Deputy Minister of Finance, Mr Mcebisi Jonas;
Mr David Sislen representing the World Bank;
Representatives of the International Finance Corporation and the Swiss State Secretariat for Economic Affairs,
Representatives of the South African Local Government Association
CEO of the South African Cities Network
Director General of National Treasury, Mr Lungisa Fuzile;
Management of Municipalities;
CEOs and leadership from the private sector and NGOs;
Distinguished guests;
Representatives of the media and of press organizations
Most importantly the mayors and representatives
Ladies and gentlemen.

Thank you very much for the opportunity to participate in the launch of the 2015 Sub-national Doing Business Report. We thank National Treasury, the World Bank, SA Local Government Association, the SA Cities Network and the Swiss State Secretariat for Economic Affairs for excellent work. The 2015 Sub-national Doing Business Report is timely and strategic. Tip O’Neill, a former Speaker of the US House of Representatives once said: “All politics is local.”

The same can probably be said of economics. Successful local economic development needs well run local government and successful local government needs growing economies.SA is urbanizing very rapidly. UNHabit estimates that 71.3% of SA population will live in urban areas by 2030. By 2050 this will increase to eight out of every ten South Africans. Significantly, two-thirds of SA youth live in urban areas. South Africa’s urban population is growing larger and younger. Cities and large towns produce over 80% of the national gross value added.

Metros are growing twice as fast as other cities. Towns have much higher (by about 40%) average incomes, compared to the country as a whole. Employment grew twice as fast in metros. Between 1996 and 2012, metros accounted for 75% of all net jobs created in SA. Despite this ‘urbanization of poverty’ is increasing, especially in townships, informal settlements and inner cities. Urban areas are linked to rural areas through flows of people, natural and economic resources. Urban and rural areas are becoming increasingly integrated, as a result of better transport, communications and migration. Interdependence of rural and urban spaces needs a comprehensive, integrated approach to urban development.

All of this underscores the importance of the 2015 Sub-national Doing Business Report. The report is an important source of information and analysis that will contribute significantly to sound, evidence based policy making.

We are encouraged that South Africa ranks 43 out of the 189 countries surveyed. It encourages us to improve this ranking even further.

The report provides insights into challenges that need to be overcome as well as best practices that can be shared.

Certain indicators used in the report such as dealing with construction permits and getting electricity are the responsibility of local government.

Others such as starting a business, registering property are responsibilities shared across national, provincial and local government.

Yet others such as enforcing contracts and trading across borders are clearly national responsibilities.

This emphasizes the importance of initiatives such as the Back to Basics approach to local government as well as implementing the National Development Plan’s proposals regarding intergovernmental relations and collaboration.

The Back to Basics approach is based on a comprehensive assessment of South Africa’s 278 municipalities.

Criteria ranging from political stability through governance to service delivery were used in this assessment.

We concluded that one third of municipalities were doing well, one third were doing OK but faced challenges and one third were dysfunctional.

Back to Basics seeks move the bottom third of dysfunctional municipalities out of a state of dysfunctionality over two years and to consolidate the position of those doing well and to advance that of those doing OK.


The Back to Basics approach rests on five pillars:

•             Putting people first
•             Delivery of a basket of basic services
•             Ensuring good governance
•             Ensuring sound financial management
•             Building capable and resilient institutions.

Slowly but surely these objective are being achieved.

The latest Report on Audit Outcomes of Local Government for 2013/14 by the Auditor General shows consistent improvement in almost all aspects of municipal audit outcomes

Of the 335 municipalities and municipal entities audited: 102 improved, 194 remained constant, 27 regressed, 2 were new and 10 were still outstanding.

We welcome the fact that 198 (58%) of all 335 municipalities and municipal entities received unqualified audit opinions for their financial statements. This is up from 165 (49%) last year.

For municipalities, 148 (53%) now have unqualified audits - up from 120 (43%) last year.

Auditees with financially unqualified opinions now account for 76% of the total local government expenditure budget of R315 billion.

This means that almost eight out of every ten rands spent by local government is spent by entities with financially unqualified statements.

The report recognizes that a concerted effort was made to address irregular expenditure. Auditees having statements qualified for irregular expenditure decreased to 74 (down from 100 last year.) However, the irregular expenditure quantum of R11, 4 billion remains unacceptably high.

An overwhelming 96% of auditees (municipalities and municipal entities) submitted their financial statements on time. This is an improvement over 93% in 2012-13 and a massive improvement from 78% in 2007-08.

We are convinced that the foundation of any successful local economic development strategy must be to get the basic governance, administrative and service delivery functions of local government right.

Good governance, sound financial management and consistent delivery of basic services are powerful ways that municipalities can promote their local economies and job creation.

Municipalities can simplify and speed up the processes for obtaining construction permits, registering property and getting electricity.

Municipalities can introduce electronic systems for issuing rates clearance certificates and rationalize and simplify their processes for providing new electricity connections.

But municipalities cannot do this alone. We need effective intergovernmental co-operation.

The report also highlights the importance of better performance from national and provincial government departments.

National departments and agencies can work to simplify and speed up the processes involved in starting a business, enforcing contracts and trading across borders.

The report suggests that registering with the Compensation Fund and the Unemployment Insurance Fund are areas in which there is room for improvement.

It proposes simplifying the company risk classification system, delegating processes to provincial or local labour centres, or establishing effective one-stop shop electronic online platform.

A fully operational online platform at the Companies and Intellectual Property Commission (CIPC) would improve the performance of all municipalities.

The development of an integrated registry system for electronic registration, used by the national Deeds Registry and by all local governments would both improve performance and reduce the scope for fraud.

The Sub-national Doing Business report will contribute to work underway to strengthen local economic development.

The Report identifies four main types of red tape costs, namely: compliance costs, efficiency and opportunity costs, non-compliance costs and administrative costs such as slow approval of permissions.

CoGTA is working closely with the Department of Trade and Industry and the South African Local Government Association (SALGA) to implement a Red Tape Reduction Programme to reduce these compliance costs.

Guidelines for Reducing Municipal Red Tape: How Municipalities can Improve Service Delivery that Supports Small Business have been developed.

The guidelines will be piloted in 13 municipalities and will focus on:

•             Streamlining regulatory, compliance and administrative processes in municipalities;
•             Implementing a complaints management system; 
•             Improving the supply chain management processes;
•             Adhering to the 30 day payment system;
•             Land use management and business plan approval processes;
•             Municipal business registration and permits.
(Municipalities involved in pilot project: Buffalo City (EC), Elias Motsoaledi (LM), Greater Kokstad (KZN), Khara Hais (NC), Lukhanji (EC), Maluti-A-Phofung (FS), Mangaung (FS), Matjhabebg (FS), Moretele (NW), Ephraim Mogale (LM), Moses Kotane (NW), Sol Plaatjie (NC), Umzimkhulu (KZN))

We started by emphasizing South Africa’s rapid rate of urbanization, the importance of cities for economic development but also the inextricable link between urban and rural development.

CoGTA is co-ordinating government’s efforts to provide a new deal for our cities and towns.

The Integrated Urban Development Framework seeks to give effect to the vision in our National Development Plan of creating livable, safe, resource-efficient cities and towns that are socially integrated, economically inclusive and globally competitive, where residents actively participate in urban life.

This framework recognizes that urban areas are dynamically linked to rural areas, and that a comprehensive, integrated approach to urban development is required.  It also emphasizes the need to reverse the painful, costly and inefficient legacy of apartheid spatial patterns.

The IUDF seeks to unlock the synergy that comes from coordinated investments in people and places.

We will realize the urban dividend when people, jobs, livelihood opportunities and services are aligned.

The draft Integrated Urban Development Framework was approved by Cabinet for public consultation in September 2014. We will finalize the Framework by November 2015.

In conclusion, we commit ourselves as the Department of Cooperative Governance to work with National Treasury, SALGA, the SA Cities Network as well as the Departments of Labour, Trade and Industry, Small Business Development, Justice and Constitutional Development, Rural Development and Land Reform, the South African Revenue Service, and state-owned enterprises such as Transnet and ESKOM to improve the ease of doing business in our municipalities.

I thank you.