Local Government Borrowing

80 Chris Heymans

slow,because the stringent conditions require extensive negotiations between municipalities and the National Treasury.

To assist other municipalities,the government introduced a local government financial management grant (FMG) and a municipal systems improvement grant (MSIG).The FMG has been putting in place the systems defined in the MFMA.It supports a pilot program oftechnical assistance at the municipal level,supported through donor funding since 2001/02.The MSIG is mainly geared toward establishing Project Implementation and Management Support System centers,and funding routine running costs and capacity-building and support activities (mainly in the field oftraining).

In the past,a multiple grant system meant that other grants still continued to fund capacity-building initiatives.For example,a part ofthe CMIP that is allocated through the provinces also assists municipalities with capital project planning and alignment with integrated development plans,the water operating grant and water capital development grant support installation ofcost-recovery systems with some emphasis on customer relations and responsiveness,and Project Viability assists in the development ofinformation systems.Although Project Consolidate may be the beginning ofa more coherent approach,the multiplicity ofcapacity-building support measures suggests that there is not yet a fully coherent capacity-building strategy.This lack ofa clear strategy is likely to be a primary concern as the government attempts to improve the targeting ofthese funds in the near future.As the discussion here highlights,there are different needs in different types ofmunicipalities,and it remains necessary to introduce a degree ofnuance and differentiation to address their respective requirements. Table2.8 provides a perspective on the relative contributions ofthe three major types oftransfers to the major categories ofmunicipalities.

Local Government Borrowing

Since the late 1990s,the South African government has been working on creating an enabling environment for municipal borrowing.It published a wide-ranging policy paper on this topic in mid-2000 and has incorporated conditions in the MFMA to create the legal conditions for borrowing by municipalities and municipal entities.

The 1996 constitution provides both implicit and explicit support for local-level borrowing.By recognizing the role oflocal government in governance and service delivery,it delineates a sphere ofgovernment and highlights the identity oflocal government and by implication the notion that it