Policy Brief 9 - Reviewing the Effectiveness of Sanitation Fiscal Instruments and Governance in Enhancing Rural Development?

Improving sanitation reduces the risk of infection from excreta-related diseases, especially for children under the age of five. Since 1994, the government has introduced programmes to reduce the high sanitation backlogs in South Africa. Sanitation backlogs have decreased overall but remain high in rural areas. To understand some of the reasons for the slow progress in reducing sanitation backlogs in rural municipalities, the Financial and Fiscal Commission (the Commission) undertook a review of constraints within the current intergovernmental fiscal relations system and weaknesses of current institutional arrangements. The study found that backlogs remain high in rural municipalities because the Rural Household Infrastructure Programme is underperforming, and municipalities are under-spending the Rural Household Infrastructure Grant. Reasons for this include the design of the grant (as an indirect grant), the failure by municipalities to submit business plans on time and to prioritise sanitation infrastructure by including it in their integrated development plans and maintenance plans.

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Policy Brief 8 - Are District Municipalities Necessary?

Local government has a key role to play in rural development, through the provision of basic services and infrastructure. However, infrastructure backlogs remain high in rural municipalities (because of under-spending
of capital budgets), and the allocation of functions between district municipalities (DMs) and local municipalities
(LMs) is ambiguous. The Financial and Fiscal Commission (the Commission) looked at how efficiently rural municipalities use intergovernmental transfers and how effective they are in driving rural development. The
study found that LMs use resources less efficiently than DMs and have higher staff vacancy rates. Many of the
functions that DMs should be performing are increasingly shifting to LMs, especially in urban areas.

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Policy Brief 7 - Who Finances Rural Local Municipalities?

ProvinciaThe majority of financially unviable municipalities are in rural areas and depend significantly on grants to fulfil their mandate. The government’s aim is to minimise this grant dependency by amalgamating municipalities.
The Financial and Fiscal Commission (the Commission) investigated whether amalgamations result in viable municipalities, as well as the adequacy of intergovernmental transfers and possible alternative own-revenue sources that would lessen the dependency of rural municipalities on transfers. The study found that amalgamations do not necessarily result in financially viable municipalities, and (if all grants are included) the current system of transfers is adequate for some (but not all) services rendered by rural local municipalities.

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Policy Brief 6 - Can Public Employment Programmes Create the Jobs Needed in the Rural Areas?

ProvincialUnemployment rates in South Africa remain stubbornly high, and rural areas are the worst affected. In response to the persistent and structural nature of unemployment, government established two public employment programmes (PEPs): the Expanded Public Works Programme (EPWP) and the Community Works Programme (CWP). The high priority that government attaches to PEPs is shown in their increased funding, which is growing faster than most programme budgets. The Financial and Fiscal Commission (the Commission) carried out a study to ascertain the effectiveness of the PEPs in creating jobs especially in rural areas and in providing value for money. The study found that the nature of the PEP activity being funded has a critical bearing on the impact of expenditure. The infrastructure sector has the highest costs and lowest labour intensity, implying that an infrastructure-led growth approach may not result in the required jobs.

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Policy Brief 5 - How Provinces are Funded to Fulfil Rural Development Mandates

Provincial rural development mandates straddle many concurrent functions, but how each sphere perceives its role is not always clear. Provinces in South Africa have very different levels of tax effort, reflecting the different tax bases. Between 2005 and 2014, tax effort increased across all provinces, with some provinces relatively optimising their collection of own revenue, but the scope to increase revenue collection from current provincial
tax sources is limited. Provinces therefore rely heavily on transfers from national government, especially the
provincial equitable share (PES), which is criticised for perpetuating regional imbalances. The Financial and
Fiscal Commission (the Commission) found that the PES formula is not responsive to rurality, whereas infrastructure conditional grants are responsive to rural needs because the largest share of the main infrastructure grants goes to the three most rural provinces. Many conditional grants are targeted at the agricultural sector, although agriculture is not the dominant economic activity in all rural areas. The Western Cape has the second highest (after KwaZulu-Natal) agriculture output, whereas the Northern Cape contributes the least to national agriculture output and yet receives the largest share of agricultural grants.

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“For an Equitable Sharing of National Revenue"


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