Presentation to the Sport and Recreation Portfolio Committee

24 February 2015

Constitution

• The Constitution of the Republic of South Africa, Act 108 of 1996 places exclusive legislative competence of beaches, amusement facilities, local sport facilities and municipal parks and recreation on provinces

• Thus provinces should pass legislation governing sport and recreation matters within the province

•  However, Schedule 5 part B articulates that local government is the core delivery arm of these services and can enact by–laws to regulate them.

• Thus grant funding is provided to local government for sport and recreation facilities

Evolution of Grant System

Water Serv. Proj.

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MIG

The MIG was started in 2004/05, through the merger of:• Consolidated Municipal Infrastructure Programme, • Local Economic Development Fund, • Water Services Capital Grant, • Community Based Public Works Programme, • Building for Sports & Recreation Programme and • Urban Transport Grant.

MIG

• The Municipal Infrastructure Grant (MIG) programme is the largest local government infrastructure development funding programme in South Africa

• The programme was introduced as part of major reforms implemented by government to improve service delivery in a coordinated manner (that involves all government spheres)

• The Department of Cooperative Governance manages the MIG by exercising its mandate to foster cooperative governance and to develop capacity in the local government sphere.

15% within MIG for sports facilities• The construction of municipal sports facilities has been

funded as part of the Public Municipal Service Infrastructure component (P-component) of the MIG – which accounts for 15 per cent of the total value of the MIG

• Originally the P-component was intended to fund community infrastructure, including sports facilities, community centers, parks, cemeteries and other community amenities

• In 2011/12 this funding was ring-fenced for sport infrastructure only

• Municipalities may also allocate funding from their equitable share and own sources of revenue to complement MIG or for maintenance of sport facilities

MIG allocations to Sport and Recreation in 2014/15

Province Water and Sanitation

(%)

Roads and Storm Water

(%)

Solid Waste

(%)

Public facilities

(%)

Sport Facilities

(%)

Community Street

lighthing(%)

Eastern Cape 55.70 31.96 0.67 6.77 4.29 0.61Free State 34.67 28.55 2.22 12.50 18.92 3.13Gauteng 17.94 62.90 2.81 3.33 11.74 1.28KwaZulu Natal 68.17 20.01 0.24 7.55 3.70 0.33Limpopo 58.91 31.31 0.05 5.46 3.85 0.42Mpumalanga 62.73 28.12 0.82 3.80 3.59 0.95Northern Cape 60.50 30.95 0.09 5.11 3.25 0.11North West 38.03 39.89 4.84 11.81 3.20 2.23Western Cape 56.49 24.99 2.89 2.77 11.95 0.92TOTAL 54.76 30.99 1.21 6.59 5.49 0.97

Summary of MIG Expenditure by Province as at end January 2015 (2014/15)

Province Allocated (R'000)

Transferred to date

Expenditure to date

Expenditure as %

allocation

Expenditure as %

transferred

Balance Unspent

Eastern Cape

2 916 227

1 663 196

1 452 710 49.81% 87.34%

210 486

Free State

813 654 566 378

354 701 43.59% 62.63%

211 677

Gauteng

453 318 331 732

225 822 49.82% 68.07%

105 910

KwaZulu Natal

3 207 141

2 176 888

1 586 366 49.46% 72.87%

590 522

Limpopo

3 064 058

1 514 828

938 962 30.64% 61.98%

575 866

Mpumalanga

1 707 250

1 126 639

871 952 51.07% 77.39%

254 687

Northern Cape

450 944 332 245

268 564 59.56% 80.83%

63 681

North West

1 598 850 952 582

748 025 46.79% 78.53%

204 557

Western Cape

472 393 362 154

273 463 57.89% 75.51%

88 691

TOTAL

14 683 835

9 026 642

6 720 566 45.77% 74.45%

2 306 076

Province Water and Sanitation

(%)

Roads and Storm Water

(%)

Solid Waste(%)

Public facilities

(%)

Sport Facilities

(%)

Community Street

lighting(%)

Eastern Cape 66.39 23.57 1.10 6.02 2.40 0.52

Free State 21.32 16.80 1.68 9.63 49.75 0.82

Gauteng 15.91 84.09 1.57 3.87 20.94 0.09

KwaZulu Natal 63.63 22.36 0.30 8.69 4.61 0.41

Limpopo 55.02 34.42 0.12 5.70 4.61 0.12

Mpumalanga 33.62 59.08 0.63 2.52 3.46 0.70

Northern Cape 72.40 19.65 0.05 6.69 0.76 0.46

North West 44.75 35.93 5.86 7.88 3.80 1.78

Western Cape 58.71 28.58 2.24 1.50 8.61 0.36

TOTAL 50.01 33.43 1.21 6.28 8.48 0.60

MIG Expenditure per Sector as at 31 January 2015

MIG Allocation, Beneficiaries and Expenditure for sports facilities for 2014/15

Province Sport Facilities

Budget Allocation by Municipalities

Planned Households Expenditure

Eastern Cape 51 624 289 24 499 14 232 053

Free State 148 498 460 501 741 283 328 343Gauteng 49 724 129 152,727 35,631,665

KwaZulu Natal 71 736 815 467 173 71 736 815

Limpopo 119 288 452 181 342 37 061 428

Mpumalanga 46 169 152 46 618 35 017 232

Northern Cape 12 035 426 31784 1 542 474

North West 46 249 254 41 349 21 684 762

Western Cape 57 940 651 35 363 23 404 802

TOTAL 603 266 628 1 329 869 488 007 909

Challenges

The following challenges are generic to the MIG programme:•Inadequate planning and communication of sector priorities by sector departments, in the context of Integrated Development Planning•Lack of Intergovernmental cooperation (municipalities, provinces, and sector departments involvement in MIG implementation)•Lack of capacity to manage MIG projects (Project Management Units)•Appointing service providers or contractors who cannot deliver•Late payment of service providers•Delays in approval of projects and budgets by Councils•Delays in Technical reports and Environmental Impact Assessment (sector departments)•Use of MIG funds for operational budget pressures

• The proposed MIG Framework for 2015/16 is that “The P-component of the MIG formula (described in part 5 of Annexure W1 to the Division of Revenue Bill) amounts to 15 per cent of the MIG and must be used for municipal sport facilities only”

• Proposal for the P-component over the MTEF: R 2,058,114,300 in 14/15 R 2,146,928,250 in 15/16 R 2,280,056,400 in 16/17• Only Local Municipalities have a P-component• MIG funding for Districts is only allowed for water and sanitation -

Municipal allocations are not made to District Municipalities as MIG funding is only allowed for water and sanitation.

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Proposed MIG Framework 2015/16

COGTA support to municipalities

• COGTA’s main responsibility is oversight of MIG processes and procedures. This role includes:

• promoting sound inter governmental relations• coordination between stakeholders• coordination of stakeholder support to municipalities • coordination of stakeholder participation in MIG project pre-

implementation and implementation phases• COGTA• SALGA does not have a monitoring role on the spending of

15% MIG allocation – this is COGTA’s role

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The SALGA MandateThe SALGA Mandate

Represent

Support

Advise

SALGA’s keyroles

Employer Body

Knowledge hub (intelligence) to support the roles above

Profile

Employer Body

Act as an employer body representing all

municipal members and, by

agreement, associate members.

The Voice of Local Government

Support and advise our

members on a range of issues

to assist effective

execution of their mandate.

Build the capacity of the municipality as an institution as well as leadership

and technical capacity of both Councillors and

Officials.

Lobby, advocate, protect and

represent the interest of local government at

relevant structures and

platforms.

Transform local government to

enable it to fulfil its

developmental mandate.

SALGA Mandate

Lobby, Advocate & Represent

Support &Advice

Capacity Building

Build the profile and image of

local government within South

Africa as well as outside the

country.

StrategicProfiling

Serve as the custodian of local

government intelligence and facilitate inter-municipal peer

learning

Knowledge & Information

Sharing

The Voice of Local GovernmentThe Voice of Local Government15

The SALGA MandateThe SALGA Mandate

Consult and represent municipalities • While the impact of ring-fencing 15% of MIG for sport infrastructure is

yet to be assessed – initial consultations with municipalities during 2011 found that municipalities supported the creation of a separate grant for municipal sport infrastructure

•  Such a grant would look specifically into backlogs of sport infrastructure in municipalities especially rural areas

• During the Infrastructure Grant Review consultations of 2014 municipalities indicated a preference for consolidated funding which would rationalise the number of grants a municipality receives and have to report against

Infrastructure Grant Review• The review resulted from concerns regarding underspending and inefficiency

in local government infrastructure grants, and the proliferation of new grants in the system as a whole

• The Budget Forum committed National Treasury to undertake a thorough review of these grants. (ToR were endorsed by the BF in October 2013 and the Review’s recommendations were presented to the BF in 2014.

•  The Review is a collaborative effort between the National Treasury, the Department of Cooperative Governance (DCoG), theI Financial and Fiscal Commission (FFC), the South African Local Government Association (SALGA), and the Department of Planning Monitoring and Evaluation (DPME).

• The Review engaged other stakeholders at national and local government levels throughout the process to ensure full consultation.

• Following literature reviews, policy analysis and consultation with all stakeholders, 8 principles agreed upon:

1) Respect the Constitutional Mandates of different spheres2) Provide for Predictability and Stability 3) Encourage Transparency, Simplicity and Accountability4) Integrate a Variety of Funding Sources and Aims5) Be Sustainable and Unlock Growth6) Involve Supportive National Departments7) Reflect the Approach of Differentiation8) Reinforce practices that optimise the impact of grants and minimise

negative spill-over or perverse unintended effects

• All reforms relating to the local government infrastructure grant system must therefore adhere to and be guided by these principles

Principles

Key outcomes of the review

1. Grant Structure• Greater asymmetry and differentiation in the grant system; proposals address

service delivery and locational challenges applicable to the different types of municipalities

• Rationalisation in the number of grants each municipality receives and municipal discretion (i.e. consolidated, not ring-fenced funding) is key

2. Asset Management and Planning• Incentivising and enforcing improved pre-planning and asset management over the

life-cycle of grant-funded infrastructure

3. Management of the Grant System• A rationalised, more functional and accountable reporting system

• Clearer roles for national government departments even if not grant administrators; NT to manage the grant system holistically, then grant administrators and sector departments to support and monitor municipal implementation of grants

Grant structure summary (2 of 2)

Metros and Emerging cities•Future: Consolidate INEP with USDG (+ MIG for secondary/ emerging cities) into Integrated Urban Development Grant, administered by DCoG. •Towns•Future: Asset management reforms. INEP into MIG in long-termWSA Districts (Rural)•2015: Rationalise water and sanitation grants administered by DWS into one W&S grant•Future: Review possible extension of general infrastructure grant to other district municipalities depending on institutional role envisaged for districts and NDP’s call for regionalisationNon-WSA Locals (Rural)•Future: Ensure need for sector oversight is reduced as capacity improves and movement is towards more general funding

Asset managementKey Problem•New infrastructure at expense of sustainable investment in existing infrastructure; maintenance funding not prioritised by municipalitiesRecommendation1.Encourage grant investment in renewal of existing assets (rather than always creating new) and incentivise improved asset management2.No extra funds for maintenance (LGES already does; perverse incentive) but emphasise importance (like DCoG’s 7% rule in Back to Basics)

National administrationKey Problem•Limited data on grant performance/outcomes with limited analytical use•Uncontrolled proliferation of new grants (esp. indirect); old grants are not phased-out

Recommendation1.Streamline & standardise reporting of grants to improve accountability2.Stricter requirements for introduction of new indirect & ad-hoc grants; regular reviews to ensure holistic/strategic management of system

Time line for reforms2015 Budget•Smaller changes (i.e. combine public transport grants, begin process of reconfiguring water and sanitation grants) implemented immediately•Signal medium and long term direction of reforms and findings of Review

2016 MTEF•Phase-in medium-term reforms to avoid disruption to planning at municipal level•Begin implementation towards longer term vision

On-going•Regular (every 3-5 year) reviews of LG infrastructure grant system to continue longer-term reforms