so many municipalities prepare one-year capital budgets, have poor cashflow
and implementation plans, and secure funding sources only after the
tabling of the budget. This situation causes underspending and delays.
Nonetheless,National Treasury (2003b) analyses showed that more than 80
percent of the amounts budgeted for capital budgets were targeted at general
infrastructure, especially housing, water reservoirs, and reticulation;
roads, bridges, and pavements; and electricity distribution. Some 11 percent
was earmarked for other assets, 6 percent for community infrastructure, and
1 percent for specialized vehicles.
Revenue
The national government’s determination to use local government as the
agent of service delivery is evident from substantial increases in funds for capital
expenditure. In the 2004 national budget, the provision for the Medium-
Term Expenditure Framework until 2006/07 shows real growth in resources
allocated to the local government equitable share and infrastructure grants,
above the average growth in national resources going to all spheres of government.
The equitable share is projected to grow by more than 8 percent
over this period, and infrastructure grants are to grow by more than 7 percent,
against a national average of about 4 percent for all resources.
Revenue budgets have also shown marked improvement in recent years,
with the revenue from property rates increasing from R 12.6 billion in
2002/03 to R 15.7 billion in 2004/05, and income from RSC levies on business
turnover and wages increased from R 4.4 billion to R 5.7 billion in the
same period. The bulk of this income was generated in the six metropolitan
areas, which accounted for about 70 percent of all RSC levies and property
rates. Local or category B municipalities raised the remainder of income
from property taxes, but District (category C) municipalities do not have the
power to impose property rates. They have been able to raise levies to which
local municipalities have not had access.7 Table 2.2 gives some perspective
on these revenues in local budgets over three fiscal years.
Certain qualifications need to be made about these revenue figures. First,
property valuations are out of date in many municipalities, and a major priority
related to reforming the relevant legislation has been to update these
data and broaden the base of the property rates to also include development,
not only land. Second, the substantial electricity and water components of
the figures in table 2.1 for services income do not take account of overhead
costs, such as salaries and administration, repairs and maintenance, capital