By Clement Marumoagae
To be sustainable, municipalities should effectively manage their spending and implement their revenue policies as well as pay their creditors while efficiently delivering services to their respective communities. District municipalities must co-ordinate and support their local municipalities as mandated by the Local Government: Municipal Structures Act 117 of 1998. This legislation requires district municipalities to ensure integrated development planning for the district as a whole and promote infrastructural development and services for the whole district. To achieve this goal, district municipalities together with their local municipalities should comply with the Local Government: Municipal Finance Management Act 56 of 2003. This legislation creates a legal framework for sound and sustainable management of the financial affairs of municipalities and other institutions operating in the local government sphere.
Municipalities are at the heart of South Africa’s development and economic growth. The budgets allocated to municipalities and infrastructure projects which they manage often lead to political power battles driven by desire to abuse elected positions to loot municipal finances. It is partly for this reason that this legislation creates treasury norms and standards for local governments. Those involved with or tasked to deal with municipal finances should ensure transparency, accountability, and appropriate lines of responsibility in the fiscal and financial affairs of municipalities and municipal entities.
Municipalities have been criticised for failing to adequately utilise their finances to initiate, develop, implement, and control their infrastructure projects. The Local Government: Municipal Structures Act allows municipalities to spend money on capital projects only if budgets have been allocated such projects. Such projects and their costs must be approved by councils that run these municipalities after consideration of projected costs covering all the financial years until such projects are operational. This legislation seeks to prevent municipalities from spending money on capital projects that have not been budgeted. This is aimed at fostering transparency, accountability, fiscal and financial discipline. The goal is to promote good governance and sound financial management within municipalities. The Supreme Court of Appeal in Merifon (Pty) Ltd v Greater Letaba Municipality and Another [2021] 4 All SA 356 (SCA) has held that it is impermissible for municipalities to undertake capital projects that are neither budgeted for nor approved by the councils for such municipalities as required by the Local Government: Municipal Finance Management Act. We advise municipalities and all entities operating at local government spheres on all aspects of municipal financial management regulation and compliance, which includes financing capital projects and procurement issues.
