The albatross of municipal finances hangs around local government’s neck

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Election fever has reached fever pitch with political parties pulling out all the stops to secure the vote ahead of the 1 November polls. Theelections will close the fourth chapter in the unfolding story of our democratic local government dispensation, which is attached to the hip of our constitutional directives of the “progressive realisation of socioeconomic rights”, as codified in the Bill of Rights. 

The past term since 2016 has seen exciting developments that have begun to reshape the nexus of government, judiciary and active citizenry. Increasingly, residents have turned to the courts to compel their local municipalities to uphold and discharge their constitutional duties and obligations. 

The Lekwa local municipality in Mpumalanga is perhaps the most striking of these actions, where, following an application by a significant corporate player in the town’s economy, the court, in the face of an apparent ineptness of the provincial government to comply with its oversight responsibilities provided for under section 139(5) of the Constitution, issued an unprecedented ordered that national government must intervene, under section 139(7). 

So punitive was the resultant action that the council was dissolved and an administrator appointed to develop and implement a financial recovery plan. While a section 139(5) intervention is not without precedent, the case of Lekwa municipality is unique to the extent the court, on application from a private entity, found cause to direct a national intervention, superseding the provincial government. 

But the dissolution is rendered null, because the November 1 elections will deliver a new municipal council. The question is whether the new set of councillors will rise to the challenges faced pre-dissolution and see the financial recovery plan to its successful conclusion. More than this, will they be able to sustain the intervention over time? 

The situation in Lekwa was, to some degree, a personification of the state of local government in the country. This state is likely to be top of mind for most voters as they make their mark come election day. By all indications, albeit anecdotally, if the outcome of the 2016 local government elections is anything to go by, South Africans have transcended the stranglehold of ideological and historical affiliation as a sole basis for deciding who should govern our towns and cities. 

Increasingly these decisions are based on the calibre of candidates and the track record of political parties, and we should be better off for it. There is, of course also, as 2016 testified to, the effect of the stay-away voters. In the urban centres, a poor voter turnout resulted in the ANC losing control in the metropolitan municipalities of Nelson Mandela Bay, Tshwane, and Johannesburg, while just barely managing to hold on to power in Ekurhuleni. It also introduced the quagmire of coalition politics at a local level into our body politic for the first time. By all accounts, these coalitions resulted in instability and exacerbated the service delivery difficulties.

The ANC has introduced the local government barometer, determining service delivery targets and tracking them through the five-year term across municipalities. But the success of this concept lies in a broader social compact that each local municipality should facilitate to bring together the skills, competencies, and resources available in the area to give true meaning to the call of democracy — that the “people shall govern”. 

The point is that the elections, vital as they are to strengthen democracy and legitimise our institutions of governance, will by themselves not change the state of local governance and service delivery. Perhaps then, the most significant takeaway from the Lekwa experience is that “people’s power” lies not in a once-off cross against a party but the persistent spirit of broader civic activism and social compacting that includes residents, the labour movement and corporate South Africa. Among the key issues that require treatment in this process are the following: 

Municipal “integrated development plans” are anything but integrated, not even in the specific municipality. They have been ineffective in shaping and driving integrated and sustainable long-term development planning that corrects the spatial inefficiencies of cities and towns. Neither have they been able to catalyse opportunities for broad-based economic growth to undermine unemployment and poverty or formulate appropriate responses to climate change and resource management challenges in municipalities whilst aligning and giving expression to the objectives of the National Development Plan.

Then there is the albatross of municipal finances. Two significant problems require treatment. First, the collection rates for municipal services have dwindled, with Eskom alone, being owed billions by local governments. The Covid pandemic has some role in this regard, but the root cause remains more in a structural defect.

Although municipalities have extensive taxing capabilities, their collection capacity is constrained. The South African Revenue Services is the single national tax collection agency, but no such capacity exists at the local level, with each municipality having to establish collection departments. In many instances where they do have, these have been outsourced at a high cost. With the legislative environment the same across municipalities, except perhaps for municipal rates and collection policies, which could easily be synergised, there is a solid case to enact national legislation to create a single local government revenue collection agency. 

Second, to collect revenue, municipalities have to deliver services. The development community will attest that one of the single most significant challenges to growth and development is the unavailability of bulk municipal services. The regional services council levy (RSC Levy) was a taxing instrument used by municipalities to fund bulk infrastructure. This levy was discontinued in about 2006, presumably because it was biased towards urban municipalities and added to the corporate tax burden. The income forgone to municipalities was never really addressed. An attempt to offset it against a contribution from the fuel levy was made and continues, but this did not plug the enormous financial gap municipalities experienced as a result.  

The introduction of some form of business tax needs an urgent conversation. Studies undertaken by the City of eThekwini in about 2014-15 confirmed that the business sector was not opposed to such a tax, provided its proceeds were applied to improving basic service delivery and the funding of maintenance of current infrastructure and creation of new assets to strengthen the quality and reliability of supply of municipal services and support growth and expansion of municipal tax bases. 

It would be incomplete not to address the bane of fraud and corruption in this equation. Hence, an additional critical element that the social compacting should address is cultivating an ethical culture of local governance.

Professor Stu Woolman’s notion of  “politics of accountability”, which he defined as a broader concept than the “substantive embrace of the rule of law”, argues convincingly that the narrow conformance to law by itself is not the yardstick for creating a value-based society. It follows that elections are but one crucial element of the democratic value-based society our Constitution envisioned. 

South Africans should go out in their numbers to cast a vote on Monday but, if beyond these elections, we recede into a slumber for the next five years, we would have failed the ultimate test of our democracy — an active and engaged citizenry, vibrant social and political institutions, including the media. Casting a vote will be mere compliance with the rule of law and not result in genuine accountability and ethical leadership as we re-imagine local governance following the 1 November elections.