Presentation to the Select Committee on Finance National Council of Provinces by Ms Lindiwe Msengana-Ndlela Director-General: Provincial

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Presentation to the Select Committee on
FinanceNational Council of ProvincesbyMs
Lindiwe Msengana-NdlelaDirector-General
Provincial Local Government

• DIVISION OF REVENUE (DOR) BILL 2009/10

Cape Town, 25 February 2009
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Outline of the Presentation
Slide no

• Introduction Purpose of Grants 3
• Progress on Conditional Grants 4
• 2.1 Allocations in current term (2004/05 -
  2009/10) 5
• 2.2 Future estimates (2010/11 - 2011/12) 8
• 2.3 Future estimates Provincial Dynamics 9
• Nature of the Problem 11
• Engagements on DoR Bill in 2008/09 12
• Proposed Engagements in 2009/10 15
• Principles underlying current future
  engagements 16
• Conclusion 17

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1. Introduction - Purpose of the Grants

• Local Government Equitable Share (unconditional)
• The grant is intended to supplement municipal
  own-revenue to achieve universal access to free
  basic services to poor households and to improve
  governance and administrative systems
• Municipal Infrastructure Grant (conditional)
• The grant is intended to provide capital finance
  for basic municipal infrastructure for poor
  households, micro-enterprises and social
  institutions provide for new, rehabilitation and
  upgrading of municipal infrastructure and
  eradicate bucket sanitation system mainly in
  urban townships
• Municipal Systems Improvement Grant (MSIG)
  (Conditional)
• The grant is intended to assist municipalities
  in building in-house capacity to perform their
  functions and stabilise institutional and
  governance systems

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2. Progress on Conditional Grants

• Some of the highlights in the 2007/8 financial
  year include
• Through MIG
• The cumulative households benefited by end June
  2007 water (610 293), sanitation
  (399 662), storm water (99 542), solid waste (238
  552)
• A cumulative total of 2934 SMMEs utilised in the
  implementation of MIG projects
• Through MSIG
• Support provided to a total of 96 municipalities
  on financial management aspects, including the
  compilation of Annual Financial Statements
• A total of 68 out of the 124 municipalities that
  implemented Municipal Property Rates Act projects
  had successfully completed all the processes
  involved in the MPRA implementation process

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2.1 Progress on Conditional Grants

• Allocations in the current 2004/05 2009/10

Grant 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10
LGES R7,6 bn R9,6 bn R18 bn R20,6 bn R25,5 bn R23,8 bn
MIG R4,4 bn R5,4 bn R5,7 bn R8,2 bn R8,6 bn R11 bn
MSIG R182 m R200 m R200 m R200 m R200 m R200 m
TOTAL R12,1 bn R15,2 bn R23,9 bn R29 bn R34,3 bn R35 bn
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2.1 Progress on Conditional Grants

• Allocations in the current term (2004/05
  2009/10)
• LGES has been increasing from R7,6 bn (2004/05)
  to R23,8 bn (2009/10), representing a 68
  increase
• MIG has been increasing from R4,4 bn (2004/05) to
  R11 bn (2009/10), representing a 60 increase
• MSIG has been increasing from R182m (2004/05) to
  R200m (2009/10), representing a 9 increase a
  matter of concern
• Total transfers from R12,1 bn (2004/05) to R35 bn
  (2009/10), representing a 66 increase

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2.2 Progress on Conditional Grants Future
Estimates
Local Government Transfers 2009/10 2010/11 2011/12
  Medium-term estimates Medium-term estimates Medium-term estimates
  MTEF Baseline MTEF Baseline MTEF Baseline
Equitable Share (LGES) 23,846,502 29,267,706 31,889,901
Municipal Systems Improvement Grant (MSIG) 200,000 212,000 224,720
Municipal Infrastructure Grant (MIG) 11,084,860 12,528,884 15,068,551
Total 35,131,362 42,008,590 47,183,172
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2.3 Progress on Conditional Grants Future
Estimates

• Note
• The gap in growth of allocations between
  Municipal Systems Improvement Grant (MSIG) (dplg)
  and Financial Management Grant (FMG) (NT) both
  the two recurrent grants face the similar
  challenges.

Grant 2009/10 2010/11 2011/12
MSIG 200 mil 212 mil 224.7 mil
FMG 299 mil 364.5 mil 384.6 mil
Difference (Increasing) (99 mil) (152 mil) (160 mil)
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2.3 Provincial Dynamics MIG Allocations
Provincial allocations are informed by, amongst
other things, the extent of backlogs and
poverty-weighted data.
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2.3 Provincial Dynamics MSIG Allocations
PROVINCE 2009/10 (R 000) Share 2010/2011 R000 Share 2011/2012 R000 Share
EASTERN CAPE 28,870 14 33 950 16 35 840 16
FREE STATE 18,465 9 19 250 9 20 370 9
GAUTENG 7,175 4 8 000 4 8 420 4
KWAZULU NATAL 41,040 19 45 050 21 48 180 21
LIMPOPO 19,675 10 21 000 10 22 370 10
MPUMALANGA 16,895 8 16 450 8 17 570 8
NORTHERN CAPE 28,810 14 25 600 12 26 820 12
NORTH WEST 19,325 10 19 200 9 20 340 9
WESTERN CAPE 19,735 10 23 500 11 24 810 11
TOTAL 200 000 100 212 000 100 224 720 100
Provincial allocations are informed by municipal
capacity and past expenditure performance.
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3. Nature of the Problem (whilst noting some
progress)

• Capacity, resources and local leadership
  accountability
• Uneven capacity spatial rural-urban areas,
  nature of development, decision-making, skills,
  planning, project management, cash flow
  management, performance and contract management
• Limited resources large scale/ bulk
  infrastructure
• Uneven levels of local political and municipal
  leadership
• Symptoms
• Poor operations maintenance of infrastructure
  under-spending, poor regulations enforcement, low
  quality of service delivery, health hazards
• Other matters have been raised in the Policy
  Review process on the system of provincial and
  local government to be dealt with by the
  incoming administration post 2009 Elections
• Note We would like to thank the Select
  Committee, which has invited us over the past
  years, for extensive oversight sessions in
  various provinces, municipalities and in
  Parliament to address the nature of the problem
  outlined above.

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4. Engagements on DoR Bill in 2008/09

• Consultative engagements between the dplg and
  National Treasury on the Division of Revenue Bill
  started in June 2008.
• Comprehensive comments were formally submitted to
  the National Treasury by end of August 2008.
• Further engagements during December 2008 and
  January 2009.

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4. Engagements on DoR Bill in 2008/09
outstanding matters

• Some of the inputs from dplg have been
  incorporated in the current version, except for
  the following
• Infrastructure grant for cities the new clause
  in the bill suggests that transfers go through
  dplg vote but monitoring and reporting only to
  National Treasury. This is contrary to the
  mandate of Vote 29 and duties of the national
  transferring officer (in this case dplg) sec
  9(1) and (2)
• The need to increase funds for municipal systems
  improvements
• Enabling mechanisms for dplg to report to
  Parliament on performance of municipalities with
  regard to conditional grants. For example, the
  current framework does not enable the dplg to
  reallocate funds to municipalities who have the
  capacity to spend and
• Addressing MIG performance audit findings, as
  indicated below

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4. Engagements on DoR Bill in 2008/09
outstanding matters

• Issues raised by Auditor-General in the
  performance audit of MIG
• The crafting of DoRA in relation to municipal
  infrastructure is restricting dplgs role in the
  management of the grant.
• The following issues were raised by the AG and
  has also informed our input to the 2009 Bill
• The dplg has limited powers to address
  under-performance by municipalities
• Funds from conditional grants should be deposited
  into a separate bank account by each municipality
  to ensure proper monitoring and
• Based on the above proposal, VAT reimbursements
  from SARS and interest received w.r.t MIG funds
  should be ploughed back to MIG projects by each
  municipality.

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5. Proposed Engagements on DoR Bill in 2009/10

• Greater effort to be directed at poor and low
  capacity municipalities (not only cities)
• Utilisation of Schedule 7 of DoRA in the
  management of MIG
• - In view of the need for SA to meet its
  development targets and the Millennium
  Development Goals
• - Informed by infrastructure programmes
  identified in the municipal Integrated
  Development Plan (IDP), Provincial Growth
  Development Strategies (PGDS), the National
  Development Perspective and the Comprehensive
  Infrastructure Planning (CIP).

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6. Principles underlying current future
engagements, in all spheres

• Principle of developmental local government
• Intergovernmental relations
• Improving performance management and the role of
  dplg
• Local leadership
• (Also refer to Annexure A)

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7. Conclusion

• The Select Committee on Finance to
• Note the progress made in the current term
  (2004/5 2009/10) and in the context of the
  Fifteen year Review of Government (1994 2009)
• Note the underlying problem that is being
  addressed in local governance, w.r.t. the
  relevant grants managed by the dplg
• Discuss the engagements held with National
  Treasury and matters that remain to be addressed
  (slides 12 15)
• Note the principles underlying current and future
  engagement in all spheres.

THANK YOU
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Annexure A

• What did we indicate to the Select Committee on
  Finance in the past years?
• A selection of slides

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Presentation to the Select Committee on Finance
By the Director-General of the Department of
Provincial Local Government (dplg), Ms Lindiwe
Msengana-Ndlela
Tuesday, 8th March 2005 Cape Town
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Key Challenges Future Action (08/03/2005)

• Late submission of the MSIG Business Plans.
• Poor spending by district municipalities.
• Roll-overs at the end of the financial year.
• Non-compliance with the DORA by some
  municipalities, especially reporting requirements.

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Key Challenges Future Action (08/03/2005)

• Lack or little consultative processes with local
  municipalities by districts in the compilation of
  business plans and in the implementation of
  projects.
• In response to these challenges, a Programme of
  Support to municipalities has been developed and
  is being implemented within the context of
  Project Consolidate.

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MIG - Roles and Responsibilities (08/03/2005)

• Department of Provincial and Local Government
  (dplg) Administers the MIG and convenes
  Municipal Infrastructure Task Team meetings.
• Other key Departments
• Department of Water Affairs and Forestry (DWAF)
• Department of Public Works (DPW)
• Department of Minerals and Energy (DME)
• Department of Transport (DoT)
• Department of Housing (DoH)
• Sport and Recreation South Africa (SRSA).
• Sector Departments and their provincial counter
  parts retain the policy making and regulatory
  functions and retain the constitutional role to
  support municipalities. They also need to provide
  oversight and monitor sector outcomes.

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MIG - Provincial and Municipal Roles and
Responsibilities (08/03/2005)

• Provincial Departments responsible for Local
  Government
• Ensure that municipal IDPs are vertically
  integrated with the PGDS ensure that IDPs give
  priority to the basic needs of communities
• Promote the development of local government
  capacity
• Monitor the financial status of municipalities.
• Municipalities are to
• Structure and manage municipal administration,
  budgeting and planning processes
• Participate in national and provincial
  programmes
• Manage MIG funding for specific projects.

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Presentation to the Select Committee on
FinanceBy the Director-General of the
Department of Provincial and Local Government
(the dplg),Ms Lindiwe Msengana-NdlelaWednesday
, 8 March 2006Cape Town
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Refining DoRA (08/03/2006)

• Resource allocation must support policy and
  strategic imperatives
• The process of refining DoRA is necessary and
  will be enhanced by an Intergovernmental Fiscal
  Relations system which provides for
• Improved monitoring and evaluation of
  performance
• Greater certainty provided to municipalities
• Alignment with objectives of the
  Intergovernmental Relations Framework Act and
  Local Government Legislation and
• An integrated approach to service delivery and
  development of all three spheres.