Municipalities do not budget adequately for infrastructure and its maintenance, something which could spell disaster for the provision of services in the future as billions of rand would be needed to repair and upgrade the systems.

These findings are contained in a report published by the SA Local Government Association (Salga) yesterday, which analysed budget spending patterns in 30 municipalities for the 2003-04 financial year.

The country's 284 municipalities have a combined capital and operating budget of R74bn and are owed about R24bn in service fees. The report says repairs and maintenance of infrastructure is still well below the 10% norm of total expenditure, and warns that if this is not addressed, it will result in lower service standards and excessive costs in upgrading infrastructure in the future.

Meanwhile, the salary bill at local government level has remained constant at about 30% of total expenditure, but is still high in smaller municipalities with budgets of less than R50m, where it stands at 41%.

Salga executive director for policy and strategy Musa Soni said the high salary bill in smaller municipalities was due to the inclusion of contract workers such as municipal managers who tended to negotiate their salaries upwards.

"If we are to make inroads in reducing poverty we have to try and maintain or reduce the salary costs at local government so as to increase money budgeted for maintenance and repairs in infrastructure," he said.

The report also highlights the declining allocations for capital projects at local government level, saying municipalities were becoming more reliant on grants to fund capital programmes as a result of poor payment levels.

"Although capital programmes are initiated from internal funding, it is most likely that a large portion of these projects will not be executed as a result of lack of funding."

Smaller municipalities were finding it difficult to raise external loans, as their cash flow positions did not allow for the timeous and continued servicing of the debt. Consequently they were becoming dependent on district municipalities, provincial and national government departments to address infrastructure backlogs.

Municipalities were also not providing enough for bad debt in their budgets as required by national treasury.

Salga chairman Smangaliso Mkhatshwa said municipalities needed resources to fight poverty. The budget processes were a very important political tool in achieving that. "The discussions around budgets are not only technical. They are political tools to implement the decision of the majority party in that particular municipality," said Mkhatshwa.

He said the survey was a broad assessment of SA's municipalities to see how far they were in achieving their objectives.