Gordhan slams municipalities for underspending

2014-10-08 19:05

Co-operative Governance and Traditional Affairs Minister Pravin Gordhan has lashed out at municipalities for failing to spend over 20% of their budgets last year even as service delivery levels were not up to scratch.

Gordhan was today addressing the media on the sidelines of the Presidential Co-ordinating Committee meeting at the Union Buildings in Pretoria. The meeting was chaired by President Jacob Zuma.

The gathering – which was attended by all premiers and Deputy President Cyril Ramaphosa – started off as a jolly affair where Zuma seemed to be in a good mood, joking with DA leader and Western Cape premier Helen Zille during a “photo opportunity” before proceedings began.

Gordhan later briefed the media about concerns raised by various political leaders including underspending by municipalities.

“If we look at the overall operating expenditure of municipalities in 2013/2014 financial year it amounted to R282 billion and their revenue was R292 billion and capital expenditure was R47.9 billion which was only 77.7% of all the money municipalities had to spend on capital infrastructure. So we still have more than 20% of the money that was available to municipalities for infrastructure that is not being spent,” said Gordhan.

In terms of expenditure, Eastern Cape, KwaZulu-Natal and Gauteng were the best performing provinces, he said.

Municipalities spent R69 billion on employee salaries and Gordhan expressed concern that the amount of money paid by some municipalities to their staff was sometimes as high as 44% of their overall spending.

“You’re spending almost 50% to pay for your staff, then what are you using to pay your suppliers and for services? We’ve taken stock of the 278 municipalities and we now have an understanding of what works and what doesn’t,” he said.

Households accounted for R75 billion of the R94 billion owed to municipalities, said Gordhan, with some households refusing to pay for municipal services even when they could afford to do so.

The meeting also discussed some changes to the way municipalities awarded tenders and an agreement was reached that certain services could be centralised while in other areas municipalities could be made to buy machinery in bulk.

Gordhan said the meeting also discussed the possibility of merging underperforming municipalities with better performing ones to increase the revenue base in areas where there is a need.

“We need to get better value for our people’s money,” said Gordhan, adding that the department of health had saved R3-4 billion buying anti-retroviral drugs in bulk.

He said travel, accommodation, medical equipment, computer services and hardware were among the items government was looking at buying in bulk to save costs.

“If we know that next year we will need 1000 machines, buy them together and then allocate them to each province on the basis of their needs and there was general support for the kinds of improvements we are introducing,” said Gordhan.

He said moves were already underway to ensure that the best people were hired to run municipalities.

Gordhan has written to all local government MECs regarding the manner in which 170 senior municipal managers and financial officers were hired. He said another concern was that some of the managers were not adequately qualified for their positions and this would result in some of them being removed from their positions.

“Our development programme called ‘back to basics’ says that every municipality has to do what they are supposed to do ... we would have little difficulty in terms of the basic performance of municipalities.”

The first implementation programme was to identify “clear indicators” such as sound financial management.

“We want every municipality to ensure they keep proper records. For example, 40 municipalities in the country have received disclaimers every year for the past three years. Most of the reasons is that they can’t produce the documents that the Auditor General wants to see. If record keeping from the start is right, there’s no need for disclaimers, you can have qualified opinions but at least there won’t be any disclaimers.”

One of the first goals will be to strengthen district municipalities through a shared service concept by sharing professionals such as financial managers and engineers from other municipalities with district councils who do not have the expertise.

“Among the policy changes we are looking at is how in certain parts of the country we strengthen the district municipalities because you have many parts of the country where you have district or local municipalities that are financially weak or financially unviable or have difficulties in attracting the right level of capacity. Our plan is to look at the way to strengthen capacity at a district level.

“We’ve also undertaken another look at unviable municipalities, particularly municipalities that have a very small population like four or five councillors or on the other hand have a very limited revenue base and are dependent entirely on funds transferred from national government. Provinces are in agreement with the back to basics approach,” said Gordhan.

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