Underspending by municipalities had risen from 14% in 2008/09 to 25% in 2010/11, while provincial underspending rose from 8.3% to 16% over the same period, the Medium-Term Budget Policy Statement (MTBPS) revealed.

The document said that underspending against capital budgets had emerged as a “core concern” and government was establishing capacity to help municipalities improve their planning and management of infrastructure.

At provincial level, the third phase of the infrastructure delivery improvement programme would be rolled out.

Reversing the trend would be critical to the objective to improving service delivery and changing the composition of government expenditure to achieve a more efficient balance between personnel, goods and services and capital spending.

This was particularly so for municipalities given that the recent ‘Local Government Budgets and Expenditure Review’ showed that many municipalities were spending significant amounts on nonpriority items, including unnecessary travel, luxury furnishings, excessive catering and unwarranted public relations projects. Consultants were also often used to perform routine tasks.

Altering this pattern was also important in the context of rising allocations to the provinces and municipalities over the coming three years.

The fiscal framework outlined in the MTBPS made available an additional R48-billion over the coming three years, with the provincial share being revised upwards by R20.2-billion and the local government allocation by R5-billion.

In other words, the provinces would receive 42% of the additional funding available, owing to the widened Budget deficits over the period, while municipalities would receive 11%. That would result in a provincial allocation of R384.5-billion in 2012/13 and a local government allocation of R77-billion.

“The proposed allocation of resources recognises the need for national, provincial and local government to redirect spending towards frontline services, and to reduce noncore and ineffective expenditure,” the MTBPS outlines.