SALGA Parliamentary Programme Focal Areas

www.salga.org.za

Select Committees on Finance and

Appropriations

SALGA Parliamentary Programme Focal Areas

21 September 2011 1

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PRESENTATION OUTLINE

1. Background Context

2. Review of Funding Model of SALGA

3. Review of LG Fiscal Framework and Municipal Financial Management

4. Bulk Water Infrastructure, Economic Regulation and IGR Approach to Investment Backlogs

5. Councillor Support

6. Conclusions

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1. BACKGROUND & CONTEXT

• In order for LG to participate effectively in intergovernmental relations, it needs to act as a collective, through an organised LG structure.

• Section 163 of the Constitution, recognises organised local government as the legitimate voice for LG and affords it representation in key national institutions.

• The section further provides that an Act of Parliament must cater for the recognition of national and provincial organisations representing municipalities, and determine procedures by which LG may consult the national and provincial government, designate representatives to participate in the National Council of Province (NCOP) and nominate persons to the Financial & Fiscal Commission (FFC).

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BACKGROUND & CONTEXT

• SALGA, a voluntary body representing all nine provincial LG associations (PLGAs), was established in 1996 and has been recognised by the Minister as the body representing LG.

• SALGA is a schedule 3A public entity in terms of the Public Finance Management Act and is required to prepare its “Annual Budget” and “Corporate Plan” for submission to the Ministers of Cooperative Governance and Finance.

• SALGA’s mandate is derived from the Constitution of South Africa.

• This mandate defines SALGA as the voice and sole representative of the sphere of local government.

• SALGA is a unitary body with a membership of 278 municipalities, with its national office based in Pretoria and provincial offices in all 9 provinces.

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BACKGROUND & CONTEXT

Role of SALGA:

• Represent, promote and protect interests of LG;• Enhance Role and Status of Municipalities; • Represent municipalities in key IGR structures at both provincial and

national level;• Position LG at the centre of cooperative governance and development ;• Deepen democracy and accountability at the local level;• Optimise the governance system within municipalities; • Develop common approaches for LG as a distinct sphere of govt; • Enhance co-operation, mutual assistance and sharing of resources

among municipalities; and• Lead in transformation of LG to be developmental.

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KEY IGR PROCESSES FOR SALGA

• Legislative process – The OLG Act allows SALGA to designate up to 10 part-time representatives

to the NCOP in Parliament, as non-voting members. In the main, the NCOP is the platform on which SALGA engages with Parliament.

• Budgetary process– One of the critical tools in IGR planning is the budget cycle. LG’s input

received through SALGA’s participation in the LG Budget Forum.

– The Financial and Fiscal Commission is a critical organisation in the budget process - views of SALGA are incorporated into that process.

• SALGA nominates 2 persons to the FCC, which advises the Finance Ministry on budget issues.

• SALGA nominees often serve on the FFC Local Government task group and the Audit Committee of the FFC.

www.salga.org.zaSALGA Mandate and Strategic Priorities 2009-2012:

SALGA 5 YEAR STRATEGIC PLAN

2007-2012

SALGA 5 YEAR STRATEGIC PLAN

2007-2012

SALGA CONSTITUTION1. Employer Role 2. Representative Role3. Advisory Role 4. Profiling Role

SALGA CONSTITUTION1. Employer Role 2. Representative Role3. Advisory Role 4. Profiling Role

SALGA’SMANDATESALGA’SMANDATE

5YLGSA / LGTAS5YLGSA / LGTAS

MTSF 2009-2014MTSF 2009-2014

MDG’sMDG’s

COGTA 10-POINT PLANCOGTA 10-POINT PLAN

1Improve SALGA’s capacity to support and advise its members.2Improve SALGA’s capacity to engage with stakeholders, lobby and advocate them on issues in the interest of member municipalities.

1Improve SALGA’s capacity to support and advise its members.2Improve SALGA’s capacity to engage with stakeholders, lobby and advocate them on issues in the interest of member municipalities.

SALGA CHANGE AGENDASALGA CHANGE AGENDA

3Improve SALGA’s capacity to effectively represent members as the employer.4Enhance and maintain a high profile position nationally, regionally and internationally.5SALGA’s corporate governance and internal functioning.

3Improve SALGA’s capacity to effectively represent members as the employer.4Enhance and maintain a high profile position nationally, regionally and internationally.5SALGA’s corporate governance and internal functioning.

1. Councillor Support: High calibre, professional and effective Local Government political leadership.1. Councillor Support: High calibre, professional and effective Local Government political leadership.

SALGA 10 PRIORITY OUTCOMES (All priorities would find expression in CDS’s)2010-2012

SALGA 10 PRIORITY OUTCOMES (All priorities would find expression in CDS’s)2010-2012

2. Service Delivery: Improved access to municipal services and enhanced provision of FBS, through effective operations management and service maintenance.

2. Service Delivery: Improved access to municipal services and enhanced provision of FBS, through effective operations management and service maintenance.

3. Social Cohesion: Transversal (gender, youth, children, HIV/AIDS) socio-economic issues mainstreamed.3. Social Cohesion: Transversal (gender, youth, children, HIV/AIDS) socio-economic issues mainstreamed.

4. Economic Development: Municipalities drive growth and employment creation, both in urban and rural areas.4. Economic Development: Municipalities drive growth and employment creation, both in urban and rural areas.

5. Labour Relations: A productive, stable labour environment, supported by a mutual gains approach.5. Labour Relations: A productive, stable labour environment, supported by a mutual gains approach.

6. Sound financial management and governance system: Improved financial management and financial viability of municipalities.

6. Sound financial management and governance system: Improved financial management and financial viability of municipalities.

7. Stable Municipal Governance: Stable Municipal Governance.7. Stable Municipal Governance: Stable Municipal Governance.

8. Capacity Building and Institutional Development: Enhanced skills and organisational systems and structures of municipalities towards improved service delivery.

8. Capacity Building and Institutional Development: Enhanced skills and organisational systems and structures of municipalities towards improved service delivery.

9. Reform Organised Local Government: A more effective, responsive and financially viable SALGA.9. Reform Organised Local Government: A more effective, responsive and financially viable SALGA.

10. Climate Change response measures at municipal level: Integrated climate change responses in development planning and management.

10. Climate Change response measures at municipal level: Integrated climate change responses in development planning and management.

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2. REVIEW OF FUNDING MODEL OF SALGA & LISTING AS

PUBLIC ENTITY

SALGA’s current Funding is as follows:

• Membership fees

• Local Municipalities = 0.5% of total salary and allowances budget

• District Municipalities = 0.6% of total salary and allowances budget

• Metropolitan Municipalities = a flat rate of R9.1 million

• Government Grants

– The annual grant received by SALGA from CoGTA

• Donors

– Donor funding secured have decreased significantly since the 2001/02 financial year; further complicated by listing as a 3A public entity.

• Sponsorships

– SALGA holds a number of constitutional events and public activities each year that draws on the support of sponsors. 8

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SALGA REVENUE FOR 2010/11

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REVIEW OF FUNDING MODEL OF SALGA

• SALGA is experiencing several challenges in terms of meeting its mandate, which is to represent LG when key policy and legislative matters are proposed by the other spheres of government, as well as supporting our members to overcome implementation challenges.

• However, in order to exercise its mandate and demonstrate its relevance to its key stakeholders, SALGA requires finances to fund its activities.

• At present, SALGA is substantially reliant on subscriptions from municipalities and a grant allocated by CoGTA.

• There is a risk that its current financing may not be sustainable in the longer-term and if additional sources of revenue are not obtained, the activities of SALGA may have to scale down.

• For SALGA to perform the role outlined in the White Paper and legislation, it is critically important that the current funding model be reviewed to empower the organization to respond effectively to its mandate and stakeholder expectations. 10

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OVERVIEW OF THE ACTIVITIES OF SALGA

Undertaking internal governance activities to

manage and provide oversight over the activities

of SALGA

Participating in mandatory inter-governmental

structures and undertaking legislated responsibilities

Providing services to members, including research

and advocacy on key local government issues, and other direct support to

municipalities

Supporting the transformation and

restructuring of the local government sector, including

research and advocacy on key local government issues

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HOW IS THE BUDGET SPENT?

• The cost of governance imposed by national legislation, in the form of the Public Finance Management Act, is significant and requires SALGA as well as other public sector organisations to be audited externally, establish and implement an internal audit function and establish an audit committee (i.e. implement good governance practices).

• There are also a number of IGR structures on which SALGA is required to participate:

– The NCOP (in terms of the Organised Local Government Act);

– The Finance and Fiscal Commission (in terms of the Organised Local Government Act);

– The Budget Forum (in terms of the Intergovernmental Fiscal Relations Act); and

– Various structures (Presidential Co-ordinating Council, Premier’s Co-ordinating Forums, MinMECs, MuniMECs etc in terms of the Inter-governmental Relations Framework Act)

• In respect of the NCOP, there are Select Committees that SALGA must attend.

• SALGA must also attend certain Portfolio Committee meetings of the National Assembly of Parliament.

• It is our assertion that government (through the National Fiscus) should fund the costs of compliance related governance and mandatory IGR engagement. 12

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• In addition, SALGA is also required to participate in the Technical Structures that feed into these political structures.

• It is estimated that approximately 68% of activities of the governance structures of SALGA are dedicated to IGR activities.

• The direct costs of participating in IGR mandatory structures is approximately R76.82 million.

• The main reason for requesting government grant financing is that SALGA is undertaking legislated functions regarding its mandatory participation in the various IGR structures.

• The extent and form of such participation, and whether representation is at a nat or prov level, is effectively required in terms of legislation.

• There is no opportunity for SALGA to vary its representation unless there is a change to legislation.

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• The financing of support to members, on the other hand, must be funded by members.

• These services rendered have to be relevant to members and perceived to be fundamental to the LG sector.

• There is a direct correlation between fees charged to members and the services provided to members, both directly and indirectly. – Members have a clear understanding of the services that they will receive from

SALGA and how this compares with the membership fees paid.– This promotes accountability in that members will seek services that are relevant

and affordable to them and for which they are prepared to finance. – In this way, the linkage between members and SALGA are strengthened.

• In the main then, members should fund governance structures of SALGA, support activities while the grant from the National Fiscus must cover SALGA’s mandatory governance requirements and IGR participation.

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REVIEW OF LISTING OF SALGA AS A SCHEDULE 3A PUBLIC ENTITY

• Nature of SALGA’s business calls listing and its implications into question. • A typical Schedule 3 entity must provide to its Executive Authority (responsible Minister)

for approval – – Strategic plan– Annual performance plan– Shareholders’ Compact (with Minister)

• In the normal course of events, the Executive Authority would have the power to call an AGM and to appoint directors – completely contrary to how SALGA is governed

• The role and mandate of SALGA calls upon the organisation to speak on behalf of Local Government in respect of, among others– REDs– Integrated public service– LGTAS– Amendments to LG legislation – Policy review issues

• Would be more appropriate to report to Parliament 15

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REVIEW OF LISTING OF SALGA AS A SCHEDULE 3A PUBLIC ENTITY

• SALGA’s attempts to source additional funding have been difficult, particularly as a direct result of limitations of our listing as a public entity under Schedule 3 of the Public Finance Management Act (PFMA).

• If the requested additional funding from the National Fiscus is not forthcoming, SALGA should be de-listed as a Schedule 3 public entity, allowing the organisation to raise additional external funds.

• There are also other financial and reporting complications which arise as a result of the listing, some due for example to the financial year of SALGA being out of sync with that of its members and term of office of our accounting authority (NEC), as opposed to how other types of public entities function.

– Nature of SALGA’s business calls listing and its implications into question.

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3. REVIEW OF FISCAL FRAMEWORK AND FINANCIAL

MANAGEMENT

Context:

• Municipalities have different fiscal capacities and varying service delivery demands, yet they are treated the same in policy making

• Municipalities face a significant fiscal gap between their expenditure responsibilities and revenue resources

• There are challenges in the intergovernmental fiscal system that requires review

• Municipalities are facing challenges in the area of revenue and debtors management (e.g. billing and outstanding debtors)

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Key Issues

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REVIEW OF LG FISCAL FRAMEWORK

• In 2009 SALGA recommended a comprehensive review of LG fiscal framework (LGFF). • Comprehensive review must address the fundamental structural challenges rather than

introducing minor ad hoc adjustments to improve operational efficiency in the short term.• There are also challenges with the existing system of conditional grants which the

comprehensive review of the LGFF should address, including: – insufficient coordination between grants,

• e.g. Municipal institutional capacity development grants MSIG, FMG and Siyenza Manje,

• Services and infrastructure development grants such MIG, INEP and housing development by provinces; (many cases in which housing development programmes are not aligned with availability of funding for underlying infrastructure)

– little account of the impact of the grants, especially on smaller municipalities; – heavy reporting burden on municipalities which is costly and time consuming; – LG is not central to setting the agenda for capacity-building programmes; and– delays in the gazetting and transfer of provincial allocations.

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• The comprehensive review of the LGFF should systematically re-assess the appropriateness of the baselines that underpin the vertical division of revenue to examine whether the local government sphere is receiving adequate revenue for funding its broader development mandate, not just free basic services.

• The recent substantial increases in the prices of bulk electricity and water which are also anticipated to continue over the medium term need to be factored in as well.

• There is ample evidence that the LGES is deeply flawed and will need to be re-conceptualised in its entirety rather than through minor adjustments to parameters.– Underlying data under-pinning LGES formula is now severely out-dated & out of

touch with dynamically changing service delivery context (e.g. migration patterns). • In poorer municipalities, expansion of infrastructure to poor communities through the

MIG has resulted in greater pressure on operating and maintenance budgets. • The comprehensive LGFF review should explore ways in which to explicitly link the

LGES to the MIG.

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• SALGA recommends that the proposed comprehensive review of the LGFF outlines a long term vision for sustainable LG finance which entails a differentiated approach to all the main elements of the LGFF configuration, including:

− Address the vertical division of revenue;− To assess the actual needs of smaller municipalities and how additional resources will be

directed for institutional capacity, infrastructure funding and service maintenance;− To address issues of unfunded mandates and the costing and provision of free basic

services for all municipalities;− Revenue assignment;− Conditional grant design; − Infrastructure funding; and− Borrowing powers.

• A differentiated approach to revenue assignment would allocate significant own revenue instruments to municipalities so that those with sufficient fiscal capacity are able to finance investment in infrastructure to lay the foundations of economic growth and to ensure that ageing core infrastructure is maintained.

• To this end, SALGA is exploring the modalities of implementing a Local Business Tax. 21

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• Reality is that muns with high concentrations of poverty and low fiscal capacity (mainly B3 and B4 municipalities) will unfortunately have to continue to primarily rely on intergovernmental grant funding which must not only provide for basic services provision but for levels of service that support economic growth if these areas are to develop

• Rural areas are recipients of services with not rates or service charges collected from them, this will need to be addressed as part of the review.

• Nat and prov govt depts will need to commit resources to provide intensive implementation support to build the capacity of these muns to spend effectively and efficiently.

• All municipalities, including those heavily dependent on grant funding, should exert maximum effort to collect own revenues, even though these may be limited.

• This is a concern in the light of indications that municipal revenue may be declining, for example due to the limitation of ratios of non-residential to residential property categories as part of the implementation of the MPRA.

• SALGA will continue to strongly encourage its membership to exert maximum fiscal effort through improving metering, billing, credit control and other dimensions of revenue management. 22

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REVENUE MANAGEMENT SOURCES

LOCAL BUSINESS TAX• In October 2009, SALGA submitted to the Budget Forum a proposal to introduce a

local business tax as a second general tax revenue source for municipalities. • Specifically, SALGA proposed that:

– Steps be taken to implement a local business tax to increase municipal responsiveness to the local economy, and local accountability generally; and to increase municipal fiscal capacity, so that municipalities are better able to provide the infrastructure services required for economic development and growth;

– Appropriate adjustments be made to the overall intergovernmental fiscal structure, in particular by reviewing the basis for distributing the local equitable share to make it more redistributive.

• There are two reasons why such an additional revenue source is needed:– the emergence of a significant gap between the expenditure requirements and the

revenue capacities of LG; and – corresponding weaknesses in the formal governance and accountability arrangements

which currently characterise the intergovernmental fiscal system. 23

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REVENUE MANAGEMENT SOUCRES

• In summary, the `local business tax for economic services’, is conceived of as part of a comprehensive package of adjustments to strengthen the overall system of intergovernmental fiscal relations, and has the following objectives:– To generate more revenue for economic infrastructure and services– To strengthen fiscal governance arrangements– To improve economic and general urban efficiency

• There are three possibilities for an LBT, all of which would be administered by South African Revenue Services : – Origin-based VAT administered by SARS but where cities can vary the rate– National business tax administered by SARS but with some local characteristics – Local business tax administered by SARS

• The choice of option will be determined by the optimal balance struck between the localisation of the tax to enhance accountability and the ease of administration together with the legal parameters set by the constitution and the scope for altering these. 24

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SALGA CONFERENCE RESOLUTIONS – REVENUE MANAGEMENT SOURCES

• SALGA explores alternative taxation systems in rural areas and for a local business tax to fund economic services & infrastructure in cities and towns.

• Proposal to develop a municipal revenue management framework to prevent the erosion of municipal revenues.

• Integrity of property data must be improved (Deeds Office and Surveyor General) as it impacts on property rates revenue.

• NT to lobby for NERSA to align tariffs setting process and alignment with municipal budget cycle.

• Develop a framework of revenue management which would shape policy, develop norms, standards for billing and systems to enhance the ability of municipalities to collect outstanding revenue.

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Financial management Audit results:

• Submissions of annual financial statements on-time for auditing have increased from 215 in the previous financial year to 217 in 2009-10;

• The number of unqualified audits with no emphasis have increased from 4 to 7. This includes municipalities from Mpumalanga, Northern Cape and Limpopo that are rural in nature and Cape Town;

• The number of unqualified audits with findings have increased from 113 to 120. A gradual increase from 91 municipalities in this category in 2007-08 and;

• The number of municipalities with qualified audit opinions remained at 50 and negative, adverse and disclaimer, audit opinions have declined from 113 to 60.

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FINANCIAL MANAGEMENT AND REPORTING

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Key observations from Audit results

• Auditor General report on MFMA audit outcomes 2009-10 shows an increase from 71% to 90% on lack of necessary technical expertise although vacancies decreased from 29% to 10%

• Survey by AG shows that the use of consultants in the preparation of annual financial statements appears to be widespread across municipalities

• Lack of necessary capacity in small rural municipalities imply that there is need to consider less onerous set of accounting standard – difficulties in retaining interns

Financial Management challenges

• Complexity of compliance – accounting standards, reporting

• Cost of compliance – consulting costs for AFS, asset registers and valuations (eThekwini R400m and rising)

• Capacity for compliance - high turnover of CFOs in smaller municipalities, challenges regarding training and retention of interns27


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Asset management

• Municipalities have had to implement various reforms over a very short time.

• Asset management poses a major challenge to many municipalities.

Asset Maintenance

• The huge backlog of infrastructure assets and lack of sufficient financial and personnel has posed a huge challenge post 1994.

SALGA Nat Conference Resolutions: Financial Management

• SALGA to promote peer learning and support between municipalities and private institutions (e.g. banks) to continuously improve systems of financial management .

• SALGA engages NT for a focussed support programme for rural/smaller municipalities (similar to that of the City Support Programme dealing with challenges of cities on a differentiated basis).

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REVIEW OF FISCAL FRAMEWORK & FINANCIAL

MANAGEMENT• Muns face a significant fiscal gap between their expenditure

responsibilities and revenue resources, which varies according to circumstances of each mun.

• Some, but not all, of this fiscal gap is the responsibility of muns themselves. • Muns must improve revenue collection & increase expenditure

efficiency. • SALGA supports the rapid implementation of a more comprehensive

review of all the elements of the municipal fiscal framework over the medium term.

• We also recommended the speedy resolution of a number of protracted national policy processes (policy review, differentiation model for LG, two-tier system of LG etc.) which are precluding the finalisation of a long term sustainable municipal fiscal framework configuration. 29

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4. BULK WATER INFRASTRUCTURE

• The issue of bulk infrastructure for municipal services tends to focus only on funding of bulk infrastructure. This has then led to a discussion, within government, about the need to introduce a bulk infrastructure grant.

• Funding of bulk infrastructure is indeed an issue and a sustainable funding model for bulk infrastructure in required.

• However the other dimension to the bulk infrastructure constraint to development is institutional.

• DWA capacity to develop and manage dams and inter-basin water transfers is focused on national scale projects leaving regional water resources development needs unattended to.– Development in many parts of the country (e.g. Kimberly, ORTDM, Ndlambe, etc) is

now held back because of lack of water• In cases where there are no fresh water resources and the alternative is to desalinate

seawater, the costs of this national government function (i.e. bulk water provision) are being shifted to municipalities

• SALGA recommends that DWA urgently completes and address these issues through its institutional review project which it started five years ago in 2007.

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ECONOMIC REGULATION OF BULK WATER PRICING

• In the past two years high increases in bulk water prices were allowed by the Minister of Water Affairs despite objections from SALGA and its member municipalities as it leads to increased objection and nonpayment by consumers when municipalities pass on the increases

• As a result of these increases some water boards reported huge profits/ surpluses even under depressed economic conditions– e.g. after being allowed a 12.9% increase (more than twice the inflation rate for a second

consecutive year) in February 2011 Rand Water reported a 51% increase in net income to R390 million for the half year ended in December 2010

• This is a consequence of poor economic regulation where DWA continues to play a conflicted role of being a:

1. Raw water provider to water boards (therefore interested in ensuring that water boards can afford its unregulated raw water price increases)

2. Shareholder of Water Boards (therefore interested in ensuring profitability of water boards); and 3. Regulator of Water Boards (which is in conflict with, an apparently secondary to, the above two

interest)• SALGA proposes that in the intervening time, while DWA is working towards the establishment

of an independent economic regulator of water pricing, bulk water price increases should be evaluated by an independent panel of experts before approval by the Minister 31

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IGR APPROACH TO INFRASTRUCTURE

INVESTMENT BACKLOGS

• Upon establishment, municipalities inherited old infrastructure some of which was more than 30 yrs old and already overdue for replacement.

• In a sense municipalities inherited a liability rather an asset because by taking up these functions, they accepted an unalienable responsibility of replacing and refurbishing old infrastructure that was associated with the function.

• This infrastructure had been servicing a minority of the population largely defined along racial lines with the majority population not having access to services.

• New democratic govt correctly decided to rather prioritize extension of services to the un-serviced than rehabilitating infrastructure that largely served only a minority.

• In a sense an infrastructure replacement liability was given to LG without a policy solution as to how this liability was to be financed. – The absence of such a policy solution is now playing itself out in the public

domain through spectacular collapse of infrastructure in many municipal areas. • The following graphs, show that, in addition to other infrastructure investment needs,

rehabilitation of infrastructure is estimated to about R20 bil. a year for next 20 yrs.32

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33Source: Discussion document: Development of a strategy that informs coordinated bulk infrastructure investment and motivates for the establishment of the Bulk Infrastructure Fund (BIF) June 2011

Capital expenditure: excluding land and top structure for housing

-

20,000

40,000

60,000

80,000

100,000

120,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

R m

illio

ns

Water Supply Sanitation

Electricity Solid Waste

Roads Public services

Public transport Public places

Economic infra and buildings Admin buildings and systems

Budget


INVESTMENT BACKLOGS

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-

20 000

40 000

60 000

80 000

100 000

120 000

140 000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

R m

illio

ns

Capital expenditure: Excluding land and top structure for housing

Rehabilitation Growth Upgrading Backlog eradication Budget

Source: Discussion document: Development of a strategy that informs coordinated bulk infrastructure investment and motivates for the establishment of the Bulk Infrastructure Fund (BIF) June 2011


INVESTMENT BACKLOGS

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44%

21%

35%

Category A and B1 munics

Growth Backlog Rehab

21%

20%59%

Category B2 and B3 munics


9%

47%

44%

Category B4 munics


• The seems to be a need for a country debate about possible tradeoffs between:

– Service levels and extending services to all?

– New infrastructure vs. maintenance of existing infrastructure?

– Temporal (10 yrs) focus on new bulk vs. new retail/ distribution in some sectors?

– Urban infrastructure investment vs. rural infrastructure investment etc?


INVESTMENT BACKLOGS

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• A related challenge is lack of data regarding the state of infrastructure especially in sectors such as roads and water services.

• Many water and waste water treatment schemes inherited by municipalities, from pre-1994 were without documents such as updated drawing designs (as-is drawings).

• Consequently, in some municipalities, it is not known where infrastructure such as pipes is laid, the age and the materials used.

• The increasing use and pressure on these pipes leads to regular pipe burst and leaks.

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INVESTMENT BACKLOGS

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SALGA recommends:

– Establishment of a national municipal infrastructure refurbishment fund that will to provide for the rehabilitation of municipal infrastructure at the required scale.

– Establishment of national GIS based databases and national programmes to collect data and manage information on an ongoing basis on the state of municipal infrastructure starting with priority sectors such as roads, water services and electricity.

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INVESTMENT BACKLOGS

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5. COUNCILLOR SUPPORT

• The then DPLG, now DCOG, in collaboration with SALGA and the National Treasury undertook a review of the system of remunerating councillors.

• A report was developed and presented to Cabinet on 8 February 2006. Cabinet made a number of decisions in this regard, key amongst which were the following –– approved a modified grading system, including independent grading of districts;– approved benchmarking of the upper limit (salary of Mayor of the most well-off metro)

against the salary of an MEC and the rest to cascade down depending on the grading of municipality;

– Approved tabling of a Report in this regard before the Independent Commission for the Remuneration of Public Office-bearers.

• The then Minister for dplg published a draft Notice on 28 February 2006, followed by the actual Notice on 30 June 2006 . Further notices introducing the annual increment followed (1 December 2006; 18 December 2007; 8 December 2008; 21 December 2009 and 10 December 2010). 38

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COUNCILLOR SUPPORT

• Despite the fact that the 05/06 review of the remuneration system for cllrs was intended to improve the financial support given to cllrs to fulfil their mandates, it gave rise to a number of challenges.

• Central to these challenges is that cllrs receive a “total remuneration package” and are required to structure their own packages within the legislative prescripts.

• Other challenges include:-

– The statutorily prescribed process for the determination of the salaries, benefits and allowances of Municipal Councillors curiously differs from that which pertains to other categories of defined public office bearers.

– The inclusion of the medical aid and pension benefits within the total remuneration package, contrary to the arrangement for public office bearers at a national and provincial level;

– The timing of the issuance of the gazette, largely being half-way through the financial year leading to retrospective implementation challenges;

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COUNCILLOR SUPPORT

– Alignment of Municipal Councillor remuneration and benefits with the recommendations contained in the Commission’s 2007 and 2008 review reports;

– The absence of risk benefits (such as death and funeral benefits) despite the number of attacks on the person and assets of councillors;

– The lack of appropriate tools of trade provided to Municipal Councillors;

– The implementation of the new Tax Allowance in terms of Section 8 (1)(d) of the Income Tax Act including it’s tax implications.

• As a result of these challenges, the 2011 National Conference of SALGA discussed the critical areas and made recommendations on how Municipal Councillor remuneration should be aligned into the total public office bearer remuneration scheme.

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COUNCILLOR SUPPORT

The Conference noted that:

1. The new system of remuneration for councillors was introduced in June 2006;

2. Within the context of 5 years implementation experience, the ranging challenges with the system of remuneration;

3. Lack of appreciation of the critical role of councillors vis-a-vis public office bearers at other spheres of government;

4. Lack of understanding the roles and responsibilities and more so the critical contribution councillors make in our democracy;

5. The disturbing increase in number of attacks on councillors and their property, with no recourse/protection.

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COUNCILLOR SUPPORT

NATIONAL CONFERENCE RESOLUTIONS:

1. A total review of system of support for councillors should be conducted urgently.

2. The process to review the system of remuneration of councillors to include the principle of uniformity across the 3 spheres of government. This principle to be implemented by April 2012.

3. The remuneration of Councillors should be paid out of the central National Revenue Fund instead of municipal budgets by April ‘12.

4. The full-time/part-time nature of councillors should be abolished and make provision for full-time councillors only.

5. The benefits of councillors should be directly benchmarked against Public Office Bearers at a provincial legislature level by April ‘12.

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COUNCILLOR SUPPORT

RESOLUTIONS:

6. The total remuneration package should be designed for an entry level position, and that additional amounts to be added for higher positions, in accordance with increased duties.

7. The timing of the issuance of the Notice should be reviewed to be before the start of the municipal financial year.

8. A clear distinction be drawn between remuneration and tools of trade and that tools of trade be excluded from remuneration.

9. Mandatory/Compulsory membership to the Pension Fund should be introduced.

10.Identical Pension Fund benefits as those recommended for Public Office Bearers at provincial and national level be extended to councillors.

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COUNCILLOR SUPPORT

RESOLUTIONS:

11. The Application of the non-inclusion of travel between work and ordinary place of business for ward councillors and councillors appointed to the district municipality should be reviewed and/or clarified.

12. Years of service for councillors be recognised.

13. The Section 8(1)(d) allowance to be reviewed to be beneficial and provide value-add to councillors.

14. Chairpersons of Section 79 and 80 should become full-time.

15. Cllrs should be entitled to, at the cost of the state, risk benefits including death cover, disability benefits, funeral benefits and cover for personal assets lost or damaged as a direct result of public violence.

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6. CONCLUSION

• The status of LG as a sphere responsible for development of our people must be re-affirmed through action. – One of key areas is to ensure that cllrs are accorded full public office

bearer status and enjoy all the necessary support from govt. • The dynamic external context within which SALGA operates, and its own

internal manifestations, has largely shaped the organisation’s strategic direction.

• It has a clear strategic role to play in representing the interests of LG within the system of govt as a whole and within IGR structures in particular.

• SALGA must be strengthened to perform our role and mandate as expected from its members, government and stakeholders.

• To do so, the funding model and listing of SALGA as a Schedule 3A public entity requires urgent attention.

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CONCLUSION

• With regard to the other key focal areas, SALGA will continue to strengthen our engagement with the NCOP and Committees to ensure that LG is indeed capacitated and held accountable for bringing services & development to our people.

• These engagements are critical and provide us with an opportunity to address some of the fundamental constraints hampering LG in our quest to consolidate and accelerate service delivery. – We must collectively ensure that LG has a more stable, sound and

equitable policy framework to deliver on the developmental mandate. • SALGA looks forward to playing our role meaningfully in the NCOP and

appeal to the House to support the proposals for strengthening local government and the Association so that we are adequately resourced to fulfil our role and mandate.

Documents

SALGA Parliamentary Programme Focal Areas