Cape Town – Indirect grants to provinces and municipalities are projected to increase by 70% over the next three years – from R8.4 billion in the current financial year to R14.3 billion in 2016/17, the Minister of Finance Pravin Gorhan said today.
Presenting his Medium Term Budget Policy Statement in Parliament on Wednesday, Gordhan said changes to the way these grants are managed will be considered over the next three years, adding that amounts may be shifted between direct and indirect grants before the 2014 Budget is tabled.
Provinces get most of their funding through equitable share allocations and conditional grants, while allocations are also made from the fiscus to local government.
However, allocations to provinces and local government are only set to grow at 6.9% and eight percent a year respectively between 2013/14 and 2016/17 – far less than the annual rate of 19.5% that indirect grants are set to grow at over the same period.
Indirect grants are currently R2.7 billion for provinces and R5.7 billion for municipalities and are projected to reach R4.6 billion for provinces and R9.7 billion for municipalities by 2016/17.
Provinces presently account for 43.6% of all allocations, national departments 47.5% and local government 8.9%.
By 2016, national departments’ portion is expected to drop slightly to 47.2%, while that of local government grows to 9.2% and that of provinces remains at 43.6%.
Total allocations to provinces are expected to grow from the current R415.8 billion to R507.8 billion in 2016/17, while that for municipalities is projected to grow from R84.8 billion to R106.7 billion in 2016/17.
Allocations to local government will outpace those to national government (currently at R452.5 billion) and provincial government, growing at eight percent a year, compared to national and provincial allocation which will grow at 6.7% and 6.9% respectively.
Currently the equitable share of provincial allocations makes up R338.9 billion, while conditional grants make up a further R76.9 billion.
Government has proposed several changes to provincial conditional grants, among other things, these include small reductions to a number of grants so that funds can be reprioritised.
New allocations will be made to the human settlements development grant to speed up the upgrading of informal settlements in mining towns, while additional resources will be added to the further education and training (FET) colleges grants to cover higher than anticipated salary increases.
Extra funds through the public transport operations grant will help provincial governments to offset the rising costs of fuel and labour in provincial bus services.
An occupation-specific dispensation for therapists in the education sector will be funded through a new conditional grant for two years before these funds are incorporated into the provincial equitable share.
In the local government sphere, a further R356 million has been added over the next three years to the integrated city development grant.
The grant provides the eight metros with incentives to encourage cities to become more compact and efficient and in so doing help low-income households on the periphery of cities to access jobs and other opportunities.
The regional bulk infrastructure grant will get an extra R934 million over the next three years to help accelerate the roll out of bulk water projects.
To cater for the additional municipal grant allocations, moderate reductions have been proposed for other municipal grants.
Gordhan said government had begun a review of local government infrastructure grants, together with the Financial and Fiscal Commission and the SA Local Government Association, which may result in changes to the number and structure of these grants.
He said proposals for changes to the grant system may be included in next year’s Medium Term Budget Policy Statement.
A new equitable share formula for local government is being phased in from the current financial year.
The formula provides for a package of free basic services for the 59% of households with monthly incomes below the value of two state old-age grants. – SAnews.gov.za
