. Disaster Management Amendment Bill: National Treasury inputs National Assembly: Portfolio Committee on Cooperative Governance and Traditional Affairs (CoGTA) x 20 May 2015
Outline Composition of the intergovernmental system Alignment between functional and fiscal assignments Roles of municipalities with respect disaster management Outline of the intergovernmental and local government fiscal frameworks Outline of the local government fiscal framework Funding streams for disaster management Management of function Responses to disasters (immediate and rehabilitation)
Composition of the intergovernmental system SA s intergovernmental system is based on principle of cooperation between 3 spheres of government (National, Provincial and LG) Constitution describes these spheres as distinctive, interdependent and interrelated The elements and principles underpinning the South African intergovernmental system Accountability Transparency and good governance Mutual support Redistribution Revenue-sharing Broadened access to services Responsibility over budgets 3
Composition of the intergovernmental system In terms of s156(1) of Constitution, a municipality has the executive authority in respect of, and has the right to administer: - The LG matters listed in Parts B of Schedules 4B and 5B - Any other matter assigned to local government in terms of national legislation Assignments to LG i.t.o. s156(4) Schedule 4 Part A Schedule 4 Part B Schedule 5 Part A Schedule 5 Part B
Constitutional and legislative framework for Disaster Management function (1 of 2) Disaster Management is listed in Schedule 4A as a functional area of concurrent national and provincial legislative competence Various pieces of legislation deals with municipal functions and powers General/overarching legislation (applicable to all functions) includes the Municipal Structures Act, Municipal Systems Act and Financial and Fiscal Commission Act Various sector legislation defines the functional roles and responsibilities of municipalities (particularly important when a function is concurrent) and sets norms and standards (national oversight responsibilities) Disaster Management is allocated to local government in terms of section 156(1)(b) of Constitution through the Disaster Management Act of 2002
Constitutional and legislative framework for Disaster Management function (2 of 2) Functions allocated to local government through Disaster Management Act of 2002 Development of Disaster Management Plans all municipalities currently this is not a mandatory function as the Act uses may Establishment of Disaster Management Centres Metros and District Municipalities (DMs) Disaster Management Amendment Bill (the Amendment Bill ) clarifies and strengthens these provisions by: Amendment Bill recognises importance of disaster plans and will make it mandatory ( must instead of may ) for all municipalities to develop these plans Although metros and DMs responsible for establishing disaster management centres, some local municipalities also have these centres. Amendment Bill will require these local municipalities to sign service level agreements with the assigned district municipalities
Intergovernmental and Local Government Fiscal Context Priorities set nationally through: legislation; norms and standards or political statements The available revenue pool needs to be shared between spheres - There is never enough funding to do everything we want to Functions performed by municipalities (as set out in the Constitution and national legislation) Municipal Funding to enable municipalities to perform their assigned functions Own revenues (Property rates, service charges) Equitable Share Each municipal council decides where to allocate resources to perform their assigned powers and functions 7 Conditional Grants
The local government fiscal framework is designed to finance municipalities Transfers and Grants Direct transfers Equitable share & RSC levy replacement grant National / provincial operating grants Municipal operating budget Municipal own revenues Operating revenues Rates and taxes Service charges Sources of capital funding National / provincial infrastructure grants Surplus / cashbacked reserves Municipal borrowing Indirect transfers Municipal capital budget 8 Chapter 3 Intergovernmental relations and the local government fiscal framework
Composition of the local government fiscal framework Services for non-poor households and businesses are paid for from own revenues Services for poor households are mainly funded through transfers from national government (some cross-subsidisation within municipalities is also expected) For the whole of local government, own revenues fund 75% of budgets, but in rural areas (with higher poverty rates) transfers can fund up to 80% of budgets Size of own revenues determined in part by high volumes consumed by non-poor HHs and businesses Local government fiscal framework LG equitable share Conditional Grants to LG Local Government Own Revenues Services Rates & charges Services Poor HH Middle to upper income HH and Businesses In 2014/15 budgeted revenue for all municipalities is R310 billion Budgets ranged in size from R44 billion in Johannesburg to R34 million in Mier 9
At the heart of local government is managing finances to deliver services Non-priority wants Assignment of functions Allowed taxes Priority of LG in vertical divisions Design of ES Formula Low tariffs Poor billing Poor debt management Theft and graft Policy constraints on fiscal potential Revenue forgone Bad management Inefficient procurement Demand for other important services National and provincial mandates Demand for basic services Institutional set up Conditional transfers Borrowing Service charges Rates and taxes Equitable share Revenue lost due to lack of fiscal effort Conditional transfers Borrowing Service charge revenue Rates and taxes Equitable share Non-priority wants Other important services Mandates Basic services Institutional set up Under-spending Leakages Effective and efficient expenditure Non-priority wants Other services Mandates Basic services Institutional set up Community needs and wants LG Fiscal Framework Revenue choices and collection 10 Budgeted expenditure choices Managing delivery 1 Actual service delivery
Funding Disaster Management in municipalities Reduction LG equitable share LG Own Revenues Disaster management functions, as assigned in the Disaster Management Act Mainly operational expenditure funded through general funding Own revenues (metropolitan municipalities) LG equitable share (district municipalities) Municipal responsibilities for disaster management vary as there are different levels of risk exposure Recovery Funded through own revenue but if declared a disaster, conditional funding may be provided Conditional grant for immediate response Conditional grant for rehabilitation Immediate response deals with a combination of (mainly) operating and infrastructure costs Rehabilitation deals with infrastructure and conditional grants allocated to sphere assigned for a function (e.g. agriculture, housing funded through provincial grants) 11
Funding arrangements for different phases of disaster management Disaster Management Planning involves the following phases: Risk Assessment, Prevention and Mitigation, Emergency Preparedness, Response and Recovery. Various funding sources are illustrated as follows: Risk Assessment LG Equitable Share Prevention and mitigation Emergency Preparedness Response and rehabilitation LG Own Revenues Conditional Grants 12
How the local government equitable share (LGES) formula works Primary purpose of LGES is to fund basic services and to assist smaller municipalities with basic institutional structures Review led to a new formula being phased-in from 2013/14 to 2017/18 Formula has two main parts: Basic Services Component: Basic services component funds delivery of free basic services (accounts for 75% of funds allocated in 2015/16) Institutional and Community Services Directs greater funds towards municipalities that cannot raise substantial own revenues Institutional component funds admin costs Community services component funds general municipal services How the local government equitable share formula works (2015 Allocations) Free basic services R33.8 billion R314 per month for a package of free basic services for the 59% of SA households with an income of less than 2 old age pensions per month Institutional R4.5 billion to assist with administration costs Community Services R6.8 billion to fund community services These funds are only allocated to poorer municipalities (some cities can fund these from own revenues) 13
Institutional and community services funding explained (1 of 2) These components are only allocated to municipalities with a low own revenue base Institutional component Provides funds for administration costs necessary to run a municipality. Includes a base amount and allocation amount for the size of a municipality Community services component This component is allocated based on the number of households in the municipality (15% or R6.8 billion of the formula) to fund services that benefit communities rather than individual households, including: Municipal Health Fire services Disaster Management Municipal roads Cemeteries Storm water management Street lighting, and parks and others 14
Potential future refinements to the formula Although the structure of the formula is not expected to change, several refinements could be made to improve the allocative efficiency of the formula If a reliable and fair methodology can be found to differentiate the costs of providing services in different areas then the basic services component could use this to target more funds to areas where services are expensive (the FFC and SALGA have commissioned research on this) Funds are divided between local and district municipalities based on their functions. An official database on the assignment of community services functions could assist to make this division fairer. E.g. fire service funds could be allocated only to the municipality officially authorised for the function. 15
Specific conditional grants for disaster response and rehabilitation There are two conditional grants to fund disasters in municipalities: 1) Municipal Disaster Grant This is a grant that is released within 3 days to 3 months after a disaster has been declared to a timely response to immediate needs of the communities after a disaster has occurred R261.1 million has been allocated for 2015/16 financial year 2) Municipal Disaster Recovery Grant The grant is allocated to following a declaration of a disaster to fund the rehabilitation and reconstruction of damaged municipal infrastructure R188.9 million has been allocated for 2015/16 financial year The Division of Revenue Act of 2014 makes provision that other municipal infrastructure grants that are unlikely to be spent by the end of the financial year can be reallocated to pay for reconstruction and rehabilitation of infrastructure damaged by disaster. 16
In conclusion Disaster management is a fundamental component of development and poverty reduction Disaster management is a function performed by all three spheres of government Coordination, planning and funding across spheres to be aligned Focus should be on risk reduction measures Political commitments and will to institutionalise disaster management into development planning and to allocate necessary resources will go a long way in reducing the impact of disasters on infrastructure and lives There is a need to develop monitoring mechanisms for identifying the degree of mainstreaming disaster risk management tracking of expenditures for disaster risk management Effective disaster management requires capacity building of all three spheres and communities at large 17
THANK YOU 18