Local Government Organization and Finance: South Africa
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their local government and finance counterparts, as well as organized local government, and obtain an assessment of the financial implications from the Financial and Fiscal Commission. However, there are no firm rules to ensure the quality of consultations and assessments, to ensure the quality of the information to support them, or to guarantee the ability and willingness of sector agencies and organized local government to engage in these consultations effectively. There is perhaps a need, therefore, for a more detailed appreciation of this diversity and its relevance to specific expenditure assignments. Fourth, the government’s policy of free basic services demands a fine balance between expenditure assignment and fiscal capacity. National departments (notably the Department of Water Affairs and Forestry) have been developing policy and strategy on free services, with the provision of the services ultimately being the responsibility of local government. However, most municipalities—especially in rural areas—would need substantial fiscal assistance from the national government and adequate operational support from service providers with the required capacity (Palmer Development Group 2004). Finally, the persistent growth in personnel expenditure has been notably high, generally outstripping other expenditure items. Over the past few years, the amalgamation process intensified this growth. The trend has been to aggregate salaries toward the highest common denominator when merging jurisdictions that were previously of different grades. There have also been significant increases in management remuneration, and national regulation of municipal personnel spending has been erratic. It is a difficult challenge; municipalities employ more than 200,000 people (National Treasury 2001).
Local Governments’ Own Taxes and Charges The constitution sets the broad framework for locally raised revenues. Provided that they do not prejudice the national economic interest (section 229(2)(a)) and adhere to regulation by national legislation, local governments are exclusively empowered to impose property rates and surcharges on fees for services provided by or on behalf of the municipality (section 229(2)(b)). They are, however, prohibited from imposing income, value added, or general sales tax or customs duties. In addition, national legislation could enable specific categories of local government to impose other taxes, levies, and duties. Aggregate figures would suggest that local government is largely selffinancing, raising between 80 and 90 percent of its own revenue (Momoniat
