NATIONAL NEWS - South African cities are facing a financial crisis, and it is lower income households bearing the burden of revenue shortfalls in local municipalities, prompting calls for an overhaul of the country’s intergovernmental fiscal framework.
The 2018 State of the Cities Report, by the South African Cities Network, highlighted the rampant inequality in urban areas, evidenced by the higher proportion of income paid by poorer households towards municipal rates than their wealthier counterparts.
According to the report, South Africa’s metros have a funding gap of between 20% and 38% of their capital expenditure. In 2017 this funding gap was at R18 billion and projected to grow to R83 billion by 2026.
This amounted to a total funding gap of R569 billion over the next 10 years. Research in the report suggested that the poorer income brackets were bearing the brunt of this shortfall.
Own revenues for municipalities made up over 75% of total income, with the main sources being property rates and service charges. Using an affordability analysis threshold of 10% maximum of household income spent on tariffs, the report found that municipal bills accounted for a proportionally greater share of the income of poorer households than that of wealthier households.
While some panelists suggested that poor financial management in municipalities contributed the most to the resource shortages in local governments, an expert suggested that the fiscal powers and functions of local government needed to be reviewed, suggesting government did not spend enough on the sector.
Pundy Pillay, professor of Economics and Public Finance at University of the Witwatersrand, said SA was due for a review of its intergovernmental and fiscal framework to address the administrative and accountability issues faced by local governments.
