Acceding that municipalities and provincial departments had limited revenue-raising powers, with 97% of provincial spending financed through the division of revenue, Finance Minister Pravin Gordhan has allocated 43.4% of nationally raised revenue in 2014/15 to finance the priorities of the provinces, while 9% of the National Budget would be allocated to municipalities.

Addressing Parliament on Wednesday, Gordhan outlined during his yearly budget speech that national government would, over the next three years, allocate R105-billion to municipalities for free basic water, sanitation, electricity and refuse removal services.

Similarly, a total of R40-billion in infrastructure grants would be transferred to local governments in 2014/15 for water, sanitation, energy and environmental functions.

Moreover, small towns and rural municipalities would receive R3.9-billion for capacity building programmes over the medium-term expenditure framework, with R3.7-billion of this amount awarded as conditional grants.

A further R857-million was allocated to the Municipal Infrastructure Support Agency and R276-million to the Human Settlements Upgrading Support Programme in 53 municipalities.

The budget also made way for a new grant of R300-million a year to assist metropolitan municipalities in managing the human settlements function, and an additional R180-million as part of the Human Settlements Development Grant earmarked for settlement upgrading in mining towns.

“The assignment this year of the human settlements function to metropolitan municipalities is a vital intervention in accelerating housing investment and integrated urban development,” noted Gordhan.

“WIDESPREAD WASTE”

Stating that while “much” had been achieved in the roll-out of municipal infrastructure in the last decade, the 2014 Budget Review document acknowledged that “significant” work remained to eradicate backlogs in access to services and to ensure that services were properly operated and maintained over the long term.

The document conceded that, in some areas, there was “widespread waste and inefficiency”, or slow service delivery, while, in certain cases, the provision of grant financing may have weakened incentives to obtain other financing.

“A review of the effectiveness of existing infrastructure grant structures is under way to determine how the system can be improved. This collaborative initiative involves the Financial and Fiscal Commission, the South African Local Government Association and the National Treasury, and will draw on extensive consultation with municipalities and relevant national departments,” it stated.

Proposed changes to infrastructure grants flowing from the review could be implemented from the 2015/16 fiscal period.

This review would support the comprehensive reform of the municipal infrastructure conditional grant system and would follow the prior introduction of certain reforms aimed at responding to “the needs of different types of municipalities”.

Several municipalities had already introduced additional interventions to root out fraud, theft and corruption among its ranks, including the Buffalo City municipality, in the Eastern Cape, which had improved its internal controls and fraud prevention techniques, and had, since December 2012, dismissed eight officials.

In addition, the Johannesburg municipality had developed a citywide anticorruption and antifraud strategy, leading to the arrest of ten officials, while the eThekwini municipality was currently conducting 125 internal investigations related to procurement fraud allegations, noncompliance with supply-chain management regulations and financial misconduct by employees.