Transforming South African Local Government

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Transforming South African Local Government

• Dave Savage

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Summary of presentation

• Brief background to the South African local
  government reform process
• South African Local Government Restructuring
  Grant
• Introduction
• Lessons

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South African local government reform

• The apartheid city
• Well established white cities with strong tax
  base
• Separate black towns administered from centre
• 1976 Soweto uprising
• Creation of black local authorities
• Early 1980s mass resistance to indirect rule
  built around civic associations
• Rent and service charge boycotts
• Slogan One City One tax base!

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Local government reform

• While national negotiations were occuring there
  was a separate process of urban local
  negotiations
• Agreement on three phase local transition
• Pre-interim phase (1994/5) twinning (no
  elections)
• Interim phase (1995-2000) new boundaries and
  single elected councils White Paper process
• Final phase (2000-?)

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Some key features

• Local government an independent sphere
• Widely drawn boundaries
• Single tier metropolitan municipalities
• Two tier non-metropolitan system
• Macro-economic impacts 10.5 of total public
  expenditures, and increasing

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Local Government Challenges

• Service backlogs
• Inefficient service delivery
• Management and leadership shortfalls
• Municipalities in financial distress
• unbalanced budgets and no cash reserves
• increasing bank overdrafts, debtors, and loan
  defaults

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Key elements of the reform agenda

• Developmental local government
• Strategic and planned response to local
  conditions
• Sustainable service delivery
• Universal access to basic services
• Accountability
• Clear allocation of responsibility
• Requirement for substantial local consultation
• Performance management systems
• More rigorous financial administration
• Create conditions for private sector involvement
  in municipal service provision

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Local Government Transformation Programme
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Structural Reform Goals

• Creating sustainable and efficient local
  government structures
• Boundary changes through demarcation
• Changes to leadership structures and categories
  through Municipal Structures Act
• Appropriate allocation of powers and functions

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Systems Reform Goals

• An enabling and regulatory role for local
  government
• Empower Councillors
• Allow managers to manage
• Improve accountability to residents
• Ensure transparency
• Embed local government in intergovernmental
  system

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Fiscal Reform Goals

• Improve legibility, certainty, equity and
  efficiency of all transfers
• Overcome funding gaps for urban poor, large
  municipalities
• Improve sustainability of capital investments
• Stimulate capital market access
• Improve revenue administration and strengthen tax
  powers
• Appropriate division of fiscal powers between Bs
  and Cs

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What is the Restructuring Grant?

• Grant administered by National Treasury
• Aimed at approximately the largest 15
  municipalities
• Those whose success or failure would have an
  impact on the national economy
• Was developed in the context of a response to the
  Johannesburg crisis
• Intended to facilitate restructuring which
• pre-empts and avoids key threats
• Leads to significant enhancement of a municipality

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Characteristics of the grant

• Not intended to finance specific projects
• Aimed at getting municipalities to develop a
  coherent strategy and programme for
  improvement.and stick to it
• Structural reform programme to be determined by
  municipality not Treasury
• Agreed amounts are paid out on the basis of
  reaching pre-agreed targets and milestones
• Aimed at developing a more substantial
  relationship between bigger cities and Treasury
• Amounts available are considerable

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Content of application

• Key motivation of about 10 to 15 pages
• Annexures containing detail
• Must show proper appreciation and ownership of
  key issues and problems
• Must indicate strategies to address key problems
  and opportunities
• Must include indicators against which progress in
  addressing key problems can be measured
• To be refined in the process of negotiations
• Emphasis on financial sustainability

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What are we looking for?

• An understanding of the current context and
  trends
• Economic
• Social
• Service delivery
• Financial
• Organisational

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• A vision and approach that addresses these issues
• credible
• owned and understood by key leadership (political
  and administrative)
• clearly communicated

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• A set of lead programmes and projects which give
  life and momentum to the vision
• Limited number
• Appropriately balanced between inward and outward
  focus
• Milestones that can be monitored
• Outputs and dates
• Aimed at supporting key drivers and managing key
  risks

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• Must be based on financial sustainability
• Must address revenue/income issues

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Lessons from SA experience

• Take-up slower than expected
• Limited strategic capacity amongst municipalities
• Reforms need to be nurtured
• Unfamiliar grant approach
• Good vehicle for building a common urban agenda
• Reforms must be self-imposed

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Lessons (cont)

• Over-prescription is unenforceable and
  unconstructive
• Monitor outputs and risks not inputs
• Link payment to performance
• Dedicated capacity with credibility amongst
  municipalities required to manage grant