FY 2002/03–FY 2008/09

TABLE 2.6 National Transfers to Local Government, FY 2002/03–FY 2008/09 (R million)

Revised Outcome estimate Medium-term estimates

Type oftransfer 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

Direct transfers to local government Equitable share and related 4,230 6,623 7,811 9,808 18,558 20,626 23,375 Equitable sharea 4,187 6,350 7,678 9,643 18,058 20,076 22,775 Water and sanitation operation 43 273 133 165 500 550 600 Infrastructure 3,472 4,102 5,258 6,302 7,225 9,129 11,801

Municipal Infrastructure Grant 1,865 2,442 4,440 5,436 6,265 7,149 8,053

Public Transportation Infrastructure and Systems — — — 242 519 624 1,790

Local Neighbourhood Development Partnership Grant — — — — 50 950 1,500

National Electrification Programme 225 245 196 313 391 407 458

Implementation ofWater Services Projects 999 1,022 208 — — — — 76

Chris Heymans

Disaster relief — — 280 311 — — — Poverty relieffunds and otherb 383 393 134 — — — — Current 400 856 768 749 749 749 400 Restructuring Grant 151 494 388 350 350 350 — Financial Management Grant 155 211 198 199 199 199 200 Municipal Systems Improvement Grant 94 151 182 200 200 200 200 Subtotal direct transfersc 8,102 11,581 13,837 16,859 26,532 30,503 35,575

Indirect transfers to local government Water and Sanitation Operation 656 817 819 904 491 490 531 National Electrification Programme 740 796 819 863 977 1,016 1,143

Subtotal indirect transfers 1,396 1,613 1,638 1,767 1,468 1,506 1,673

Total 9,498 13,194 15,474 18,626 28,000 32,010 37,249

Source: National Treasury 2006—information provided to the author upon request. Note: — = not available. a. Includes main local government equitable share, replacement ofRSC levies, and special support for councilor remuneration. b. Includes phasing out poverty reliefgrants and Urban Transport Fund. c. Reflects local governments’ share ofthe division ofrevenue. Local Government Organization and Finance: South Africa

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78 Chris Heymans

removal.Table 2.7 provides an overview ofthe funding windows,purposes, factors,and relative allocations under the equitable share in 2003/04.

Specific-Purpose Capital Grants Capital grants constitute more than a third ofdirect national transfers,but they have been projected to drop in significance because ofthe strong growth in the equitable share.The biggest,fastest-growing capital grant has been the Consolidated Municipal Infrastructure Programme (CMIP).Other substantial flows have occurred through sector grants from the Department ofWater Affairs and Forestry,the National Electrification Programme (managed by the Department ofMinerals and Energy),the Local Economic Development Fund,the Community-Based Public Works Programme,and the Building for Sports and Recreation Programme.

In March 2003,the cabinet decided,in principle,to take consolidation forward by bringing all municipal infrastructure grants (including the CMIP) into a single,decentralized,non-sector-based,multiyear,and formula-driven capital allocation.The new municipal infrastructure grant has started (since 2003/04) to consolidate seven sector grant programs over three years,building on the limited consolidation first achieved through the CMIP.Municipalities are expected to need considerable support in adapting their organizations’decision-making and reporting processes to the requirements ofthe grant.Its conditions would therefore also entail requirements to support the development ofsuch capacity.However,the grant is still in a pilot phase and its procedures and project management mechanisms are still being developed.

Specific-Purpose Capacity Building and Recurrent Grants The transformation oflocal government has imposed many new demands on municipalities,and it has therefore been necessary to introduce a number ofcapacity enhancement measures.A one-offlocal government transition grant 2000/01 assisted with specific issues ofamalgamation after the demarcation process,but more significantly,a number ofmeasures have been supported to ensure long-term structural change.

The first among these has been through the local government restructuring grant,introduced in 2000 to assist large urban municipalities with modernizing their service delivery,fiscal,and institutional systems.It is awarded on application,and the relevant councils have to make proposals that are then evaluated by the National Treasury.Implementation has been