R55bn boost for municipalities

Wednesday, February 17, 2010

Cape Town - Finance Minister Pravin Gordhan has in his Budget Speech announced a R55 billion allocation to widely cash-strapped municipalities in the next financial year.

This figure will increase to R78 billion in 2012/2013.

Delivering the R907 billion budget for 2010/2011 on Wednesday, Gordhan said municipalities will receive an additional R6.7 billion through the local government equitable share to help them cushion the poor households from the rising costs of electricity and water.

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 better the 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.

He said his department was working with the Minister of Co-operative Governance and Traditional Affairs to ensure that the higher spending allocations to municipalities translate into real improvements in people's lives.

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

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.

Gordhan said government had taken steps to equip development finance institutions to step up their lending to municipalities, land reform programmes and business 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