Lynda Loxton
LOCAL government is facing “an affordability crunch”that could have long-term consequences for the delivery of services by newly-elected local governments.
Development Bank of Southern Africa policy co- ordination manager Chris Heymans last week told a parliamentry select committee hearing on local government that a great deal of innovative thinking would be needed on the part of central, provincial and local governments as well as the private sector to ensure that local governments were financially
Several speakers criticised the fact that the Department of Finance, hell-bent on keeping the budget deficit under control, had cut inter-governmental grants to local authorities by R80-million to R800-million in the 1996/1997 budget now being finalised.
This, they said, overlooked the fact that all local governments were going through a transition phase “and that usually costs more rather than less, especially in the short to medium term”.
“Local governments across the country will face different economic realities and we should not pretend that in the new order they are going to end up with bustling economies,” Heymans said.
“Some will continue to struggle, either because they have no economic base or because they manage their economic base poorly.”
This highlighted the need to help local authorities build up their ability to mobilise resources and Heymans said the government should consider temporarily waiving the restriction on local government borrowing for recurrent expenditure such as training and other capacity building.
He admitted this could be risky, but also very
For example, one of the major problems facing many local authorities is their lack of capacity to collect revenues. This is exacerbated by the unwillingness, rather than the inability, of many people to pay bills, especially when they have a state label on
Local authority revenue has traditionally come from property taxes and service charges, especially for electricity. Heymans said it was too soon to tell whether the new demarcation of local authorities left them with a viable property tax base while several parastatals seemed set to take over the provision of services.
This indicated a need to identify additional sources of revenue and Heymans said local governments would have to “think on their feet”if they were to raise the funds for the huge developmental needs of their areas.
For example, he said, the present system of vehicle licenses being collected by local authorities for provincial authorities could be reviewed so that local authorities received a share.
“Another option could be surcharges on personal and company tax,”Heymans said, adding that he had received differing options of how easy or difficult this would be to
Given the fact that the capital market is increasingly wary of providing loans to local authorities, and even large metropoles such as Johannesburg, Heymans said greater attention should be paid to involving the private sector in the provision of services and infrastructure development.
“I am not making a case for privatisation, but we must look at creative ways of engaging the private sector,”he said, adding that the DBSA could assist by “taking that portion of the risk that the private sector is not prepared to take”.
“All of this points to the need for a financial framework (for local governments) … to facilitate consistency.
“We have had too much chaos, too much collapse … we need to create a framework within which the transitional and the more structural long- term constraint on the borrowing capacity of local authorities is resolved. It will also make it easier to attract private sector financing for local government and possibly the development of private sector service
“It will also support predictable grants and ensure accessibility in a relatively uniform system of financial reporting.
“The framework should confirm that local government is the key policy-making and implementing agency for the Reconstruction and Development Programme, that inter-governmental transfers will be systematic and transparent, that capital will, in principle, be financed through borrowing, that private sector funding will be actively sought, that public-private partnerships in service delivery will form part and parcel of the institutional arrangement for local government and that there will be some form of macro-economic control over local government expenditure.”