at the Annual South African Local Government Association (Salga) Budget week,
Taung
12 July 2007
It is once again an honour and an inspiration for me to have been invited to
be part of this year's Salga Budget Week. It is also a real privilege for me
and a tall order to be given an opportunity to deliver a keynote address in
this august occasion.
It behoves me, on behalf of Premier Edna Molewa and the provincial
government, to take this opportunity to thank all our councillors and officials
who have committed themselves to delivering services to our people.
The importance of local government derives largely from its position as the
critical interface between the government service delivery system and the
people. It is with this understanding of the importance of local government
that we have always strived to capacitate our municipalities so that they are
able to tackle the challenge of reducing poverty among our people.
It is for this reason that we have always emphasised the importance of each
and every ward councillor to be the custodian of all the critical information
on economic activities, unemployment and poverty in their respective wards. In
fact, ward councillors need to be familiar with the poverty profile of the
families in their areas.
At least, they should know the most indigent families in their areas and be
certain that they are accessing social security grants. That is the most
tangible form of public service at ward level.
Over and above familiarity with the poverty profile of their wards, each
ward councillor needs to be familiar with new economic investment activities
and trends as well as growth potential in their ward and municipality.
It is only when such information is at their fingertips that they can
influence council to develop informed strategic Integrated Development Plans
(IDPs) and Local Economic Developments (LEDs). This will help reduce the number
of indigents as more and more people will be able to generate some form of
income and help relieve pressure from the municipality to provide free basic
services.
There is consensus in government that no municipality will be able to
achieve proper development if it is not financially stable. This implies that
for a municipality to be able to facilitate real economic growth within its
area of jurisdiction, it must be able to manage its finances first.
Over the past six years, our municipalities have experienced a number of
challenges in areas such as financial management, especially financial
accountability and effective revenue collection and the implementation of
capital projects. Slowly but surely, we have been striving to improve this
situation and I must say some of our municipalities have been responding very
positively.
Since the past two years, the province has shown significant improvement in
utilising the Municipal Infrastructure Grant (MIG) to provide basic
infrastructure and eradicate service delivery backlog. In the past financial
year several municipalities managed to spend 100% of their allocations and they
must be congratulated for that.
There was also an overall 27% improvement in infrastructure expenditure and
I think this is a positive step towards the right direction. I must hasten to
say, though, that there are some municipalities that are still disappointing
when it comes to spending their MIG allocations. Perhaps SALGA will have to
work out strategies to try and assist in pulling everybody to improve in this
regard.
It is also encouraging that during the 2005/06 financial year, all our
municipalities managed to submit financial statements to the Auditor-General.
However, it is of serious concern that eight of them did not submit their
statements within the required deadline due to vacant Chief Financial Officer
(CFO) posts and other capacity problems.
It is therefore sad to realise that we still have municipalities that
struggle to account for their finances as stipulated by law. I hope this body
will help in alleviating this problem once and for all.
About five municipalities in the province currently do not have CFOs, which
is a matter of great concern. But I hope we have already learned from past
experience that we should not leave critical posts such as that of CFO vacant
for a long time.
I am told all the municipalities in the province have already approved their
operating and capital budgets for the 2007/08 financial year with a combined
budget for all municipalities sitting at R5,84 billion. Without the necessary
financial management systems and skills, the bulk of this money may not benefit
the communities we serve.
We must therefore ensure that we improve our systems and policies and
appoint people with the right skills for the job in order to have better
outcomes. Community engagement will also be necessary in order to ensure that
our people understand and support our development programmes.
Further strategies must be employed to try and increase our collection rate
of municipal revenue. It has been brought to my attention that municipalities
in the province are owed at least R2,6 billion that they are struggling to
recover. This amount is more than the R2,36 billion that municipalities have
budgeted for capital projects, this financial year.
The most affected municipalities are Merafong, Matlosana, Mafikeng and
Rustenburg, which are owed between R297 million and R682 million each. Of
particular concern is that almost R400 million of this is owed by government
departments.
Good revenue collection strategies are therefore needed to recoup this money
as a matter of urgency. One of the challenges we are going to grapple with in
the next four years is to achieve the alignment of development plans of all
three spheres of government. The national government has promised us the
requisite support in order to realise this critical imperative.
In terms of the Municipal Finance Management Act (MFMA) municipalities are
expected to table their draft budgets by 31 March which is 90 days before the
start of the budget year and out of the 25 municipalities in the North-West
province only eight municipalities met the stipulated timeframes in terms of
the draft budget.
Only 22 municipalities adopted their budget on or before 31 May 2007. This
matter was referred to the MEC for Finance to pro-actively engage with the
responsible municipalities to elude the consequences of not adopting their
budgets.
From the municipalities that submitted their draft budgets on time, about
nine municipalities were analysed and the following are the most common problem
areas identified:
1. low allocations in terms of the capital budget
2. municipalities still depend entirely on government grants to fund the
capital infrastructure programmes. In some municipalities it is as high as
95%
3. collection of revenue is still a serious challenge to our municipalities.
The total debt in the North West is estimated at R1,8 billion of which a great
portion of it is irrecoverable
4. lack of clear linkage between the budget and the IDP
5. credibility of the budget is still lacking.
In light of the sequential nature and prescribed timelines of all the key
issues in the MFMA, My department has planned to engage all municipalities with
an incremental approach. This would give priority focus on:
1. The effective and efficient implementation of 2007/08 Budgets, which
entails effective monitoring, consistent and timeous reporting by our
municipalities in a prescribed manner.
2. Analyse quarterly expenditure reports from municipalities and submit to
legislature and publicise this information to our community to make sure that
our communities are well aware of how municipalities are performing.
3. Encourage and assist municipalities with the establishment of internal audit
sections and audit committees.
4. Assist municipalities towards significantly improving on the audit opinions
of 2005/06.
5. Assist our municipalities with the General Recognised Accounting Practices
(GRAP) and General Acceptance of Management and Accounting Practices (GAMAP)
especially the medium capacity, as they are expected to comply with GRAP
requirements by end of August 2007.
6. Assist municipalities with the compilation of 2006/07 Annual Financial
Statements which must reflect the quality and integrity of the information and
most importantly reflect the true financial performance and position of the
municipality.
7. Assist municipalities with the revenue collection and enhancement.
I wish to take advantage of the platform to record my appreciation of the
co-ordinating work your organisation is doing to make our municipalities and
councils function better. This function is going to progressively increase if
the face of our province is to transform evenly within the remaining years of
your term of office.
Our programme for this term is unambiguous: "We want electricity for all. We
want water and sanitation for all." Our politics are about economic
development, and the rollout of infrastructure.
We must become activists and self-made experts on the implementation of all
these programmes.
The success of our local government system must not be predicated on some
highfaluting behaviour or genius officials, but rather on an understanding the
system of local government within the cornerstones of a developmental state.
That is, the existence and practice of sound developmental 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 of a better tomorrow. We owe it to our people! We dare not
fail.
I thank you!
Issued by: Department of Finance, North West Provincial Government
12 July 2007
Source: North West Provincial Government (http://www.nwpg.gov.za)
