Finance minister Tito Mboweni. Picture: ESA ALEXANDER
Finance minister Tito Mboweni. Picture: ESA ALEXANDER

The long-disputed issue of the Treasury’s allocation of funds to local government is to be thrashed out at a meeting later this year, probably in June.

The local government budget forum meeting initiated by finance minister Tito Mboweni will include representatives from the Treasury; the budget council, which consists of the MECs of finance; local government MECs; the Financial and Fiscal Commission (FFC); the department of co-operative governance and traditional affairs (Cogta); and the SA Local Government Association (Salga). They will deliberate on the structure of local government finances.

Salga has argued for some time that local government is not getting a fair slice of the national revenue cake and that the formula used by the Treasury for determining the equitable share received by municipalities and provinces needs to be revised because local government’s share is insufficient, despite it being at the coalface of service delivery.

In 2020/2021 national government will get 48.2% of national revenue, provinces 43% and local government 8.8%.

The local government equitable share, which is divided among 257 municipalities, is an allowance for basic services, community services and administration, and is meant to supplement the revenue they generate themselves. Local government raises about 70% of its own revenue, but would be able to raise more if municipalities improved their revenue collection.

The FFC, a constitutional body set up to advise the Treasury on inter-governmental finances, believes that municipalities are not getting enough money from national government to provide the services they are obliged to deliver. Cogta minister Nkosazana Dlamini-Zuma also believes the equitable share formula should be revised as it does not take into account “the real needs and developmental challenges confronting the various municipalities”.

Treasury deputy director of inter-governmental relations Malijeng Ngqaleni said in an interview after briefing parliament’s appropriations committee on the Division of Revenue Bill on Thursday that the meeting will be a robust engagement around the current allocations to local government in the context of the claims that it is is underfunded.

“We will have to come up with more clarity as to how we see local government financing and maybe some clarity on what we need to do to further enhance the structure of funding of local government,” said Ngqeleni. “We all acknowledge that there is not enough money across the whole of government.”

She told MPs that having equitable allocations from national government does not guarantee that they would be used effectively to deliver services. The government is stepping up enforcement over unfunded budgets and is prepared to impose consequences for the violation of budget rules, including withholding funds in the equitable share.

Ngqaleni also noted that the division of revenue is “highly redistributive”; while national revenue was raised in urban areas, it was spent on services across the country. And that while per capita revenues from personal income tax were three-times higher in Gauteng than in the Eastern Cape, transfers per capita to the Eastern Cape were about 40% higher than those to Gauteng.

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