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List of Recommendations

Year:2017/18

Subject:Rural development

Recommendation: With respect to creating conditions for rural development from infrastructure-led growth by public entities, the Commission recommends that:
• Economic Development Department, in collaboration with the departments of agriculture, forestry and fisheries, rural development and land reform, and public enterprises, designates a single champion for rural finance and development. This champion should guide and coordinate investment by DFIs in rural areas, and encourage crowding-in by the private sector. The Department of Telecommunications and Postal Services ensures that SAPO modernises and broadens focus towards becoming a one-stop shop in rural areas, where communities/customers can renew (car, driver’s) licences and access financial products such as banking (ATM etc.).
• The Department of Public Enterprises ensures that Transnet contributes to regional economic growth and development by connecting business to customers, goods to markets. Transnet should also transport agricultural goods, so as to include rural communities, from rural areas where they are produced to urban areas where they are consumed, process, or sent out of the country.
• The Department of Telecommunications and Postal Service puts measures in place to improve Telkom’s network infrastructure in rural areas, so as to improve cellular network coverage. Telkom and SAPO, under the guidance of the Department of Telecommunications and Postal Services, should forge a partnership to develop the mobile market.

Government's response:

Year:2017/18

Subject:Rural development

Recommendation: With respect to measures to improve land reform impacts on rural development, the Commission recommends that:
1. CASP and RADP are consolidated into one funding programme for post-settlement support to emerging and land reform farmers under DAFF, which has more expertise in the area of agriculture. The consolidated fund should provide timeous support to land reform beneficiaries and be complemented by affordable loan funding. DFIs should explore possible funding models, so that the funding framework can reach more land reform beneficiaries.
• For individual farm transfers, the LRAD model should be emulated, as it provides the necessary incentives to access credit, own an asset and enter into productive activity on the land.
• For group-owned projects, models should be explored in partnership with commodity organisations and land reform specialists.
2. Coordination and alignment between DRDLR and DAFF is strengthened at both policy and implementation levels. To enhance coordination, the recently established district land reform committees should include officials from all relevant sector departments, including agriculture. This multi-stakeholder arrangement should be replicated in the provincial and national land reform committees.
3. Implementation gaps in the land reform programme are addressed through reprioritised funding. Gaps include providing resources for planning and aligning land reform with human settlements, agriculture and infrastructure; training land reform farmers in technical and business skills (with a mechanism to assess skills of mentors); establishing selection criteria for land reform beneficiaries that are applied uniformly across all the provinces. An important criterion for transfer should be maintaining agricultural production.
4. The role of municipalities in supporting land reform beneficiaries is clarified. Areas of support that municipalities could provide include offering land reform beneficiaries discounts or exemptions from municipal tariffs for the first three years and liaising with DRDLR to resettle farm evictees on land assigned for land reform. Ways in which municipalities can access national funding to support the land reform programme, should be worked out with the DRDLR.

Government's response: 1. Government agrees that post-settlement support that ensures arable land remains in production is important. Moreover, government acknowledges the need to improve coordination in the agricultural sector given its multifaceted nature and its intersecting mandates across several departments, including the Department of Agriculture, Forestry and Fisheries and the Department of Rural Development and Land Reform. However, given the overlapping roles between the Department of Agriculture, Forestry and Fisheries and the Department of Rural Development and Land Reform, the first task is to clarify the roles of these two departments, which both include aspects of post-settlement support. This first step was recently completed. Given the ongoing nature of this process, it would be premature to start shifting programme funding or conditional grants between departments, in isolation of an assessment of the funding flows to the entire agriculture sector. As such, the next step is to assess the current funding model, for realignment to the delineated roles and to promote better outcomes. The funding model should support increased land-reform outputs and ensure that both departments are able to deliver on their responsibilities. While conditional grants make up part of the funding of these functions, the funding landscape should be assessed in its entirety to ensure it supports productivity and land reform across the country. Government agrees that improved post-settlement support can be provided within existing resources as a result of this process.

Year:2017/18

Subject:Rural development

Recommendation: With respect to measures to improve land reform impacts on rural development, the Commission recommends that:
1. CASP and RADP are consolidated into one funding programme for post-settlement support to emerging and land reform farmers under DAFF, which has more expertise in the area of agriculture. The consolidated fund should provide timeous support to land reform beneficiaries and be complemented by affordable loan funding. DFIs should explore possible funding models, so that the funding framework can reach more land reform beneficiaries.
• For individual farm transfers, the LRAD model should be emulated, as it provides the necessary incentives to access credit, own an asset and enter into productive activity on the land.
• For group-owned projects, models should be explored in partnership with commodity organisations and land reform specialists.
2. Coordination and alignment between DRDLR and DAFF is strengthened at both policy and implementation levels. To enhance coordination, the recently established district land reform committees should include officials from all relevant sector departments, including agriculture. This multi-stakeholder arrangement should be replicated in the provincial and national land reform committees.
3. Implementation gaps in the land reform programme are addressed through reprioritised funding. Gaps include providing resources for planning and aligning land reform with human settlements, agriculture and infrastructure; training land reform farmers in technical and business skills (with a mechanism to assess skills of mentors); establishing selection criteria for land reform beneficiaries that are applied uniformly across all the provinces. An important criterion for transfer should be maintaining agricultural production.
4. The role of municipalities in supporting land reform beneficiaries is clarified. Areas of support that municipalities could provide include offering land reform beneficiaries discounts or exemptions from municipal tariffs for the first three years and liaising with DRDLR to resettle farm evictees on land assigned for land reform. Ways in which municipalities can access national funding to support the land reform programme, should be worked out with the DRDLR.

Government's response: 1. Government agrees that post-settlement support that ensures arable land remains in production is important. Moreover, government acknowledges the need to improve coordination in the agricultural sector given its multifaceted nature and its intersecting mandates across several departments, including the Department of Agriculture, Forestry and Fisheries and the Department of Rural Development and Land Reform. However, given the overlapping roles between the Department of Agriculture, Forestry and Fisheries and the Department of Rural Development and Land Reform, the first task is to clarify the roles of these two departments, which both include aspects of post-settlement support. This first step was recently completed. Given the ongoing nature of this process, it would be premature to start shifting programme funding or conditional grants between departments, in isolation of an assessment of the funding flows to the entire agriculture sector. As such, the next step is to assess the current funding model, for realignment to the delineated roles and to promote better outcomes. The funding model should support increased land-reform outputs and ensure that both departments are able to deliver on their responsibilities. While conditional grants make up part of the funding of these functions, the funding landscape should be assessed in its entirety to ensure it supports productivity and land reform across the country. Government agrees that improved post-settlement support can be provided within existing resources as a result of this process.

Year:2018/19

Subject:Information and Communication Technolgy

Recommendation: In order to enhance intergovernmental instruments, institutional and governance arrangements pertaining to the provision and maintenance of information and communication technology in urban municipalities, the Commission recommends that:
• National Treasury should ensure that allocations for assisting municipalities with municipal standard chart of accounts implementation through the Financial Management Grant be ring-fenced and deliberately biased towards lesser resourced urban municipalities who struggle under the financial burden of attaining compliance with the municipal standard chart of accounts financial reform.

Government's response: • Government acknowledges the financial challenges experienced by some municipalities in complying with the municipal standard chart of accounts regulations. The financial management grant, however, is relatively small, with municipalities allocated about R1.7 million each, on average. Allocations are biased towards municipalities with financial management challenges identified in the Financial Management Capability Maturity Model and/or disclaimer audit opinions. In addition to supporting the implementation of the municipal standard chart of accounts, the grant also supports a host of other financial reforms, including preparing funded budgets, improving asset management and ensuring audit outcomes are consistent with Outcome 9 (a responsive, accountable, effective and efficient developmental local government system). The amount spent on each activity must be specified and approved in the financial management grant support plan submitted by each municipality and approved by the National Treasury. As such, there is no need to ring-fence funds for a particular activity. All municipalities and municipal entities should have complied with the regulations for implementation of the municipal standard chart of accounts by 1 July 2017. It is the responsibility of those municipalities that are not yet compliant with the regulations to ensure that they appropriately budget for its implementation using the revenue at their disposal (including own resources and transfers). Municipalities needing technical assistance to help with their budgeting can ask the relevant provincial treasury for support.

Year:2016/17

Subject:Information and Communication Technolgy

Recommendation: With respect to improving government operations through the use of ICT, the Commission recommends that:
• The policy and regulatory framework underpinning the ICT sector is simplified, and roles and responsibilities are clearly delineated, particularly for the roll-out of broadband and eGovernment.
• The department responsible for devising and finalising the eGovernment policy is identified. Finalisation of the policy along with a fully costed implementation plan should be expedited if the NDP goals around eGovernment are to be met within the required time-frame.
• A fully costed implementation plan is published and made publicly available, to ensure that the NDP goals for rolling out broadband are attained and that sufficient funding is prioritised.
• eGovernment services are made more attractive to citizens, by offering a wide range of services and ease of access.

Government's response:

Year:2018/19

Subject:Spatial development

Recommendation: With a view at achieving compaction in South African metropolitan cities, the Commission recommends that:
• National Treasuty introduces an incentive grant specifically targeted at city compaction, an urban form that has the potential to remedy apartheid geography and bring the masses closer to the opportunities of work and facilities. The spatial development grants currently accessed through the Built Environment Performance Plans treat compaction as ony but a small and negligible component of spatial transformation.

Government's response: • The National Treasury agrees that there is a need for incentives to encourage targeted densification that restructures South Africa’s urban spaces. This has been identified as a key measure in the fiscal framework, and confirmed by the local government infrastructure grant review process. A small incentive grant has already been introduced in the form of the integrated city development grant. Government has adopted an incremental approach to introducing performance incentives for two reasons. First, there is a need to ensure there are objective, measurable indicators of performance in place that are well understood by all eligible municipalities and consistent with global and national monitoring frameworks. To accomplish this, the National Treasury and the Department of Cooperative Governance have led the reform of outcome indicators and reporting for urban local governments ± a process that is nearing completion. Second, there is a need to ensure that measures are taken to address countervailing incentives to spatial restructuring, which could mute the impact of the fiscal incentives. These could include changes to policies and regulations to ensure they do not create implicit incentives that encourage investments in low-density developments on the edges of cities. Incentive effects are not drawn solely from the size of financing provided, but also from the extent to which they complement other initiatives in a coherent programme. The built environment performance plans provide each city with a mechanism to coordinate infrastructure investment funded through grants and own revenues that will lead to spatial transformation. Section 14(2) of the Division of Revenue Act requires that cities invest an increasing proportion of their grant allocations in the integration zones identified in their built environment performance plans. Several grants to metropolitan municipalities also have an explicit focus on spatial transformation and compact cities, including the public transport network grant, which promotes transit-oriented development along public transport corridors, and the neighbourhood development partnership grant, which funds the development of urban hubs in townships.

Year:2018/19

Subject:Integrated Urban Development

Recommendation: With respect to strengthening the Integrated Urban Development Framework as well as the Cities Support Program for positive impact on urban development, the Commission recommends that:
• The Department of Cooperative Governance and Traditional Affairs and the Department of Planning, Monitoring and Evaluation continue strengthening coordination and monitoring mechanisms (by ensuring that departmental sector plans and strategic investments are aligned to local spatial plans and priorities) and coherent with the national objectives espoused in the Integrated Urban Development Framework.
• he Department of Cooperative Governance and Traditional Affairs and National Treasury consolidate the urban development related grants so (for example incorporate the Integrated City Development Grant into the Urban Settlement Development Grant) so as to achieve the Integrated Urban Development Framework objectives and address urban development holistically.

Government's response: • Government recognises the need for the progressive consolidation of conditional grants to metropolitan municipalities. It remains committed to consolidating grants for urban municipalities as a long-term objective, while acknowledging that several sector-specific grants, such as the public transport network grant, will need to remain separate in the short term to fund specific programmes within cities. Government will review spending on urban informal settlement upgrades, with a view to changing the grant system to enable increased investment in on-site upgrades. This may have implications for the structure of the grants mentioned in the FFC’s recommendation, as the urban settlements development grant is the main source of grant funding for informal settlement upgrades in metros and the integrated city development grant is the main grant for improved governance and spatial transformation in metros. National departments, cities and the FFC will be invited to participate in the review. A new integrated urban development grant will be introduced for non-metropolitan cities in 2019/20. While this grant will initially be funded by reprioritising amounts previously allocated to qualifying cities through the municipal infrastructure grant, it could include the consolidation of other grants in time. Government has consistently emphasised the need to increase the proportion of own revenue in urban municipalities’ capital budgets. Reforms to conditional grants, including the proposed consolidation of grants, must be structured to promote this objective, as it is the best way of increasing total capital investment in urban infrastructure. The current structure of the integrated city development grant aims to incentivise municipalities to invest in a targeted and sequenced manner to achieve a more compact, inclusive, productive and sustainable urban environment. The incentive is based on the performance of the metropolitan municipality as a whole, including performance on all grants and own-revenue-funded projects. Steps to incorporate this grant into 68 another grant will need to be structured carefully to ensure that the incentive created for holistic planning and development across municipalities is not distorted.

Year:2009/10

Subject:Tax

Recommendation: Proposed that the replacement revenue source for municipalities should be a tax that enhances the fiscal autonomy and discretion of local governments

Government's response: However, the revenue capacities of individual municipalities need to be taken into account, because a replacement revenue instrument that is purely in the form of a tax is unlikely to achieve the desired goal

Year:2000/01

Subject:Tax

Recommendation: Proposed that the following taxes should constitute provincial own revenue sources: a surcharge on personal income tax, a fuel levy and betting and gambling taxes

Government's response: Consistent with government’s approach but identification of specific taxes and rates is an outcome of a technical and political consultative process according to the Provincial Tax Regulations Act. There are also other technical factors such as additional administrative burdens and exacerbation of inter-provincial inequalities which make a personal income tax surcharge undesirable

Year:2012/13

Subject:Data

Recommendation: Data available at local government level should be reviewed to ensure appropriate surveys or alternatives are available to account accurately for changes in demographics and other factors at municipal level

Government's response:

Year:2008/09

Subject:Data

Recommendation: The FFC recommended that a process for the collection of data on homelessness be initiated and that such data should be included in the housing formula as part of the indicators of housing need

Government's response: Government agreed to the recommendation that homelessness should be quantified.

Year:2005/06

Subject:Data

Recommendation: Proposed that Government should ensure that comprehensive information and data on each basic service and tax source at municipal-level be collected.

Government's response: Government agreed with the FFC proposal and will explore how such a database can be established, and be accessible to key stakeholders.

Year:2012/13

Subject:Data

Recommendation: Data available at local government level should be reviewed to ensure appropriate surveys or alternatives are available to account accurately for changes in demographics and other factors at municipal level

Government's response:

Year:2008/09

Subject:Data

Recommendation: The FFC recommended that a process for the collection of data on homelessness be initiated and that such data should be included in the housing formula as part of the indicators of housing need

Government's response: Government agreed to the recommendation that homelessness should be quantified.

Year:2005/06

Subject:Data

Recommendation: Proposed that Government should ensure that comprehensive information and data on each basic service and tax source at municipal-level be collected.

Government's response: Government agreed with the FFC proposal and will explore how such a database can be established, and be accessible to key stakeholders.

"For an Equitable Sharing of National Revenue"