JOHANNEBSURG - THE COUNTRY’S largest municipalities are dipping into their local government equitable share (LGES) to cover their expenditure obligations as Covid-19 exacerbates their poor revenue performance.
The 2020 State of Cities Finance Report released by the South African Cities Network (SACN) yesterday revealed that the state of cities’ finances remained poor.
The biennial report examined the finances of nine cities: Joburg, Cape Town, eThekwini, Ekurhuleni, Tshwane, Nelson Mandela Bay, Buffalo City, Mangaung and uMsunduzi.
SACN said municipalities were battling to generate enough revenue to keep their levels of service up, which has been heavily aggravated by the Covid19 pandemic.
Covid-19 has left cities operating in a far more unstable and difficult environment, and burdened with many additional responsibilities and costs such as providing sanitation and shelter.
The increasing issue of raising revenue was also compounded by the public’s inability to pay for city services as many ratepayers have lost their jobs or have had household incomes cut down.
SACN programme manager Danga Mughogho said cities were finding it increasingly difficult to raise sufficient revenues to cover their many expenditure obligations. Mughogho said cities relied on the LGES to subsidise some of these obligations and were not able to use it only for free basic services as intended.
“Cities are functioning in an environment of ever-increasing input costs and a sluggish economy, which constrains growth in revenue and leads to an increase in the number of low-income households that require support,” Mughogho said
“As their fiscal space closes, cities are forced to target subsidies ever more tightly, rather than expanding support.”
While cities are entirely within their rights to spend the LGES on items other than free services, SACN said data indicated that the intention of the grant was in fact not being realised.
Mughogho said it was perhaps time for a complete review of the local government fiscal framework. He said it was time to reopen the discussion about a new tax instrument for cities in order to ensure continued financial sustainability.
“Available data suggests that the LGES is not being used properly, which is at least in part due to the increasing pressure on the fiscal framework within which cities operate,” Mughogho said
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