Urban Development

Crisis brewing in local governance amid conflicting signals

Dawn of growth lies with cities
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There seems to be confusion among government departments about their approach towards municipalities, while threats to social stability are building in South Africa’s urban areas.

Last week the Minister of Cooperative Governance and Traditional Affairs, Pravin Gordan, announced an initiative by central government to assist municipalities to get their finances onto a sound footing.

The very next day his previous department, the National Treasury, announced the withholding of so-called ‘equitable share’ grants from the national budget to 60 municipalities in arrears with their debt to the state-owned beleaguered electricity utility company Eskom.

Showing how confusing, even disjointed, government’s response to both the crisis in the financial position of some municipalities and Eskom has become, the South African Local Government Association (SALGA) in a statement said: “National Treasury must play an active role in supporting municipalities to recover their debt by taking a similar approach with defaulting provincial and national departments.

“Funds owed by these departments (to municipalities) should be channelled directly to municipalities so that they can pay their debt to Eskom as well as ensure the necessary systems and capacity to implement full credit control initiatives.”

SALGA did not only call into question the legality and constitutionality of the Treasury’s move, but also pointed out that it would “disproportionately punish the poor and negatively affect service delivery to those communities, with some municipalities already being unable to pay salaries and provide basic services as a result;” and

“The equitable share is the means of ensuring that the poor continue to be cushioned against the effects meted out by the vagaries of the triple challenges of unemployment, poverty and inequality.”

A sensitive time

At a time that government and civil servants are deadlocked in salary negotiations, the inability of some municipalities to pay their employees, combined with the interruption of services to large groups of urban residents, could just represent one of those tipping points into widespread civil unrest warned about last week. 

While Minister Gordan’s initiative, as part of government’s “Back to Basics” campaign, is in part aimed at helping municipalities recover the R96 billion owed to it for services, approximately R5.4 billion of that debt is owed by national and government departments.

Adding to this already extremely complicated situation, is the fact that much of the ‘equitable share’ is used by municipalities to subsidise services to the urban poor. It is also an indication of how South Africa over many decades, dating back to at least the early 1980s, has failed to properly cater for the urbanising poor, making up the bulk of the numbers in a rapid urbanisation process. (We will take an in-depth look at this next week.)

As far back as 1994, the year of the dawn of the country’s democratic dispensation, a report by Derik Gelderblom and Pieter Kok for the Human Sciences Research Council (HSRC) warned: “Abolition of Influx control in 1986 changed the dynamics dramatically (of the urbanisation process) but a proper strategy to deal with this never got off the ground.”

Twenty years later, in 2004, another HSRC report under the title “Is urbanisation in South Africa on a sustainable trajectory?, concluded: “... the provision of urban infrastructure has outstripped population growth, resulting in better access to essential services and reduced backlogs. In contrast, the provision of affordable housing has not kept pace with household growth, so more people than ever are living in shacks. (Our emphasis.)

New complication

To further complicate the situation, the latest developments pose the possibility of government institutions, at different levels of government, soon confronting one another in court.

In its statement in reaction to the Treasury’s announcement on equity grants SALGA stated, among other things:

  • The equitable share is an unconditional grant that enables municipalities to provide basic services to poor households, and to enable municipalities with limited own resources to afford basic administrative and governance capacity and perform core municipal functions.”;
  • “Moreover, it is our considered view that the withholding of the equitable share to these municipalities and local government in general is unconstitutional. Neither the Constitution nor Legislation makes provision for withholding the equitable share ...”;
  • “It must also be noted that some of these municipalities are currently under section 139 intervention, being a measure imposed by provincial government to assist these municipalities on the road to recovery. This will therefore undermine the intergovernmental effort to address the challenges being experienced in these municipalities”; and
  • “In view of the current situation and vast debt owed to municipalities, SALGA calls upon its member municipalities to immediately implement credit control measures to recover the debt from government departments. Defaulters must be given due notice to effect payment, failing which their services must be terminated with immediate effect.”    

The present situation could probably, at least in part, be ascribed to what the Centre for Development and Enterprise in a March 2014 report described as officialdom’s “relationship with urbanisation as (being) complicated and ambiguous”.

It points out that top political leaders often in speeches focus on rural areas and developments there, as did the ANC’s in its 2014 election manifesto. Conversely, urban areas are afforded little attention – if at all.

Urbanisation is essential to, and offers substantial opportunities for, economic development and job opportunities – but also brings challenges to social stability.

In this regard, the HSRC report states: “To be effective, policy-makers have to coordinate a range of processes so that they can capture the positive spill-over effects (of urbanisation).

“For this reason, it may be essential to the success of cities that their development be elevated to the highest political levels so that policy-makers across government are focused on helping cities grow.”

by Piet Coetzer

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