The challenge local governments face in investing in infrastructure has been starkly highlighted by their below-budget expenditure on capital projects in 2017.
According to Treasury figures on local government’s revenue and expenditure for the 2017-2018 financial year, released on Friday, municipal capital expenditure amounted to R58.8bn, or 82.3%, of the adjusted capital budget of R71.4bn. This means R12.6bn (17.7%) was not spent on urgently needed infrastructure such as roads, sanitation, water and schools.
SA’s local governments have been bedevilled by service delivery protests and these figures are a clear indictment of the various political parties running these municipalities.
Metropolitan governments’ underperformance was even worse: they only spent 70.6% (R26.3bn) of their adjusted capital budget of R37.3bn, an underperformance of 29.4%.
"Low capital spending has potentially serious implications for the government’s ability to meet the targets for expanded access to service delivery, as well as its job creation targets," the Treasury said in its statement on the figures.
SA Local Government Association (Salga) spokesperson Tebogo Mosala said municipalities faced capacity challenges when it came to spending conditional capital grants.
Municipalities also slacken their ability to implement and see a project through by constantly reprioritising projects. There is a general project management skills gap within the sector," he said.
The Treasury said underspending of capital budgets could be attributed to a number of factors, including the adoption of unrealistic budgets, increases in adjustment budgets, single-year budgeting, interference in governance by politicians, and a failure to roll over unspent funds. A weakness in supply chain management and poor project and contract management were also problems.
"Often delays are caused by poor planning of capital projects, appointment of incompetent service providers resulting in poor workmanship and failure to meet project milestones, high occurrence of variation orders, cost overruns, and litigation by aggrieved and unsuccessful applicants owing to the allegations of irregularities in the appointment of service providers and contractors.
Social unrest was also cited as a factor. It has resulted in the construction of infrastructure projects being halted due to communities demanding that locals be hired. High unemployment had created a desperate situation in which many jobless people were demanding jobs from on-site contractors.