Assessing financial viability of selected urban and rural municipalities in the Eastern Cape
- Authors: Maclean, Sindisile
- Date: 2013
- Subjects: Finance, Public -- South Africa -- Eastern Cape , Municipal government -- South Africa -- Eastern Cape , Sustainable development -- South Africa -- Eastern Cape , Human services -- South Africa -- Eastern Cape , Municipal services -- South Africa -- Eastern Cape , South Africa -- Economic policy , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Doctoral , PhD (in Public Administration)
- Identifier: vital:11661 , http://hdl.handle.net/10353/d1007093 , Finance, Public -- South Africa -- Eastern Cape , Municipal government -- South Africa -- Eastern Cape , Sustainable development -- South Africa -- Eastern Cape , Human services -- South Africa -- Eastern Cape , Municipal services -- South Africa -- Eastern Cape , South Africa -- Economic policy , South Africa -- Economic conditions
- Description: The purpose of the research is to assess the financial viability of selected urban and rural municipalities in the Eastern Cape. Municipalities that are not financially viable and sustainable will always struggle to deliver basic services to communities. Without sound financial management systems, municipalities will be forced to discontinue their operations. Municipalities, particularly small and rural ones, are not self-sufficient and often rely on grants and transfers to satisfy their immediate short-term goal of providing basic services to satisfy the needs of their communities. Therefore, finance is regarded as an overriding and decisive factor for determining the viability of municipalities. The study seeks to investigate the financial viability of selected urban and rural municipalities in the Eastern Cape. Its key research questions are: Are municipalities able to provide sufficient funds to provide a range of services at an acceptable service level? To what extent do municipalities rely on external funding? Do municipalities have revenue collection capacity and revenue policies? The study asserts that most municipalities lack the required financial resources. They depend mainly on transfers from Provincial Government and equitable share and conditional grants from National Government. Section 152 (1) of the Constitution of the Republic of South Africa, Act 8 of 1996, states, amongst other things, that Local Government should ensure the provision of services to communities in a sustainable manner. The constitution further states that a municipality must strive, within its financial and administrative capacity, to achieve its objectives. The Municipal Finance Management Act, Act 56 of 2003, creates a framework for municipalities to borrow money and determine the conditions for short- and long-term borrowing. The Act assigns clear roles and responsibilities to the various role players involved in local government financial management. According to the Act, an annual budget for a municipality may only be funded from realistically anticipated revenues to be collected. As revenue projections in the budget must be realistic, the Municipal Property Rates Act, Act 6 of 2004, facilitates the collection of revenue in municipalities and establishes a uniform property rating system across South Africa. Property tax is the biggest element of local government tax revenue and is central to municipal finance. The Municipal Systems Act, Act 32 of 2000, amongst its objectives, provides for the manner in which municipal powers and functions are exercised as well as establishes a simple framework for the core processes of planning, performance management and resource mobilisation. The Act also provides a framework for public administration and human resource development. Finally, it also empowers the poor and ensures that municipalities put in place service tariffs and credit control policies that take their needs into account. The research contends that, whilst there is legislation and structures to assist and direct municipalities, it has been established that municipalities do not properly collect rates and taxes due to them to augment their revenue. The study has shown nevertheless that metropolitan municipalities have the capacity to collect revenue for municipal services. This is confirmed by their collection rate which ranges between 94 % and 97 %. There is also the culture of non-payment by communities for services rendered by the municipalities. Rural municipalities are exempted from property tax, while other rural municipalities who have an urban component, have to collect. There is also the question of unemployment and poverty. Consequently, municipalities are not self-sufficient and rely on grants and equitable share to survive. As a result of this lack of self-sufficiency, it is difficult to implement service delivery and also difficult to attract skilled personnel. The study has investigated why some municipalities fail to collect revenue and depend on national grants. The study employed both qualitative and quantitative methods. The findings of the quantitative paradigm have been presented in the form of graphs and charts. The major findings include: All municipalities have limited borrowing capacity; have not exceeded their budgets in terms of their spending; small municipalities have households as their main contributor of revenue collected; metropolitan municipalities get the big slice of their revenue from business; small and rural municipalities rely on grants and transfers and are therefore not financially viable; metropolitan municipalities are, to a great extent, financially viable but lack skills and capacity to utilize their resources for effective service delivery; and all municipalities under-spend their budgets. The study, after elaborating on the findings, makes recommendations on how municipalities should become financially viable.
- Full Text:
- Authors: Maclean, Sindisile
- Date: 2013
- Subjects: Finance, Public -- South Africa -- Eastern Cape , Municipal government -- South Africa -- Eastern Cape , Sustainable development -- South Africa -- Eastern Cape , Human services -- South Africa -- Eastern Cape , Municipal services -- South Africa -- Eastern Cape , South Africa -- Economic policy , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Doctoral , PhD (in Public Administration)
- Identifier: vital:11661 , http://hdl.handle.net/10353/d1007093 , Finance, Public -- South Africa -- Eastern Cape , Municipal government -- South Africa -- Eastern Cape , Sustainable development -- South Africa -- Eastern Cape , Human services -- South Africa -- Eastern Cape , Municipal services -- South Africa -- Eastern Cape , South Africa -- Economic policy , South Africa -- Economic conditions
- Description: The purpose of the research is to assess the financial viability of selected urban and rural municipalities in the Eastern Cape. Municipalities that are not financially viable and sustainable will always struggle to deliver basic services to communities. Without sound financial management systems, municipalities will be forced to discontinue their operations. Municipalities, particularly small and rural ones, are not self-sufficient and often rely on grants and transfers to satisfy their immediate short-term goal of providing basic services to satisfy the needs of their communities. Therefore, finance is regarded as an overriding and decisive factor for determining the viability of municipalities. The study seeks to investigate the financial viability of selected urban and rural municipalities in the Eastern Cape. Its key research questions are: Are municipalities able to provide sufficient funds to provide a range of services at an acceptable service level? To what extent do municipalities rely on external funding? Do municipalities have revenue collection capacity and revenue policies? The study asserts that most municipalities lack the required financial resources. They depend mainly on transfers from Provincial Government and equitable share and conditional grants from National Government. Section 152 (1) of the Constitution of the Republic of South Africa, Act 8 of 1996, states, amongst other things, that Local Government should ensure the provision of services to communities in a sustainable manner. The constitution further states that a municipality must strive, within its financial and administrative capacity, to achieve its objectives. The Municipal Finance Management Act, Act 56 of 2003, creates a framework for municipalities to borrow money and determine the conditions for short- and long-term borrowing. The Act assigns clear roles and responsibilities to the various role players involved in local government financial management. According to the Act, an annual budget for a municipality may only be funded from realistically anticipated revenues to be collected. As revenue projections in the budget must be realistic, the Municipal Property Rates Act, Act 6 of 2004, facilitates the collection of revenue in municipalities and establishes a uniform property rating system across South Africa. Property tax is the biggest element of local government tax revenue and is central to municipal finance. The Municipal Systems Act, Act 32 of 2000, amongst its objectives, provides for the manner in which municipal powers and functions are exercised as well as establishes a simple framework for the core processes of planning, performance management and resource mobilisation. The Act also provides a framework for public administration and human resource development. Finally, it also empowers the poor and ensures that municipalities put in place service tariffs and credit control policies that take their needs into account. The research contends that, whilst there is legislation and structures to assist and direct municipalities, it has been established that municipalities do not properly collect rates and taxes due to them to augment their revenue. The study has shown nevertheless that metropolitan municipalities have the capacity to collect revenue for municipal services. This is confirmed by their collection rate which ranges between 94 % and 97 %. There is also the culture of non-payment by communities for services rendered by the municipalities. Rural municipalities are exempted from property tax, while other rural municipalities who have an urban component, have to collect. There is also the question of unemployment and poverty. Consequently, municipalities are not self-sufficient and rely on grants and equitable share to survive. As a result of this lack of self-sufficiency, it is difficult to implement service delivery and also difficult to attract skilled personnel. The study has investigated why some municipalities fail to collect revenue and depend on national grants. The study employed both qualitative and quantitative methods. The findings of the quantitative paradigm have been presented in the form of graphs and charts. The major findings include: All municipalities have limited borrowing capacity; have not exceeded their budgets in terms of their spending; small municipalities have households as their main contributor of revenue collected; metropolitan municipalities get the big slice of their revenue from business; small and rural municipalities rely on grants and transfers and are therefore not financially viable; metropolitan municipalities are, to a great extent, financially viable but lack skills and capacity to utilize their resources for effective service delivery; and all municipalities under-spend their budgets. The study, after elaborating on the findings, makes recommendations on how municipalities should become financially viable.
- Full Text:
Agricultural public spending, growth and poverty linkage hypotheses in the Eastern Cape Province of South Africa
- Authors: Ndhleve, Simbarashe
- Date: 2012
- Subjects: Poverty -- Economic aspects -- South Africa -- Eastern Cape , Rural poor -- South Africa -- Eastern Cape , Sustainable development -- South Africa -- Eastern Cape , Rural development -- South Africa -- Eastern Cape , Agricultural industries -- South Africa -- Eastern Cape , Government spending policy -- South Africa -- Eastern Cape , Finance, Public -- South Africa -- Eastern Cape
- Language: English
- Type: Thesis , Doctoral , PhD (Agricultural Economics)
- Identifier: vital:11157 , http://hdl.handle.net/10353/493 , Poverty -- Economic aspects -- South Africa -- Eastern Cape , Rural poor -- South Africa -- Eastern Cape , Sustainable development -- South Africa -- Eastern Cape , Rural development -- South Africa -- Eastern Cape , Agricultural industries -- South Africa -- Eastern Cape , Government spending policy -- South Africa -- Eastern Cape , Finance, Public -- South Africa -- Eastern Cape
- Description: The adoption of the Millennium Development Goal 1 (MDG1) of reducing the rate of poverty to half of the 1990-level by 2015, the advent of democracy in South Africa, among other things, have raised concerns over the potential role of the agricultural sector. There is a belief that the sector has the capacity to successfully reduce poverty among the rural masses and contribute to addressing the problem of inequality in South Africa. In line with that thinking, South Africa‘s agricultural sector has attracted considerable fiscal policy interest. For instance, South Africa‘s statistics show that public investments in agricultural development programmes have been growing. In spite of this, rural poverty is still a major concern on an overall basis. However, this might not be the case in the Eastern Cape Province and the situation might be different for each district municipality. This study assesses the linkages between public agricultural investment, agricultural growth and poverty reduction in the Eastern Cape Province. The study also addresses the question whether Eastern Cape Province is on course to meet several regional development targets. The study also aims to provide an estimate of the amount of agricultural investment required to attain the agricultural productivity growth rate which is sufficient to meet MDG1. The study reviewed the various theories of public spending, linkages between public investment and agricultural growth and how these components affect the incidence of poverty. The conventional wisdom that public expenditure in agriculture positively affects economic growth and this growth consequently reduces poverty was noted. The reviews also revealed that in many developing countries, the current level of public agricultural investment needs to be increased significantly for countries to meet the MDG1. This study employed the decomposition technique and growth elasticity of poverty concept to estimate the response of poverty to its key determinants. The size of public spending, prioritization of public spending and the intensity in the use of public funds emerged as important in increasing agricultural production. The relationship between government investment in agriculture and agricultural GDP shows iv that public funds were largely behind the province‘s success in increasing agricultural production throughout the period from 1990s to 2010. Agricultural spending went to sustainable resource management, administrative functions and then farmer support programme. Exceptional growth in the size of spending was recorded in respect to agricultural economic function, structured agricultural training, sustainable resource management and veterinary services. Overall output from the agricultural sector fluctuated, and the sector contributed less than 5 per cent to the total provincial GDP. Correlations between growth in agricultural sector and changes in the incidence of poverty in Eastern Cape show that during the period 1995 to 2000, increases in the agricultural GDP per capita may have failed to benefit the poor as poverty increased in all the reported cases.–However, for the period between 2005 and 2010, the situation was different and it was observed that increases in agricultural GDP per capita and were associated with reduction in the incidence of poverty. Growth elasticity of poverty (GEP) estimates reveal that agricultural GDP per capita was more important in reducing poverty in 5 out of the 7 district municipalities. Non-agricultural GDP per capita was only important in two district municipalities. It emerged that most of the district municipalities are not in a position to meet any of the regional set goals. This situation is largely attributable to the province‘s failure to boost agricultural production which is an outcome of low and inefficient public expenditure management, inconsistent and misaligned policies and failure to fully embrace the concept of pro-poor growth. Varied provisional estimates for the required agricultural growth rate and the increase in public spending on agriculture required in order to reach MDG1 were calculated for each district municipalities. All the district municipalities of Eastern Cape will need to increase public investment in agriculture for them to achieve MDG1.
- Full Text:
- Authors: Ndhleve, Simbarashe
- Date: 2012
- Subjects: Poverty -- Economic aspects -- South Africa -- Eastern Cape , Rural poor -- South Africa -- Eastern Cape , Sustainable development -- South Africa -- Eastern Cape , Rural development -- South Africa -- Eastern Cape , Agricultural industries -- South Africa -- Eastern Cape , Government spending policy -- South Africa -- Eastern Cape , Finance, Public -- South Africa -- Eastern Cape
- Language: English
- Type: Thesis , Doctoral , PhD (Agricultural Economics)
- Identifier: vital:11157 , http://hdl.handle.net/10353/493 , Poverty -- Economic aspects -- South Africa -- Eastern Cape , Rural poor -- South Africa -- Eastern Cape , Sustainable development -- South Africa -- Eastern Cape , Rural development -- South Africa -- Eastern Cape , Agricultural industries -- South Africa -- Eastern Cape , Government spending policy -- South Africa -- Eastern Cape , Finance, Public -- South Africa -- Eastern Cape
- Description: The adoption of the Millennium Development Goal 1 (MDG1) of reducing the rate of poverty to half of the 1990-level by 2015, the advent of democracy in South Africa, among other things, have raised concerns over the potential role of the agricultural sector. There is a belief that the sector has the capacity to successfully reduce poverty among the rural masses and contribute to addressing the problem of inequality in South Africa. In line with that thinking, South Africa‘s agricultural sector has attracted considerable fiscal policy interest. For instance, South Africa‘s statistics show that public investments in agricultural development programmes have been growing. In spite of this, rural poverty is still a major concern on an overall basis. However, this might not be the case in the Eastern Cape Province and the situation might be different for each district municipality. This study assesses the linkages between public agricultural investment, agricultural growth and poverty reduction in the Eastern Cape Province. The study also addresses the question whether Eastern Cape Province is on course to meet several regional development targets. The study also aims to provide an estimate of the amount of agricultural investment required to attain the agricultural productivity growth rate which is sufficient to meet MDG1. The study reviewed the various theories of public spending, linkages between public investment and agricultural growth and how these components affect the incidence of poverty. The conventional wisdom that public expenditure in agriculture positively affects economic growth and this growth consequently reduces poverty was noted. The reviews also revealed that in many developing countries, the current level of public agricultural investment needs to be increased significantly for countries to meet the MDG1. This study employed the decomposition technique and growth elasticity of poverty concept to estimate the response of poverty to its key determinants. The size of public spending, prioritization of public spending and the intensity in the use of public funds emerged as important in increasing agricultural production. The relationship between government investment in agriculture and agricultural GDP shows iv that public funds were largely behind the province‘s success in increasing agricultural production throughout the period from 1990s to 2010. Agricultural spending went to sustainable resource management, administrative functions and then farmer support programme. Exceptional growth in the size of spending was recorded in respect to agricultural economic function, structured agricultural training, sustainable resource management and veterinary services. Overall output from the agricultural sector fluctuated, and the sector contributed less than 5 per cent to the total provincial GDP. Correlations between growth in agricultural sector and changes in the incidence of poverty in Eastern Cape show that during the period 1995 to 2000, increases in the agricultural GDP per capita may have failed to benefit the poor as poverty increased in all the reported cases.–However, for the period between 2005 and 2010, the situation was different and it was observed that increases in agricultural GDP per capita and were associated with reduction in the incidence of poverty. Growth elasticity of poverty (GEP) estimates reveal that agricultural GDP per capita was more important in reducing poverty in 5 out of the 7 district municipalities. Non-agricultural GDP per capita was only important in two district municipalities. It emerged that most of the district municipalities are not in a position to meet any of the regional set goals. This situation is largely attributable to the province‘s failure to boost agricultural production which is an outcome of low and inefficient public expenditure management, inconsistent and misaligned policies and failure to fully embrace the concept of pro-poor growth. Varied provisional estimates for the required agricultural growth rate and the increase in public spending on agriculture required in order to reach MDG1 were calculated for each district municipalities. All the district municipalities of Eastern Cape will need to increase public investment in agriculture for them to achieve MDG1.
- Full Text:
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