Date: 22/10/2009
Source: Inkatha Freedom Party
Title: IFP: Liptak: Address by the Inkatha Freedom Party Provincial Legislature leader, on the KZN budget, Pietermaritzburg

Madam Speaker

The Hon. MEC's report shows that virtually every municipality in this
province is grossly underperforming, failing to deliver on its mandate, and
wasting significant amounts of public money. More than half of the
municipalities in each of the 10 districts of KwaZulu-Natal are in financial
trouble. The lack of skills, poor financial management, flawed procurement
and political interference in the running of municipalities directly
translate into declining delivery of services.

At least in principle, there is an easy solution to these challenges - the
accounting officers in the municipalities that receive qualified audit
opinions should be held accountable. The Municipal Managers, the Mayors, the
Chief Financial Officers and the relevant section 57 managers must all be
held accountable. Accountability means consequences, and action needs to be
taken against those individuals who have not properly managed public money.
Part of the problem is that maladministration is almost never acted upon,
even though the legal framework for doing so is in place. It is never easy
to cut through the local vested interests. The IFP has recently taken action
against political heads and officials in Nongoma and Indaka and, if
necessary, we will intervene elsewhere.

Hand in hand with immunity from accountability go political appointments.
They are an aberration which has seen political loyalty and factional
interests trump merit and expertise in the appointment of people to the
civil service.
The combination of these two factors has resulted in a situation in which
those people who abuse the public office for personal gain are protected
from consequences. The message this sends to the public is that corruption
is tolerated and excused. The guilty are routinely allowed to continue in
their positions and often are even rewarded with promotion. At best they are
simply redeployed, often to other spheres of government.

Another contributing factor to the malaise in our municipalities - and one
that is growing ever more serious - is the total debt of R7.6 billion
currently owed to municipalities, by both government departments and
residents. In addition, there is a long list of state institutions other
than government departments that do not pay their utility accounts. The
finance portfolio committee has made a commitment to categorise the debt
owed to municipalities by our government departments and appeal to the
relevant MECs to ease their financial distress.

Some of the blame for the sky-rocketing municipal debt rests with
municipalities themselves. At the heart of the problem is the lack of proper
billing and debt management systems. One third of the municipalities in this
province raise less than 15 percent of their own revenue while one tenth of
the municipalities raise less than 5 percent of own revenue. And yes, there
are municipalities that collect close to zero in own revenue. Many of them
have not set their rates or identified their ratepayers.

The lack of capacity to generate own revenue means that the majority of
municipalities rely for survival on national government grants, often to pay
for their own administration. Naturally, the ever increasing debt has
implications for the cash flow of municipalities. The result is a
hand-to-mouth existence when they should be delivering basic services and
developing new and maintaining old infrastructure. Precariously, almost one
third of the municipalities delegated to the provincial Treasury still use
overdraft facilities. Not only was this practice phased out by Treasury in
July last year but it makes the municipalities incur further expenses in
interest.

Equally problematic and related to the lack of municipal capacity is the
continued under-spending by various municipalities, mainly in capital
expenditure which is key to economic development. This tendency is
perpetuatingl infrastructure and impacting negatively on service delivery.
The Hon. MEC's report illustrated this point by observing that although
municipalities spend the bulk of their capital budgets on water, there are
still more than 400 000 households without access to piped water.

Madam Speaker, the long and short of this assessment is that the financial
viability of the entire local government sphere is at stake. The
municipalities in KwaZulu-Natal need leadership and support and they are
looking to the provincial Department of Local Government and Treasury to
provide it. The department has given the struggling municipalities some
assurance that the outcome of the recently undertaken local government
assessment programme was meant to assist municipalities rather than
dismantle them.

The provincial Treasury has gone a long way towards assisting municipalities
in achieving financial stability through its Municipal Support Programme.
However, the MSP itself is now under strain due to the 7.5 percent cut in
Treasury's budget. Reportedly the cutback will result in the reduction in
the number of municipalities assisted by the Municipal Support Programme
from 15 to 6.

Since November 2007 the Provincial Treasury has lent support to 9
municipalities through the MSP. This support has had a significant effect on
the 2007/08 audit opinions of the municipalities supported by the programme.
We are interested to know to what extent the budget reduction will affect
Treasury's aftercare in some of these municipalities designed to ensure the
sustainability of the improvements instituted by the MSP.

On the whole, the economic recession and related budget cuts are bad news
for those municipalities that depend on support and assistance from the
provincial government. The economic slowdown will put additional pressure on
finding solutions for the high vacancy rates in finance, career planning and
competency building in municipalities. But these difficult times can also
inspire new creative solutions to the challenges faced by our municipalities
and we in the IFP believe that they are more likely to originate on the
ground than with the government.

I thank you.