PROVINCES: Less for services
Provincial and local governments take a hit as Gigaba makes trade-off for free higher education
The provincial and local spheres of government were left bruised following finance minister Malusi Gigaba’s maiden budget speech.
The minister announced that the planned spending for 2018/2019 was affected by reprioritisation and reductions that had been undertaken since the 2017 medium-term budget policy statement.
The real effect for municipalities and provincial governments was R3.2bn less to local government and R5.2bn less in the bank for transfers to provinces.
‘The reductions in the budget focused specifically on infrastructure conditional grants.
The SA Local Government Association had pleaded with President Cyril Ramaphosa before his state of the nation address that municipalities should be protected and supported in the harsh economic climate.
"The economic crunch has seen local government fiscal budget allocations shrink substantially. Insufficient funding of infrastructure projects will further undermine the very same initiatives meant to turn the economy around and create jobs," it said.
But municipalities are now out in the cold following the cuts, as the budget makes clear that this adjustment will delay delivery of some planned infrastructure.
It requires departments responsible for front-line services to exercise "exceptional care" in allocating public funds to maintain core services.
Provinces and municipalities are also expected to invest in infrastructure that can boost economic growth, and larger municipalities are expected to invest more of their own resources, offsetting some of the impact on the reductions of the infrastructure grants, and to build partnerships with the private sector.
Underspending in national and provincial governments has stabilised, while weaknesses in planning and budgeting at municipal level remain.
KwaZulu Natal received the biggest chunk of the provincial equitable share, with Gauteng receiving the second highest.
Gigaba said over the next three years, 48% of nationally raised funds would be allocated to national government, 43% to provincial government and 9% to local government.
"Of course, we would like to be able to allocate more to each sphere for service delivery, and a larger share to local government, but the reality is that the rising cost of servicing our national debt leaves fewer resources available to invest in services across all three spheres of government," he said.
Gigaba said over the medium-term expenditure framework period, after providing for debt-service costs and the contingency reserve, funds available for spending on public services would grow by an average of 7.1% a year, increasing to R1.3trillion next year, and projected to rise to R1.5trillion in 2020/2021.
One of the highlights was the drought relief to provinces and municipalities Gigaba announced in his address to the national assembly on Wednesday.
The Western Cape, Eastern Cape, Northern Cape, Free State and parts of KwaZulu Natal are affected by drought, with Cape Town facing a real possibility of taps running dry this year.
"Government stands ready to provide financial assistance where necessary. A provisional allocation of R6bn has been set aside in 2018/2019 for several purposes, including drought relief and to augment public infrastructure investment," Gigaba said.
Gigaba also said government would use the expanded public works programme to mitigate any serious economic impact of the drought, including the loss of jobs.
It was clear, however, that tough times await provincial and local governments, and by implication residents who depend on these spheres of government to deliver services to them.
DA leader Mmusi Maimane says the cuts to the budgets of local and provincial governments is one of the reasons the budget is an "is an assault on poor people".
He adds: "I would hope that we begin to grow our economy so that people will be able to find work, but what we saw today is a consequence of nine years of mismanagement under the ANC."
But Theo Venter of the North-West University’s school of business and governance, says Maimane’s comment is a cheap shot.
He says the direct trade-off made is savings on capital expenditure, to contribute to pay for free higher education. "That is the immediate trade-off, which may haunt us in the long term," Venter says, adding that there is no certainty that the education of students would give the same economic foundation that building a new highway would.