a Municipal Finance Management Act (MFMA) Colloquium
2 May 2006
Honourable Premier, BEE Molewa
My colleague, Honourable MEC P Vilakazi
Chairperson of South African Local Government Association (SALGA), Honourable
Councillor Lobelo
Honourable Executive Mayors and Mayors of our towns and cities
The provincial Auditor-General, Mr Madliwa
Distinguished guests
Officials from all spheres of government
Programme Director
In Milan Kundera's first novel "The Joke," the protagonist, Ludvik, says to
his son, "I believe things have meaning, Vladimir, I see signs in the fact that
it was you they chose to be king. I am as proud as I was twenty years ago.
Prouder."
It is with this in mind that I wish to congratulate our Mayors and Executive
Mayors in their new roles as pathfinders in our quest towards the realisation
of our peoples' wish for their 'season of hope.' We congratulate you mindful
that the challenges ahead may be colossal. This notwithstanding, I am in no
doubt that you too will make us proud because you were the brave ones who
accepted the sceptre of leadership to lead our people away from poverty and
humiliation.
However, in spite of your bravery, it is not our intention to send you 'up
the creek without a paddle.' We are steadfast in our commitment to work with
you to surmount the challenges ahead. Our collective mandates dictate that we
join together in the fight to free our people from the miasma of apartheid
underdevelopment and degradation.
Comrades and compatriots, I must draw your attention to President Mbeki's
First State of the Nation address on 25 June 1999, when he boldly declared, "We
are on course. Steadily, the dark clouds of despair are lifting, giving way to
our season of hope."
Thus, it was not fortuitous when, in his most recent State of the Nation
address President Mbeki goes even further to proclaim, "Our country has entered
its 'Age of Hope,'" declaring "yesterday was another country." Some may
consider these to be prophetic words; we think that these are words of a leader
with the palm of his hand on the heartbeat of the nation.
Clearly, it is no coincidence that we selected to highlight these
submissions by the President of the Republic of South Africa. We do this to
remind all of us that what is required of those of us who are leaders is to be
in constant touch with the masses of our people.
We can only understand the pitter-patter beat of the heart of society if we
establish a dynamic and liberating relationship with the masses of our people.
Remember, we are about and for the people who mandated us to see to their
wellbeing. Thus, we must spare no effort in ensuring that they are both the
subject and objects of the sustainable development about which we so often
speak. In this, their country's 'season of hope,' we dare not betray their
faith.
But what is the significance of this colloquium, if not to consider how best
we should move towards the realisation of this faith by our people in the
possibilities for a better life? What is the contribution of our municipalities
to the vision enshrined in the people's declaration, The Freedom Charter, that
"The People Shall Govern and there Shall be Houses, Security and Comfort?" Put
differently, what is the importance of prudently managing public resources to
sustainable development?
Programme Director, we have selected for this gathering the theme, "Towards
Sustainable Development and Financial Accountability for all our
municipalities." This is based on our view that unless public resources are
prudently managed, there can be no sustainability in service delivery. For
purposes of this colloquium, I wish to elaborate more on the notion of good
governance as a critical aspect of sustainable development as conceptualised by
government.
To paraphrase Honourable Ben Turok, key elements of good corporate
governance include accountability, proper oversight, good systems of internal
control and risk management. These are just some of the principles of corporate
governance that are essential to the notion of good governance. If we transpose
this understanding of accountability in the context of our municipal finance
regime, we will note that councils are particularly circumscribed to the
approval of both policy and budget, and to discharge oversight over the
Executive Mayor or committee. However, Council is always accountable to the
community.
Accordingly, the Mayor or Executive Mayor is responsible for policy,
budgets, outcomes and oversight over the municipal manager. Needless to say,
the Executive Mayor or the Mayor remains accountable to council.
Colleagues, it is therefore expected that the accounting officers of our
municipalities are assigned the responsibility for outputs and implementation
of council approved policies. To achieve this goal, the accounting officers are
charged with the responsibility over the whole administration, council assets
and liabilities. However, the accounting officer's accountability is to the
Executive Mayor or committee as the case may be. This level of oversight over
the Accounting Officer requires that the Executive Mayor or the committee be
assiduous about the implementation of council policy and decisions.
Accordingly, the separation of responsibility and accountability between the
political and administrative arm of council is essential in ensuring
sustainability in service delivery. In accordance with our decentralisation
regime, good governance demands that two types of accountability mechanisms
exist:
(1) mechanisms which ensure that elected representatives are accountable to
communities or voters
(2) mechanisms which ensure that bureaucrats are accountable to elected
representatives.
Against this background, it is our expectation that our Commissions will
provide us with the platform to explore further the implications of this
categorisation with a view to clarifying ourselves and thus establish a common
understanding as to what each of us is about in the implementation of municipal
finance reforms.
This notwithstanding, we also need to highlight the fact that for purposes
of efficiency and effectiveness, it is necessary that municipalities establish
and implement delegation policies that will enable each component to execute
their responsibilities without any undue interference. In this way, it will be
possible to hold each functionary accountable for their performance in
accordance with their assigned mandates. Hence, apart from understanding our
mandatory roles, there is also a need for this Colloquium to seriously consider
the optimal role that each component of the municipality will play to ensure
sustainable financial management for better municipal governance.
Programme Director, with respect to co-operative government, part of the
challenge we face is to internalise an appreciation by other departments of the
role of our municipalities in integrated sustainable service delivery.
A common intergovernmental challenge relates to the issue of unfunded
mandates and/ or fiscal dumping. In this regard, it is incumbent on both the
Provincial Treasury and the Department of Developmental Local Government and
Housing to engender an appreciation by provincial departments of the planning
and budgeting cycles of our municipalities. This may require that the two
departments co-sponsor a memorandum to the Executive Council (Exco) regarding
this matter.
As the Department of Finance, we are of the view that the Municipal Finance
Management Act has also gone a step further towards resolving the perennial
question of sustainable integrated development planning processes. In this
regard, the Act makes it possible for municipalities to develop their
Integrated Development Plans (IDPs) cognisant of national and provincial
priorities and programmes.
Further it obliges departments to make known their financial allocations to
municipalities in time for the latter to build such allocations into their
budget aligned municipal integrated development plans. As regards the mandatory
obligations of other organs of state in respect of municipalities, the
Provincial Treasury will spare no effort in enforcing compliance with the
provision of the Municipal Finance Management and the Division of Revenue Acts.
Accordingly, departments in the provincial government will be encouraged to
meet their financial obligations to municipalities in as much as municipalities
are expected to meet their obligations towards other organs of state.
However, where conflict of this nature arises between municipalities and
other organs of state, we will need to be provided with documentation necessary
to support our interventions.
Needless to say those municipalities are equally expected to make their
contribution to sound intergovernmental co-operation. Hence, they are expected
to observe the injunction to submit a number of reports to other organs of
state, including the Office of the Auditor-General. I must hasten to add that,
the response by our municipalities to this requirement has been lukewarm to say
the least.
It is our wish that the deliberations of the Commissions will assist in
identifying exactly whose responsibility it is to produce and supply these
Reports. Once that has been achieved, we must then look at how best we are
going to ensure that these Reports are indeed produced in accordance with the
law. We must emphasise here that these monthly, quarterly and annual reports
constitute significant early warning mechanisms by which government can detect
how municipalities are performing.
Colleagues, it is appropriate to pronounce our commitment as a department to
work with all stakeholders in ensuring that we support our municipalities in
their effort towards the integrated sustainable development of our communities.
In collaboration with other role players, we will facilitate the co-ordination
of all efforts to provide much needed support necessary to sustainable
municipal financial reforms.
Accordingly, we have included in your package a hands-on MFMA roll-out plan
particularly attuned towards improving financial management capacity within our
municipalities. Of course, it is our wish that this initiative should not be
seen as a substitute for Project Consolidate, but rather as a supplement that
enables us to discharge our mandate as Provincial Treasury.
Hence, our plan is underpinned by five key imperatives, and these include
the following:
* The supremacy of the Constitution: The constitution establishes local
government as a 'sphere' of government, not a lower 'tier.' This sense of
equality should always be appreciated in our interaction with
municipalities.
* The need to observe laws that govern municipalities: In this we commit to
respect the fact that the structuring of municipal institutions falls squarely
within the purview of municipalities themselves. However, in establishing their
structures, municipalities are expected to align these to the IDPs, to observe
the requirement to produce Service Delivery Budget Implementation Plans, the
establishment of the Budget and Treasury Offices and the necessary Supply Chain
Management committees to ensure transparency in procurement.
* The need for sound intergovernmental fiscal relations: There is a need for
all spheres of government and organs of state to meet their obligations to
municipalities in as much as municipalities are expected to meet theirs to
other organs of state. Moreover, every effort should be made to avoid unfunded
mandates and/or 'fiscal dumping.'
* The necessity for a clear articulation of powers and functions: As the
Provincial Treasury, we are of the opinion that a clear articulation of powers
and functions between the respective spheres of government is necessary to
ensure accountability and role-clarification. Thus, we believe that every
effort should be made to avoid unfunded mandates and appropriately allocate
functions to municipalities with the requisite capacity to discharge them.
Towards this end, we are guided by the principle that funds follow
functions.
* Finally, the balance between service delivery and capacity building: In this
respect, we are of the view that it is necessary to continuously improve
municipal institutional capacity to deliver on their mandates, but that
municipalities must not be subjected to too much capacity building training
sessions that are to the detriment of service delivery. In our view, municipal
institutional support must not disenable municipalities from spending enough
time fulfilling their constitutional mandates.
Programme Director, in conclusion, I must stress that our plan, like Project
Consolidate, 'is intended to erect the scaffolding for bridging the gap between
intentions and outcomes.' Hence, its success is not predicated on some
highfaluting behaviour or genius of officials in any sphere or department of
government, but rather on an understanding that for a developmental local
government to be effective requires the existence in practice of sound
developmental intergovernmental relations across the three spheres of
government.
It is thus my view that hand-in-hand we can become workmen and women in the
eternal construction sites building a better tomorrow. We owe it to our people
and to posterity, for history will never forgive us if we fail. But as I said
at the beginning, I am an optimist, and like Milan Kudera's protagonist, I
believe things have a meaning. I see a sign in the fact that our people have
chosen you to become their governors.
I wish you success in your deliberations.
Thank you.
Issued by: Department of Finance, North West Provincial Government
2 May 2006
Source: North West Provincial Government (http://www.nwpg.gov.za)
