Ms Lindiwe Msengana-Ndlela

1. INTRODUCTION

Thank you for inviting our Department to this Budget Hearing. We view the input of the Portfolio Committee to our work as critical.

Interestingly, we meet today six days (04 March 2003) after President T Mbeki addressed the Commonwealth Local Government Forum on issues of local government service partnerships. This conference was co-hosted by our Minister, Mr F S Mufamadi together with Father S Mkhatshwa, the Chairperson of the South African Local Government Association and the Mayor of the City of Tshwane.

The President emphasised the need for countries to observe the "Local Government Declaration" that was adopted at the World Summit for Sustainable Development in 2002. The ‘Declaration’ asserted, in part, that there are four inter-connected principles for local governments, which need to inform and underpin all efforts to combat poverty and build a just, peaceful and sustainable world. As the President stated,

"These are the over-arching principles of sustainable development; the issue

of effective democratic decentralization with commensurate financial

resources for local governments, the matter of good governance as well as

co-operation and solidarity." (My emphasis)

The 2003/4 budget for Provincial and Local government is significant in a number of ways.

Firstly, the budget of the Department has increased from R6.5 billion in the last financial year (2002/3) to R 9,4 billion in the new financial year (2003/04). The bulk of this amount (R6,3 billion) goes towards building the capacity of government to bring services closer to the people, at local level. This budget reflects the commitment and the will of government to provide adequate resources for the strengthening of our intergovernmental system between national, provincial and local spheres.

Secondly, this budget is presented after two years since the new system of local government was inaugurated in 2000. Our presentation today will give us an opportunity to share with the Honourable Members our views on progress made in the establishment phase (2000-2002) of local government transformation, with particular reference to the last year of that phase, the 2002/3 financial year. We also intend to advise the Honourable Members of the key interventions that we intend to undertake as we enter the consolidation phase, which will start from 2003 until 2005.

2. PRELIMINARY REPORT FOR 2002/3

We present to you the preliminary report for the financial year 2002/3. In this report we identify set objectives, what was achieved and the intended impact of our programmes on our communities.

As we assessed our progress during last year (2002/3), we have identified a number of challenges, which will be addressed in various ways, including the effective and efficient application of resources. Previously we have, correctly so, paid particular attention to the development of policy and governing frameworks. In this 2003/4 financial year our department will focus more on policy implementation at a heightened pace.

3. FROM POLICY TO IMPLEMENTATION…Incremental funding to municipalities

Our work at provincial and local government continues to benefit from the growing national economy. As the President said, in his state of the Nation address on the 14^th February 2003,

" South Africa has been able to have 10 consecutive years of positive growth".

This healthy state of our national economy has made it possible for the funding of municipalities through the equitable share that is administered by our department to increase from R3,9 billion in the last year to R5,3 billion this year. The funds will enable municipalities to improve their capacity to deliver quality services.

4. FROM POLICY TO IMPLEMENTATION …Infrastructure and job creation

Over 450 000 additional households will receive access to services through the improvement of infrastructure supported by R2,2 billion in the Consolidated Municipal Infrastructure Programme (CMIP). An additional 14 million will be allocated to infrastructure projects that are delivered through municipal service partnerships countrywide. The Local Economic Development (LED) Fund will be allocated R117 million and it is expected that 3000 temporary permanent jobs will be created.

FROM POLICY TO IMPLEMENTATION …

With regard to the provision of free basic services particularly to the rural poor, there is a need to implement government’s policy with greater speed and vigour. To this end an allocation of R1.1 billion to rural municipalities will be utilised to provide free basic water and electricity. A total of 3 million more people will have access to free basic water and a total of 28 million people will have access to free basic electricity.

From 1994 we inherited the legacy of municipalities that do not have a decent revenue-base. This is our historical legacy, which we must strive to collectively change for the better. We are therefore concerned about the inability of some of our municipalitlies to collect revenue due to them. The staggering debt for services must be addressed with urgency. Our Department presented the extent of this debt to the Portfolio Committee on the 4^th of March 2003. Facts, figures and proposed solutions were also placed before the Municipal Viability Indaba, which was held in December 2002. The intended outcome of the Municipal Viability Indaba was therefore to achieve a collective and heightened awareness of the threat of municipal viability so as to encourage the appropriate emphasis and attention to this matter and its relationship to service delivery and the national economy. The Indaba agreed on the need for a Municipal Revenue Enhancement Programme, which we will fund from this budget. In this context, the department will provide an amount of R252 million to assist municipalities to reduce the accumulated municipal services debt and improve their overall financial viability. We will also pay particular attention towards improving the treasury capacities of our municipalities.

Whilst it is important that, on one hand, we address the legacy of municipal debt it is equally important that we create conditions for local economic development. The more we invest in entrepreneur development the more we will have municipalities with improved revenue sources. This is the dynamic link that we intend to maintain between municipal financial viability and economic development. In our view, improving the revenue and economic base of municipalities is a key component of the current phase of developmental local government.

We intend to increase the capacity of local government institutions and their leadership to be efficient. We will allocate an amount of R135 million towards improving the quality of municipal leadership and technical capacity. As you will know, local government leaders and municipal managers are expected to exhibit a tremendous amount of service delivery initiative, commitment and expertise. That is why we will seek to support them through capacity building programmes.

It is important that the integrity of the new system of local government is preserved. We will require municipalities to engage in their programmes strictly within the principles of good governance and accountability. In the 2003/4 financial year, our department will establish an anti-corruption unit that will guide municipalities in dealing decisively with corruption. We will pursue a national anti-corruption campaign that will impose strict penalties for corruption and reward good governance. Through this programme we will mobilise and empower our communities to expose corrupt practises and work together with government to root our corruption. Most importantly, the law will take its course in instances where local government councillors and officials are on a collision course with clean and good governance.

In the last financial year, with your support, the Disaster Management Act was promulgated into law. This year, we will allocate an amount of R13.3 million to enhance our disaster preparedness and management capacity. This will go a long way towards improving human security and reducing the vulnerability of communities to natural and human made disasters.

One of the problems that face our municipalitlies is the inherited under-development, neglect and the high level of unemployment in rural areas. That is the reason why we have designed major interventions such as the Consolidated Municipal Infrastructure Programme (CMIP), the Local Economic Development Fund (LEDF) and the Integrated Sustainable Rural Development Programme (ISRDP). In this financial year an amount of R 1.2 billion will be allocated to rural projects. Of this R 1.2 billion an amount of R 307.7 million will go towards the 13 development nodes in 55 local municipalities (Annexure A).

In addition a total of R 26.7 million of the LEDF will go towards the rural nodes to unlock their agricultural and tourism potential (Annexure B). The rural nodes will also receive R 140 million of the Equitable Share. We will also allocate an amount of

R 300 000 million towards research on the impact of development programmes on poverty.

You will recall that in 1994 we inherited segregated administrations, which were made of:

• The Central government
• 10 Bantustan administrations
• 4 Provincial administrations
• Over 1200 municipalities

We now have 284 municipalities, which have been integrated to meet the objective of developmental local government. However, because of the legacy of segregation, our municipalities have uneven levels of development. It is therefore important that in allocating our budget we focus on the different capacities of the three categories of municipalities, that is, local municipalitlies, district municipalities and metropolitan municipalities.

A total of R 309million from CMIP will be allocated to the rehabilitation and upgrading of basic infrastructure for local municipalities with a budget of larger that R200 million (Annexure C). Of the CMIP amount, R 22 million will be allocated to local municipalities hosting urban nodes (Annexure D). The local municipalities will also receive R 96.1 million from the Local Economic Development Fund in order to contribute to job creation and SMME development (Annexure E). From the total Equitable Share, a total amount of R20million and R11million, respectively, will be allocated to the Local Municipalities, which host urban and rural nodes. The Planning Implementation Support System (PIMS) centres will receive financial support that will be focused on infrastructure planning and the provision of free basic services (Annexure F).

Targeted and direct support will be given to 55 municipalities in 13 nodes and 209 local municipalities who have not been able to comprehensively roll out free basic services. These municipalities will receive an amount of R 1.3 billion for this purpose. (Annexure G).

The state of infrastructure in district municipalities requires attention. An amount of

R 1.4 billion will be allocated towards the rehabilitation and upgrading of basic infrastructure for district municipalities, through the CMIP Programme (Annexure H). Of the above CMIP amount, R 307.8 will be allocated to district municipalitlies hosting rural nodes (Annexure I). From the total Equitable Share amount, R 137 million will be allocated to district municipalities hosting rural nodes.

The Department will also allocate an amount of R 11.5 million towards job creation, SMME/BEE development and local income generation projects in district municipalitlies. In view of the need to increase our human resource capacity in a number of areas, including matters of the local economy, business management and project management, the District Municipalities will be able to use these funds for training programmes.

Investment, rehabilitation and upgrading of basic infrastructure in metros will be allocated R 549 million from CMIP (Annexure J). Of the above CMIP amount, R 71 million will be allocated to metros hosting urban nodes (Annexure K). The LEDF will contribute R 9.2 million towards job creation, SMME, BEE development and local income generation in Metros (Annexure L).

Metros will also benefit from the general LED-training programme. Through the Municipal Infrastructure Investment Unit (MIIU), focus on facilitating strategic partnerships between all municipalities and public or private service providers will be strengthened. There are currently 29 partnerships of this nature. Improvement of planning in Metros will also be facilitated through engagements with the Cities Network, which we will allocate an amount of R1, 5 million this year.

Networks, engagements and partnerships will become increasingly important in governance and matters of local service delivery. Our officials, councillors and communities are increasingly being engaged in programmes that will enable them to share experiences and develop innovative ways of making our newly found democracy meaningful for all citizens. At a number of levels, people are doing their best to make the new system of developmental local government to work. Although we face a number of challenges, there are areas where our people have been successful. That is why we will continue to support these networks and partnerships.

In view of the importance of Provincial Government in inter-governmental relations, our Department will introduce targeted support programmes to Provinces. These programmes focus, amongst other things, on;

• Supporting the Premiers’ Offices to coordinate Inter-Governmental Relations within provinces and with national government;
• Aligning provincial plans with local government plans (the Provincial Growth and Development Plans – PGD’s - and the Integrated Development Plans – IDP’s). In effect, this means that the National sphere of government will have to take into consideration these provincial and local government plans before pursuing programmes in Provinces; and
• Working with National Treasury in supporting provinces to implement the Municipal Finance Management legislation.

6. STABILISING THE IGR SYSTEM

The overall theme which our Department will follow this year is that of:

This is the context within which the Provincial Support programmes, mentioned above, will be implemented. In addition, we intend to provide more legal certainty to matters of planning, budgeting and implementation within the three spheres. We will therefore propose an Inter-Governmental Relations Bill, which will deal in detail with these matters, including the following:

• The elimination of unfunded mandates to municipalities, where applicable, by managing the assignment of powers and functions to municipalities;
• The predictability of fiscal allocation processes to municipalities; and
• A clear framework for interaction, which will result in government officials spending more time on implementation and less on processes that impede implementation.

We intend to add value to the work of government. As we implement this year’s programme, our main focus will on the people we serve, the public, and the taxpayers who expect quality services from government. Our Department is committed to contributing to a better life for all South Africans.

It is within this context that our organisational value chain is premised.

1. Public participation and empowerment
2. Provision of Free Basic Services at local government level
3. Provision of basic Infrastructure and Local Economic Development
4. Development of local government systems, capacity and leadership
5. Contributing towards a predictable Inter-Governmental Fiscal Relations system and enhancing Municipal Viability
6. Targeted Provincial Support programme
7. Integrated Development Policy and Programmes

The components of this value chain are interrelated. Departmental programmes cannot be implemented in silos, and thus the need for internal integration within the Department, before we talk of external integration.

High-level business plans which indicate how the Department’s budget priorities will be implemented (Annexure M), are available. Details of each programme and the associated institutions will be discussed over the next four days.

Soon this quarter, our Minister, Mr F S Mufamadi will table the Department’s Policy and Budget in Parliament. As we conclude, we look forward to meaningful discussions with the Honourable Members today. We are mindful of your critical and constructive inputs in previous sessions with the Department. As the State President said during the 14^th February 2003 State of the Nation Address: