Cash boost for poor municipalities

Wednesday, February 27, 2013

Cape Town – In a move that could change the face of local government, Finance Minister Pravin Gordhan has announced that a new formula for the local government equitable share will be introduced in the upcoming financial year.

Delivering the Budget Speech in the National Assembly on Wednesday, Gordhan said the new formula will address the need to better differentiate assistance to different municipalities, including those in rural areas.

Under the current formula, municipalities get their budget share according to their size. But the new formula will result in significant changes in allocations with municipalities that have higher poverty rates and less ability to raise their own revenue. 

The formula for calculating equitable share will also be updated to reflect population changes as published in the 2011 Census. The Census count showed that overall, the South African population grew from 44.8 million in 2001 to 51.8 million in 2011.

“Municipal infrastructure grants will also be realigned, and go hand in hand with more integrated planning of new developments so that we can make meaningful strides in overcoming the spatial inequalities of the past,” said Gordhan.

The new budget for 2013/14 puts the equitable share for provinces to just off R338 billion.

Struggling rural municipalities are set to benefit more from the new allocation formula to be phased in over a period of five years.

Conditional grants to provinces will be over R77 billion with further R5.3 billion over three years added to the education infrastructure grant, including the construction of Grade R classrooms and facilities for learners with special needs.

Gordhan said additional allocations have been made to increase employment of social workers and to provide additional support to non-governmental organisations that provide critical welfare services.

“There’s additional funding for teachers in the poorest 20 percent of schools and Grade R classes and for community library services. Provinces are also funded for an expansion in HIV and AIDS programmes and an improved TB diagnosis system,” Gordhan added.

It is also worth noting that during the 2011/12 financial year, national and provincial spending amounted to R885.9 billion, including transfers to provinces and municipalities.

Provincial expenditure fell 1.3 percent short of an adjusted budget of R373 billion in 2011/12, primarily due to under spending on health and basic education in the Eastern Cape, KwaZulu- Natal and the Free State.

In the same period, municipalities underspent by R31 billion, representing 11.7 percent of the total budgeted municipal expenditure. Of 278 local municipalities, 212 underspent their transfer receipts by more than five percent while 30 over spent by more than five percent. –