to specific suppliers, interference by "construction mafias", among others. SALGA encourages municipalities to do better and spend all the allocated funds in line with laws and regulations governing Local Government.

SALGA welcomes the additional allocation of R1.4 billion to the Municipal Disaster Grant. This will assist municipalities with repairs and maintenance of the damaged municipal roads and infrastructure caused by floods and other disasters. The introduction of the smart meter grant of over R2 billion in the medium term to support municipalities approved for the Eskom Debt Relief is a positive development and will go a long way in improving revenue collection.

SALGA commits to join hands with the Minister of Finance in his efforts to tackle the challenges confronting local government and to empower municipalities as catalysts for growth.

SALGA pledges its support to the national government by actively engaging in Intergovernmental Relations (IGR) forums to realise the developmental objectives and expedite the review of the fiscal framework by the National Treasury.

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