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South African Local Government Association on meeting outcomes of 7 November 2019

SALGA National Executive Committee meeting outcomes Statement: Thursday, 7 November 2019, Sandton

The SALGA National Executive Committee

The SALGA Leadership

Members of the Media

Thank you for this opportunity to engage with you to discuss the current status and developments in Local government.

The South African Local Government Association (SALGA) National Executive Committee (NEC) held is ordinary NEC Meeting over the last two days. Customarily, the meeting of the NEC discusses critical issues affecting local government and shapes the implementation of predetermined objectives set by those in positions of influence and power within councils. The meeting further analyses contemporary issues and the challenges facing the local government environment and society at large. The NEC exercises authority of SALGA in between the National Conferences and National Members Assemblies and consists of the President, three deputy presidents and 6 additional members elected separately by National Conference and provincial chairpersons who are ex-officio members of the NEC.

The NEC meeting noted the following:

Municipal debt in relations to the monies owed by general households, government departments and businesses to municipalities, as well as outstanding Eskom and Water Board debt.

SALGA's response to the Medium Term Budget Policy Statement (MTBPS); concerning its

The upcoming 6th Congress of United Cities and Local Governments (UCLG) and World Summit of Local and Regional Leaders taking place on 11-15 November 2019 in Durban

Increasing outstanding debts owed by Government and Business to Municipalities

In the past weeks SALGA has been interacting with various Parliamentary Portfolio Committees in relation to municipalities owing Eskom, Water Boards and Water Trading Entities. Municipal debt in relations to the monies owed by general households, government departments and businesses to municipalities.

The issue of Municipal Arrears to Eskom Bulk Electricity Accounts remains a matter of concern for SALGA due to its dire implications on Eskom. Whilst acknowledging this challenges, SALGA's assessment confirms the following factual picture:-

Whereas municipal debt to Eskom (for electricity) and Water Boards and Water Trading Entity (for water) sits at R 25b and R14.9b respectively, debt owed to municipalities for municipal services already delivered, is currently sitting at a whopping R165.5 billion as at 30 June 2019 (Compared to R143.2 billion reported in the same quarter of the previous financial year);

The largest component of debt relates to households which accounts for 71.7 per cent or R118.6 billion;

The amount for outstanding debtors for government represents 6.2 per cent or R10.3 billion of the total outstanding debtors;

Metros consumer debts account for 49.7 per cent of the total consumer debts of R165.5 billion, of which government debt constitutes approximately R10,5 billion and business constitutes approximately R23billion;

National Public Works has the largest debt of R3.0 billion of the total R3.4 billion;

Provincial Public works, roads and transport has the largest debt of R3.7 billion of the total R5.8 billion; and

Debt over one year is R4.4 billion.

It is evident that there is a clear link between the ability of a municipality to service its debt, including that to Eskom and Water Boards, and the inability of a municipality to collect from government, business and households for services delivered. With the situation becoming untenable for municipalities who are constantly threatened by disconnections from Eskom and Water Boards, the SALGA NEC today resolved on a two phased approach to address this difficult challenge. Phase 1 is to advocate that all municipalities should urgently and aggressively enforce credit control management measures. This phases will include targeting government properties and businesses, through disconnection where there is sufficient merit, in line with their credit control policies. Phase 2 is to conduct a rigorous analysis of the gross debt and restructure debts to see realistically collectable debts and those that could be considered for write off or repeal as historical uncollectable, including installation of pre-paid meters.

SALGA reactions on the recent Medium Term Budget Policy Statement tabled in Parliament by the Minister of Finance

SALGA welcomes the Medium Term Budget Policy Statement (MTBPS) and notes that the changes effected will have a significant and fundamental impact on the Local Government Fiscal Framework for the short to medium term.

The Medium Term Budget Policy Statement as presented by the Minister of Finance on 30 October 2019 tabled a number of changes that will see the Local Government Equitable Share being reduced by approximately R3, 2b, while conditional grants were cut by R14, 2b over the MTEF or on average 11% over the next 3 years.

As SALGA we registered our concerns at the appropriate intergovernmental platforms and maintain our strong view that although the proportion of nationally raised revenue allocated to local government has increased from 3% in 2001 to 9% in 2019, it remains insufficient for many municipalities to adequately provide basic services and infrastructure to the communities they serve.

The reality is that the current state of local government revenue, compared to the assumptions that underpinned the financial model presented in the Local Government: White Paper are not aligned. Both potential and actual revenue collected by municipalities fall far short of the assumptions in that planning, implementation, management and expenditure demands placed on local government were radically extended whilst per capita revenue base to fund those demands was radically reduced. A significant number of municipalities will never come close to that target, under the current fiscal framework.

Our view is that there is no good way to make cuts to grant allocations and we want to propose for more flexibility in the roll-over conditions by National Treasury, even though Treasury argues that they are more lenient in roll overs for Local Government more than for national government.

So much has been done to persuade the Minister that local government should not be made to suffer due to the systematic and structural issues caused by the deficit in collecting national revenue but more stringent efforts are put in place to ensure that local government are enabled to carry out their mandate.

In this context, we are advocating for an alternative strategy to rather redirect resources to strategic priority municipalities, linked to the 57 priority municipalities, that will assist in anchoring the new district delivery approach, however, looking at the MTEBPS, this motivation doesn't appear to have been accommodated

UCLG World Summit of Local and Regional Leaders a game-changer and a new municipal movement

The World Summit of Local and Regional Leaders taking place next week at Inkosi Albert Luthuli International Convention Centre, Durban on 11 15 November 2019 would be a game-changer for local government and will go a long way to strengthen the impact of the municipal movement for the whole world.

We believe that the UCLG Congress will be a useful event not only for its members but also a key experience for all attendees, that will leave a mark on the city of Durban. The full 5 Days (11 15 Nov) will be spread across 400 plus speakers, over 80 sessions and 80 Countries that have confirmed attendance.

From the 1500 delegates, over 1000 are international delegates from Global North to Global South, a testimony to the interconnected world that we live in. Over 50 exhibitions, partner delegates and South African delegates will fill the various meeting rooms and halls of Inkosi Albert Luthuli International Convention Centre for world-changing conversations and dialogues.

Among the guest expected includes the Presidency of the Republic, Cabinet Ministers National and Provincial Government Departments, Premiers of Provinces and Members of Provincial Legislatures; Members of National Assembly and NCOP, Members of National House of Traditional Leadership; Executive Mayors, Mayors, Speakers, MMCs, Councillors; City Managers, Municipal Managers and CFOs, CEOs of key State Enterprises, Professional Bodies, and South African Media.

Local Government is brought together at national, regional, continental and global level under a number of banners which are, within the South African context, as follows:- National SALGA; Regional Southern Africa Regional Office (SARO), Continental United Cities and Local Governments of Africa (UCLGA); and Global United Cities and Local Governments (UCLG). The UCLG elective World Congress convenes every three (3) years with its next sitting, which will also include a sitting of the newly elected World Council and Executive Bureau, scheduled to take place as follows.

The decision to host the Congress in South Africa is a confirmation that the importance of our country as a destination of choice for many tourists and a preferred venue to host important international conferences

SALGA is of the view that the UCLG Congress must push its members to be vigilant of developing mobility, public spaces and social infrastructures that provide cohesion and fair access for all groups of society, particularly those who are more vulnerable or marginalised. Local and regional governments must be the sentinels of the dreams, creativity and rights of the youth who look at the future with hopeful eyes.

We invite members of the media and media activist to come and not just be with us but join the conversation and dialogue to shape the future of local governments going forward.

Source: Government of South Africa

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