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Submission for the division of revenue2017 20182017/18 Submission for the Division of Revenue

The theme of this Submission is “The Intergovernmental Fiscal Relations System and Rural Development in South Africa”, reflecting the demographic, economic and political importance of rural areas. The aim is to provide a comprehensive review of the intergovernmental fiscal relations (IGFR) instruments, and their reform for more effective rural growth and development. Rural development is a complex process and, therefore, requires proper coordination among the institutions and departments involved.

In South Africa, rural areas account for 80% of the land and are home to 38% of the population. Rural areas lag behind the country as a whole on economic performance indicators, such as economic growth, labour force participation rates, unemployment, education attainment and life expectancy at birth. Challenges include insufficient skills and educational performance, socio-spatial inequalities, infrastructure deficits, housing backlogs, environmental issues and health disparities. The agriculture sector contributes less than 3% to South Africa’s economy, and so rural development is clearly not just about agricultural development. Addressing the challenges facing the rural poor requires more than agricultural and agrarian reforms, and must include education and health care outcomes, social and economic infrastructure, the creation of employment opportunities as well as changing the economic geography of rural areas.

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2015 Policy Brief 7Policy Brief 7 - Improving Service Delivery through eGovernment

As economies become increasingly knowledge-based, investment in information and communication technology (ICT) has come to the fore. Shifting to an eGovernment approach has the potential to improve and expand service delivery, reduce corruption and costs, and overcome the spatial divisions that persist in South Africa. Although government allocates significant public resources to ICT, the spending is neither coordinated nor strategic. Issues that need addressing include: identifying a lead government department that will be responsible for driving eGovernment, clarifying roles and responsibilities among the different roleplayers, ensuring implementation is closely aligned to policy objectives, and improving access (and ease of access) to services, e.g. through the Thusong centres. To improve government operations through the use of ICT, the Financial and Fiscal Commission recommends simplifying the ICT policy and regulatory framework, clearly delineating roles and responsibilities, identifying the lead department for eGovernment, finalising a fully costed implementation plan and making eGovernment services more attractive and accessible to citizens.

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Prof Daniel Plaatjies - Full Time Chairperson

Prof PlaatjiesProf. Daniel Plaatjies (Commissioner from1 September 2013–31 July 2017) (Appointed as Chairperson on 3 July 2017) Daniel Plaatjies is Chairperson of the Financial and Fiscal Commission since 1 July 2017 having previously served since mid-2013 as part-time Commissioner. He specialises in public policy, public finance and governance and is an author and has edited three books: Future Inheritance: Building State Capacity in Democratic South Africa (2011 Jacana Media); Protecting the Inheritance: Governance and Public Accountability in Democratic South Africa (2013 Jacana Media); and State of the Nation: State of the Nation 2016 : Who Is in Charge? (2016 HSRC). He is a founding director of the Rosmead Institute, as well as an experienced executive civil servant, special adviser, academic and researcher in public institutions such as National Treasury, Human Sciences Research Council and the University of Witwatersrand. Plaatjies is also the former Director and Head of the Graduate School for Public and Development Management (now called Graduate School of Governance). He was a leading technocrat in the establishment of the South African Social Security Agency. Plaatjies holds a PhD (Wits), MPhil (UWC), BSocSc Honours (UCT), Diploma VI Social Science (UWC) and numerous professional certificates from international academic institutions.

Dr Sibongile Muthwa - Part Time Deputy Chairperson

Dr Sibongile Muthwa bwDr Sibongile Muthwa (28 July 2014–27 July 2019) (Appointed as Deputy Chairperson on 3 July 2017)
Dr Sibongile Muthwa has international work experience in the non-government, development and public sectors, as well as in academia. She is currently the Deputy Vice Chancellor: Institutional Support at the Nelson Mandela Metropolitan University and sits on the boards of Seriti Institute, Women in Dialogue Trust, University Sports Company and Curro Holdings. In the past, Sibongile has served in various structures, including the Joint Universities Public Management Education Trust (Chairperson) and Applied Fiscal Review Centre. Previous positions include Director of the University of Fort Hare’s Institute of Government (1999–2004) and Director-General of the Eastern Cape Provincial Government (2001–2010). She holds a BA (SW) (Fort Hare), BA (SW) Hons (Wits), MSc (SPPDC) and PhD (London).

Mr Kenneth Fihla - Commissioner

FihlaMr Kenneth Fihla, Commissioner
(1 September 2013–31 August 2018)
Mr Kenneth Fihla is the Head of Client Coverage, Corporate and Investment Banking/CIB Franchise, Standard Bank Group. He is responsible for corporate client relationship management across 19 African countries and 20 countries on other continents, as well as for managing Standard Bank’s Corporate and Investment Bank (CIB) South Africa Client Franchise business. He is a respected leader with extensive investment banking experience. Kenneth joined Standard Bank as Head of Investor Services in September 2006, was appointed to the CIB’s Executive Committee in March 2007, and became Head of Transactional Products and Services South Africa in April 2008. He studied Mechanical Engineering at the Harare Polytechnic. He holds an MSc in Financial Economics from the University of London and an MBA from the University of Witwatersrand.

Mr Sipho Lubisi - Commissioner

Mr Sipho LubisiMr Sipho Lubisi, Commissioner
(28 July 2014–27 July 2019)
Mr Sipho Lubisi commenced work at TSB Sugar Holdings in 1981 where he served as a shop steward of the Food and Allied Workers Union (FAWU). From 1986 to 1993, he held a number of regional and national positions with FAWU and Cosatu, including that of Chairperson of the Cosatu Eastern Transvaal Region (1989–1993). He was a member of the African National Congress (ANC) Provincial Executive Committee (1992–2008), the ANC Provincial Deputy Chairperson (2002–2005) and a member of the South African Communist Party (SACP) Central Committee (2002–2007). He is currently a member of the SACP Executive Committee in Mpumalanga province. In 1998, Sipho joined the Mpumalanga Provincial Legislature and was elected as the Speaker of the Legislature (1998–2004). He has served as a Member of the Executive Council (MEC) for the departments of health and social development, and economic development and planning, and was Speaker of the Mpumalanga Legislature from 2009 to 2014.

Prof Gilingwe Mayende - Commissioner

Prof Gilingwe MayendeProf. Gilingwe Mayende, Commissioner
(28 July 2014–27 July 2019)
After completing his PhD in 1990, Prof. Gilingwe Mayende was selected to be Visiting Fellow and Senior Associate Member of St Antony’s College at Oxford University in the UK, where he conducted research on the land question in South Africa. Between 1995 and 2005, he served as a senior public servant in the
South African government, during which time he held the positions of Director-General of the Department of Land Affairs (2000–2005), Deputy Director-General of the Eastern Cape Provincial Government (1999–2000) and Regional Land Claims Commissioner for the Eastern Cape and Free State (1995–1998). Since leaving the public service in 2005, he has held a variety of posts and is currently attached to the Centre for the Advancement of Non-Racialism and Democracy at the Nelson Mandela Metropolitan University, where he is a Senior Research Fellow. Gilingwe holds a BA in Sociology and History from the University of Botswana, an MA in Development Sociology (1987) and a PhD in Sociology (1990) from the University of Hull in the UK. He also holds a Diploma in Executive Leadership (Senior Executive Programme) from Wits and Harvard Universities.

Prof Nico Steytler - Commissioner

Prof Nico SteytlerProf. Nico Steytler, Commissioner
(1 September 2013–31 August 2018)
Prof. Nico Steytler is a Professor of public law and the South African Research Chair in Multilevel Government,
Law and Policy at the Community Law Centre, the University of the Western Cape. He was formerly Director of the Community Law Centre, a research and advocacy institute that works on governance and human rights. His main field of research is multilevel government, including local government. He has written extensively on the subject, including co-authoring the Local Government Law of South Africa. Nico has advised governments at all levels on constitutional and statutory design and implementation of multilevel governance, including being a technical adviser to the Constitutional Assembly for the 1996 Constitution and to the Western Cape Provincial Legislature for the provincial constitution (1996-1997). He was a member of the Municipal Demarcation Board (2004–2014) and is President of the International Association of Centres for Federal Studies (2010–2016). Most recently, as an UN-appointed expert, he advised the Yemen’s Constitutional Drafting Committee on the design of a federal constitution. Prof. Nico Steytler holds a BA LLB (University of Stellenbosch), an LLM (University of London), a PhD (University of Natal) and a doctorate (honoris causa) from the University of Fribourg, Switzerland.

Mr Mandla Nkomfe - Commissioner

Mr. Mandla Nkomfe, Commissioner
(1 April 2013–31 March 2023)

Prof Aubrey Mokadi - Commissioner

blankProf. Aubrey Mokadi, Commissioner
(1 April 2013–31 March 2023)

Submission Chapters



Rural areas account for four-fifths of the land and are home to about two-fifths of the population in South Africa. Although poverty and economic deprivation has been reduced substantially since the advent of democracy, greater poverty is found in provinces that contain former homelands (only the Western Cape and Gauteng did not “inherit” former homeland territory). Like many other countries, South Africa does not have a government-wide, officially agreed and accepted definition of “rural”. Understanding what “rural” means is particularly important when assessing programmes aimed at stimulating rural development. This lack of a common definition may explain the plethora of rural development programmes that are found in virtually every corner of the government. Furthermore, measurement issues remain unresolved, and so the relationship between rural development, intergovernmental fiscal relations instruments and related aspects (such as land reform, food security or infrastructure) is not always clearly defined and understood. Thus, the effectiveness of spending on rural development is unclear. This section sets the context for the rest of the Submission, by looking at these issues and offering the lens through which the Commission will approach the contestable areas. It examines the socio-economic profile and characteristics of rural areas, as well as how to define rural areas, and assesses how rural regions are coping with economic change, and the weight of agriculture and agriculture spending in rural economies. It also explores the evolution of rural policy, including who is implementing policy for rural areas and whether integrated rural policies work, and presents the rural development model underlying the Commission’s recommendations.

Over the past decade, South Africa has implemented many rural development strategies focused mostly on land reform and restructuring the country’s agrarian economy, as a catalyst for poverty reduction and wider societal transformation. In recent years, conditional grants have been used to fund the flagship policy programmes. However, agriculture’s declining share (in terms of employment and gross value added) has raised concerns about the efficacy of directed public investments in agriculture for achieving growth, reducing rural poverty and creating a vibrant and inclusive rural economy. Three aspects are examined in this section. The first seeks to show that agriculture and non-agricultural linkages can play an important economic development role and, if well managed, the interactions between the two can be the basis for economically, socially and environmentally balanced regional development. The second argues that land reform is essential because for many poor rural households, land is the main source of livelihood and means for investing, accumulating and transferring wealth. Providing secure rights in land they already possess can significantly increase the net wealth of rural households. Finally the third deals with state entities and their critical developmental role in the economy, looking at what SOCs and DFIs do in rural spaces and what they need to do in order to be drivers of rural growth.

Similar to many other developing countries, South Africa is characterised by disparities across provincial jurisdictions. The distribution of poverty is highly skewed, with the rural provinces carrying the highest burden due to historical social engineering policies and weak regional economies. The higher poverty burden imposes additional demands for services and funding on rural provinces, but the funding framework for provinces is not adequately sensitive to the different developmental needs. Poverty is a manifestation of under development emanating from a range of factors including historical legacies, under-investment and structural issues. This section focuses on provinces and rural development. Limited economic activity and a narrow tax base impede the ability of rural areas to mobilise sufficient resources to finance their own development programmes, leaving them dependent on the centre for both transfers and interventions. As a result, their spending discretion (i.e. directing resources towards province-specific needs) is limited – the provincial equitable share, which accounts for 80% of revenue, is normally tied to national priorities and statutory responsibilities. Similarly, spending on the remainder of the funding from conditional transfers is restricted to specific sector and expenditure activities. The inability of the rural provinces to intervene in their spaces through the powers and functions assigned to them by the Constitution is evident from their consistent maladministration practices and fiscal management failures. Whereas such failures reflect poor fiscal choices, the lack of appropriate skills in the rural areas may also exacerbate management inadequacies and thus reinforce rural under-development.

Poor access to adequate levels and standards of basic services compound the challenges of poverty and unemployment in rural areas. Dealing with these challenges requires not only a strong national government but also a capable and capacitated local government – the sphere of government closest to the people. However, despite increased funding and interventions over the years, this has not translated into commensurate service delivery improvements in the majority of rural municipalities. Initiatives underway include the recent review of the local government equitable share formula introduced in 2013, the ongoing “Back to Basics” initiative, as well as the infrastructure grant reviews. In addition, amalgamations of municipalities are being experimented with in order to turnaround the fortunes of this sphere of government. Yet many municipalities continue to under-spend their budgets, and suffer from inefficient procurement and irregular and wasteful spending, bad management and outright corruption. For many rural municipalities, their dilemma is one of expanding expenditure requirements and shrinking fiscal space. They have limited scope for economic diversification, deficient services and infrastructure, and face declining revenue bases because of high unemployment and population losses through migration. This section looks first and foremost at whether the resources transferred to the sector are adequate and used efficiently and effectively. It then considers the extent and costs of farm displacements, and how rural local municipalities can deal with this problem and the associated costs. Lastly, the focus turns to finding innovative ways of tapping into economic activity of rural areas, and developing new sources of municipal income while arresting the decline in existing sources.




> Table of Contents-Foreword-Acronyms (309kB)

> Executive Summary (122Kb) 


> Chapter 1: Budget Consolidation in South Africa: Balancing Growth and Socioecomic Rights (292Kb)

> Chapter 2: Economic and Social Value of Social Grants (335Kb)

> Chapter 3: Funding of South African Further Education and Training Sector (319Kb)

> Chapter 4: Financing Research in Higher Education (343Kb)

> Chapter 5: Evolution of Conditional Grants (328Kb) 


> Chapter 6: Assessing and Improving the Fiscal Performance of Provinces (331Kb)

> Chapter 7: Managing the Provincial Wage Bill to Contain Fiscal Stress and Build a Capable State (329Kb)

> Chapter 8: Effective Devolution of Transport Functions to Municipalities: Towards an Optimal Transport system (307Kb)

> Chapter 9: Effective Intergovernmental Planning and Budgeting for Better Outcomes (321Kb)


> Chapter 10: Measuring Fiscal Distress in South African Local Government (795Kb)

> Chapter 11: Improving the Performance of Municipalities through Incentive-based Grants (310Kb)

> Chapter 12: Challenges Contraints and Best Practices in Maintaining and Rehabilitating Water and Electricity Distribution Infrastructure (392Kb)

> Chapter 13: A Collaborative Effort to Enhance Revenue Generation in Rural Municipalities (524Kb)References (91Kb)

References (91Kb)



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