Cape Town - Finance Minister Nhlanhla Nene says over the next three years, the division of revenue across the various spheres of government will be biased to strengthening front service staff.
The Minister said this when he delivered his Medium Term Budget Policy Statement in Parliament on Wednesday.
He said government recognised the need to improve service at the local government sphere, with an aim of delivering basic services efficiently to improve the quality of life for all citizens.
“Strong growth in allocations to provincial and local government reflects the priority placed on front-line services such as health, education and basic services, as well as the rising cost of these services due to higher wages, and bulk electricity and water costs,” he said.
Over the three-year spending period ahead, national departments are allocated 47.4% of available non-interest expenditure while provinces will get 43.4%.
Local governments are allocated 9.2%. These allocations equate to spending growth of 5.6% for national government (excluding indirect grants), 7.8% for provinces and 8.2% for local government.
“As we know, provinces account for 70% of all public service employees. They therefore make substantial adjustments to accommodate the increased cost of the wage agreement.
“To assist with the adjustments, R3.8 billion is added to the provincial equitable share this year and a further R49 billion over the next three years. However, this will not fully fund the shortfalls.
“Provinces will have to seek further cost-efficiencies in order to maintain service levels,” the Minister said.
According to National Treasury, the most pressing funding challenge provinces face over the period ahead was covering higher compensation costs stemming from the public sector wage settlement.
In this regard, an amount of R29.9 billion will be added to the provincial equitable share in the current year and over the next two years to fund the shortfall.
National Treasury said the balance will be covered through savings and the reallocation of surpluses.
“The additional funds will be allocated using the equitable share formula, the largest components of which measure demand for services in education and health.
“National Treasury and the provinces will review this formula over the medium term to ensure it takes spending pressures across provinces into account fairly.”
Reforms to conditional grants in the pipeline
The National Treasury, meanwhile said, that government has completed the second phase of its local government infrastructure grant review.
Several changes will be introduced over the MTEF period to streamline these grants and improve the value and sustainability of associated investments.
Treasury said the proposed reforms to be introduced from next year include:
- Enabling the use of funds for the renewal, refurbishment and rehabilitation of existing infrastructure, alongside asset management systems to plan and prioritise maintenance;
- Reforming the public transport network grant to support financially sustainable transit networks in large cities;
- Consolidating urban grants over the next three years to tackle challenges in the built environment;
- Rationalising grants to reduce complexity and administrative burdens. e.g. Several water and sanitation grants are being merged, and
- Introducing grants that differentiate between metros, secondary cities and rural areas. Secondary cities in particular will see changes to their planning requirements. – SAnews.gov.za
