NEWS & ANALYSIS

The state of the municipalities in SA - Thembi Nkadimeng

SALGA President says 40 municipalities are currently subjected to provincial govt intervention

Joint sitting debate on the President’s SONA

19 February 2020

Honourable Speaker of the National Assembly, Mme Thandi Modise;

The Honourable Chairperson of the NCOP, Councillor Amos Masondo;

Your Excellency; President Cyril Ramaphosa;

His Excellency; Deputy President David Mabuza;
HonourableMembers;

Fellow South Africans;

It is once again my honour, on behalf of the collective leadership of organised local government, SALGA, and the sphere of local government, to contribute towards the debate on the State of the Nation as delivered by His Excellency President Ramaphosa with specific focus on the local government issues.

Madame Speaker and Chairperson, the Constitution of the Republic of South Africa entrenches local government as a fully-fledged sphere of government, in a system of cooperative governance in which the three spheres are distinctive, yet interrelated and interdependent.

This constitutional architecture recognises the challenges facing us to redress poverty, inequality and underdevelopment can only be addressed through concerted efforts by government in all spheres to work together and integrate our actions in the provision of services and development of our communities. Ultimately, the three spheres must together provide effective, transparent, accountable and coherent government for the Republic as a whole.

Madame Speaker and Chairperson, on the 5th of December this year, we will celebrate 20 years of democratic local government. It is our view that government and in particular local government has undergone rapid transition and transformation over the last 20 years. There can be no doubt that, in confirming the Honourable President’s reflection on the service delivery gains made to date, local government has had a profound impact on the lives of ordinary South Africans in expanding the provision of services to our people. While it is true that a number of serious and complex challenges persist in some municipalities, by and large local government has delivered quality services and a better life for the majority of our people.

Official statistics show that tremendous progress has been made particularly in historically neglected areas like former homelands, despite the reality that we are continually chasing a moving target due to our population growth and in-migration rapidly giving rise to new settlements. The latest Non-Financial Census of Municipalities, released by the Statistician General in August 2019, confirms that the number of households receiving services from municipalities increased between 2017 and 2018.

For this period the highest percentage increase was recorded in the provision of water (an increase of 3,7% or 477 122 additional connections), followed by sewerage and sanitation (an increase of 3,6% or 408 608 additional connections), electricity (an increase of 3,1% or 361 764 additional connections) and solid waste management (an increase of 2,4% or 229 324 points of removal).

In his address yesterday, Honourable Dodovu acknowledged that local government experience in South Africa is a complex one and democratising local government to represent and service all South Africans has been extremely challenging, further exacerbated by stubborn challenges that continue to bedevil local government’s progress, these include:

Governance and oversight challenges, including strengthening community involvement and ownership of development in their municipalities;

Confronting our basic services infrastructural challenges and making long-term sustainable choices;

Intergovernmental debt and rising consumer indebtedness, as well as the declining revenue base of municipalities; and

Linked thereto, the viability and long term financial sustainability of municipalities, including consideration of the impact of continuous municipal demarcation reforms.

The focus has been on debts owed by municipalities to Eskom, Water Boards and Water Trading Entities. Whilst acknowledging this challenges, our own assessment confirms the following factual picture:-

Whereas municipal debt to Eskom (for electricity) and Water Boards and Water Trading Entity (for water) sits at R 25b and R14.9b respectively, debt owed to municipalities for municipal services already delivered, is currently sitting at a close to R170 billion;

The largest component of debt relates to households which accounts for close to R120 billion;

The amount for outstanding debtors for government represents close to R10 billion;

Business constitutes approximately R25 billion;

Madame Speaker and Chairperson, it is evident that there is a clear link between the ability of a municipality to service its debt, including to Eskom and Water Boards, and the inability of a municipality to collect from government, business and households for services delivered. With the situation becoming untenable for municipalities who are constantly threatened by disconnections from Eskom and Water Boards, SALGA has resolved on a two phased approach to address this difficult challenge.

The first is that all municipalities should urgently, aggressively and on an ongoing basis enforce their respective credit control management measures. This phases should include targeting government properties and businesses, through disconnection where there is sufficient merit, in line with their credit control policies. As a second Phase, we are conducting a rigorous analysis of the gross debt and restructure debts to see realistically collectable debts and those that could be considered for write off or repeal as historical uncollectable, including installation of pre-paid meters.

We once again stand to support the decision to restructure Eskom, as well the policy commitment to an independent, state-owned transmission company with power planning, procurement, contracting and system operation functions, that ensures non-discriminatory access to the grid on level playing fields by incumbent Eskom generators as well as new generation entrants.

For the benefit of our municipalities, we also welcome the policy commitment to a diversified, competitive generation sector comprising a number of Eskom generators, public-private partnerships (PPPs), municipal generators, independent power producers (IPPs) and embedded generators on customers’ premises. Of particular appreciation are the measures to be in place to enable municipalities to procure their own power from independent power producers. This, in itself, will present municipalities with the ability to negotiate cheaper bulk electricity prices and as a consequence passthese onto consumers, who are already under tremendous taxation strain.

Municipalities are already being assisted to cost their tariffs correctly through cost of supply studies, and SALGA together with our international partners are training and capacitating municipalities with processes to take renewable energy plants on board, including application forms, contracting, grid integration studies for renewable plants, safety regulations etc. We are supporting municipalities in determining the renewable energy tariffs for small scale embedded generation plants that are already connected to their systems.

Further to this, there are plans in place to develop a toolkit for municipalities which they will use when approached by IPPs. These include model Power Purchase Agreements, Model Energy Wheeling Contracts and financial models that can be used to cost the projects and their returns or margins including risk analysis and licensing processes.

We are, however, concerned about firstly, the exclusion of local government, who has the executive authority over electricity distribution, at the table as the social partners organised under NEDLAC are meeting to agree on the principles of a social compact on electricity. 
Secondly the continued financial viability of municipalities, having regard to the local government funding assumption that municipalities would raise enough own revenue to cover 90% of its operational expenditure, where commercial and industrial users will now be able to produce electricity for own use above 1MW therefore negatively affecting the revenue generation ability of a municipality through surcharges on such electricity. We therefore submit that local government, through organised local government, should be included in the consultative processes on the future of energy and further consideration should be given to the impact of the self-generation of electricity on the revenue of municipalities.

We embrace the President’s announcement on the alternative rural roads programme as this is in line with and confirms acceptance of SALGA’s proposal made during the February 2019 Cabinet Lekgotla. We commit to making proposals on the modeling of the implementation of this Programme and undertake to, once completed, share this with relevant Ministries and the Presidency as this, if properly designed, will be a massive public worth’s Programme in municipalities thus creating job opportunities to many young people.

Madame Speaker and Chairperson, as local government, we stand firmly behind the President and re-affirm our position that indeed through working together 2020 should be “about the critical actions we take this year to build a capable state and place our economy on the path to recovery”. As correctly stated by the Honourable President, currently 40 municipalities are subjected to provincial government intervention in terms of Section 139 of the Constitution, with a number of other municipalities threatened with intervention.

This high number of interventions in the affairs of local government is indicative of the failure of the current system of provincial and national government to support and strengthen the capacity of municipalities as required by Section 154 of the Constitution and to provide for the monitoring and support of municipalities in order to promote the development of capacity to enable municipalities to perform their functions and manage their own affairs, as required by Section 155 of the Constitution. SALGA has developed a clear consequence management framework for municipalities who deliberately deviate from recovery plans.

Otherwise the development of South Africa that hinges on the ability of our municipalities to achieve their constitutional developmental objectives will not be realised. Proper delivery of services to our people is dependent on solid and clear systems and processes to detect problems and to determine the type of support that is required by municipalities that cannot perform their responsibilities. Only as a last resort, when such support does not bear the necessary results may national and provincial government exercise the power of intervening into the executive functioning of municipalities.

These preventative measures, complement and fit neatly with the objectives of the new district-based model of development, that seeks to be an integrated, district-based, service delivery approach aimed at fast-tracking service delivery and ensure that municipalities are adequately supported and resourced to carry out their mandate. In so doing, local government, through the existing 44 districts and eight metropolitan municipalities, is placed at the epicentre service delivery and development.

Madame Speaker and Chairperson, as I draw to a conclusion, we re-assert our commitment to the objectives of determining municipal boundaries and related matters that it should facilitate Co-ordination between municipal, provincial and national functions, services and programmes and facilitate integrated social and economic planning and development.

Successful implementation of the system of a developmental local government requires that municipal boundaries and wards are demarcated in such a way that it best enables municipalities to fulfil their functions effectively and provide for good local governance.

Madame Speaker and Chairperson, I once again stand before you on behalf of the leadership collective of organised local government and the local government leaders from all our municipalities and pledge our positive response as we embrace the spirit of citizen activism. Our communities look up to us in this period of need. Difficult and complex as it may be, Nelson Mandela once implored us to use our freedoms to light the path to a more humane, more caring society. He demanded that we lift our sights far into the horizon. That we use our voices to proclaim our freedoms.

In turn, our history taught us courage and resilience. That we embrace the challenges. That we be strong. That we be confident. That we be humble. That we be patient.

At no point during its entire history, have our municipalities been in a better position to confront the challenges they are facing than it is today.

Our people deserve better.

I thank you.

Thembi Nkadimeng, SALGA President