3
“We are, most of us, profoundly uninterested in municipal affairs.” — Maud (1938, p.1)
3.1 Introduction
Building on the previous chapter, which outlined the political development of local government within a broader governmental context – hierarchical and centralised from inception – this chapter commences by tracing the evolution of South African municipal finances since democracy.
Historically, as we have already seen, municipalities were required to comply with, and implement, ordinances issued by the Provincial Administrator (directed by national government), without dissent or question and regardless of the beliefs and views of their constituencies. This low political standing was then compounded by national government’s requirement that municipalities be almost entirely self-funding; even with only one primary source of local taxation – property tax. Financial assistance from NT was negligible. In 1979, for example, subsidies from central government constituted just 4.7% of the City of Cape Town’s income (Solomon, 1983, p.58). And although the 1996 Constitution elevates local government and protects municipal revenue sources, the principle of self-sufficiency, or self-funding, remains. Simultaneously, for reasons to be explained in more detail, the financial needs of municipalities have grown since the inception of democracy, such that municipalities are unable to balance their budgets without national grants. By 2014, the City of Cape Town required that 14.7% (operating and capital budget) of their budget be subsidised by national government (City of Cape Town, 2015, p.128). This figure had climbed drastically from the above-quoted 4.7% in 1979; while the national average had increased to 8% in 2003 (Bahl, 2003), and NT reported it climbing to 30% in 2015 (NT, 2016a, p.81).
The examination of municipal finances in this book now thus begins by trying to determine:
- The extent to which decentralised local government and financial self-sufficiency (detailed in the previous chapter) were adopted by post-apartheid municipal government;
- How the municipalities have fared;
- The contribution of user fees to municipal budgets; and
- The inconsistencies between the theory and application.
Three international case studies are provided. These explore the role that local government plays in different international environments, how various municipal operations are financed, how these countries’ municipal ESI developed, and the financial contribution (if any) that electricity has made, or continues to make, to municipal revenue in these countries.
3.2 South African Local Government Finance under Democracy
3.2.1 Period 1: 1994–2003
Beyond the euphoria of peaceful transition, South Africa’s conversion to democracy caught the attention of the world. This was particularly so because it came at a moment in history when the new government could be encouraged, as all developing countries were at the time, to adopt fiscal decentralisation. In truth, major