MoneyThe newly released Cost of Municipal Basic Services Report has been welcomed by the Minister for Cooperative Governance and Traditional Affairs (CoGTA).

The report, by the South African Local Government Association (SALGA) and Financial and Fiscal Commission (FFC), is a culmination of a study undertaken by the pair to understand different variables that affect the costs of providing municipal basic services and to establish a standard costing model applicable to local government sector.

The new municipal services costing model highlights that funding required per poor household is sensitive to local conditions and vary from municipality to municipality and from project to project.

It also has also established that the need to provide funding for capital renewal of ageing infrastructure is becoming more dominant – an estimated R45.270 billion annual capital funding will be required by 2018.

Speaking at the launch, Deputy Minister of CoGTA Andries Nel said the model was a commendable work which would feed into the broader government efforts to consolidate local government system especially the improvement of the transfer of local government equitable share to municipalities.

In 2013, the National Treasury and CoGTA introduced a new differentiated municipal equitable share model. Nel said the new local government costing model will complement the treasury and CoGTA’s work on municipal equitable share funds which must be reflective of municipalities’ realistic needs to fund their operations and capital projects.

Municipalities require an estimated R39 billion annually for operational costs to deliver services to the poor and an additional R41 billion for administrative costs for providing the same services.

The cost of basic municipal services new model looks at capital costs, administrative costs and operational costs of providing basic municipal services to households by taking into consideration that cost drivers are unique from municipality to municipality.

The costs of providing basic municipal services are largely influenced by the municipalities:

a) Settlement typology (size and number of settlements, size of municipal area and the number of settlements)
b) Level of urbanisation (number of households in farm areas, tribal areas and urban areas)
c) Travel time from main economic centre
d) Location (coastal or inland)
e) Topography (mountainous, flat terrain or rolling)
f) Population and household profile (population size and household growth)
g) Poverty and unemployment status