Home South African Rural municipalities to feel the brunt of budget cuts to provinces

Rural municipalities to feel the brunt of budget cuts to provinces

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RURAL municipalities that are dependent on transfers from government for survival are in for a shock as the provincial equitable allocation will be slashed for the next three years.

Minister of Finance Tito Mboweni. Picture: Phando Jikelo/African News Agency(ANA)

RURAL municipalities that are dependent on transfers from government for survival are in for a shock as the provincial equitable allocation will be slashed for the next three years.

A warning has also been issued to two unnamed cities that are performing poorly in expenditure on the public transport network grant.

The medium term budget policy statement said the allocations to provinces would be reduced by R60 billion in 2021-22, R85.6bn in 2022-23 and R64.1bn in 2023-24.

“These reductions include compensation reduction … and reductions to conditional grants of R12.1bn,” the report said.

The National Treasury warned that rural areas in provinces, which are dependent on a transfer from the national government, were likely to be more affected than urban areas in provinces that get additional revenue.

“To respond to the planned adjustments to expenditure, all provinces will need to reprioritise and increase efficiencies.”

The document also stated that transfers to local government would be reduced by R17.7bn, including R14.5bn from the local government equitable share, R2.7bn from the general fuel levy and R569m in conditional grants.

The National Treasury also warned that underperforming programmes would be revisited.

It said some cities receiving public transport network grants have not launched their integrated public transport networks.

“Over the medium term expenditure framework, at least two more poorly performing cities will be suspended from this grant and the remaining will be required to reduce costs and demonstrate their effectiveness to remain funded,” read the report.

Earlier this year, Buffalo City, Mzunduzi and Mbombela were suspended from the grant and did not receive allocation in this financial year.

The medium term budget policy statement also said the local government equitable share formula has been updated to account for projected household growth, inflation estimated increases in bulk water and electricity costs over the medium term expenditure framework period.

“To help municipalities improve their asset management practices, an indirect component of the municipal infrastructure grant will be introduced in 2021-22.”

The National Treasury said the government was reviewing the operating model of the Passenger Rail Agency of South Africa to return the entity to sustainability.

“The Department of Transport is also exploring ways to integrate public transport funding.”