I am very pleased to address you today and convey our appreciation to you for coming to this important meeting.
As most of you will know, government has adopted the Local Government Turnaround Strategy (LGTAS) to address the challenges of local government and ensure a stronger, more efficient and effective local government system. Over 1 100 people, representing a very wide range of stakeholders, attended a National Local Government Indaba in October last year and committed themselves to the LGTAS. As adopted at the indaba, the slogan of the LGTAS is “Local government is everybody’s business”.
We made it very clear from the outset that government alone cannot implement the LGTAS effectively. We need everybody involved, the private sector, trade unions, State-owned Enterprises (SOEs), non-governmental organisations (NGOs), community-based organisations (CBOs), experts, municipal residents and whoever else. We’re in this together. Of course, government will take overall responsibility to implement the LGTAS, but our success depends significantly on the effective participation of a range of other actors.
The private sector and the SOEs have a crucial role to play, hence this meeting, hence our new “Business-adopt-a-municipality” campaign.
Essentially, the “Business adopt-a-municipality” campaign is a new initiative to mobilise the private sector to play an increased role in the efforts to turn local government around.
Clearly, business cannot function effectively without effective municipalities. The costs of doing business increase significantly with dysfunctional municipalities. How do businesses function if there isn’t a constant supply of electricity? Or water runs out? Or the roads have potholes? Or refuse is not being collected regularly? Or business licenses and other applications are not approved in time? Business has a vested interest in effective municipalities.
And municipalities have a vested interest in ensuring that businesses thrive. How do municipalities function if they do not get enough rates and services revenue from businesses? If businesses are unable to create new jobs? If businesses are unable to transfer managerial capacity, new technology and specialised skills to municipalities?
So municipalities and business need each other now, more than ever before. The challenge is to find each other. To establish terms for a mutually beneficial relationship. It’s towards this end that this meeting is being held.
We are, after all, seeking to forge a developmental state. This means the market and state working together as part of an overall national plan. The National Planning Minister and just appointed National Planning Commission (NPC) are to begin work on this plan. And business is well represented in the NPC.
The SOEs in particular with their more developmental role have an added responsibility to ensure better engagement with municipalities. The LGTAS is the best point of entry for businesses into municipalities. Business played an important role in shaping the LGTAS. Now you have a responsibility to help to implement it effectively.
Besides fully acquainting yourselves with the LGTAS, you might also want to look at “The state of local government in South Africa report” on which the LGTAS is based. This report flows from an interactive, hands-on assessment of municipalities throughout the country done between May and September last year. Essentially, the report concluded that while some municipalities are performing well, municipalities in general are in distress.
A fuller presentation on the LGTAS is to be offered to you later this morning. But among the reasons for the failure of municipalities to perform effectively I want to draw attention to for now are the following:
* Inadequate resources to address both the economic and social infrastructure
* Lack of capacity and shortage of skills, particularly in regard to technical, financial and administrative capacity and systems.
The National LGTAS Framework revolves around a 10-point plan that includes the following of immediate relevance to business:
* Improving the quantity and quality of municipal basic services to the people in terms of access to water, sanitation, electricity, waste management, roads and disaster management
* Enhance the municipal contribution to job creation and sustainable livelihoods through Local Economic Development (LED).
Within the National LGTAS Framework, each municipality is finalising its own municipal-specific turnaround plan, which will constitute the core of the Integrated Development Plan (IDP) that provides the framework for the municipality’s budget to be implemented from 1 July. Businesses in each municipality should play an active role in shaping these municipal-specific turnaround plans. If you haven’t played a role yet, you should reach out to your municipality and seek to do so. It is crucial that businesses have a say in a municipality’s IDP and turnaround plan on an on-going basis.
There are many areas in which municipalities and businesses can work together. Businesses can help municipalities with financial, planning, administrative, technological, managerial and other skills. The greater efficiencies that would result will provide a better environment for businesses to flourish. What is certainly clear is that the inefficiencies of municipalities impacts negatively on the output of businesses.
Businesses can also play a more active role in LED. There are public-private partnerships that businesses could enter into with municipalities. There are various mechanisms available for government and the private sector to cooperate and these include:
* lease contracts and concessions
* build-operate and transfer (BOTs) arrangements
* public-private joint ventures
* informal and voluntary cooperation.
Areas of cooperation could include:
* The construction and operation of water, sewer, and waste treatment facilities
* Contracts and concessions for other services and the management of facilities
* The co-ownership or co-financing of projects
* The development and implementation of economic initiatives such as ecotourism
* The strengthening of the systems of municipalities to support accelerated service delivery.
Another possible way of cooperation with the private sector is through what in other countries, notably Brazil, is called public passive investment. This refers to where state guarantees and incentives reduce private companies’ costs or increase the potential for profits in activities that would, in their absence, seem risky or unprofitable.
These incentives may ultimately be less costly for government than providing services directly. Guarantees and incentives can mobilise private sector financial resources that would otherwise not be available to the government and assure that services are provided more flexibly and efficiently than by government. However, both government officials and the private sector can abuse the guarantees and incentives unless they are monitored and supervised. And any such guarantees and incentives must be part of the overall IDP which should provide for a variety of partnerships, including with NGOs and CBOs. There needs to be more discussion about this option.
The LGTAS classifies municipalities into degrees of vulnerability. Business can shape their approach to municipalities according to this classification. The most vulnerable are often in the rural areas. It is important for businesses to assist these municipalities for many reasons. One of them is that by strengthening rural municipalities, the flow of migrants into the towns will be reduced, so easing the stresses on the infrastructure and services of urban municipalities. This, in turn, means that the pressure on infrastructure and services that the private sector uses is reduced.
But if business is prepared to work with municipalities, are municipalities prepared to work with business? Not necessarily! We admit that not enough has been done to ensure that municipalities are attuned to the value of working with business. Cooperative Governance and Traditional Affairs Department (COGTA) and South African Local Government Association (SALGA) will work towards ensuring this.
Municipalities need to show political and strategic leadership in engaging with business. And COGTA and SALGA need to assist them to acquire this.
Councillors and officials must see engagement with businesses as a way of developing the municipality, not as a means of advancing their own interests.
As COGTA, we will work closely with the provincial departments of local government to educate municipalities about the importance of the “Business-adopt-a-municipality” campaign. We will raise awareness of the campaign at the SALGA National Assembly next week, at which municipalities from the country over will be present.
COGTA will have a special team with a coordinator to ensure the success of the campaign and assist businesses having difficulty with accessing municipalities. The provincial departments of local government will also be drawn in to play a role. We will also assist with profiles of municipalities. COGTA will also play a role in finalising Memorandum of Understandings between businesses and municipalities where required to do so.
We are also to work closely with other departments on this campaign, particularly, the Department of Trade and Industry, Economic Development Department and National Treasury.
We need to also strengthen the capacity of municipalities to manage, monitor and evaluate projects done with the cooperation of business. We need to boost municipal capacity to draw lessons from these experiences and appropriate them accordingly.
There are various other COGTA programmes that will facilitate a better relationship between business and municipalities. Among them are the reviews of the local government equitable share (the share of the national fiscus allocated to local government), the municipal infrastructure grant, and capacity-building and anti-corruption programmes.
But business also needs to be pro-active. At present, municipalities vary considerably in their willingness to work with business. There are certainly municipalities that will respond quickly to offers of help from business. And the business representative organisations present here could also help by informing their members of this campaign and why they should get involved. We are certainly willing to offer COGTA representatives to address meetings of business chambers and other organisations on the campaign.
In calling for more active involvement of businesses in municipalities, we are not seeking to privatise the state. We see this as part of our attempts to forge a developmental state and to give more effect to the model of developmental local government that we subscribe to. The role of businesses in municipal investment will become clearer as the National Planning Commission (NPC) and government finalise the national development plan. This call on business is part of government’s attempts to get a range of stakeholders, including NGOs, CBOs, trade unions, experts and others, to assist in strengthening municipalities.
Of course, whilst looking at new opportunities to work with businesses, we want to acknowledge the cooperation we have received from businesses. We recognise the support of the Afrikaanse Handel Instituut (AHI) in dealing with the sewage spillages in some municipalities, the contribution of Old Mutual through the Ilima Trust, the role played by the Business Trust in the provision of infrastructure projects and the Development Bank of Southern Africa (DBSA) through the Siyenza-Manje Programme. Their contributions have certainly improved the state of several municipalities.
The challenges of local government are huge. We will not be able to address them overnight. We cannot as government do it alone. We need your help. And you need our help. We’re in this together. Local government is the business of business. The sooner we realise this, the better. The sooner we act on this, even better!
Issued by: Department of Cooperative Governance and Traditional Affairs
4 May 2010
Source: Department of Cooperative Governance and Traditional Affairs (http://www.cogta.gov.za)
