Call for local infrastructure upgrade fund

Posted On Friday, 23 September 2011 02:00 Published by eProp Commercial Property News
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Salga has called for a national municipal infrastructure refurbishment fund to be set up to deal with the R400bn it estimates will have to be spent over the next 20 years to rehabilitate infrastructure.

Infrastructure ImageThe South African Local Government Association (Salga) has called for a national municipal infrastructure refurbishment fund to be set up to deal with the R400bn it estimates will have to be spent over the next 20 years to rehabilitate ageing infrastructure.

Salga told MPs yesterday that the lack of an adequate government policy on how to fund the infrastructure backlog was playing itself out in the public domain through the “spectacular collapse of infrastructure in many municipal areas”. This included water supply, electricity, roads, sanitation and buildings.

The Treasury provides municipalities with an infrastructure grant but this has been spent on extending services rather than maintaining and rehabilitating existing infrastructure.

In a briefing to the National Council of Provinces’ select committee on finance, Salga chairman Thabo Manyoni said municipalities had inherited old infrastructure, some of it 30 years old and overdue for replacement.

“In a sense municipalities inherited a liability rather than an asset. The new government correctly decided to prioritise extension of services to the unserviced (over) rehabilitating infrastructure. An infrastructure replacement liability was given to local government without a policy solution as to how this liability was to be financed,” Mr Manyoni said.

Another problem was the lack of data about the state of infrastructure, especially in sectors such as roads and water services, often as basic as where the pipes were laid pre-1994 and what materials were used.

Salga also complained about the high increases in bulk water prices over the past two years, which had led to nonpayment by consumers. Despite these price increases, some water boards had posted huge profits even under depressed economic conditions. For example, after being allowed a 12,9% increase in February, Rand Water reported a 51% increase in net income of R390m in the six months to end-December.

Mr Manyoni said this was a result of poor economic regulation where the Department of Water Affairs and Forestry had a conflicted role of being the provider of raw water to water boards and shareholder in the boards as well as their regulator. An independent regulator of water prices was required.

Salga has also called for a comprehensive review of the fiscal framework for local government and reiterated its call for the introduction of a local business tax as an additional source of revenue for municipalities that were coming under financial pressure as their revenue was eroded.

Mr Manyoni also appealed for a change in Salga’s financial status to allow it to raise its own funds and for it to report directly to Parliament rather than to the responsible minister. He said its listing as a schedule three entity under the Public Finance Management Act made it difficult to source additional funding.

The association depends on an annual grant from government, donations and membership fees paid by local, district and metropolitan councils.

“There is a risk that Salga’s current financing may not be sustainable in the longer term,” Mr Manyoni said, “and if additional sources of revenue are not obtained, its activities may have to scale down.”

 

Last modified on Tuesday, 29 October 2013 12:33

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