Salga hails allocation increases, urges more support

The South African Local Government Association (Salga) told Parliament’s Standing Committee on Appropriations that even though increases in allocations to municipalities were above inflation, they were not enough to pull them out of their various financial quandaries.

Salga briefed the committee in the midst of national government’s scramble to save some municipalities from the losses they suffered from investing their equitable share allocations in VBS Mutual Bank.

While municipalities were warned well in advance about this – by the South African Reserve Bank, no less – the predicament speaks volumes of some council’s inability to generate their own viable capital to provide basic services or build infrastructure.

Salga’s director for audit support Mohammed Lorgat told the committee that true upward movement in allocations must take municipalities' capacity to generate revenue into account.

Lorgat said several government departments were likely to overspend on compensation of employees with some calling for wage bills to be reprioritised.

"One potential holy cow that’s throwing a spanner in the spending works is the public servants wage bill. It accounts for more than 35% of government’s total spending. The 2018 public service wage agreement exceeds budgeted baselines by about R30.2bn," Lorgat said.

Minister of Finance Tito Mboweni announced in his medium term budget policy statement that the largest transfer to municipalities – local government equitable share – will grow by 9.9% in 2019/20; 9.7% in 2020/21; and 8.6% in 2021/22.

However, this wave of above-inflation increases was necessary because of population growth and the need to maintain infrastructure.

"These above inflation increases account for growth in household numbers and higher bulk water and electricity costs. The government will strengthen municipal capacity to improve the use of these allocations," said Lorgat.

Lorgat told the committee that Minister of Cooperative Governance and Traditional Affairs Zweli Mkhize was providing support to municipalities that suffered losses in the VBS Mutual Bank fallout.

"The VBS Mutual Bank situation has hurt a number of municipalities because they have not only invested there but have deposited the equitable shares there," said Lorgat.

Lorgat said Salga welcomed the new Integrated Urban Development Grant to be introduced in 2019/20 as it allowed cities more autonomy over their planned infrastructure projects.

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