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SECTION 4: FUNDING DISASTER MANAGEMENT |
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This section establishes principles to guide the development of financial arrangements for disaster management. It outlines current financial mechanisms, highlights key problems with the current situation, and proposes a set of future funding arrangements. |
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4.1. CURRENT FINANCIAL MECHANISMS Overview of current funding arrangements Generally, the financial responsibility for disaster management is borne by local government. However, depending on the magnitude of the disaster and the capacity of the relevant municipality, provincial and national government may become involved. The Disaster Relief Fund may also provide relief when a disaster is first declared in terms of the Fund-raising Act, No. 107 of 1978. This fund is administered by the Department of Welfare and Population Development ("the Department of Welfare"). Funding for the identification of slow onset responses tends to be drawn from the budgets of national departments. 4.1.1. Prevention Currently, municipalities, provincial governments and various national departments - including Water Affairs and Forestry, Agriculture, Health, Environment and Tourism, Safety and Security and Minerals and Energy - all dedicate some financial resources towards prevention and mitigation measures, often as part of their development strategies. There is no active monitoring of the funding of prevention and mitigation activities. These costs are usually absorbed into other line items except in the case of certain expenditure by the Department of Agriculture. The Department of Agriculture has historically made provision for disaster relief in the line item "Relief of Distress". During the 1992-93 drought, this provision was used to provide approximately R3,8 billion, most of which went to commercial farmers. However, this approach tends to discourage prevention and mitigation measures and is currently under review. 4.1.2. Capacity to respond Currently, there is no separate budget line item for the funding of disaster management response. This comes from general government funding for the maintenance of equipment, training and staffing. There is no formal system that monitors and evaluates the capacity of each sphere of government to respond to disasters. 4.1.3. Immediate relief (i) Local government Municipal services are usually first on the scene of disasters and assume initial control. Municipal services are usually first on the scene of disasters and assume initial control. In addition, section 156(4) of the Constitution enables national and provincial governments to assign functions to municipalities (These functions are listed in Part A of Schedules 4 and 5). This is done only if the relevant municipality has sufficient administrative capacity and can provide the service more effectively. Section 154 of the Constitution also makes provision for national and provincial governments to assist local government to develop sufficient capacity to carry out their functions. However, in the event that a municipality has insufficient resources to deal with a disaster, it may request assistance from the provincial or national government. (ii) Provincial government Provinces have concurrent responsibilities with national government for disaster management, health and welfare services and so on. (Part A of Schedule 4 of the Constitution). Provinces have full responsibility for ambulance services (Part A of Schedule 5). A province has executive authority to carry out these functions only if it has the administrative capacity to assume effective responsibility (section 125 (3) of the Constitution). This section of the Constitution, however, places the onus on national government to assist provinces to develop sufficient administrative capacity to fulfil these functions. The Premier of a province may declare a disaster and take the steps that are necessary. This may include the rendering of financial assistance to a municipality for up to four days. This assistance is rendered from the province's budget. (Section 2 (3) of the Civil Protection Act No. 67 of 1977). Where the financial resources of the provincial government and those of the relevant municipality are insufficient to deal with a disaster, provincial governments can approach the national government for assistance. Once a disaster occurs, the Minister of Finance may be approached for the release of funds. In the interim, the relevant provincial government pays these expenses from its own budget while national funds are approved. (iii) National government Depending on the nature of a disaster, national government departments may respond by providing services and expertise. The Minister of Finance must approve any reallocations of resources. The Director-General of the relevant department is required to provide a full explanation of the reasons for the reallocations at the close of the financial year to the Department of State Expenditure. A request for international aid may be considered by the national government in the case of very serious disasters. 4.1.4. Recovery in the post-disaster phase Recovery is a vital aspect of disaster management as the affects of disasters continue long after the immediate threats to life and property have diminished. National, provincial and municipalities do not generally make specific allocations for recovery activities. There are, however, exceptions: (i) Funds administered by the Department of Welfare There are three funds currently administered by the Department of Welfare that provide financial support after a disaster:
The operation of all of these funds is governed by the Fund-raising Act. Before money can be released from these Funds, the President must first declare a disaster. These funds were originally designed to provide immediate relief to persons affected by disasters. However, they have been slow to provide assistance to victims of disasters and organisations involved in relief efforts. (ii) Contingency reserve Government is the self-insurer of provincial and national public assets. This means it finances repairs to damaged infrastructure from its own funds. Provisions are made in the Medium-Term Expenditure Framework (MTEF) for a contingency reserve, which can be made available after a disaster to repair damaged infrastructure. (iii) The Exchequer Act Section 1(1)(iv) of the Exchequer Act No. 66 of 1975 provides funding for expenditure incurred due to unforeseen and unavoidable circumstances. The Treasury Committee and Cabinet must approve applications for this funding. As the Treasury Committee only meets twice a year, the Minister of Finance may grant authority for money in the State Revenue Fund to be used in exceptional circumstances. (iv) Conservation of Agricultural Resources Act The Minister of Agriculture can provide financial assistance for relief during agriculture-related disasters. This can be done in terms of section 8 of the Conservation of Agricultural Resources Act, No. 43 of 1983. The Act, however, is currently being revised. The direction of current agricultural policy is that a greater burden of risk associated with agricultural activity will have to be borne by commercial farmers. The Department plans to place greater emphasis on prevention and mitigation strategies by supporting risk management initiatives, research of large-scale epidemics and hazards, providing information to farmers on markets, climate and available taxation and insurance measures. 4.1.5. Expediting tender procedures In the case of rapid onset disasters, it is sometimes necessary to waive tender procedures. This prevents delays in providing services and equipment. Government agencies can be given powers to deviate from the procurement process, if they can motivate why it is necessary to do so. There is a limit on the amount of R150 000 per requirement without reference to the State Tender Board. If any estimated expenditure exceeds this amount, an application for an exemption must be made to the State Tender Board. Ex post facto requests are only considered if the State Tender Board is satisfied that a real emergency existed and that the funds were spent in the best interests of the state. 4.2. PROBLEMS WITH CURRENT MECHANISMS 4.2.1. General There are a number of difficulties associated with the current funding arrangements. In general, there are no incentives and punitive measures to ensure that all aspects of disaster management are catered for. This applies, in particular, to prevention, capacity to respond, immediate relief and recovery. 4.2.2. Prevention There are currently no criteria for disaster prevention, risk mitigation or preparedness when accessing funds administered by the Department of Welfare, the Treasury Committee and the Minister of Finance. This means that costs of recurring disasters are paid by the government time and time again. No, or little, action is taken to reduce the risk of similar disasters in the future. There is little incentive for government agencies to spend money on effective risk reduction programmes and activities. There is also no comprehensive monitoring and evaluation of mitigation and surveillance activities and there is little accountability for the success or failure of funded prevention programmes. The current relief-grants encourage individuals and organisations to expect compensation in the event of a disaster. This reduces the incentive to take appropriate measures to avoid a disaster or to mitigate its effects through insurance or other means. 4.2.3. Capacity to respond Most municipalities have limited financial resources and many are in financial difficulty. They are unable to allocate sufficient resources to emergency services. There is, therefore, an urgent need to examine additional sources of funding for local emergency services. 4.2.4. Immediate relief The three funds administered by the Department of Welfare take an extremely long period of time to reach affected people or organisations involved in emergency service delivery. This delay affects poorer members of communities who are often worst affected by natural disasters. In addition, each of these funds has its own board, thus duplicating administrative structures and placing unrealistic demands on the resources of the department. 4.2.5. Recovery in the post-disaster phase There are few programmes or activities dedicated to recovery in a post-disaster context. The funds administered by the Department of Welfare and the national contingency reserve fail to address the full effect of disasters. It is vitally important that resources are allocated for effective recovery activities. 4.3. PROPOSALS FOR FUTURE FUNDING ARRANGEMENTS 4.3.1. General When a disaster occurs, the initial financial burden is usually borne by the individuals affected by the event. However, because of the vulnerability and poverty of many South Africans, particularly in rural areas, government in line with national objectives of efficient and effective management of the nation's resources, will make a significant contribution to the alleviation of the long-term effects of disasters. However, the provision of resources by government should not replace nor discourage self-help or community support in an emergency. It should also not discourage the use of commercial insurance schemes. Government resources should only be used when individuals or communities cannot cope. However, when such resources are provided, they should be provided rapidly and efficiently. 4.3.2. Guiding principles Financial arrangements for disaster management should:
4.3.3. National arrangements (i) Release of funds in an emergency The proposed Treasury Control Bill will replace the Exchequer Act. Once enacted, section 15 of the Treasury Control Bill will allow Cabinet to release funds in emergency situations from the National Revenue Fund to defray expenditure which is not provided for in the current budget, and which cannot be postponed until the next budget. These funds may be used to provide immediate relief for affected people or for emergency services. This means that funds could be released for emergency situations more rapidly than is presently possible under the Exchequer Act. The combined amount for these authorised expenditures may not exceed two percent of the total amount in the annual national budget and would be charged against the National Revenue Fund (contingency reserve). Once these funds are approved, the expenditure must be accounted for in an Adjustments Budget. (ii) Immediate relief to individuals The three funds administered by the Department of Welfare should be merged into a single Disaster and Emergency Fund ("the fund"). The purpose of this fund should be to provide immediate relief directly to people affected by disasters. The fund should, however, supplement rather than replace local and provincial contributions. The Department of Welfare will in consultation with the centre be responsible for the administration of the fund. It should draw on the capacity of various governmental and non-governmental agencies to assist with relief efforts and the disbursement of grants to individuals. The emergency funding provisions in section 15 of the Treasury Control Bill should be used to finance the Disaster and Emergency Fund. The decision by Cabinet to release money to the Disaster and Emergency Fund should be guided by a set of previously agreed criteria and guidelines. To prevent the fund being used for recurring or foreseeable disasters in the same areas, a post-disaster review should automatically be conducted whenever funds are drawn from the fund. This review should include recommendations on how the municipality or the provincial government in question should improve its disaster management capacity to prevent or mitigate the impacts of such disasters. A monitoring system should be introduced to ensure that the recommendations of the post-disaster review are implemented. The new proposed Disaster Management Act (see Section 5) should make provision for the declaration of local, provincial and national disasters. These provisions should be linked to accessing funds from the fund. (iii) Funding repairs to damaged infrastructure A national reserve has been established in line with budgetary requirements under the MTEF to provide contingency funds for a range of situations. This fund should continue to be utilised for repairs to public infrastructure, as a result of damage caused by disasters. (iv) Expediting tender procedures When a disaster occurs, prices for essential goods and services are sometimes dramatically inflated. Government should investigate the possibility of compiling lists of tender approved goods and services from local suppliers at prices fixed in advance. The listed suppliers should be used in disaster situations to procure goods in an expeditious and cost-effective manner. 4.3.4. Provincial and local government arrangements (i) Budgeting Budgets of municipalities and provincial government departments involved in disaster management system should be adapted to provide for a budget item called "disaster management". The main purpose of this proposal is to make provision for, among other things, the following:
The expertise of members of the proposed Disaster Management Centre should be drawn on for the preparation and compilation of disaster management plans and strategies financed by this line item. In the event of a major disaster, provincial departments and municipalities should be encouraged to draw from their current budgets to respond to the disaster. Section 15 of the Treasury Control Bill should only be resorted to after all other options have been explored. All funds approved by Parliament or a Provincial Legislature for disaster management should be reflected in the respective Appropriation Acts as funds allocated for this specific purpose (that is included in Column 2 of the respective Act). This will ensure that such funds are not shifted without the necessary political authorisation. The disaster management item must be audited and accounted for in the same way as other line items. The introduction of the new system of "output-orientated budgets" means that outputs will have to be established for the item. This will make it easier for the activities and spending on the line item to be assessed. (ii) Financing shortfalls While there is a need for local and provincial government to allocate more resources to disaster management, as proposed earlier, it is necessary to take into account the tight budgetary constraints under which they operate. To overcome this tension, a mix of capacity building, incentives and punitive measures should be introduced. Some options are set out below, which could be implemented on a staggered basis.
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Capacity-building options Capacity-building of municipalities and provincial government is emphasised in the Constitution and is already being undertaken, particularly in the areas of financial planning and management. In the context of disaster management specifically, the following capacity-building options should be explored:
Incentives There are currently few, if any, incentives to encourage municipalities and provinces to take preventative and longer term risk reduction measures, develop disaster management plans, conduct surveillance for signs of slow onset disasters and provide sufficient capacity to respond to disaster events. A phased introduction of the following options is proposed:
For example, national government could provide funding equal to 20% of what provincial governments and municipalities budget for disaster management. The additional funds from national government could be used for a specific undertaking that the provincial government or municipality can not afford in that year. Punitive measures National government intends introducing legislation to make municipal accounting officers strictly accountable. This will ensure that all the functions of municipalities - including disaster management - are adequately budgeted for and that budget items are spent efficiently and effectively. |
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4.3.5. Insurance National government's policy on insurance is to avoid the funding of insurance schemes that are better managed by the private sector. However, there is a need for government to explore insurance options for municipalities with limited financial capacity and for low-income individuals and communities. Small-scale emerging farmers are a key group whose insurance needs require consideration, as they are generally unable to afford commercial insurance rates. While the private sector is beginning to offer a wider range of insurance products for commercial farmers, little attention has thus far been paid to the insurance needs of small-scale farmers. In all likelihood, such schemes would have to involve a public-private partnership. The Department of Agriculture and the commercial insurance sector should develop product options for this group. 4.3.6. Funding of training and community awareness programmes The funding for disaster management training and community awareness programmes (outlined in Section 6) may be met by existing sources, as they do not require significant additional funding. Funds for this may also be drawn from the budget of the Disaster Management Centre. There are some items, however, which will require additional funds. A variety of sources should be accessed to provide financial support, as well as skills and expertise, for these items. These are outlined in the table below.
With regard to the funding of local government training, the Skills Development Act provides for the creation of a National Skills Fund through the imposition of a 1% levy from the payroll of certain organisations, including municipalities. Money from this Fund will be made available to the local government SETAs and may only be utilised for the training of local government employees and councillors. It is, therefore, imperative that disaster management training should compete for a fair share of the proposed training levy envisaged in the Skills Development Act. When provincial government provides disaster management training and community awareness support to local government, the necessary funding should come from the provincial budget. 4.3.7. Funding the National Disaster Management Centre The National Disaster Management Centre should be funded by government so that it can effectively perform its functions, both in phase one and two of its development (see Section 3). The budget for the centre must be approved by the IMC. Since the centre is to function as the node for communication, liaison and advice, it is expected that a significant portion of the budget will be used to acquire appropriate technical skills and expertise to staff the centre, as well as dedicated information technology systems. |
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How to read the White Paper | Foreword by the Minister of Provincial Affairs and Constitutional Development | Section 1: Introduction | Section 2: Setting the context | Section 3: The National Disaster Management Centre | Section 4: Funding disaster management | Section 5: A national Disaster Management Act | Section 6: Training and community awareness | Section 7: Conclusion | Appendices | The drafting team and acknowledgements |