Cape Town – With municipalities continuing work to improve themselves, new conditional grants and so called “game changers” will be introduced, National Treasury said on Wednesday.
This as government continues to work to reduce costs and improve financial management.
Tabling the 2017 Budget before a joint sitting of Parliament, Finance Minister Pravin Gordhan said government continues to invest in improving the financial capability of municipalities.
He said that in the period ahead, National Treasury and provincial treasuries have agreed to focus their efforts on four “game changers”.
New Municipal Standard Chart of Accounts
Minister Gordhan said the new Municipal Standard Chart of Accounts, which will be implemented from 1 July 2017, will contribute to greater transparency and consistency of municipal finances.
According to the 2017 Budget Review, the Municipal Standard Chart of Accounts will also make data from different municipalities easily comparable.
From July 2017, municipalities will have to capture all financial transactions in the new classification framework. For the first time, every municipality will record the same items in the same way. Each transaction will reflect what project or service it is part of, the region in which it was spent and the funding source.
This information will enable better financial management and improved legislative oversight.
Improved supply chain management
The second of the four “game changers” is improved supply chain management can reduce irregular expenditure and procurement reforms that can generate significant savings. “For example, municipalities will benefit from the Office of the Chief Procurement Officer’s efforts to centrally negotiate contracts for items such as software licenses and services, with potential cost savings of up to 60%.”
Enhanced revenue management
In addition, enhanced revenue management, including appropriate tariff-setting, regular billing and effective collection systems will also assist municipalities.
Improved asset management
Improved asset management, including adherence to 8% of the value of assets being spent on their maintenance formed part of the four “game changers”.
Division of revenue, redistribution of resources
National Treasury said that of the funds available over the next three years after providing for debt service costs and the contingency reserve, 47.5% is allocated to national government, 43.4% to provincial government and 9.1% to local government.
“The funds available after providing for debt service costs and a contingency reserve increase by 6.9% to R1.24 trillion next year, and are projected to rise to R1.43 trillion in 2019/20,” said Minister Gordhan.
“The division of revenue involves a substantial redistribution of resources from the wealthiest areas in our country – where most of our taxes are raised – to lower-income communities and households. The allocations to predominantly rural municipalities are twice as large, per household, than those to metropolitan councils.
“This redistribution of resources is an enabling foundation for a broader transformation of services and opportunities in our cities, towns and rural areas,” he said.
New early childhood development grant
Meanwhile, a new early childhood development grant to expand access and improve facilities for young learners is to be introduced. The grant is allocated a total of R1.3 billion over the MTEF period.
New grant for learners with intellectual disabilities
Also a new grant in 2017/18 to fund the education of learners with intellectual disabilities will also be introduced.
New grant to expand social development services
Government will also introduce a new grant in 2017/18 to expand social development services by employing additional social workers.
Pushing back the scheduled consolidation of the indirect school infrastructure backlogs grant (through which the Department of Basic Education delivers projects on behalf of provinces) into the direct education infrastructure grant from 2017/18 to 2018/19 to allow projects currently under way to be completed.
The three new conditional grants will take effect in 2017/18.
Allocations to provinces over MTEF
Meanwhile, allocations to provinces total R1.7 trillion over the MTEF period, growing at an average annual rate of 7.5%. This is slightly higher than the annual average growth rate of 7.3% in the previous MTEF period as a result of additions to enable provinces to continue to provide public health and schooling in line with population growth.
To support improvements in health and education, R3 billion will be added to the equitable share in 2018/19 and R4.3 billion in 2019/20. The provincial equitable share grows at an annual average rate of 7.2% over the medium term.
Treasury further said that more than half of nationally raised revenue will be transferred to provinces and municipalities.