Comments on FFC Annual Submission for 2006/07

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Comments on FFC Annual Submission for 2006/07
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• COMMENTS ON RECOMMENDATIONS
• Local Government Equitable Share Allocation
• Infrastructure Grants
• Health Conditional Grants
• National Housing Allocation Formula
• FFC Comments on Proposals to replace RSC levies
• FFC Comments on Development Component of LGES
• COMMENTS OTHER ISSUES
• Transfer of Water Operating Schemes to LG

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• LG Equitable Share Allocation
• The recommendation calling for government to
  consider increasing the
• estimated cost of basic services was long overdue
  and is such supported.
• Government should consider using this estimated
  cost to determine allocation to local government
  rather than using budget constraints as an excuse
  and thus having to just re-adjust allocation
  between municipalities of already determined
  funding envelope.

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• It must be noted that the Constitution states
  that there is a need to ensure that the
  municipalities are able to provide basic services
  and as such National Government defined basic
  services that should be provided for free to the
  poor, eg. 6kl water, 50kwt electricity etc.
• The committee must note that these standards are
  effectively imposed on local government that
  provides these basic services and they just have
  to comply with it.

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• Infrastructure Grants
• Recommendation for funding of maintenance costs
  (rehabilitation and replacement of dilapidating
  infrastructure) is supported and government need
  to work out technicalities of including this
  variable on MIG formula.
• MIG formula seems to be allocating more funds to
  municipalities that has potential to raise more
  revenue and thus there is a need to build the
  revenue raising capacity into the formula so that
  the formula addresses the MIG policy framework
  objectives of addressing basic infrastructure to
  the poor.

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• The current formula does not take into
  consideration issues regarding unit costs of
  providing basic level of infrastructure. Under
  practical circumstances, it is found to be
  expensive to put up infrastructure in sparsely
  populated areas than in densely populated areas
  due to long distances between points.

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• Health Conditional Grant
• Municipalities especially the metros and those
  with secondary cities still continue to render
  primary health care services and as such there is
  a need to determine their exact spending on this
  service.
• Provincial government should thus reimburse the
  municipalities affected on these cost as long as
  the municipalities remain rendering this service.

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• National Housing Allocation Formula
• Previous year FFC recommendation resulted in the
  provision of R50 million per year specifically
  allocated for municipal capacity building as part
  of the accreditation process. However this amount
  will need to be increased.
• The condition for municipalities to be allowed to
  retain a percentage of all housing subsidies in
  order to fund programme management and
  administration costs should be included in the
  accreditation agreements.

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• FFC Comments on Proposals to replace RSC levies
• Government undertook that the RSC levies
  replacement sources of funding would be
  legislatively protected before 1 July 2006. This
  has not happened, leaving municipalities
  vulnerable to the whims of Government at budget
  time.
• Instead National Treasury will be tabling
  Constitutional Amendment Bill proposing among
  others the repeal of item 21(6) of schedule 6.

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• FFC Comments on Development Component of LGES
• SALGA supports FFCs views that development
  component be removed from the formula as it add
  no financial value for municipalities.
• As defining development and finding relevant data
  to use in determining allocation seems not easy
  this will result in a compromise to the formula
  principles and objectives (i.e. simple,
  transparent, certain).

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• Furthermore, unlike conditional grant, the
  unconditional transfers could not induce the
  municipality to spend more for services defined
  within the component of the formula unless
  additional policy framework like in the case of
  municipal free basic services is provided for.

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• Transfer of Water Operating Schemes to LG
• Funding of water operating schemes transferred to
  municipalities will beyond 2008/09 according to
  the current scheme framework be incorporated in
  the equitable share. Will this funds be
  ring-fenced like in the case of RSC levies?

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• Thank you