Revitalised municipalities will make a positive difference

On the infrastructure front, intensified expenditure on national roads projects is welcome news as Sanral rolls out construction works in key regions. A prime example is an approximately R1.165 billion investment in two developments within Great Kei Local Municipality, where some R983 million has been allocated for the upgrading of National Route R63 between km 21.7 and the N2 past Qumrha.

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The remaining R182 million has been allocated for the resealing of the N2 Section 16 between Mooiplaas (km 49.9) and Qumrha intersection (km 70.2), with works on both phases due to commence from the Q3 2023. In the immediate and longer term, these investments will help to support and sustain the local economy, which is one of South Africa’s poorest and more under-developed regions, but with major potential for tourism due to its scenic coastline.

Refocus

Following the Covid years, and the current rate of sustained load-shedding, the South African economy is struggling to recover, and unemployment remains one of the country’s greatest social ills. For this reason, it’s crucial that local municipalities refocus their efforts on meaningfully implementing their local infrastructure development programmes, both to enable employment and to retain and attract commercial investors.

This is the rationale that drives the ongoing implementation of Cogta’s District Development Model concept, which needs far more accelerated implementation and visible gains on the ground nationally. Effective coordination between national, provincial and local municipalities is key, but the latter are the ultimate creators and implementers. They also need to account for how funds donated were spent.

Remuneration versus expenditure

For the 2021/22 financial year, overall municipal expenditure was around R472 billion, of which 28% was spent on employee remuneration costs. The latter figure falls within National Treasury’s norm of 25% to 40%. However, local government entities also expended some R39 billion on contracted services during the period. This equates to around 8.4% of total expenditure, which is above National Treasury’s 2% to 5% range. So, what’s going on?

Exceeding the norm for contracted services could be supported where municipalities embrace the advantages of outsourcing certain services, like operations and maintenance on their water and/or wastewater treatment works or, for example, where independent power producers are involved. However, an overreliance on private contractors could also indicate inefficiencies or gaps in capabilities. A red flag should certainly be raised where municipalities spend well below the contracted services percentage benchmark, yet exceed the 40% remuneration threshold and have little to show for it.

Rightsized for success

If these were under-performing private enterprises, the investors – in this case national government, taxpayers and municipal residents – would step in and overhaul, rightsize, retrench or even close the ‘business.’ The point to make is that there is so much opportunity to effect change within the municipal environment – and no excuses not to. Plus, there are so many qualified candidates in the private sector who could make a major difference ‘overnight’ if given the chance to work and lead in the public domain free of political influence.

The smart money is on performancebased models and that’s what local and international investors want to see when it comes to eradicating sustained power outages, using construction to tackle youth unemployment, and ensuring that South Africa is future-proof. I believe it is. We just need to put those taxes to work more effectively.

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