Chairperson, Mr Yunus Carrim;

Honourable members of the Portfolio Committee;

Ladies and Gentlemen.

We stand before you today to present an overview of the major areas of progress in the past years, challenges and priorities for the future. This input follows a general briefing that our Department presented to Parliament during special induction sessions of new members held on 18 May 2004.

The year 2004 has provided an opportunity for our people and all sectors of society to have a collective appreciation of the dividends of our ten years of democracy. in the context of provincial and local government, democracy has brought with it fundamental transformation and a change in our people's lives for the better.

The most significant achievement in the area of governance since 1994 has been the dismantling of the apartheid state and the establishment of a nonracial, democratic, unitary state. This fundamental transformation saw a shift from over 1200 racially-based local authorities, four provincial administrations and ten bantustans into 284 democratically elected municipalities, nine provinces and a strong national government.

State transformation was made possible by peaceful and fully-democratic elections that took place in 1994,1999 and 2004 for the national and provincial spheres of government as well as the 2000 local government elections.

Support for local government transformation, by national and provincial spheres, received particular focus in the second term of this democratic government. This resulted in the establishment of a progressive policy, an institutional framework and a regulatory environment conducive to developmental local government.

The intergovernmental machinery of the State is steadily improving. National, provincial and local government are increasingly working together in a co-ordinated manner on key national priority programmes such as municipal infrastructure investment, the provision of Free Basic Services, the Urban Renewal Programme and the Integrated Sustainable Rural Development Programme.

Utilizing some of the programmes mentioned above, massive public and state resources have been set aside to create quality jobs and alleviate poverty. Thus it can be said that, as we enter the Second Decade of Freedom, our evolving system of integrated governance is increasingly making it possible for the country's development objectives to be met.

At the same time, the year 2004 has provided our Department with an opportune moment of strategic reflection, informed by the voices of our people during the election period. The budget for the 2004/5 financial year and the medium-term has therefore been informed by the electoral mandate that our government has received from the people and the appreciation of the road we have traversed thus far.

The dplg priorities and programmes have been aligned to government's broad strategic outlook, which encompasses the following:

(i) Building a people's contract that will unite South Africans in efforts to create work, fight poverty and reinforce national pride;

(ii) Improving the performance of the State through focused implementation, better integration, alignment across all spheres of government and direct contact with the people;

(iii) Addressing the consequences of social transition, including interventions to address the two economies paradigm and better focus on the National Spatial Development Perspective (NSDP); and

(iv) Improving the regional environment and implementing the New Partnership for Africa's Development (NEPAD), including interventions to restore socio-political normalcy and achieving high growth in the Southern African Development Community (SADC).

It is within this context of an encompassing framework that we propose the allocation of the dplg budget.

he dplg budget has increased from R9,4 billion in the 2003/4 financial year to R12,8 billion in the 2004/5 financial year, representing an increase of 35,8 percent. Our detailed report for the past year and financial statements reflect that the department has utilized 99,7 percent of its budget and has gone a long way to improve the quality of spending.

In our view, this is a significant achievement and in the new year, the Department will continue its efforts to improve the use of funds economically, efficiently and effectively

Over the medium term, it is expected that at least R14 billion and R15 billion respectively will be allocated for the 2005/6 and 2006/7 financial years.

Of the R12,8 billion total allocation the dplg has received for this financial year, an amount of R7,6 billion represents the equitable share that will be transferred directly to municipalities. In view of the need to consistently enable municipalities to deliver on their constitutional mandate, more work will be undertaken in this area.

The dplg, as mandated by Cabinet and the President in the State of the Nation Address in May 2004 will work with National Treasury and the Financial and Fiscal Commission (FFC) to refine the intergovernmental fiscal relations system as it relates to local government in particular. This body of work will entail the following elements:

(i) A major review of the local government equitable share and formula;

(ii) Critically examining the existing fiscal and funding instruments for local government;

(iii) Assessing and ensuring that there is institutional capability to manage these resources at municipal level; and

(iv) Strengthening the revenue-raising powers and capacity of municipalities within a national economic growth path.

With regard to the latter, we would like to thank Parliament, the previous Portfolio Committee and Select Committee for your valuable insights and commitment towards the finalization of the Local Government: Municipal Property Rates Act. This piece of legislation was finalized in 2003 in Parliament. The Act will provide a legal framework for a property rating system, whilst at the same time, introducing innovation in administration and improving revenue collection at local level.

The Department intends to contribute in major efforts that are directed towards job creation and poverty alleviation in our country. To this end, the dplg will be launching the Municipal Infrastructure Grant (MIG) whose major expected benefits will include:

· Improving access to basic levels of service, especially to the poor;

· Creating a broader, more robust basis and enabling environment for local economic development; and

· Increasing opportunities for job creation through close collaboration with the Expanded Public Works Programme.

This flagship programme of MIG resulted from a rationalization of several national government infrastructure programmes and grants. Over the next three years an amount of R15,6 billion has been allocated for the Municipal Infrastructure Grant with R4,4 billion earmarked for the 2004/5 financial year. In addition to this amount, an amount of P21 ,8 million has been allocated to the Municipal Infrastructure Investment Unit (MIIU). This Unit was established in 1998 to assist municipalities find innovative solutions to infrastructure investments and management. As indicated by our President, the focus of government's infrastructure programme will be in the 21 rural development and urban renewal nodes.

The dplg provides a co-ordination role with regard to the implementation of the government's policy on free basic services, particularly with respect to water, electricity, sanitation and refuse removal in municipalities.

In the 2004/5 financial year, we will work closely with key stakeholders in an effort to increasingly support the local government sphere in targeting the poor and improving the quality of services. These stakeholders include the Department of Water Affairs and Forestry (DWAF), the Department of Minerals and Energy (DME), the Department of Environmental Affairs and Tourism (DEAT), the Department of Social Development, State-Owned Enterprises, Public Utilities and Provincial government.

As you will be aware, a substantial amount of government's nationally raised revenue is allocated to the social security net, which includes a mileau of social grants, health and education programmes. However, our assessment of the impact of the system has pointed to the need for better co-ordination of these social grant mechanisms with municipal indigent policies that should target the poor. In the past year, there has been some varied progress with regard to this co-ordination throughout the country and clearly there is a need to provide national guidelines in this regard.

In the 2004/5 financial year, the dplg will finalise a national policy on the indigent and mobilize national and provincial government to assist municipalities in implementing government policy. The practical implications of this process will involve:

(i) The determination of the cost to provide free basic services at levels that have been approved by government. The results of this work will contribute to the review of the local government equitable share that we referred to earlier;

ii. The development of credible databases on poor households, at municipal level;

iii. The registration of currently unregistered poor households;

iv. The registration of businesses and households from where revenue is currently not being collected;

v. Improving billing systems and other customer care infrastructure;

vi. Ongoing support for councillor interaction and public participation in the form of the Integrated Development Planning (IDP) processes, Ward Committees and community development work; and

vii. Continuous monitoring and evaluation of progress in the delivery of free basic services.

Chairperson,

All of these initiatives, at local level, will be undertaken with our associated institutions. These include the South African Local Government Association which will received R55,1 million over the MTEF period, the Municipal Demarcation Board which will received R46,7 million and the South African Cities Network which will receive R4,5 million over the same period.

The role of provinces within our system of governance is of critical importance. Our department will continue to work with Provinces utilizing a targeted support programme, that takes into consideration the unique characteristics of each province.

In the 2004/5 financial year, provinces will be expected to develop Provincial Growth and Development Strategies (PODS's). These strategies must be informed by, and aligned with, the Integrated Development Plans of municipalities as well as the National Spatial Development Perspective (NSDP).

The benefit of this alignment will be a better targeting of the poor and more prudent resource allocation by all spheres of government in addressing the challenge of economic growth and development.

The national framework legislation on the institution of traditional leadership is now in place, as passed by Parliament in 2003. This Act provides the framework and environment for the institution of traditional leadership to play its role as a partner in service delivery. Provincial legislatures will announce provincial-specific legislation on the institution of traditional leadership that will give effect to the national framework legislation. At the same time, a process is underway to establish a national Commission that will deal with claims and disputes regarding the institution of traditional leadership. This Commission has been allocated an amount of R6,3 million over the MTEF period. The National House of Traditional Leaders continues to play a significant role in matters that pertain to the institution of traditional leadership and has been allocated an amount of R22,8 million over the MTEF period.

With regard to government's objective of building and reinforcing national pride, a Commission on the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities has now been established as envisaged in Section 185 of the Constitution. This Commission has been allocated an amount of R30,2 million over the MTEF period.

With regard to government's broad framework on Intergovernmental Relations, extensive work was undertaken in the 2003/4 financial year, including:-

1. Proposal on assignment of powers and functions to local government

(ii). A review of Schedule 4 and 5 of the Constitution; and

(iii.) A draft Bill on Intergovernmental Relations, which will be presented to Cabinet soon.

We anticipate that work on this Bill will feature prominently in the schedule of the Portfolio Committee in the coming months.

On the regional and international front, the department has taken steps to ensure greater participation within the formal structures of SADC.

The SADC Local Government Forum of Ministers, under the chairpersonship of our Minister, Mr FS Mufamadi, recently affirmed a decision to institutionalize the local government structure within SADC. We hope that through this programme, South Africa will contribute towards the successful implementation of regional and continental priorities. With regard to the continent, the current departmental focus is on contributing towards the establishment of a technical committee to the African Union, comprising Local Government Ministers continentally. In the long term, international initiatives will bring further impetus to our domestic programme on good governance.

Chairperson,

In conclusion, I would like to draw your attention to our organizational approach that the dplg will follow as we implement government policies and bring into practical effect all the programmes we have referred to In this presentation.

The present task of consolidating and sustaining the new system of local government requires all of us to find innovative ways of organization and engagement at practical levels. To this end, the dplg will establish troubleshooting capacity at national level to unblock bottlenecks inhibiting the transformation of local government. Provinces will develop such capacity in order that both the national and provincial sphere can practically support local government to deliver on its' constitutional mandate.

In all, the dplg's priorities are informed by Government's broad priorities on governance. The focus will be on deepening of the developmental orientation and capability of the State both in theory and in practice.

Once again, Honourable Chairperson, we look forward to fruitful deliberations.

Thank you.