Transcript Local government finances

Local Government Budgets and
Expenditure Review
2001/02 – 2007/08
1
Overview
• This is the first publication by National Treasury devoted to local
government finances
• It tracks progress in the reforms and highlights the challenges
in local government
• Key elements of LG framework being refined:
– Alignment of functions and fiscal powers of category B and C
municipalities
– Reforms to municipal own revenue sources
– Appropriate capital finance arrangements for infrastructure e.g.
borrowings
– Continued assessment of formulae for equitable share and MIG
– Assessment of roles of municipalities and provinces on housing,
health and public transport
– Impact of REDS and Water Distribution reforms on local
government finances
2
Underlying budget trends
• Aggregate budgets of munis nearly doubled from
R64 billion to R119 billion in four years
• Increases largely driven by capital expenditure which
has grown by 22 per cent against 17 per cent growth
in operating expenditure over the same period
• Capital budgets rose from R12 billion in 2001/02 to
R26 billion in 2005/06
• Increase fuelled by increased grants from R2.3
billion (19%) in 2001/02 to R6.4 billion (38%) in
2005/06
• Operating budgets rose from R53 billion in 2001/02
to R93 billion in 2005/06
3
Underlying budget trends (cont)
• Metropolitan municipalities make up 57 per cent or
R68 billion of the combined local government budget
• Local municipalities account for 34 per cent or R41
billion
• District municipalities account for 9 per cent or R10
billion
• Operating budget of metros are double the size of
local’s and seven times those of districts
• Capital budgets of metros are 1.3 times the size of
local municipalities and 4 times higher than those of
districts
• The reason is metros and local municipalities have
larger trading activities than the districts
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Electricity
• Institutional arrangements of the electricity
sector
• Recent developments in the electricity supply
industry
• Progress made with electrification and
provision of free basic electricity
• Proposed reforms to the electricity regulatory
environment
• Future of the electricity distribution sector in
the context of the restructuring process
5
Electrification and FBE
• 72% or 7,7m households were connected to
the electricity grid by 2005 (DME data)
• Target to eliminate backlog by 2012
• R4,3 bn will be made available over next
three years to address electrification
backlogs (R1,2bn to muni and R3,1bn to
Eskom)
• As at 30 June 2004, municipalities provided
basic electricity to 4,7m households, of which
3m households received free basic electricity
(Stats SA, 2004 non-financial LG census)
• Eskom provided free basic electricity to 1m
households as of 28 February 2006
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Water and Sanitation
• Classifies water sector into two main areas:
water resources and water services.
• Water and Sanitation are crucial for improving
health, alleviating poverty and facilitating
economic development.
• Significant commitment of resources: in 05/06
–
–
–
–
National capital budget allocation is R3,8 billion
Municipal budgets contribution is R5,9 billion
Total municipal budgets for water services R9,8 billion
Water boards - approximately R3 billion
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Water and Sanitation
• Complex sector involving a wide range of
organisations
– Primary responsibility for water services rests
with municipalities as water services authorities
(WSA)
– DWAF is ending it’s role as an implementing
agent
– Water boards’ are mainly responsible for bulk
water provision, with limited retail and
reticulation
• Coordination, accountability and capital investment
for new infrastructure, rehabilitation and
maintenance
• Institutional reforms are still in early stages and are
likely to take several years to complete
8
Basic Services
• Significant increases on number of
households receiving basic services
• Total number of households receiving
basic services increased by 39,2% from
2002 to 2005
• 14% more households received access to
free basic water in 2004 than in 2003
• 18% more households received access to
free basic sanitation sewerage in 2004
than in 2003
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Personnel Expenditure
1.6 million employed in the SA public sector in 2005
180 000 employed by 283 municipalities
Table 5.1 Salaries and wages as a percentage of expenditure, 2005/06
R million
Salaries, wages
and
allowances
Number of
employees
Salaries, wages and
allowances as a
% of expenditure
Budget
operatin
g
expenditure
Average annual
salaries
1/c
Category A (Metro)
15 134
103 714
27,4%
55 308
145 924
Category B (Local)
8 223
74 740
26,7%
30 816
110 017
537
2 758
7,5%
7 197
194 610
23 894
181 212
25,6%
93 321
131 855
Category C (District)
Total
Source: National Treasury Local Government database
(i) The R23,9 billion accounted for 25,6% of the combined
municipal operating budget of about R93,3 billion
(ii) The six metro's personnel expenditure accounted for
63,3% of total personnel expenditure
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MFMA
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•
•
•
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Promoting sound financial governance
Ensuring a strategic approach to
budgeting
Modernising financial management
Promoting cooperative and
consultative governance
Promoting sustainable local
government
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Improvements in budgeting
• Many municipalities show improvement in the
following elements of budgeting:
–
–
–
–
–
–
Multi-year budgets
Approval of budget before 1 July
Integration with IDP
Service delivery and budget implementation plan
Consultation with community & governments
Documentation, content and quality
12
Challenges
– Continue with skills training and capacity
building programmes
– Improve quality and timely reporting
– Strengthen ability to raise and collect
revenue
– Implement reforms in planning and
budgeting
– Increase spending on infrastructure
development
– Improve ability to deliver basic services
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