Speech on the Division of Revenue Bill [B4–2024]
Speech by ACDP MP, Steve Swart

Issued by the ACDP Parliamentary Media Office

169 of 250 municipalities are in financial distress causing a collapse of services

Mar 26, 2024

House Chair,

National Treasury transfers more than half of the nationally raised revenues to nine provinces and 257 municipalities.

The ACDP has studied the report and we definitely share concerns, Honourable Minister, about the inflation average increase of only 3.8% over the Medium Term Framework (MTF) for the provincial equitable share.

Now, I do appreciate that it’s a very difficult balancing act when one comes to fiscal consolidation on the one hand, how to spend on this side, and its opportunity cost from an economics perspective, but as we know, Honourable Minister, through you Chair, provinces do not have significant taxation powers and the transfers through the Division of Revenue account for 97% of their revenues and free and low-cost social services are provided by provinces which include basic public education for 13.4 million learners and health care for more than 51.9 million people and this could be placed at risk through this lower than inflation increase, with the health care inflation being far higher than the 3.8%.

As far as the municipalities are concerned, the ACDP shares concerns as expressed in Treasury’s own State of Local Government Finances Report that found that a large number, almost 169 out of the 250 municipalities, are in financial distress.

There seems to be a continued pattern of deterioration as there were far fewer municipalities in financial distress in 2010, and this has resulted in a collapse of services. Potholes, for example, are rarely fixed, in fact, we see load shedding and now there’s a new term called ‘road-shedding’ due to potholes, which might sound funny but is actually quite tragic.

Municipal salaries are not paid in certain cases and rate payers often, rightfully, feel they’re not getting value for money. Service delivery protests are rife often accompanied by violence and destruction and this explains why increasing number of households might not be paying their municipal bills, which adds to the stress of municipalities.

Now, we are aware that National Government invited municipalities to apply for debt relief on Eskom, and we appreciate that there are very strict conditions regarding the writing off of billions of Rands (R56 billion). The danger, of course, is that you create a moral hazard that municipalities know that these debts could be written off going forward, so those conditions must be very closely watched. 

Chairperson, in view of the fact that we have this severe challenge with provinces now with the reduction of R19 billion, as well as the distressed state of municipalities—and whilst we appreciate the Minister’s efforts in this regard, we believe more could have been done, and therefore, the ACDP will not support this Bill.

I thank you.

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