“Helen Suzman Foundation: Responses to Questions Put”

Yunus Carrim
Deputy Minister of Cooperative Governance and Traditional Affairs

HELEN SUZMAN FOUNDATION ROUNDTABLE DISCUSSION ON LOCAL GOVERNMENT
Johannesburg
16 May 2011

I have 12 minutes. And the Foundation provided several questions, as guidelines of a sort, to the panellists on the issues we should address. So I thought perhaps the easiest and quickest way of doing this input is to specifically respond to the questions. And it’s the safest way too. Let me explain. Obviously, I’m in election mode right now, and it’s real cruel for the Foundation, just two days before the elections, to preclude me from telling you why you should vote for a certain party, whose name, in fairness, I shall not mention, even if it turns 100 years old next year. I suggested to Francis that he should offer a prize for a competition among you to see who names the correct party first!  He wasn’t impressed! Anyway, so by answering the questions directly, I’ll be suitably shackled! And Francis can be calm! So here goes.....Oh, and I won’t be able to cover the full text of what I have with me in 12 minutes – so if anybody’s interested in looking at the text, I’ll leave a copy with the Foundation.

Does Local Government have the capacity to meet its objects as outlined by the Constitution?
Do we all mean the same thing when we talk about local government “capacity”? We need to unpack the term “capacity” some time, I think. For now, I understand it to refer to the political, managerial, technical and financial ability of a municipality to fulfill its functions. But this is not an adequate explanation. We need to look more carefully at the term. We can settle for this for now –and in terms of this, municipalities, unfortunately, don’t have adequate capacity.  

Most parties do not allocate sufficiently senior and experienced leaders with significant political clout to municipalities. Yet local government is such a key site of democracy, service delivery and development. And it is the sphere of government that is most challenged!  
CoGTA’s 2009 State of Local Government in South Africa Report revealed that in many municipalities senior managers do not have the necessary skills. There is also a lack of technically skilled staff like engineers, planners and electricians. This is hardly surprising. South Africa has a shortage of skills – and this afflicts municipalities too.  

The financial capacity of municipalities is hindered both by the lack of adequate funds and financial management skills.
But there is also a more fundamental issue: we opted for a local government model in which essentially all municipalities exercise basically the same powers and functions, irrespective of their capacity. In other words, a “one size fits all” approach. There has to be a better correlation between a specific municipality’s capacity and the powers and functions it exercises.

Another fundamental issue: national and provincial government have not monitored and supported municipalities adequately, as required in terms of the Constitution, and this too has impaired the capacity of municipalities.
 
What then is being done to improve local government capacity?
CoGTA (Cooperative Governance and Traditional Affairs), SALGA (South African Local Government Association) and NT (National Treasury) are working on a more intensive induction programme for councilors as part of a consistent education programme for them.  
We are also working with SALGA, NT and the Auditor’s General Office on training programmes to significantly improve the financial management capacity of municipalities. A major review is also underway of the Intergovernmental Fiscal System directed at allocating more funds and resources from the national fiscus to municipalities. Importantly though, these extra funds will go with better training.   
CoGTA is also working with all departments and other public sector institutions providing municipal capacity-building programmes to rationalize them and provide greater cohesion.

The LGTAS (Local Government Turnaround Strategy) is to be implemented far more actively after the elections with greater support from provincial and national government for the specific MTAS (Municipal Turnaround Strategies) shaped in terms of the LGTAS.
 
We are processing a Bill at present, The Monitoring, Support and Intervention Bill, that stresses the crucial role of provincial and national government to assist municipalities to be more effective, without eroding their powers.
A major review of the local government model is underway. It is likely to result in a differentiated model of local government in which powers and functions are linked to capacity. I deal with this further later.  Of course, all these programmes will take time to implement and result in sustainable outcomes. 


What are the funding issues relating to Local Government?
The very premise of the current financial model is wrong. It’s based on the presumption that municipalities can raise 95% of their own revenue. But this was the case before 1994 when municipalities had much smaller boundaries, mostly excluded the African majority, and had a limited service delivery role!  It cannot apply to the new municipalities, with their larger boundaries, significantly bigger numbers of residents, and expanded developmental role.         
The slow-down in the economy, the high unemployment levels and the huge number of indigents mean that municipalities find it difficult to collect the revenue due to them. These are structural issues requiring the attention mainly of the national and provincial government. Local government bears a far too great a proportion of the burden for this. National government in particular has to assist local government more to deal with these challenges.  
Some municipalities, especially in the rural areas, are technically unviable – they do not have a minimal economic, financial or revenue base. The majority of the people living in these municipalities are indigent. These municipalities depend substantially on intergovernmental transfers to survive.
Municipalities are also owed a huge debt.  By December 2010, the municipal debt had reached R62.3 billion. 61.9 % (R38.3 billion) of the debt owed is owed by residents, 20.7 % (R12.8 billion), by businesses, 5.1 % (R3.1 billion) by national and provincial departments and 12.4 % (R7.6 billion) by others.  
 
Then there are the unfunded mandates – municipalities fulfill provincial functions like libraries, aspects of health and social services, including early childhood development, and homes for the elderly, disabled and abused women. Municipalities get no or little money for this from the provinces!    
Despite its huge responsibilities, local government gets at present only 8,7% of the national revenue. There needs to be an expeditious and significant overhaul of the current Intergovernmental Fiscal System, including the formula for the “equitable share” – the allocation of money from the national budget to each sphere of government.

Yes, yes, municipalities need to do more to raise money from those who can afford to pay. Yes, they have to make more effective and productive use of their limited resources. And, yes, municipalities are unable to fully spend funds they have, especially for infrastructure. But even if they were to raise all the funds due to them and effectively spend all their money, they will still not be able to properly fulfill their responsibilities. The answer is not to constrict national allocations to local government – but to allocate adequate funding AND assist with capacity-building so that the funds can be effectively and productively spent. Moreover, an important chunk of the extra funds should be allocated for capacity-building and a reasonable system can be found to allocate the funds incrementally, and at different times to different municipalities as their capacity develops. This funding approach would also be consistent with the differentiated local government model that is likely to be decided on.

Other aspects of the strategy to improve the financial situation of municipalities include:
    •    More effective billing systems, and debt collection and revenue enhancement programmes.
 
    •    The setting up of a Municipal Infrastructure Support Agency (MISA), a special purpose vehicle which will provide specialized and targeted technical and financial support to municipalities in the development of infrastructure.
 
    •    Tackling the fiscal inefficiencies of the two-tier District and Local municipalities model, in particular as relates to the delivery of water.
 
    •    Bringing in private sector expertise more actively, including through the “Business Adopt a Municipality” campaign.
 
 
Do the structures of Local Government enable corruption to be dealt with appropriately?
I am not exactly sure what “structures” mean in this context. I’ll take it that the question is about how local government tackles corruption? Obviously, if the national campaign against corruption is more effective, it’ll help local government to reduce corruption.  The intensification of campaigns to encourage ethical behavior in society as a whole, such as the Moral regeneration Campaign and others, will also help local government.
We are working with NT, SARS (South African Revenue Services), the Financial Intelligence Centre and other stakeholders on a major review of the entire procurement system, including the supply chain management process.
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We also launched the “Operation Clean Audit” campaign to work towards municipalities achieving unqualified audits by 2014. The Auditor General reports in the 2009/10 financial year there was marginal but significant progress in municipal audits. There was a significant reduction in “disclaimers” from 103 in the previous year to 53 in 2009/10. According to our Department, 103 of the 278 municipalities now have Municipal Public Accounts Committees.  We are also assisting municipalities to improve their internal audit committees.    
Our Department has just established a Corruption Inspectorate which will work closely with municipalities to combat corruption. Its aims include:
    •    To encourage ethical conduct of councilors and municipal administrators.
    •    Identify trends in local government corruption and contribute to developing more effective strategies to reduce it.
    •    Assist municipalities to process cases of corruption more expeditiously.
    •    Work closely with the Special Investigations Unit, Public Protector, SARS and any other agency to assist with cases of corruption in municipalities.
 
Obviously, we need to intensify our campaign against corruption, not just in local government, but in the other spheres of government, as well as in society. The government has recently launched the Special Anti-Corruption Unit or Wasps. It includes representatives of, among others, the Public Service Commission, NT, Chapter 9 institutions, SAPS, SIU (Special Investigation Unit) , business, labour, and other civil society organizations.    
The state alone cannot reduce corruption. We need the fullest participation of the public. The strengthening of the ward committees and other structures of community participation in local government being proposed should also assist, over time, in exposing corruption and reducing corruption in municipalities.
Obviously, reducing corruption will take time. But we have to do it. It is the poor, after all, who suffer the most with corruption. 
    •            

Are the administrative structures of Local Government robust enough to withstand pressures from economic and political elites?
The administration needs to be strengthened to more effectively do this. The recently passed amendments to the Municipal Systems Act  will help in this regard. Among other things, the amendments seek to:
    •    Provide for regulations to be passed on the minimum qualifications for senior managers.
    •      Provide for more effective regulations to be passed on local government human resource management.
    •    Prohibit political party office-bearers from serving as senior municipal managers.
 
These amendments are only part of other policy and legislative amendments that are pending to strengthen the role of municipal administrations.
If we effectively implement aspects of our ant-corruption strategy just mentioned, it will also make it easier for administrators to withstand pressure from economic and political elites.

While they are vulnerable to pressures from political and economic elites, we shouldn’t present administrators as helpless victims. They must conform to the laws too and not just succumb to undue pressure from these elites. And the state must help in this regard.  
Do similar sets of problems inform both the metros and smaller urban communities? If not, how do they differ?
It’s not clear to me why this of the many issues local government has to address is being focused on. Presumably, “smaller urban municipalities” do not refer to “secondary” cities like Msunduzi?  Anyway: some of the problems are similar, others not.

 
Of course, the metros (and we can now speak of 8), play a strategic role in the national economy. Together with Msunduzi, they produce 60% of the country’s economic output. They face specific problems different from the smaller urban municipalities because of their role in the economy, size of residents, higher in-migration, larger informal settlements, bigger numbers of unemployed and greater vulnerability to fluctuations in the world economy and rates of investment in South Africa. And where they face similar problems with smaller urban municipalities – and there are many – the form in which they face them and the extent to which they do differs.  

Metros and other stronger secondary cities are being more immediately targeted for the devolution of greater responsibilities for human settlements and other provincial functions. Aspects of the provincial transport function are also being devolved to municipalities. This will help metros and other stronger municipalities to better integrate their planning and use their resources more productively. But, obviously, with the devolution of these powers, it is crucial that these municipalities are fully assisted by provincial departments to develop the capacity to implement these responsibilities effectively.
The South African Cities Network (SACN) recently released its State of South African Cities Report. I refer you to this report for further information and insights. May I say, by the way, that contrary to media reports, the Cities Report is not a government report. It’s a report done by academic experts commissioned by the SACN, which is funded partly from the national fiscus.   


Have we set Local Government up for failure?
No. But national and provincial government should have done more to assist municipalities with capacity, funds and other resources, and should have worked with municipalities in a more integrated and cooperative way.  This can certainly be done without eroding the powers of local government, but in fact strengthening it. There is increasing consensus emerging that this is the direction to take.

Perhaps we were too ambitious in what we sought to get out of the current local government model? Those of us who shaped this model mainly came from the civic movement and other structures of the UDF and perhaps we were too romantic about what was possible? In any case, it’s clear that we need to review the model. The key principles and values of the model are sound. But we need to change aspects of it. The ANC’s 2012 conference is going to consider this and come up with a framework to guide the government to take these issues to parliament and public.
Among issues to be considered are:

    •    A review of the respective powers and functions of the three spheres. The imperative for this is not ideological but practical. It is to ensure a more integrated cooperative governance system, and a more effective state that is able to accelerate service delivery and development.
 
    •    A differentiated local government model in which municipalities exercise different powers and functions from a common menu, according to their capacity, spatial characteristics, funding and other resources. It will also mean differentiation in scope of IDPs as well.
 
    •    A more effective separation of the executive and legislative arms of municipalities
 
    •    A new intergovernmental fiscal system in which municipalities are allocated funds and other resources, and assisted with a more effective programmes to spend  money far more effectively.
 
    •    A much more empowered ward committee system as part of an overall programme to strengthen community participation in local government. 
 
    •    A review of a two-tier system of District and Local municipalities.
    •    
    •    Greater clarity on the respective roles of councillors and administrators, and guidelines on how to manage the relationship between them better.
 
    •    Greater clarity on the responsibilities of the Mayor, Speaker and Chief Whip of a municipality.
These issues will be processed with the fullest participation of the public. In a democracy, the majority party guides the government. Hence the ANC’s 2012 Conference will process these and other local government issues, and government and parliament will develop them further through engagement with key stakeholders and the public. We very much welcome your participation in deciding on changes to the local government model. But even more: we are keen that you actively participate in ward committees, IDP Forums, participatory budgeting processes and other means of becoming involved  in local government. “Local government”, as we repeatedly say, “is everybody’s business”. Yours too!