Local government - What progress?

Britt Youens analyses the magnitude and complexity of the task ascribed to the third sphere of governance.
Some alarming information has come to light recently about the state of local government. Local government plays an important developmental role in the new dispensation. It is responsible for the provision of basic services, particularly water, electricity and sanitation, and it also has a critical role to play in rebuilding local communities. However, it faces significant problems, including non-payment of services and strong objections to cross-subsidisation from wealthier, more established areas. Each local government body is required to draw up an Integrated Development Plan in which it defines its role in providing for the needs of the community. However, many municipalities have not completed their IDPs, and many of the IDPs that have been produced are wish lists that ignore budgetary constraints and omit the costs of maintaining existing infrastructure. Financial problems abound, and there is a dire need in most municipalities for proper credit control and debt collection programmes. In December 2002, South Africa’s municipal debt was R24 billion, 80 per cent of which was 90 days or older. Furthermore, the debt of nearly a third of municipalities is growing at more than 20% a year. According to a report by a senior adviser in the department of provincial and local government in March 2003, almost 70 per cent of local government councils have spiralling debt over which they are losing control. The outstanding payments are mainly for water (26 per cent), rates and taxes (24 per cent) and electricity (16 per cent). The same report stated that few municipalities were able to bring their financial records up to date with a month’s notice, indicating that there are insufficient internal audit functions. Also, many municipalities dip into their capital budgets to address municipal infrastructure backlogs; in some cases, employer contributions to pension and medical aid funds are being used. Very few municipalities are able to access the bond market or obtain commercial loans. The municipalities raise about 90 per cent of their own revenue, through property taxes, regional levies and user charges on the provision of electricity and water. However, a significant proportion of the estimated revenue is never collected, and actual revenue is not enough to address the multiple responsibilities of local government. This problem is exacerbated by the fact that municipalities are being forced to take responsibility for non-municipal functions (such as police forces) without being given funding for them. Increasingly, national government is making difficult problems the responsibility of local government.

Local government is both the most complex and the ‘newest’ sphere of government in South Africa. The new structure of local government was only finalised by the Municipal Demarcation Board in mid-2000, with the first local government elections taking place on the 5th December that same year. Information used to evaluate the condition of local government is therefore limited and difficult to use in comparative study in order to assess any reasonable trends. That said, there is some alarming information being released by the department of provincial and local government (DPLG), the Auditor-General, the National Treasury (most recently in the 2003 Intergovernmental Fiscal Review) and in the media about the general state of affairs in the ‘third sphere’.


The importance of local government cannot be underestimated, especially in a South African environment of dire socio-economic demands and growing inequality1. The catch phrase to describe the main mission of local government in the new dispensation is ‘developmental’. Whereas national government’s foremost role is one of policy making, provincial and local government perform major roles in the provision of social and basic services. However, it is local government that is responsible for the provision of basic services particularly water, electricity and sanitation.


Further, as stated in the White Paper for Local Government, “Local government has a critical role to play in rebuilding local communities and environments, as the basis for a democratic, integrated, prosperous and truly non-racial society”2. The nature of local government has therefore changed dramatically. In its new role it stares at the coal-face of South African society — a society with substantial levels of impoverishment and poor standards of service delivery perpetuating racial polarities and inequality.


Local government is also the most diverse of the three spheres of government — comprised of a wall-to-wall patchwork of municipalities — linking rural, peri–urban and urban areas across the country. These municipalities are divided into three further categories.


The metropolitan areas (Category A municipalities) are characterised by large urban settlements with high population densities, complex and diversified economies and a high degree of functional integration. There are six Category A municipalities — Ekurhuleni (East Rand), Johannesburg, Tshwane (Pretoria), eThekwini (Durban), Nelson Mandela Metropolitan Municipality (Port Elizabeth) and Cape Town. These municipalities have exclusive executive and legislative authority and are governed by single councils.


The majority of the 284 new municipalities are Category B municipalities, or local municipalities, that incorporate the ‘secondary cities’ (East London, Bloemfontein and Pietermaritzburg amongst others), large towns (e.g. George and Mossel Bay), small towns (e.g. Ermelo) and large tracts of surrounding rural and informal areas. Category C municipalities are commonly referred to as ‘district councils’ and usually consist of a collection of local Category B municipalities and largely uninhabited rural areas. For example, District Council 16 in the Free State consists of the local municipalities of Letsemeng, Kopanong and Mohokare. The Category B municipalities share executive and legislative authority with Category C municipalities within whose jurisdiction they lie. This blanket amalgamation effectively brings together areas that were previously separated by apartheid, resulting in diverse living conditions and demographics within single municipalities.


Over and above a whole programme of restructuring, local government faces significant problems from the communities it seeks to serve, including non-payment of services and strong objections to cross-subsidisation from wealthier, more established areas3. There are internal structural, administrative and financial problems; and incongruity between local government and the provincial and national spheres of government.


The restructuring of local government has brought with it various negative externalities that have affected staff, income, expenditure, assets, liabilities, plans and budgets. Metropolitan municipalities are still suffering the burden of amalgamating previously autonomous municipalities into uni-cities. Whilst these structures are meant to bring better co-ordination within complex urban environments, they are highly centralised. The amalgamation has also resulted in a large loss of skilled personnel due to labour cuts directed at reducing personnel costs and duplication of functions.


The introduction of district councils, essentially to ensure greater accountability and co-ordination in the development of rural communities, has become an area of contestation and duplication. Prior to authorisations by provincial and local government minister Sydney Mufamadi, for clarification of the relationship between local and district municipalities in November 2002, confusion reigned over district council roles as service providers versus service authorities. Before the announcement, service delivery lines replicated the pre-2000 Municipal Demarcation Boundaries and additional confusion arose over the existing line of service delivery and the authority of the newly demarcated municipalities. The new authorisations have helped to clarify this predicament as well, but have come a good two years after initiating the system.        


Conferring powers to a new level of government, such as the district councils, has not ensured they have real authority or capacity. District councils can address development challenges for a whole region more effectively than individual councils that would have to confer with one another independently (for example in bulk water supply and water resource management). However, they need to be able to co-ordinate this function effectively, both managerially and politically between the various local councils while simultaneously addressing the region’s needs. The overarching co-ordination function is especially useful for local councils that are relatively resource poor and therefore struggle to provide these services by themselves. However, municipalities that have strong towns sometimes resist being accountable to the district authority. Currently there is much discontent in secondary cities that feel their district councils are leaching them for resources through cross-subsidisation over the extended district.


The introduction of the district council structure has been a mixed blessing and there are growing murmurings that district councils should be scrapped. Rather, some argue, municipalities which are unable to function effectively without district support should be directly subsidised by provincial or national government. This latter suggestion obviously challenges the autonomy of local government and raises questions as to the spirit of intervention. However, the announcement of the new authorisations provides greater clarity of roles and responsibilities within which local and district councils can operate. Proponents of the intervention argument will no doubt watch this development with much interest.


Integrated Development Plans (or IDPs) have been introduced to local government planning processes in order to encourage municipalities to develop plans to address their developmental role with regard to community needs. However, over the past financial year only 177 municipalities have finalised their IDPs and many of these are described as ‘wish lists’ without clear strategic vision. The Ministerial Advisory Committee on Local Government Transformation Report (MAC), compiled under the direction of Peter Leon, states that many IDPs are infrastructure heavy, neglect maintenance of existing infrastructure, lack budgets and are in conflict with sectoral department planning processes. Many IDPs were only completed so as to comply with legislation.


Financial problems abound, most notably in the areas of debt recovery, municipal accounting and sources of income. Mufamadi has argued that revenue administration must be made to work throughout the full cycle of operation — including reading meters, generating accurate accounts, getting them delivered to the right people timeously, the provision of accessible and efficient payment facilities and effective follow-up in the case of non-payment4. Some of these problems lie outside of the municipalities’ control however. One thinks of unreliable postal services and problems with the courts and justice systems. But more needs to be done by the municipalities themselves to address poor metering systems, unreliable or corrupted resident information, inadequate billing systems and inaccessible payment and enquiry facilities.


The recent deluge of articles about municipal debt also points to the dire need in most municipalities for proper credit control and debt collection programmes. Although many of the transitional local councils, prior to 2000, were bankrupt, there is a further need for financial recovery plans in order that municipalities do not themselves generate poor creditworthiness.


In December 2002, South Africa’s municipal debt stood at R24 billion. The six metropolitan municipalities were responsible for R15,6 billion, or 64 per cent of the total outstanding amount. R12 billion of this debt was owed in Gauteng alone. The amounts owing in other provinces were: Western Cape R2,5 billion, KwaZulu-Natal R3,1 billion, the Eastern Cape R1,6 billion, the Free State R1,6 billion, North West R904 million, Mpumalanga R776 million, Northern Cape R331 million and Limpopo R265 million5. Eighty per cent of the outstanding R24 billion was 90 days or older, indicating that most municipalities either do not have any, or have only limited, provision for bad debts.


Additional findings indicate that the debt of 32 per cent of municipalities is growing at more than 20 per cent a year. In a further 37 per cent of local councils the debt is growing at more than 10 per cent per year. Senior adviser in the DPLG, Daniel Manyindo, reported to a parliamentary committee in March 2003 that almost 70 per cent of the country’s local government councils had spiralling debt of which they are losing control. Further, debt as a percentage of total revenue earned was increasing. In only 31 per cent of councils was debt growth in the order of 5 per cent, which was considered reasonably acceptable. Of the debtors, 60 per cent were households, 30 per cent were businesses, 6 per cent attributed to government and 4 per cent to other groups. The outstanding payments were mainly for water, 26 per cent, rates and taxes 24 per cent and electricity 16 per cent.


Manyindo6 has further stated that only 33 per cent of Category A, 6 per cent of Category B and 10 per cent of Category C municipalities were able to bring their financial records up to date with a month’s notice, indicating that there were insufficient internal audit functions operational. Reports have also indicated that many municipalities creep into their capital budgets in order to address municipal infrastructure backlogs. In some cases employer contributions to pension and medical aid funds are being used and many councils are defaulting on payments to creditors. Concurrently, municipalities suffer from persistent under-spending due to inadequate capacity in both capital and operating expenditure items. Very few municipalities are able to access the bond market or obtain commercial loans, while a significant number are unlikely to attract private capital investment.


This habit of dipping into capital budgets has an obvious impact on the level of new infrastructural delivery. Despite dedicated projects by national and provincial government7 aimed at helping local government speed up infrastructural delivery, capital budgets cannot be continuously undercut at the expense of communities without services.


In spite of large variances amongst municipalities, they raise on aggregate about 90 per cent of their own revenue. Municipalities can raise property tax and regional levies on businesses, as well as user charges (and a surcharge) on the provision of electricity and water. Despite this, the level of municipal revenue does not seem to be enough to address the multiple responsibilities of local governments. As the debt figures stated above show, a significant proportion of the estimated revenue is never collected. Further, the equitable share amount due to local government from the national fiscus now has to be used to subsidise the municipal accounts of indigent people8.


Some of the other sources of income are under restructuring or subject to imminent change as well. On aggregate the income earned by the provision of electricity comprises 33 per cent of municipal budgets. The proposed restructuring of electricity, into six nationwide regional structures owned by national government, will subsequently reduce municipal income significantly. Recent reports, however, suggest that this move is being reconsidered in the draft Electricity Distribution Industry Restructuring Bill, as the dire need for this form of municipal income for the benefit of municipal sustainability is slowly being realised. Concurrently, many municipalities are still trying to address the free basic services policy implemented in July 2001 while battling the effects of non-payment for services over and above the free allocation9.


The pressure is most certainly on — many argue with little or no alleviation from provincial or national government. A particularly sensitive subject is the question of ‘unfunded mandates’, as termed by municipalities or ‘uncosted’ mandates as preferred by the DPLG. Municipal police forces are a case in point. Municipalities are being forced into responsibility for non-municipal functions, without funding for these projects. Provincial and national government argue that these are funded, but the costing of those funds is miscalculated. Increasingly, however, national government is making difficult problems the responsibility of local government.


The MAC Report therefore recommends that greater equitable share allocations be transferred to municipalities. It also recommends that increased synchronization occur between local government and national and provincial government budgeting, and that the IDP and Medium Term Expenditure Framework processes be aligned. The passing of the Municipal Finance Management Bill will also help to clarify the rules concerning financial management and administration both within the local government sphere and between the three spheres as they inter-link with one another. The ongoing challenge is to implement all these structural and legislative changes without inflicting considerable disruptions on current service delivery. Additionally, local government needs to avoid the jeopardy of being overrun by national and provincial interference, especially when financial concerns are so prevalent. Local government was created as an independent sphere — and has to fight hard to remain so while balancing the necessary bridging finance and additional support from the other two spheres.





1 For evidence of this trend, see Lawrence Schlemmer’s article “A Better Life for All? Poverty Trends in South Africa” in Focus 26.


2 Ministry of Provincial Affairs and Constitutional Development (1998) The White Paper on Local Government Pretoria: Government Printers pp. ix.


3 A study by the Human Sciences Resources Council (HSRC) in August 1995 found “that 57 per cent of its black respondents opposed evictions or any cessation of services to those who failed to pay for these. Meanwhile, whites were strongly opposed to any cross-subsidisation: in the HSRC survey only 37 per cent of respondents thought that ‘taxes of the wealthy’ should be spent to upgrade poor communities”. See Lodge T., (2002) Politics in South Africa: From Mandela to Mbeki Cape Town: David Phillip pp. 87. 


4 See the Business Day, 4 December 2002.


5 See The Citizen, 2 January 2003.


6 See the Business Day, 5 March 2003.


7 See for example the Consolidated Municipal Infrastructure Programme, Integrated Sustainable Rural Development Programme and the Urban Renewal Strategy. 


8 This policy brings with it additional administrative responsibilities, including registration of indigents, as well as constant updating of the database, especially in line with changed employment status. Informal sources of revenue are often ignored meaning the number of indigents is inflated – further undercutting the municipality’s revenue base. 


9 The department of provincial and local government has stated that more than R1,3 billion will be given to 219 municipalities that have not been able to fully introduce free basic services. The policy of providing free basic services linked to transfers from the national fiscus is intended to ensure municipalities do not have to charge poor households unaffordable amounts.