South Africa’s municipalities, economist JP Landman said at a North-West University event recently, are defined by three Ps: patronage, parties and prostitutes.
“Just stop those three things and you can have much better municipalities,” he told a gathering hosted by the university’s business school.
Perhaps President Cyril Ramaphosa and the minister of co-operative governance & traditional affairs, Velenkosini Hlabisa, didn’t get that message when they launched a new white paper to fix South Africa’s broken local government on October 22. Still, Ramaphosa’s speech accompanying the paper’s launch did offer a rare moment of self-criticism for the collapse of local government services across the country.
“We assigned municipalities extensive powers and responsibilities that in some cases outstripped their capability and funding,” the president said. “We underestimated the importance of training a new generation of engineers, town planners and municipal managers. We underestimated how politicised appointments would open the door to corruption, malfeasance and a lack of accountability.”
For Landman, much of the problem dates to 1998, when the government adopted a one-size-fits-all municipal structure. “All municipalities were treated the same — but they’re not the same. Potch is not the same as Parys.”
That truth should have been self-evident. In fact, Landman estimates that a clear third of municipalities are simply not financially viable. And years of cadre deployment, mismanagement and corruption mean that between them, South Africa’s 257 municipalities have now racked up a total of R230.5bn in debt, three-quarters of which is owed by households. In turn, they owe more than R120bn in unpaid fees to Eskom and more than R25bn to water boards. The average amount of water lost or not paid for comes to a staggering 50% nationally. As many as 37 have no municipal managers in charge.
So, what, exactly, is the government proposing?
There are 78 policy changes and recommendations in the 174-page paper, but the key changes include a differentiated model in which powers and functions are directly related to the actual capacity of each municipality, as well as the ring-fencing of utility revenues — such as water and power — specifically for infrastructure maintenance.
“Where a municipality is unable to carry out a particular responsibility, that responsibility should be assigned elsewhere. In many cases, service provision would be better undertaken at a regional scale, or through partnerships and concession arrangements,” said Ramaphosa.
Refreshingly, says the paper, “residents understand that services cost money and that infrastructure must be maintained. What they increasingly reject is being required to pay more while receiving less.”
To this end there is a clear shift towards bringing in the private sector, while the national government has to develop a framework to license entities that provide key municipal services.
These may or may not be the municipalities themselves and could include “nongovernmental organisations, and private companies operating under concessions, public-private partnerships, or management contracts”.
The paper proposes a merit-based appointment system to professionalise administrations and senior management — independent of political shifts. And it sets out new regulations and a framework to guide coalition formations in hung councils, largely to prevent budget deadlocks or abandoned projects.
This is especially important given how many hung councils there are likely to be after the local government elections this week. Landman, for example, estimates that as many as 120 councils will end up with coalition governments.
Too many cooks
Then there’s the manner in which councils are structured, according to Stella Mondlane-Ngwenya, the speaker at Matlosana municipality in the North West. It puts “too many hands into decision-making”, she said at the business school event.
“You still need the full body of council to say ‘yes’, and when you have too many people to have buy-in, you get dissenting views. Sometimes it’s bought; it’s not an honest dissenting view because there will be lobby groups in the council — these are real challenges that we are living with. Part of what makes consequence management remain a concept is the fact that we have not removed a number of hands out of the process,” she warned.
The white paper has proposed an initial 90-day “transition phase” to establish a management body comprising Cogta, the National Treasury and the Presidency, with an 18-month implementation period for rolling out immediate policy changes and performance targets.
Momentum group economist Sanisha Packirisamy thinks this may be too ambitious a timeline, however.
The proposals, she warns, are going to require a lot of legislative changes. “The fact that they want to do away with 44 districts, for example, is quite a big one because there’s a big counter-argument to that.”
At the moment, there are three tiers to South Africa’s municipal make-up: eight metropolitan, 44 district and 205 local municipalities. As Packirisamy explains: “When you group some of the municipalities together you get those 44 districts, so in some cases if something goes wrong — let’s say with bulk water distribution — it could be the district manager or the councillor of the municipality or a coalition. So there’s a lack of accountability, which is why they want to take that structure out.”
However, if, say, an engineer works for the district, it’s easier to get that engineer to fix something in a small municipality because the engineer already “belongs” to the district. But if there’s no district, finding a full-time qualified engineer may be a problem.
“I think there’s going to be quite a bit of pushback,” Packirisamy predicts.
Municipal salaries are another issue.
“Let’s say you’re a really small rural municipality; you kind of get treated the same as a large municipality that is running a bigger collections procedure. So the smaller ones will get treated differently,” she says.
How that will work in practice is not clear — but, says Packirisamy, it could mean different and lower salaries for smaller towns. “There might be some pushback there too if you were getting disproportionate benefits and don’t get those going forward.”
However, she expects the ring-fencing of water and electricity functions to go through fairly quickly. In essence, all revenue generated from power and water sales must be applied only to infrastructure maintenance, capital refurbishment and bulk obligations before funding broader operational or salary budgets. The paper also separates the role of the service authority (setting policy and applying oversight) from that of the service provider.
The leadership question
Given how broken so many municipalities are already, the paper says one of the immediate actions is to agree on an “interim municipal service delivery and financial rescue and stabilisation package”.
This, it says, is necessary “because some municipalities cannot restore services and financial control through ordinary budget adjustments alone”.
Access to the package, however, will come with conditions, including “credible” funded budgets, “recovery plans, protection of service revenue, payment arrangements with bulk suppliers, action on unauthorised, irregular and fruitless and wasteful expenditure, improved billing and collection, protection of indigent households, maintenance commitments and measurable service targets”.
No small ask, then.
Much is still down to leadership at local government level, argues the chief director of NWU Business School, Joseph Sekhampu. Hiring skilled staff will be as critical, even if the state does more to involve the private sector.
“Someone still needs to audit the work of the private sector and if you don’t have capacity internally, how are you going to monitor the private players?” he asked during the panel discussion.
He decried the opportunity cost of municipal dysfunction, which has increasingly forced private firms and households to invest in their own power and water backup systems. “If we just do what we have to, it would release capital from businesses,” he said. Just imagine, he added, if business did not have to worry about basic services.
As Business Leadership South Africa CEO Busi Mavuso said earlier this year: “The issue of municipalities is not just about the one small municipality; it is a national economic issue.”
The sheer scale of dysfunction at local government level helps explain why South Africa has yet to notch up higher growth rates, even after the end of load-shedding.
Packirisamy says the missing piece of the puzzle is for reform to start strengthening sentiment, “and then you get the private sector meaningfully participating. One of the reasons foreign direct investment has been stagnant is you’re not making the environment conducive for business conditions.”
In Landman’s telling, it takes a crisis for South Africa to shift course. An example is load-shedding, which forced a “complete” deregulation of the entire electricity market; “an astonishing development”.
Still, that is cold comfort for the years of lost opportunities and growth prospects South Africa could have enjoyed, had it reversed course long before the rot set in.
