Kwazulu-Natal Legislature Pietermaritzburg: Thursday, 19 August 2010 

Honourable Speaker

There is a very close relationship between improved financial management and fiscal governance on the one hand, and effective service delivery and development on the other. Unless we improve financial management and fiscal governance in municipalities, we will not be able to significantly improve service delivery and development. Indeed, it may well be that if we improve service delivery and development, we will, also, in turn, improve financial management of municipalities.

The financial mismanagement in municipalities is due to a variety of technical failures, including lack of skills, resources and knowledge of the applicable legislation. But partly the financial mismanagement is a reflection of corruption. There is a general perception that there are high levels of fraud and corruption in municipalities. The better municipalities manage their finances and fiscal governance, the more fraud and corruption will be reduced, and the less the fraud and corruption, the better will municipalities manage their finances and fiscal governance.

The fundamental question is to what extent are the many current financial and financial management challenges in municipalities linked directly to the complex funding model we have? How by changing the model would we be better able to cope with the financial and financial management challenges being faced by municipalities?

Should the boundaries of municipalities without a minimum fiscal base be re-drawn? Uncertainty about this is compounding the problem and the national government should come clean about the fate of many non-viable municipalities as soon as possible.

Is the two-tier system of District and Local municipalities working? Do we need to improve the system or abolish it? The recent municipal hearings have shown that district municipalities are generally performing better than their local counterparts and this should perhaps form the basis for their retention.

How do we ensure greater national and provincial government support for local government? As much as we appreciate the role of the current cost-cutting measures in reducing the budget deficit, we feel that some areas of government policy such as the Municipal Support Programme should be treated as critical on a par with the filling of critical posts.

Do we need to more clearly separate the legislative and executive functions of local government as we do in the case of provincial and national government? The newly established Municipal Public Accounts Committee in eThekwini Metro shows that an oversight role can be played at municipal level and we wish it all the best as it begins its work.

How can we ensure that IDPs are productively linked with provincial and national development plans? Unfortunately, even some of the MECs who sit in this House are known for making promises during their visits to municipalities which they then expect those municipalities to deliver on – out of line with municipal IDPs.

How can we ensure effective capacity-building of municipal councillors and officials? It is clear that endless workshops and conferences have yielded little by way of tangible results. At least as far as officials are concerned, we need stringent performance assessments.

The recent municipal hearing also revealed that there is an acute lack of financial management skills, even of the most basic kind. There is a scarcity of professionals with financial skills. But also: in far too many cases the people appointed to financial positions in municipalities do not have the necessary skills. Sometimes they are political appointments – people appointed because of their political leverage, not their technical skills. Even where financially skilled people are appointed, they are not retained – there is too high a turn-over of financial staff.

Clearly, there has to be better municipalities to ensure better financial management. Changes to the current model of local government will have to provide for more effective governance of municipalities.

Aspects of this would, for example, include greater clarity on the respective roles of politicians and administrators in the financial management of municipalities; a clearer separation of the legislative and executive functions of municipalities; and more effective oversight by councillors of executive structures.

I thank you.

Contact: Dr Lionel Mtshali, 078 302 0929