ROY HAVEMANN AND CLAIRE BISSEKER: Reforming local government should start with some simple governance fixes
Operation Vulindlela could facilitate some practical legal changes
17 January 2025 - 05:00
byRoy Havemann and Claire Bisseker
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Potholes in Evaton, which falls under the Emfuleni local municipality. Picture: ANTONIO MUCHAVE
Imagine if, when Jacob Zuma was president, he had direct oversight of the national budget and was responsible for tabling it. Or if when Ace Magashule was premier of the Free State, he was both the boss of the provincial treasury’s accountant general and had control over the provincial budget.
Yet this is exactly how it works in municipalities. Mayors table the municipal budgets. There is no concept of “the municipal treasury” or “municipal finance councillor”. Mayors table the budgets they want.
In many ways SA survived state capture because finance ministers Pravin Gordhan and Nhlanhla Nene stood up to Zuma on crucial matters. This cost both their jobs.
Of course, there is a natural tension between finance ministers and presidents. Former president Thabo Mbeki and Trevor Manuel did not see eye to eye on everything. Similarly, President Cyril Ramaphosa and Tito Mboweni often had policy disagreements. They resolved these amicably, working together to get the president’s policy objectives funded. During the state capture years it was not amicable.
Yet at the municipal level there is no such tension, with section 21 of the Municipal Financial Management Act giving extensive powers to the mayor over the budget, and section 16 requiring him or her to table it.
This is curious — the constitution states that at national level the finance minister must make these decisions. All this requires is a straightforward governance fix — a simple amendment to the Municipal Finance Management Act to increase the relative importance of the finance function, even creating a “councillor for finance”, who can be allocated accountability for financial issues.
The collapse of VBS Mutual Bank highlighted another governance problem. Action against a municipal manager can only be instituted by the council concerned, but, as the investigation into the collapse of VBS showed, both councillors and municipal managers were often being bribed by VBS or its representatives.
Section 106 of the Municipal Systems Act gives the minister of local government investigative powers, but there is little they can do if malfeasance is discovered. Again, the law just needs a bit of an upgrade.
Now imagine this scenario. Johannesburg has a water department. Let’s call it City Water. However, the revenue collected by City Water is not required for water-related expenditure — it can be used for anything, including the mayor’s VIP protection fleet.
One simple reform — as Sean Phillips, the director-general of the national department of water & sanitation argues — is to require money for water to stay with water. The same with electricity. Municipal electricity revenue should be ring-fenced to fix municipal electricity grids.
These are practical legal changes that Operation Vulindlela could facilitate. In a recent Bureau for Economic Research (BER) research note, the Impumelelo Economic Growth Lab laid out some other ideas based on a series of engagements with municipal experts.
For starters, the right people must be appointed to the job. Years of cadre deployment and political appointments have interrupted the pipeline of skilled personnel, leading to a critical shortage of engineering expertise. This has delayed infrastructure spending and compromised its quality. Municipalities invest 40% less now than they did in 2016.
In addition to appointing more engineers (and internal auditors), we recommend a strong focus on making merit-based appointments, better performance measurement, practical training and steeper sanctions for errant public servants.
Second, given the increase in politically unstable coalition governments, more must be done to insulate municipalities’ administrations from political interference. One way is the “councillor for finance”.
Accelerate reforms
The Municipal Structures and Municipal Systems acts define the responsibilities of politicians and administrators to ensure clear boundaries. However, in practice conflicting interests, political pressure and governance challenges fuel tension between the two and contribute to service delivery failure.
The third recommendation is to accelerate reforms to improve service delivery and fee collection in the provision of municipal water, sanitation and electricity. One way to do this is to create viable stand-alone entities for trading services in which management is insulated from political interference.
If done in partnership with private sector entities, municipalities could reduce their financial burden while leveraging private sector expertise, technology and capital to improve the efficiency of service delivery.
Fourth, we recommend improving the legal framework that allows national or provincial governments to take control of distressed or errant municipalities, since these interventions have largely failed. This would best be done by strengthening the relevant sections of the Municipal Financial Management Act, which is under review.
Experience also shows that early intervention is crucial and that the reasons for a municipality’s distress must be understood upfront. Among other things, administrators must be qualified and their powers better clarified; interventions should remain technical, evidence-based exercises not political ones; and clear exit plans must be devised.
In short, municipal capacity and skills must improve, political interference must be curtailed, trading services must be reformed, and the framework for municipal interventions must be refined.
Absent these changes, the economic impact of other structural reforms included in Operation Vulindlela will remain muted.
• Havemann is senior economist and head of the Impumelelo Growth lab, and Bisseker publicist, at the Bureau for Economic Research.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
ROY HAVEMANN AND CLAIRE BISSEKER: Reforming local government should start with some simple governance fixes
Operation Vulindlela could facilitate some practical legal changes
Imagine if, when Jacob Zuma was president, he had direct oversight of the national budget and was responsible for tabling it. Or if when Ace Magashule was premier of the Free State, he was both the boss of the provincial treasury’s accountant general and had control over the provincial budget.
Yet this is exactly how it works in municipalities. Mayors table the municipal budgets. There is no concept of “the municipal treasury” or “municipal finance councillor”. Mayors table the budgets they want.
In many ways SA survived state capture because finance ministers Pravin Gordhan and Nhlanhla Nene stood up to Zuma on crucial matters. This cost both their jobs.
Of course, there is a natural tension between finance ministers and presidents. Former president Thabo Mbeki and Trevor Manuel did not see eye to eye on everything. Similarly, President Cyril Ramaphosa and Tito Mboweni often had policy disagreements. They resolved these amicably, working together to get the president’s policy objectives funded. During the state capture years it was not amicable.
Yet at the municipal level there is no such tension, with section 21 of the Municipal Financial Management Act giving extensive powers to the mayor over the budget, and section 16 requiring him or her to table it.
This is curious — the constitution states that at national level the finance minister must make these decisions. All this requires is a straightforward governance fix — a simple amendment to the Municipal Finance Management Act to increase the relative importance of the finance function, even creating a “councillor for finance”, who can be allocated accountability for financial issues.
The collapse of VBS Mutual Bank highlighted another governance problem. Action against a municipal manager can only be instituted by the council concerned, but, as the investigation into the collapse of VBS showed, both councillors and municipal managers were often being bribed by VBS or its representatives.
Section 106 of the Municipal Systems Act gives the minister of local government investigative powers, but there is little they can do if malfeasance is discovered. Again, the law just needs a bit of an upgrade.
Now imagine this scenario. Johannesburg has a water department. Let’s call it City Water. However, the revenue collected by City Water is not required for water-related expenditure — it can be used for anything, including the mayor’s VIP protection fleet.
One simple reform — as Sean Phillips, the director-general of the national department of water & sanitation argues — is to require money for water to stay with water. The same with electricity. Municipal electricity revenue should be ring-fenced to fix municipal electricity grids.
These are practical legal changes that Operation Vulindlela could facilitate. In a recent Bureau for Economic Research (BER) research note, the Impumelelo Economic Growth Lab laid out some other ideas based on a series of engagements with municipal experts.
For starters, the right people must be appointed to the job. Years of cadre deployment and political appointments have interrupted the pipeline of skilled personnel, leading to a critical shortage of engineering expertise. This has delayed infrastructure spending and compromised its quality. Municipalities invest 40% less now than they did in 2016.
In addition to appointing more engineers (and internal auditors), we recommend a strong focus on making merit-based appointments, better performance measurement, practical training and steeper sanctions for errant public servants.
Second, given the increase in politically unstable coalition governments, more must be done to insulate municipalities’ administrations from political interference. One way is the “councillor for finance”.
Accelerate reforms
The Municipal Structures and Municipal Systems acts define the responsibilities of politicians and administrators to ensure clear boundaries. However, in practice conflicting interests, political pressure and governance challenges fuel tension between the two and contribute to service delivery failure.
The third recommendation is to accelerate reforms to improve service delivery and fee collection in the provision of municipal water, sanitation and electricity. One way to do this is to create viable stand-alone entities for trading services in which management is insulated from political interference.
If done in partnership with private sector entities, municipalities could reduce their financial burden while leveraging private sector expertise, technology and capital to improve the efficiency of service delivery.
Fourth, we recommend improving the legal framework that allows national or provincial governments to take control of distressed or errant municipalities, since these interventions have largely failed. This would best be done by strengthening the relevant sections of the Municipal Financial Management Act, which is under review.
Experience also shows that early intervention is crucial and that the reasons for a municipality’s distress must be understood upfront. Among other things, administrators must be qualified and their powers better clarified; interventions should remain technical, evidence-based exercises not political ones; and clear exit plans must be devised.
In short, municipal capacity and skills must improve, political interference must be curtailed, trading services must be reformed, and the framework for municipal interventions must be refined.
Absent these changes, the economic impact of other structural reforms included in Operation Vulindlela will remain muted.
• Havemann is senior economist and head of the Impumelelo Growth lab, and Bisseker publicist, at the Bureau for Economic Research.
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