The objectives of the study are, first, to investigate the challenges faced by the local government with special emphasis on the financing of the local government, to determine the main factors and challenges faced by the financial management of the local government and finally, to offer a recommended direction for effective financial reform, methods of financial restructuring and business re-engineering within the wider context of South Africa's local government system. INTEGRATED DEVELOPMENT PLAN IDP LGTA LOCAL GOVERNMENT TRANSITION ACT MFMA MUNICIPAL FINANCE MANAGEMENT ACT RSA REPUBLIC OF SOUTH AFRICA.
CHAPTER ONE
INTRODUCTION
- BACKGROUND TO THE STUDY
- FOCUS OF THE STUDY
- NEED FOR THE STUDY
- OBJECTIVES OF THE STUDY
- RESEARCH METHODOLOGY
- Primary data
- Secondary data
- LIMITATIONS OF THE STUDY
- FIELD OF RESEARCH
- PRESENTATION OF DATA
- Chapter 1: Introduction
- Chapter 2: Local Government Restructuring and
For a more effective understanding of the research field, an understanding of the study of financial management of local authorities is important. According to the Act on Municipal Structures of Local Self-Government, it is classified as category "B" municipality.
Transformation in South Africa with particular reference to KwaDukuza Municipality
Chapter 3: Local Government Financing and Development in South Africa
Chapter 4: Financial Reform and Transformation in KwaDukuza
Chapter 5: Research, Design, Methodology and Analysis
Chapter 6: General Conclusions and Recommendations
CHAPTER TWO
LOCAL GOVERNMENT RESTRUCTURING AND
TRANSFORMATION WITH PARTICULAR REFERENCE TO KWADUKUZA MUNICIPALITY
INTRODUCTION
BACKGROUND
PUBLIC ADMINISTRATION
- Definition of Public Administration
- THE PRINCIPLES OF PUBLIC ADMINISTRATION
- VALUES OF SOCIETY
Meyer (1997:55) states that in Chapter 10 of the Constitution, the fundamental values and principles of public administration are articulated as follows: Good human resource management and career development practices should be fostered to maximize human potential; and. i) Public administration must generally represent South Africans in terms of recruitment and personnel management practices;
Values in public administration refer to what is fundamentally good and desirable, which the individual adheres to as a guide throughout their lives.
LEGAL RULES
- THE BATHO PELE PRINCIPLES
- NEW PUBLIC MANAGEMENT
- CONSTITUTIONAL STATE OF SOUTH AFRICA
- Three Spheres of Government and Intergovernmental Relations in South Africa
- Rule of Law Principle
- Principle of Separation of Powers
- Principle of Cooperative Government
- DISTINCTIVE NATURE OF LOCAL GOVERNMENT IN SOUTH AFRICA
- THE OBJECTS OF LOCAL GOVERNMENT
- THE DEVELOPMENTAL DUTIES OF LOCAL GOVERNMENT
- THE ROLE OF LOCAL GOVERNMENT
These divisions are enshrined in the Constitution of the Republic of South Africa and apply to all spheres of government. The sphere of local government is a separate sphere recognized by the Constitution of the Republic of South Africa (Act 108 of 1996).
LEGISLATIVE FRAMEWORK GOVERNING MUNICIPALITIES
- WHITE PAPER ON LOCAL GOVERNMENT
- LOCAL GOVERNMENT MUNICIPAL STRUCTURES ACT, 117 OF 1998
- LOCAL GOVERNMENT PROPERTY RATES ACT, 6 OF 2004
- LOCAL GOVERNMENT FINANCE MANAGEMENT ACT,56 OF 2003
- REMEDIAL MEASURES AND INTERVENTIONS IN LOCAL GOVERNMENT
The focus of the Municipal Systems Act is on operational and administrative matters. The objectives of the Local Government Finance Management Act (Act 56 of 2003) are: - To secure the sound and sustainable management of the financial affairs of municipalities and other institutions in the sphere of local government; establishing treasury norms and standards for the local government sphere; and to provide for matters relating thereto (Local Government Finance Management Act 56 of 2003).
PROCESS OF REFORM IN KWADUKUZA MUNICIPALITY
The name KwaDukuza embodies the historical background of the area, home of King Shaka. This population figure rises to over 200 000 in peak seasons during holiday periods in .. http://www.kwadukuza.gov.za).
HISTORICAL BACKGROUND AND THE
GOVERNANCE IN KWADUKUZA MUNICIPALITY
Transitional arrangements
The transitional phase created Local Transitional Municipalities with the first democratic local government elections taking place in 1996. It is also clear that the resistance machinery continued into the transitional period of local government.
INTEGRATED DEVELOPMENT PLANNING
- Integrated Development Plan for KwaDukuza Municipality
- Vision of KwaDukuza Municipality
- Mission Statement for KwaDukuza Municipality
- Development in KwaDukuza Municipality
- Critical Development Challenges
- Providing basic services
- Improving service delivery
- Developing the people
- Addressing poverty and unemployment
- Managing the health environment and the HIV/Aids pandemic
- Ensuring strict credit control
- Improving relationships
- Ensuring a safe and secure environment
The KwaDukuza Municipality Comprehensive Development Plan lists the key challenges in general as follows: In order for the KwaDukuza Municipality to address this challenge, an appropriate strategy and program has been developed (http://www.kwadukuza.gov.za).
COMMUNITY NEEDS ANALYSIS
- STRATEGIES AND PROGRAMMES
- Strategy One: Effective Infrastructure
- Strategy Two: Integrated Human Settlement
- Strategy Three: Economic Development and Job Creation
- Strategy Four: Integrated Development
- Strategy Five: People Development
- Strategy Six: Good Governance
- IMPLENTATION OF SECTOR PLANS AND STRATEGIES
- SPATIAL DEVELOPMENT FRAMEWORK
- LAND USE MANAGEMENT FRAMEWORK
- LOCAL ECONOMIC DEVELOPMENT PLAN
- STRATEGIC ENVIRONMENTAL ASSESSMENT
- INTEGRATED HUMAN SETTLEMENTS STRATEGY
- DISASTER MANAGEMENT PLAN
- INTEGRATED POVERTY ALLEVIATION STRATEGY
- INTEGRATED COMMUNITY SAFETY STRATEGY
- KWADUKUZA HEALTHY COMMUNITY STRATEGY
- CLEANING AND GREENING KWADUKUZA
- LEARNING AND LEISURE PLAN
- KWADUKUZA HIV/AIDS STRATEGY
- INFORMATION TECHNOLOGY STRATEGY
- PERFORMANCE MANAGEMENT SYSTEM
- ELECTRICITY PLAN
- OTHER SECTOR PLANS
- PROGRESS AND REVIEW
- CONCLUSION
The plan is also contained in a comprehensive document which is reviewed on an annual basis as part of the review process (KwaDukuza Municipality GOP 2006:32). The strategy is contained in a detailed document which is reviewed on an annual basis as part of the review process (KwaDukuza Municipality IDP 2006:33).
CHAPTER THREE LOCAL GOVERNMENT FINANCING AND
INTRODUCTION
PUBLIC FINANCE
THE THEORY OF PUBLIC FINANCIAL MANAGEMENT
Section 195 of the Constitution outlines the basic principles governing public administration in all three spheres of government. The Public Administration described above is related to the administration of the affairs of the three spheres of the public service sector.
COMPONENTS OF PUBLIC FINANCIAL MANAGEMENT
- Budgeting
- Expenditure Management
- Accounting
- Financial Management System
- Public Accountability and Control
- Performance Management
- Strategic Plans and Business Plan
- Provisioning
It can therefore be concluded that local government financing is an area of public finance that deals with financial management at the local government level. Financial management systems refer to technologies and tools used to exercise control over appropriated funds.
BUDGET AND BUDGETARY PROCESS
- Preparation of the budget
- Approval of the budget
- Implementation of the Budget
- Control
The budget cycle ends after the Auditor General's report has been accepted by the parliament. The budget control for the year ends when the parliament approves the Auditor General's report.
EXPENDITURE MANAGEMENT
KEY CHALLENGES FACING LOCAL GOVERNMENT FINANCE
- Infrastructural Backlogs
- Information on dwellings and access to resources is derived from the categories used by Statistics South Africa in the 2001 census
- Challenge of skills and capacity shortages
- Uneven distribution of resources and uneven tax base
- Unco-ordinated planning and development
- Legacy of racial segregation
- Limited financial resources
- Community participation
- Municipal budgets
The Apartheid policy of the Nationalist Party government governed the development and provision of services along racial lines. Later, the Constitution of the Republic of South Africa and the Municipal Systems of Local Government Act (Act 32 of 2000) provided guidelines in the case of municipalities and thereby provided a framework for the development of Integrated Development Plans for national Departments, Provinces and Municipalities (White Paper on Local Government, 1998: 14).
FINANCIAL REFORM IN LOCAL GOVERNMENT
The National Parliament passed the Local Government Financial Management Act (Act 56 of 2003) with the aim of introducing fundamental and revolutionary reforms to the management of local government finances in the country. However, elements of local government funding provide the required framework, as will be discussed below (Circular No.7 of 2004 on the Municipal Financial Management of Local Government).
ELEMENTS OF LOCAL GOVERNMENT FINANCE
The program divided the rollout program for the implementation of the Municipal Financial Management Act into manageable blocks and assigned a timeline to each section.
MUNICIPAL REVENUE
- Levies and taxes
- User levies
- Sundry revenue
According to the programme, the municipalities were classified into high, medium and low capacity municipalities and assigned timelines accordingly. According to the Municipal Property Rates Act, district municipalities are not entitled to raise and collect property rates.
SOURCES OF MUNICIPAL REVENUE IN SOUTH AFRICA
- Property Rates
- User Levy or Service Charges
- Sundry Revenue
- National Transfers, Grants and Subsidies
- Division of Nationally Raised Revenue
The current grading system in South Africa is the assessed value of property or the market value of the property. In South Africa, municipalities can invoke Section 46 of the Municipal Financial Management Act if it is necessary to take out loans for infrastructure development.
EXPENDITURE MANAGEMENT IN LOCAL GOVERNMENT
The process involves the following: a) a decision of the municipal council, signed by the mayor, and approved by (b) accounting officer. a) has, in accordance with section 21A of the Municipal Systems Act -. i) at least 21 days before the meeting of the board at which approval for the debt is to be considered, make public an information statement setting out details of the proposed debt. Including the amount of the proposed debt, the purposes for which the debt is to be incurred and details of any security to be provided; and. ii) invited the public, the National Treasury and the relevant provincial treasury to submit written comments or representations.
REPORTING STANDARDS
The Local Government Municipal Financial Management Act (Act 56 of 2003) charges the National Ministry of Finance with the duty to prescribe and establish uniform standards to be adopted and applied by municipalities in the performance of their duties . What is striking is that the challenges facing local governments are enormous, and the resources available to them are very limited.
CHAPTER FOUR
FINANCIAL REFORM IN KWADUKUZA MUNICIPALITY
INTRODUCTION
INTRODUCTION OF FINANCIAL REFORM IN KWADUKUZA MUNICIPALITY
The reform process mentioned above gained momentum and started with the filling of senior positions through the appointment of senior management within the finance department. This was then followed by the immediate revision of the municipality's organizational chart, with particular emphasis on the Ministry of Finance.
APPROACH TO FINANCIAL REFORM
- Initial Phase – Phase One
- Implementation of Interventions – Phase Two
- Consolidation Phase - Phase Three
7,800 properties were identified and found not to be on the valuation list. j) The reconciliation between creditors and debtors has been completed. k) Value added tax reconciliations have been completed. l) The escalation of debts was kept under control (Internal Memorandum KwaDukuza Municipality: Annual Plan/Action Program 2003). The 2004 Action Plan (Phase 3) included: (a) the continuation of the fiscal reform programme;
ONGOING REVIEW OF THE FINANCIAL STATUS OF THE MUNICIPALITY
- Reasons for the disclaimer
- Audit Report for the 2003/4 Financial Year
- Special interventions targeting the Audit report for 2002/3 and subsequent years
- Project to cleanse the municipal records
Report on plans for the preparation of annual financial statements for the financial year 2003/04 in terms of the Act on the Management of Municipal Finances. Memorandum: Report on the plans for the preparation of annual financial statements for the financial year 2003/04 in terms of the Act on the Management of Municipal Finances.
PROGRAMME FOR THE EFFECTIVE IMPLEMENTATION OF THE COUNCIL’S
- Billing
- Indigent support
- Monthly payment of rates
- Debt collection task team
- Revenue enhancement and debt recovery plan
- Public awareness
- Submission of the Annual Financial Statements for 2003/4
- Restructuring the Department of Finance
As a logical consequence of this philosophy, the date of completion of the 2003/2004 annual accounts was set. With a clean set of documents and a solid foundation at their disposal, financial managers could better function for the benefit of the municipality (KwaDukuza Municipality Internal Memorandum: Management Assistance Program. Item: C540 dated.
- Trend analysis
Revenue increased from R215 million in 2003 to R331 million in 2007. The major contribution in revenue increase came from rates, Service Charges and grants (KwaDukuza Municipality Internal Memorandum: Phase 3 Project - Annual Financial Statements. Item Fin :76 dated. The profits were used to finance capital investment in the 2007/8 financial year (KwaDukuza Municipality Internal Memorandum: Phase 3 Project - Annual Financial Statements Item Fin :76 dated.
SUNDRY DEBTORS
- Cash position and cash investments with banks
- Equitable share
- Ability to raise loans
- Staff development
- Budget
- Valuation roll and the Rates policy
- Debt recovery
- Assets register
- Audit report
- Conclusions
The results were again a qualified report issued by the National Audit Office (KwaDukuza Municipality's internal memo: Report on plans for the preparation of the annual accounts 2003/04 in accordance with the Municipal Financial Management Act. Item: C467 dated. However, in 2005/6 the municipality received a clean, unconditional report , which was a testimony to the successful implementation of the recovery program (KwaDukuza Municipality Internal Memorandum: Phase 3 Project Annual Accounts. Item Fin: 76 dated.
CHAPTER FIVE
RESEARCH DESIGN, METHODOLOGY AND ANALYSIS
- INTRODUCTION
- DEFINING RESEARCH
- TYPES OF RESEARCH
- NATURE OF SCIENTIFIC RESEARCH
- OBJECTIVES OF THE STUDY
- COLLECTION OF DATA
- Literature Review
- ANALYSIS AND INTERPRETATION OF FINDINGS
- INTERPRETATION OF FINDINGS
Focuses on measurements Focuses on social reality Facts must be reliable Facts must be authentic. According to Mouton, there are many possible interpretations of the nature of scientific research. a) research as a search for truth (epistemic model);
The findings established that the institutional arrangements for KwaDukuza Municipality are contained in the Strategic Document referred to in the study as the Integrated Development Plan. The main emphasis of the program is hands-on, hands-on training and on-the-job mentoring.
The organogram approved by the municipality in 2001 was a compromise decision to accommodate the merger of the three former transitional municipalities of KwaDukuza, Ballito and Zinkwazi. The organogram was revised and restructured and aimed at achieving the goals set in the Integrated Development Plan.
CONCLUSION
The survey results point to capacity as the key elements of successful financial reforms. It is interesting to note from the research that successful strategies applied at national and provincial levels, adapted to local governance, can yield positive results.
CHAPTER SIX
GENERAL CONCLUSION AND RECOMMENDATIONS 6.1 INTRODUCTION
- GENERAL CONCLUSION
- RECOMMENDATIONS
- Capacity building, staff training and development
- Institutional Capacity
- Community participation
- Performance management system
- Monitoring and control
- Empowerment of the budget as an instrument of economic development
- AREAS FOR FUTURE RESEARCH
- CONCLUSION
More resources, including training of the communities, must be made available to ensure that participation by the communities is effective. It is important for the municipality to ensure that decisions made in terms of the budget and the Integrated Development Plan are implemented.
ANNEXURE: 1
Section B
BIBLIOGRAPHY
- BOOKS
- LEGISLATION
- OFFICIAL PUBLICATIONS: KWADUKUZA MUNICIPALITY
- OTHER PUBLICATIONS
Republic of South Africa, 1997 Local Government: Public Service Transformation White Paper (Batho Pele White Paper), Government Printer, Pretoria. Republic of South Africa, 2003 Local Government: Municipal Finance Management Act, Act 56 of 2003, Government Printers, Pretoria.
