The focus over the next three years will be on reviewing the local government infrastructure grants system, Minister of Finance Nhlanhla Nene said during his budget vote.
Improved service delivery at local level is a critical government objective. However, it is common knowledge that municipalities face challenges in delivering public services to communities. “It has been suggested that the local government fiscal framework is not responding sufficiently to this objective. Given these concerns, National Treasury in collaboration with sector departments and stakeholders, is reviewing the local government fiscal framework focusing on both national transfers to municipalities and the revenue municipalities generate on their own.”Metropolitan municipalities Nene explains that, as cities grow, large metropolitan municipalities can no longer focus only on providing basic services and housing, but must also facilitate private sector investment and the creation of jobs. “Urban infrastructure investment is the key to unlocking the potential of our cities,” he said. The acceleration of these programmes requires metropolitan municipalities to more carefully select investment programmes as well as make a far greater financial contribution to their implementation. All metros have already developed urban investment strategies and identified catalytic projects that will assist to stimulate growth but at the same time transform the spatial socio-economic structure. Government is in discussion with the Development Bank of Southern Africa (DBSA) to facilitate the provision of reasonably priced financing for cities that have prepared bankable projects with private sector participation.
Debt guarantees “We will act decisively to avoid further downgrades, as these will result in a significantly higher cost of borrowing, both for government and state owned companies, and the cost of financing infrastructure programmes will increase,” Nene said, referring to the country’s credit rating. In support of the infrastructure roll out by state owned entities, government exposure to public entities through debt guarantees has increased to R209.2 billion in 2013/14, from R180.2 billion in 2012/13. Eskom makes up 58.5% of the total government guarantee portfolio. If debt provisions and contingent liabilities are added to the government’s stock of debt, its liabilities are forecast to peak at 57.1% of GDP in 2015/16.
