Viability of municipalities in the spotlight

Thursday, June 8, 2017

Cape Town – The President of the South African Local Government Association (SALGA), Parks Tau, says there is a need to improve the viability of municipalities through innovative revenue streams.

Tau said this when he addressed the opening of the Inaugural Council of Mayors at the City of Cape Town Council Chamber on Thursday.

“A capable and developmental state, particularly at a local level, is one that has the necessary financial and institutional capacity to implement our set objectives.

“In this regard, the SALGA national executive committee has directed that we identify means of accessing innovative financing solutions for the local sphere.

“This will include use of pooled financing mechanisms that we have already developed for those municipalities that cannot access the debt capital market,” he said.

He said these innovative means of raising revenue would help to bring relief to municipalities that are buckling under financial strain due to structural policy and systemic problems.

“These problems continue to weaken local government to discharge its obligations, which is now manifesting itself in, for instance, the impasse between our member municipalities and Eskom on outstanding debt owed – with a very similar impasse developing between Municipalities and Water Boards.

“Most municipalities affected by these ballooning debts and affordability repayment weaknesses, are the so called unviable municipalities.

“It means that without a structural fiscal response to review funding of municipalities including alternative revenue streams, and without reviewing systemic problems like Eskom’s high interest on debts, excessive punitive measures, Eskom credit control policies and unreconciled municipal credit policies collection cycles, the problem will persist,” he said.

Tau also said the current fiscal framework, which allocates a measly 9.1% to the local government sphere, also needs urgent reviewing.

He said without the reconsideration of these fiscal instruments and the allocative formula, some municipalities will remain unviable and unsustainable.

Tau also said that other instruments that would be explored, together with government, are social impact bonds, green bonds, climate financing instruments and the effective implementation of public private partnerships.

“…We will have to work closely with both government and parliament to effect the necessary legislative and regulatory changes to enable this. We must acknowledge the massive progress the sector has made over the last 17 years of its democratic life, including the provision of basic services to so many more of our people, the rapid development and quality of our infrastructure, the increased mobility, investments in social amenities and massive progress in financial management and institutional resilience,” he said.

He said this is also highlighted by the recently released Stats SA non-financial census of municipalities for the year ending June 2016, which reveal that:  

  • The number of consumer units receiving services from municipalities increased in the provision of sewerage and sanitation by 2.9%, electricity by 2.5%, solid waste management by 2.4% and water by 2.3%.
  • Gauteng, KwaZulu-Natal and Limpopo are the only provinces that reported zero in the provision of bucket toilets with all other five provinces showing a decrease in the provision of bucket toilets.
  • Of the 12.8 million consumer units receiving water, 4.7 million consumer units had access to free basic water.  –

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