R55bn Budget boost for municipalities

17 February 2010

Delivering his maiden Budget speech in Parliament in Cape Town on Wednesday, Finance Minister Pravin Gordhan announced a R55-billion allocation to South Africa’s cash-strapped municipalities for 2010/11, set to increase to R78-billion in 2012/13.

Delivering a Budget totalling R907-billion, Gordhan said the country’s municipalities would receive an additional R6.7-billion through the local government equitable share to help them cushion poor households from the rising costs of electricity and water.

Funding basic public services

A sizeable number of municipalities countrywide were cash-strapped in the past financial year as most families in poor households battled to pay for services. The equitable share funding allows municipalities to supplement their revenue in order to achieve the intended access to basic public services for communities.

A further R2.5-billion will go to the Municipal Infrastructure Grant to help municipalities address issues of aging infrastructure and to improve provision of services.

“We are mindful of the fact that even though transfers to municipalities have increased strongly over the past five years, service delivery problems persist,” Gordhan said.

Development finance

Gordhan said the government had taken steps to equip development finance institutions to step up their lending to municipalities, land reform programmes and businesses in distress as result of the financial crisis.

A guarantee of R15.2-billion has been approved for the Development Bank of Southern Africa, enabling it to extend capital to poor municipalities for infrastructure projects.

The Industrial Development Corporation will play a key role in the implementation of the government’s Industrial Action Plan soon to be unveiled by Trade and Industry Minister Rob Davies.

Gordhan said his department was working with the Department of Co-operative Governance and Traditional Affairs to ensure that the higher spending allocations to municipalities translated into real improvements in people’s lives.

“We need better alignment between provincial government budgets and national priorities,” he added.

Municipalities: long way to go

The government has acknowledged that while progress has been made in the transformation of local government, there is still a long way to go before all municipalities in the country are fully functional and sustainable.

Last year, government approved a strategy to turn around local government. The strategy aims to respond to both internal problems such as transparency of procurement systems as well as external factors.

Municipalities countrywide have been the subject of fierce criticism, something believed to have sparked widespread service delivery protests. Some have cited issues of budget shortfalls as causing a lack of service delivery.

Source: BuaNews