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Government’s funding model for municipalities needs a complete overhaul

Chris Pappas
By Chris Pappas
16 Mar 2023
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The current funding model does not adequately account for the unique challenges faced by different municipalities. It is unacceptable for municipalities to be left to fend for themselves without the necessary financial support from the national government, given their responsibility for delivering essential services and their proximity to the people they serve.

The state of municipal governance in KwaZulu-Natal (KZN) is a major concern. Some of the reasons for the continuous decline have been inflicted by the historic establishment of wall-to-wall municipalities. 

Municipalities have been set up to fail by including very low numbers of people able to afford rates and services who subsidise those who cannot pay. Despite this income generation gap, municipalities are still required to provide services to 100% of the population. 

To compound this, the funding model for municipalities from the national government is outdated and fails to support the constitutional mandate of local government. The equitable share allocation does not go far enough to address the expectations placed on local municipalities. And, lastly, municipalities have very limited legal mechanisms to generate revenue.

We must acknowledge the systemic failures that have led to this state of affairs. The legacy of apartheid and colonialism has created vast inequalities between urban and rural areas, with rural communities receiving inadequate service delivery. 



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In democratic South Africa, poor governance, State Capture and corruption have added to the legacy of disparity. Moreover, continued economic decline and the inability to create jobs in the economy have left many residents unable to pay for services. 

Coupled with the looting of public funds, an under-capacity of municipal administrations and an unskilled public service, these problems have worsened. Simply put, many rural municipalities, no matter how well run, would struggle to break even.

To address these issues, the funding model for municipalities from the national government needs a complete overhaul. Local government is crucial to achieving the constitutional mandate, and the lack of support from the national government undermines its effectiveness. 

The current funding model does not adequately account for the unique challenges faced by different municipalities. It is unacceptable for municipalities to be left to fend for themselves without the necessary financial support from the national government, given their responsibility for delivering essential services and their proximity to the people they serve.

Another factor that limits the success of municipalities in KZN is the limited number of legal mechanisms to generate funds. Alternative methods of revenue generation, such as municipal bonds, public-private partnerships, more equitable share and increased benefit of already taxed goods and services, need to be explored in consultation with local communities to ensure the viability and sustainability of municipalities. 

The implications of the current state of municipal governance in KZN are significant, affecting service delivery, social cohesion and economic growth. All stakeholders must work together urgently to address the systemic issues that have led to this situation. 

The most important driver of this reform must be the national government through the executive and Parliament. The national government must take responsibility for its role and take concrete steps to address the issues. 

Municipalities must also be proactive in exploring alternative mechanisms for revenue generation, provide services and address developmental backlogs without overburdening residents and businesses. 

The current state of municipal governance in KZN is alarming, and the systemic failures contributing to this state of affairs must be addressed urgently. This starts with an overhaul of the powers and functions of local government as well as the funding models. DM

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