Date: 22/07/2003
Source: KwaZulu-Natal Provincial Government
Title: Miller: KZN Local Government Budget Workshop
SPEECH DELIVERED BY KWAZULU-NATAL MEC FOR FINANCE, PETER MILLER, AT LOCAL GOVERNMENT BUDGET WORKSHOP, 22 July
THEME: TRANSPARENCY & ACCOUNTABILITY IN LOCAL GOVERNMENT FINANCE
TOPIC: MUNICIPAL BUDGETS - CUT YOUR COAT ACCORDING TO YOUR CLOTH
Introduction
Given the short notice and the 15 minute time slot allocated to my contribution today, I want to concentrate on three critical issues which should receive much more serious attention from municipal councils when preparing their budgets. These issues are:
1) Revenue collection
2) Personnel costs
3) National inflation targets
Revenue collection
In regard to revenue collection local government is in crisis. Nationally local government is owed 24 billion rand at the last count and this figure is rising. The enormity of this problem is mind-boggling and municipalities seem to think if they ignore it, it will go away.
Given that a budget is in reality nothing more than an estimate of income and how it will be spent (expenditure), failure to collect revenue due totally undermines the budget process.
At present the failure of local government to properly collect revenue due constitutes not only appalling irresponsibility but also poses a threat to the financial stability of government as a whole. Furthermore it places an intolerable burden on those who do pay particularly if the reaction of a municipality is simply to raise rates and service tariffs to compensate for revenue not collected.
Personnel costs
Personnel costs in local government are far too high and seemingly out of control. This obviously does not apply to every municipality but it certainly applies to the majority.
Former President Mandela said, "Government is not an employment agency". I today say to you "Municipalities are not employment agencies". In general every attempt must be made to increase productivity. Simply stated fewer people must do more work.
I strongly support the call for one national public service to serve national, provincial and local government, not because the principle itself is so meritorious but because many Municipalities have demonstrated their inability to manage personnel costs. This applies both to the ridiculous packages being paid to municipal managers and other senior staff and wage and benefit settlements way beyond inflation as well as to the number of people obtaining employment. In the South African economy the municipal sector is a growth sector in terms of employment creation but as yet little benefit is being derived by ordinary people. In short personnel costs consume too high a proportion of available resources leaving little if anything for service delivery particularly capital expenditure.
Inflation targets
A budget process ideally should be about estimating available revenue after fair and reasonable tariff and rates increases and then deciding how to spend the revenue wisely. In many instances however municipalities are budgeting back to front. Decisions on expenditure are made first and then revenue sources are adjusted to accommodate expenditure targets. This has resulted in administered tariffs and prices as well as rates increases far exceeding inflation targets and thus contributing to the inability of monetary authorities to bring inflation down to the benefit of all in South Africa. My estimates show that the entire R10 billion returned to the pockets of ordinary taxpayers in the 2002 National Budget with the intention of stimulating the economy was in fact all used up by increases in administered prices (water, electricity, telecommunications, etc.) and by municipal rates and tariff increases. In reality what Trevor Manuel gave away state monopolies and municipal government took back. John Citizen ended up with nothing extra to spend.
Municipalities have a duty in this regard. If the national inflation target is 3% to 6% then municipalities must abide by these targets otherwise they undermine national objectives.
Conclusion
Every municipality should set itself three basic targets. They are: -
1) Collect revenue due. Do whatever it takes to achieve this without fear or favour
2) Limit personnel costs - reduce the proportion of income spent on personnel - increase the proportion being spent on service delivery particularly capital expenditure like water and electricity reticulation, road construction and maintenance, storm water control, refuse and sanitation
3) Support national monetary objectives and targets - don't undermine the country's financial stability and future.
Remember there is no such thing as a new source of municipal income - there is only a new method of obtaining income from the same source - John Citizen.
Issued by Department of Finance, KwaZulu-Natal Provincial Government
22 July 2003
Source: KwaZulu-Natal Provincial Government
Title: Miller: KZN Local Government Budget Workshop
SPEECH DELIVERED BY KWAZULU-NATAL MEC FOR FINANCE, PETER MILLER, AT LOCAL GOVERNMENT BUDGET WORKSHOP, 22 July
THEME: TRANSPARENCY & ACCOUNTABILITY IN LOCAL GOVERNMENT FINANCE
TOPIC: MUNICIPAL BUDGETS - CUT YOUR COAT ACCORDING TO YOUR CLOTH
Introduction
Given the short notice and the 15 minute time slot allocated to my contribution today, I want to concentrate on three critical issues which should receive much more serious attention from municipal councils when preparing their budgets. These issues are:
1) Revenue collection
2) Personnel costs
3) National inflation targets
Revenue collection
In regard to revenue collection local government is in crisis. Nationally local government is owed 24 billion rand at the last count and this figure is rising. The enormity of this problem is mind-boggling and municipalities seem to think if they ignore it, it will go away.
Given that a budget is in reality nothing more than an estimate of income and how it will be spent (expenditure), failure to collect revenue due totally undermines the budget process.
At present the failure of local government to properly collect revenue due constitutes not only appalling irresponsibility but also poses a threat to the financial stability of government as a whole. Furthermore it places an intolerable burden on those who do pay particularly if the reaction of a municipality is simply to raise rates and service tariffs to compensate for revenue not collected.
Personnel costs
Personnel costs in local government are far too high and seemingly out of control. This obviously does not apply to every municipality but it certainly applies to the majority.
Former President Mandela said, "Government is not an employment agency". I today say to you "Municipalities are not employment agencies". In general every attempt must be made to increase productivity. Simply stated fewer people must do more work.
I strongly support the call for one national public service to serve national, provincial and local government, not because the principle itself is so meritorious but because many Municipalities have demonstrated their inability to manage personnel costs. This applies both to the ridiculous packages being paid to municipal managers and other senior staff and wage and benefit settlements way beyond inflation as well as to the number of people obtaining employment. In the South African economy the municipal sector is a growth sector in terms of employment creation but as yet little benefit is being derived by ordinary people. In short personnel costs consume too high a proportion of available resources leaving little if anything for service delivery particularly capital expenditure.
Inflation targets
A budget process ideally should be about estimating available revenue after fair and reasonable tariff and rates increases and then deciding how to spend the revenue wisely. In many instances however municipalities are budgeting back to front. Decisions on expenditure are made first and then revenue sources are adjusted to accommodate expenditure targets. This has resulted in administered tariffs and prices as well as rates increases far exceeding inflation targets and thus contributing to the inability of monetary authorities to bring inflation down to the benefit of all in South Africa. My estimates show that the entire R10 billion returned to the pockets of ordinary taxpayers in the 2002 National Budget with the intention of stimulating the economy was in fact all used up by increases in administered prices (water, electricity, telecommunications, etc.) and by municipal rates and tariff increases. In reality what Trevor Manuel gave away state monopolies and municipal government took back. John Citizen ended up with nothing extra to spend.
Municipalities have a duty in this regard. If the national inflation target is 3% to 6% then municipalities must abide by these targets otherwise they undermine national objectives.
Conclusion
Every municipality should set itself three basic targets. They are: -
1) Collect revenue due. Do whatever it takes to achieve this without fear or favour
2) Limit personnel costs - reduce the proportion of income spent on personnel - increase the proportion being spent on service delivery particularly capital expenditure like water and electricity reticulation, road construction and maintenance, storm water control, refuse and sanitation
3) Support national monetary objectives and targets - don't undermine the country's financial stability and future.
Remember there is no such thing as a new source of municipal income - there is only a new method of obtaining income from the same source - John Citizen.
Issued by Department of Finance, KwaZulu-Natal Provincial Government
22 July 2003
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