M Mabuyakhulu: Institute of Municipal Finance Officers
Conference

11 September 2007

Programme Director
Mayors present
The President of the Institute of Municipal Finance Officers (IMFO), Mr Victor
Cheune
Absa Corporate and Business Bank Exco Member, Oscar Grobler
The General Manager of Absa Public Sector, Ike Nxedlana
Municipal managers present
Municipal Finance Officers from across the country
Ladies and gentlemen

We wish to extend our gratitude to the organisers of this very important
conference for inviting us to share with you some of our ideas on the critical
subject of municipal finance. This meeting takes place at a time when local
government has come to rank among the issues which dominate the public
discourse in our country. It is however inspiring to observe that most of the
debates are coalescing around the need for all of us to find efficient ways to
run the affairs of our municipalities. This IMFO conference is one of the steps
that are intended to give further momentum to such a praiseworthy
endeavour.

Programme Director, allow me to convey to this Conference, the apologies of
the Minister of Provincial and Local Government Affairs Mr Sydney Mufamadi who
had planned to be part of this gathering but, due to other commitments, could
not be here. The Minister had really wanted to participate and make an input in
this Conference.

A wise person once commented: "The spirit of a people, its cultural level,
its social structure, and the deeds its policy may prepare all this and more is
written in its fiscal history, stripped of all phrases…. The public finances
are one of the best starting points for an investigation of society, especially
though not exclusively of its political life."

Indeed, Programme Director, we share the belief that the state of our public
finances depict the state of our society. We say this because we have no doubt
that the way we handle our finances has a knock on effect on all the aspects of
our lives as a people.

In other words, Programme Director, if we as a society are able to optimally
use our public finances, this will have a direct effect in improving the lives
of our people. The converse is also true. This means that as local government
practitioners entrusted with the responsibility to handle the purse strings of
our municipalities, our jobs entail more than just juggling the books but we
have a responsibility to ensure that everything we do is aimed at changing the
lives of our people for the better.

Municipal finances in particular play an important role in the daily lives
of our people. Our ability to access services such as water, electricity,
refuse removal and safe sanitation depends on the efficiency with which the
finances of our public institutions especially municipalities are managed and
utilised. For a long time, Programme Director, there has been a misconception
that public finance is the preserve of the elite few. This is largely due to
our history, where the majority of our people were denied the opportunity to
take part in making decisions that would have an impact in their very lives. We
believe that we need to demystify this. However, over and above this, the
nature of our democracy, which is characterised by public participation,
enjoins us to ensure that our people participate in all aspects of their
government including finance. Community involvement in the allocation of public
financial resources ensures that all of us are aware of the development targets
set for that particular municipality as well as the level of accountability.
When fully implemented, we have no doubt that municipal finance as a field,
will decrease the number of stand-offs between the municipalities and
citizenry, particularly on service delivery issues, because everyone will know
what to expert and when.

Therefore, it is incumbent upon all of us, particularly as people who are
responsible for ensuring that the finances of municipalities are in a good
shape, to ensure that we demystify the concept of municipal finance as the
preserve of the few and that our people participate in the determination of the
disbursement of financial resources. We want to commend those municipalities
that have already begun to demystify the concept of municipal finance through
concerted efforts like pre-municipal budget izimbizo.

While this is a good foundation from which to build, we believe that we need
to take this a step further and ensure that within our municipalities all
officials have at least a basic grasp of the various tenets municipal finance.
Municipal finance is a strategic function. It is, therefore, strategic for all
officials and politicians within a municipality to have an understanding of
municipal finance.

All of us are aware of how crippling a blow it can be to a country's
development aspirations if that country is perceived not to have its finances
in order. The international donor agencies and lending institutions give such a
country a wide berth and do not consider it for investment. The reality of the
rough and tumble world of globalisation is that South Africa, as an emerging
market, is competing with a host of other countries which want to attract the
much-elusive foreign direct investment. As all of us are aware, investors do
not make sentimental decisions, but make decisions based on what will be the
return on their investment. This means that we have to constantly improve on
how we handle our public finance in all the spheres of our government.

Bringing it closer to home, the public finances of a municipality determine
whether that municipality succeeds or fails, whether it indeed can attract aid
or investment that will enable it to invest in service delivery and achieve its
developmental mandate as enshrined in the Supreme Law, our Constitution.

Our municipalities are a physical expression of our government's efforts to
better the lives of our people. While it has almost been reduced to a cliché,
the phrase that local government is at the coalface of service delivery remains
true and relevant even in this second era of our system of local government.
All the undertakings made by the President, Premiers, the MECs and Mayors are
implemented at local government level. For most of the population of our
country, the only government they see is local government.

Therefore, we need to honestly respond to the question: "If public finances
are the best point to start when investigating the state of any society, what
picture does such an interrogation of our finances at local government paint
about our society?" Are we, as municipal finance officers, proud that the
picture tells a beautiful story?

Particularly because we are in the province of KwaZulu-Natal, we will share
with you some of our insights and experiences on the state of municipal
finances. We will do this, conscious of the fact that our system of local
government, in its current form, is fairly new and, therefore, might be in some
instances, beset by teething challenges which can only be resolved by getting
better at what we do. Because we have entered a virgin territory, there are
many challenges that we had to overcome along the way. However, because of many
historical factors not least the fact that our people have justifiably high
expectations, we had to hit the ground running.

We are proud of the strides that have been made in our province in ensuring
financial prudence and astuteness. In the financial year 2006/07, most
municipalities in our province improved in compliance and met the statutory
deadlines of adopting their budgets and submission of their financial
statements to the Auditor-General.

This is despite the capacity constraints hampering the process in those
smaller municipalities which are inadequately staffed and where reliance is
often placed on outsourcing of services to give effect to the provisions of the
Municipal Finance Management Act. In addition, there is no longer any backlog
in submissions of annual financial statements by municipalities in this
province.

This might seem like a victory so humble that it is not worth mentioning at
this meeting but given the mammoth task required of us in the implementation of
the financial reforms highlighted in the Municipal Finance Management Act, it
is imperative that we start at least with compliance before we can boast
financial management success. In other words, Programme Director, we need to
crawl before we start running.

In the light of the magnitude of the financial management reforms required
of local government, including the changing frameworks, norms and accounting
standards, it is important that we understand the environment with its
shortcomings in order that we can positively and progressively realise sound
financial management and governance.

Despite the dynamic and constantly changing municipal environment,
KwaZulu-Natal prides itself in reaching compliance at all levels, pitching our
municipalities as amongst the best run in the country. Strengthening the
capacity of municipalities and providing support on an ongoing basis has
improved the financial and institutional position of municipalities. However,
despite the giant strides we have made, our municipalities are still facing
numerous constraints.

The reality is that whilst we may have many chartered accountants, with all
due respect to the profession, we have limited municipal financial managers in
the market resulting in a general lack of capacity, skills and experience in
this functional area.

Also indicative of the lack of capacity and shortage of skills, is the fact
that municipalities are constantly experiencing an abnormally high percentage
of staff turn-over in finance and an inability to attract qualified and
experienced staff in certain municipalities.

In some cases, poor decision making or municipal finance officials who do
not display fiscal and financial discipline resulting in irregularities at
critical stages in the financial cycle, lead to such lapses in municipal
capacity. Indeed, the reports received from the Auditor-General in the previous
financial years clearly indicated to us that improving the treasury in our
municipalities is an urgent task.

A combination of short and long terms strategies are necessary to improve
performance but the long term empowerment strategies will ensure
sustainability. Based on this, it is therefore critical that all stakeholders
become involved in the process of developing capacity and empowering our people
towards achieving a "better life for all". This requires the commitment of
numerous stakeholders, the most important in this instance being government,
the private sector and academia. These three stakeholders in the form of the
Department responsible for Local Government, ABSA Bank, the University of
Pretoria and the Institute of Municipal Finance Officers (IMFO) have taken the
developmental state to higher level by partnering in the development of this
Municipal Finance Development Programme. The programme is intended for Chief
Financial Officers, Heads of Departments, and other officials involved in
municipal finance. It provides the background necessary to understand the
management function and financial relations applicable to Local Government.

The local government transformation process reached a critical milestone
with the launch of Project Consolidate in October 2004. This Municipal Finance
Development Programme has been specifically developed as an initiative under
government's Project Consolidate plan of action in order to build the capacity
of municipalities. In addition, it creates important linkages and has been
aligned to other skills development programmes including the programme
developed by the National Treasury. This is commendable in an environment where
co-ordination and alignment are paramount to ensure that the application of
limited resources is maximised.

Programme Director, it is a widely-publicised fact that our municipalities
have limited financial resources, yet they are expected to carry out a lot of
tasks.

Training and capacity building sometimes gets sacrificed for more urgent
tasks, like water provision and laying of infrastructure. We are therefore
heartened by the fact that one of our leading financial institutions, Absa has
decided to sponsor the participation of 160 local government practitioners from
120 municipalities to participate in the Municipal Finance Development
Programme. This gesture is accentuated by the fact that participants in the
programme come from small municipalities which are in dire need of
capacity.

This is in line with the objectives of Project Consolidate and the bible of
local government, The Five Year Local Government Strategic Agenda, which
specifically highlights the current imperatives for accelerating Local
Government transformation, requiring us to significantly augment the capacity
of government as a prerequisite for accelerating sustainable service
delivery.

The aim of government is certainly to roll out an unprecedented national
capacity building, training and support programme to local government over the
next five years and to mainstream hands-on support to local government to
improve municipal governance, performance and accountability. Government has
focused on priority actions including municipal financial viability and
management which has been identified under the key performance areas and
through the Project Consolidate Municipal Action Plans and the updated
Integrated Development Plans (IDPs). The relevant organs of state, stakeholders
and resources must be mobilised to address these priorities.

Having contextualised the programme, it is clear that this initiative will
enable us to make an impact on the state of municipal finances. It provides us
a platform for empowering people in this exciting and challenging field of
municipal finances and will address the shortfalls in the market for such
skills as well as lead to the improvement of municipal capacity. The investment
by Absa in our peoples' education is sure to yield sustainable and sound
financial management and governance in municipalities as an outcome of the
programme and will certainly translate to enhancing service delivery by our
municipalities.

It is therefore an honour for us to launch the Municipal Finance Development
Programme today and we congratulate Absa, the Institute of Municipal Finance
Officers (IMFO) and the University of Pretoria on their contribution. We hope
that the efforts of these three partners will serve as a catalyst for other
stakeholders to get involved in various fields of local government with a view
to ensuring that, indeed, this sphere of governance is up to the task of
fulfilling the aspirations of our people. Public private partnerships are no
longer a luxury but a necessity for sustainable development.

We trust also that municipalities will take advantage of this wonderful
opportunity and we will certainly reap the benefits going forward. We have no
doubt that with the introduction of this programme, the state of our public
finances will, when investigated, gradually begin to paint picture of a nation
healing itself.

I thank you.

Issued by: Department of Local Government, Housing and Traditional Affairs,
KwaZulu-Natal Provincial Government
11 September 2007
Source: KwaZulu-Natal Provincial Government (http://www.kwazulunatal.gov.za)