18 May 2005

Chairperson, Mr Sicelo Shiceka;

Honourable members of the Select Committee;

Ladies and Gentlemen:

Thank you for affording us this opportunity to address you today.

As a Department, we last met with the Honourable members in two recent working sessions. The first being the joint meeting of the Select Committee on Finance and Local Government that was held on the 8th of March 2005. On this occasion, we sought to provide an input on the Division of Revenue Bill (2005) as it relates to the core business of the dplg.

The second occasion was in Mpumalanga Province, when this Committee together with all Members of the National Council of Provinces interacted with communities on the 14th to the 18th of March 2005. Through the work of this Committee and the NCOP we have gained useful insights from that programme, whose theme aptly reflects the nature of our democracy: "Putting our people first by taking Parliament to the People". We hope to work together with the Select Committee in order to further benefit from this innovative initiative of the NCOP.

Having recognized this context, for purposes of our discussions today, we will focus on the Departmentís Strategic Plan and the Budget for the MTEF period.

As you may be aware, we have refined our Strategic Plan for 2005 ~ 2010 in order to position the dplg to proceed and address the needs of our people and respond appropriately to the challenges of the Second Decade of Democracy. Our President, Mr T Mbeki in the State of the Nation Address on the 11th of February 2005 and our Minister, Mr F S Mufamadi in a subsequent Parliamentary debate on the 15th of February 2005, articulated these challenges. Our Strategic Plan is therefore informed by governmentís Programme of Action for the short, medium and long-term, as articulated by our leadership.

In the next five years, we will pursue the following key objectives:

  1. Promote a governance system that will enable service delivery in a developmental state.
  2. Strengthen provincial governance and accountability.
  3. Consolidate local governmentís capability of impact to achieve sustainable development.
  4. Monitor performance, evaluate service delivery and communicate development.
  5. Strengthen the dplg organizational capacity and capability.


Arising from the Budget Speech that was delivered by the Minister of Finance, Mr T A Manuel on the 23rd of February 2005, it is clear that governmentís allocation of resources continues to be consistent with policy. This is also demonstrated by the fact that the character and design of the national budget, particularly with respect to allocations to provinces and local government, reflects an increasing and systematic allocation of financial resources in order to meet the basic needs of our people.

Equally, there is recognition in government that we need to pay particular attention to strengthening integration of our intergovernmental system, which in itself is an important resource that has been bequeathed to us by the generation of democrats who drafted our Constitution.

As the President said, in the State of the Nation Address:

"To improve integration among all spheres of government in both policy development and implementation, the Inter-governmental Relations Bill has been finalized, and is awaiting processing by the two houses of our national parliament. This will be complemented by the alignment of spatial and development strategies and planning cycles among all the three spheres of government."

It is encouraging to note that soon in this current financial year, the Select Committee will deliberate on the Intergovernmental Relations Bill. At the same time, our Department, working together with the Presidency, provinces and municipalities, has initiated a process of aligning the Municipal Integrated Development Plans (IDPs) with the Provincial Growth and Development Strategies (PGDSs) and the National Spatial Development Perspective (NSDP). In the 2005/06 financial year and in the medium term, we will increase our efforts to improve integration across all three spheres of government.

With regard to the role and place of the Institution of Traditional Leadership in our governance system, the formal recognition of this institution through national legislation was a major milestone that our government achieved recently. As you will be aware, most Provinces tabled Provincial specific legislation to the respective Provincial Legislatures. Over the 2005 MTEF period, the National House of Traditional Leaders had been allocated a total amount of R24,7 million, the Commission on Traditional Leadership Disputes and Claims, a total amount of R13 million.

Equally important, the Commission on Cultural, Religious and Linguistic Communities has now been constituted. This Commission was established in 2003 and in terms of Section 185 of the Constitution. Its mission is to develop and promote peace, friendship, humanity, tolerance and national unity among cultural, religious and linguistic communities. A total amount of R37 million has been set aside for the functioning of the Commission over the 2005 MTEF period.


We expect that the efforts of government as a whole to improve the quality of integration and service delivery, at spheres closest to our people, will also be facilitated by the significant growth of budget allocation to the 9 provinces and 284 municipalities.

Provinces and municipalities will receive a bigger share of nationally raised revenue

As the Minister of Finance has indicated in the 2005 Medium Term Expenditure Framework (MTEF), an amount of R48,8 billion has been added to the baseline allocations of provinces and municipalities. This means that national transfers to provinces will be growing at a rate of 10,2 percent a year over the MTEF period while local government allocations increase by 13,3 percent.


The Honourable Members will remember that our President also emphasized the importance of local government in the State of the National Address, and stated that:

"Because of our appreciation of the centrality of local government to service delivery, we have ensured the doubling of the municipal budget over the past eight years. We will continue to increase the resources available to local government."

Out of the three components of the budget (national, provincial and local), the allocation to municipalities is the fastest growing component

This is demonstrated by the fact that, after the new system of Local Government was introduced in 2000, the total national transfers to local government amounted to only R6,5 billion in the 2001/02 financial year and have been increased to R19,7 billion and R21,4 billion in the 2006/07 and 2007/08 financial years, respectively.

Over the next three years, from 2005 to 2008, local government will receive total transfers of approximately R58,3 billion from national government

With these increased resources, supplemented by local revenue, we hope that our municipalities will be able to plan over the medium term and increase their capacity to implement the programmes of government, particularly with respect to the following areas:

  1. Free basic services, operational costs and sustainable development, through the Equitable Share amounting to R9,6 billion in 2005/06 and totaling R31,5 billion over the MTEF;
  2. Infrastructure development and maintenance services: water, sanitation, electricity, municipal roads, community halls, sports and recreation facilities and utilizing as much as possible, labour intensive methods of infrastructure development. The amount that has been allocated for this purpose through the Municipal Infrastructure Grant amounts to R5,4 billion in 2005/06 and will total approximately R21,1 billion over the MTEF period and with the support of the Municipal Infrastructure Investment Unit (MIIU); and
  3. Capacity development in municipalities and improved systems with regard to community participation, planning, finance and performance management systems through the Municipal Systems Improvement Grant, totaling R600 million over the 2005 MTEF. The allocation of R58,3 million to the South African Local Government Association (SALGA), over the 2005 Medium Term Expenditure Framework is also intended to increase the capacity of organized local government.

The new Local Government Equitable Share Formula will benefit poor households and municipalities that have inherited high levels of poverty

In a similar briefing last year, we reported that the National Treasury, the Financial and Fiscal Commission and the dplg has been mandated by National Government to refine the Intergovernmental Fiscal Relations System as it relates to Local Government in particular. One important element of this system is the Equitable Share Formula.

As Honourable Members will know, the Local Government Equitable Share is an instrument designed to address the historical legacy of poverty and underdevelopment that confronts the majority of our people.

Through the leadership of National Treasury, this formula has now been refined and will be phased in over the 2005 MTEF period with full implementation by 2007/08.

The components of this formula seek to provide for the consideration of:

  1. Basic Service Provision
  2. Development needs, in a majority of cases as a result of economic disadvantage and structural deprivation;
  3. Institutional support and investing in efficient and effective municipal administrations;
  4. The Revenue Raising Capacity of each municipality; and
  5. A stabilization component that will guarantee allocations that were published in 2004.

In all, Honourable Members, the increased equitable share to municipalities will maximize the opportunities for accelerated service delivery and development.

Opportunities for key stakeholders to strengthen partnerships focused on creating work and fight poverty, at a local level

In this regard, we would like to acknowledge the role played by State Owned Enterprises, the Private Sector, Labour Organizations and Civil Society in continuing to contribute towards improved Local Government Capacity, Local Economic Development, Innovation Programmes and Social Development Programmes.

We take this opportunity to once again invite all our stakeholders to take part in building our proud South African nation, by joining hands with Government in different programmes, including the following: -

  1. Project Consolidate: A Hands-on Local Government Support and Engagement Programme;
  2. Economic and Social Infrastructure Development;
  3. Municipal Service Partnerships;
  4. Rural Development;
  5. Local Business Development, and enterprise development;
  6. Urban renewal programmes, partnerships with the SA Cities Network, regeneration of inner cities and utilize the Urban Renewal tax incentive; and
  7. Disaster Management.

Preparations for successful local government elections are underway

Following the Local Government Elections Preparatory Conference that was held in September 2004 and the subsequent approval of a Programme of Action by Cabinet, financial resources have been set aside in order to enable successful local government elections in the 2005/06 financial year.

In the dplg Vote, an amount of R23,6 million has been allocated to the Municipal Demarcation Board for the 2005/06 financial year and supplementary funding to the Independent Electoral Commission through the Department of Home Affairs.


Our efforts in the short, medium and long-term, will be directed towards monitoring performance and the practical impact of service delivery, particularly at Provincial and Local Government levels. Our department seeks to derive maximum benefit from periodic assessments of performance through, amongst others, the Presidentís Co-ordinating Council, the Local Government MinMEC, Municipal reports and on-site visits on due diligence and complimentary support. We have taken this approach because of the critical importance of focusing on practical performance and the implementation of governmentís policies.

As the President said, on the occasion of his Inauguration on 27 April 2004:-

"The work to create a new South Africa has begun. That work will continue during our Second Decade of Freedom."

In conclusion Honourable Members of the Select Committee, we present the budget for the Department of Provincial and Local Government for your consideration and deliberation.

I thank you.