As the recent riots have shown, cross- subsidisation between black and white areas=20 has failed as a policy. Aspasia Karras=20 reports
THE senseless death of young residents in=20 Eldorado Park was not part of the=20 transformation agenda of local government.=20 What the chaos reflected was the latent=20 social upheaval precipitated by the=20 democratisation of institutional South=20 Africa.
Ivor Chipkin of the Centre for Policy=20 Studies, who recently completed a study on=20 the eastern sub-structure of the Greater=20 Johannesburg Transitional Metropolitan=20 Council, maintains that the “one city, one=20 tax base” concept that informed the new=20 political unification and joint spatial=20 planning in local government is in crisis.
“The political unification implicit in one=20 city thinking has manifested itself=20 unevenly in terms of spatial infilling,” he=20 says. The slogan captures the intention to=20 correct the imbalances between black and=20 white areas through cross-subsidisation,=20 but in real terms this has not happened.
Chipkin explains that the capital=20 expenditure required for massive=20 infrastructural development in the former=20 black authorities was to be recouped=20 through the cross-subsidisation theory. The=20 study shows that despite a clear need to=20 change spending patterns, levels of=20 expenditure in former white areas have=20 remained the same.=20
A further problem is that the Budget was=20 formulated to support the massive capital=20 expenditure on the premise of 100% payment=20 in all areas, but the Masakhane campaign is=20 having little impact: Soweto is paying less=20 than 25% of its rates bill and Orange Farm=20 less than 0,1%.
This implies that cross-subsidisation is=20 not happening as envisioned, and as a=20 result local government expenditure is far=20 greater than anything it can actually=20 afford. Many councils now face a serious=20 shortfall.
“Sandton subsidises the rest of the metro=20 to the tune of something like R450-million,=20 which is why non-payment is an added=20 crisis,” says Chipkin. “It is an irony that=20 the apartheid financing system is still=20 impacting at the local level.”=20
The system, such as it was, established=20 common regulations for rate collection,=20 which governed white local authorities.=20 These were, however, applied unevenly from=20 council to council, so that what they=20 charged bore little relationship to the=20 services received. The rates payment was=20 and is calculated in terms of a ratio of=20 cents to every rand that a property is=20 worth.
Because of uneven practices, Sandton paid=20 one cent to the rand, while an area like=20 Roodepoort paid eight cents. Using this=20 imbalance, the Sandton council lured big=20 business from the inner city, and began the=20 process of unbundling the urban sprawl.=20
The rate has now been standardised using=20 the principle of equity. For every rand a=20 property is worth, one is now required to=20 pay 6,45 cents across the board, while a=20 rebate to the value of 60% applies for=20 domestic properties. This clearly accounts=20 for the dramatic 300% increase that has=20 brought Sandton rate-payers and the=20 Johannesburg Transitional Metropolitan=20 Council to a courtroom stand-off.=20
Meanwhile, the black local authorities were=20 kept afloat by inter-governmental grants=20 (IGGs). The rates and service boycotts of=20 the 1980s made the flow of IGGs a crucial=20 element of financing what little=20 infrastructural development took place. The=20 flat rate was introduced to areas like=20 Soweto in the 1980s as a means of inducing=20 payment.=20
But, according to African National Congress=20 councillor for Eldorado Park Jos=E9 Coetzee,=20 the flat rate debate is an inherited=20 conceptual problem rather than a reality,=20 since it is not currently being practiced=20 within the greater Johannesburg TMC.
“The confusion arises from another=20 apartheid inheritance, the provision of=20 electricity. Soweto council payments do not=20 fluctuate because they pay their=20 electricity bill directly to Eskom. Areas=20 like Eldorado Park pay directly to the=20 council as the service provider.” =20
Nevertheless, the tensions exist, and the=20 looming financial crisis at local level=20 bodes badly for delivery, which has now=20 been placed squarely in the domain of local=20 government.
The IGGs have been replaced by direct=20 subsidies from national and provincial=20 government, but they are much less than=20 before. Ralph Daskaurdt, chief director,=20 development planning and local government=20 in Gauteng, explains that the province=20 gives local authorities R160-million for=20 operational and capital costs.
“But in light of the impact of the growth,=20 employment and redistribution strategy=20 [Gear] and the low percentage of rate=20 payment, local authorities are facing a=20 financial crunch.”
He explains that estimates point to a=20 reduction in government expenditure after=20 interest in real terms by about 15% in the=20 next two years – unless economic growth=20 accelerates.=20
The Gauteng Growth and Development Plan:=20 Progress Report for 1996 points out that=20 the sharp decline in real budgetary=20 allocation in Gauteng, due to national=20 fiscal restraint and increased=20 redistribution of fiscal resources away=20 from Gauteng, is leading to a “structural=20 deficit”.=20
“Continued non-payment of rates, services=20 and bonds in many areas in Gauteng is=20 resulting in problems maintaining existing,=20 and providing new, infrastructure and=20 services.”=20
If the problem is so acute in Gauteng,=20 where local government is generally=20 stronger than in other provinces, and=20 characterised by a number of large=20 metropolitan councils with substantial=20 capacity and budgets, what are the=20 prospects for the rest of the country’s=20 local authorities?=20
Attempts are being made to deal with the=20 fiscal crisis. Dominique Wooldridge of the=20 Graduate School of Public Policy and=20 Development Management (Wits) explains:=20 “Broke local authorities need capital for=20 infrastructure. Some are borrowing from the=20 private sector, others are pursuing the=20 public-private partnership route, while the=20 capital budgets and service council levies=20 are tidying most councils over.”=20
News of loans to local councils through a=20 fund set up by Southern Life, First=20 National Bank, Thebe and other investors,=20 is one way to go. The problem here is that=20 a fifth of all government spending is=20 absorbed by interest payments; more loans=20 will exacerbate the situation, and impact=20 on Gear.=20
The other route is the one of partnerships.=20 Daskaurdt is pushing this line in Gauteng,=20 where two major meetings between province,=20 business and local authorities, to=20 establish partnerships for service delivery=20 have been held.=20
But the issue that may be central to the=20 financial crisis, argues Wooldridge, is the=20 “spatial pattern of apartheid urbanisation,=20 with the poor on the peripheries, which are=20 very expensive to service”.=20
Local authorities are faced with a planning=20 crisis: Either they buy into the apartheid=20 spatial plan, maintain the status quo,=20 provide infrastructure at a loss while=20 exacerbating the expensive urban sprawl; or=20 they challenge the inheritance and begin=20 slotting people into existing services=20 while developing alternatives.=20
The Development Facilitation Act, as well=20 as the Gauteng project of setting land=20 development objectives, are planning=20 instruments that begin to deal with the=20 issue. They also provide the opportunity=20 for creative thinking about the role of=20 urban governance in the globally=20 competitive economy.=20
The fiscal restraint imposed by Gear will=20 catapult South Africa into the global=20 economic paradigm of neo-liberal orthodoxy.=20 Says Wooldridge: “The impact of=20 globalisation will be greater=20 decentralisation and cutbacks in social=20 spending. Local government will be required=20 to do more with less. But globalisation=20 also weakens the nation state and=20 strengthens the local state, in the form of=20 the competitive city.=20
“Increasingly, city-to-city agreements will=20 become more common; businesses already=20 relocate to cities and not countries; while=20 the vision of technopoles as nodes of the=20 global economy is being realised.”
The point is that the future is in local=20 government; if Gear is to be realised,=20 urban governance is integral to its=20 success. But the rates crisis should act as=20 a warning. We face a trade-off between=20 services for the poor and the facilitation=20 of global competition through hi-tech=20 services and infrastructure.