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Poverty, human rights and importance of sound financial management

Sep 5, 2022

By Thembelihle Links

In South Africa, an Integrated Development Plan (IDP), which is a legal instrument for municipal planning, is considered the best tool to respond to the developmental needs of local communities. Although IDPs reflect the plans and aspirations of Municipal Councils, they do not always materialise.

This incongruence is linked to an apparent collapse of local government management and implementation capacity. As testament, the 2020/2021 Auditor-General’s report indicated that only 16% of municipalities had received clean audits. These outcomes are reflected on the ground by the surge of service delivery protests over the past two decades, related to the lack of service delivery.

Although municipalities have indicated that their inability to execute the objectives in IDPs is due to a lack of resources – it is, however, the premise of this contribution that it is the improper utilisation of resources by a municipality which leads to unrealised projects, more so than inadequate resource provision.

The realisation of human rights is at the cornerstone of the mandate of local government. In the City of Johannesburg Metropolitan Municipality v Blue Moonlight Properties 39(Pty) Ltd case, the court reaffirmed this, and held that a municipality could not rely on the lack of available resources to justify not meeting a particular obligation. It further held that it must, at the very least, acknowledge its obligations and attempt to find resources to allocate emergency housing which is one of the basic human rights.

In analysing municipal budgetary obligations related to IDPs, one can apply the principles of Human Rights budgeting from the Outcomes, Policy Efforts, Resources and Assessment (OPERA) framework’s resources step. The OPERA framework articulates human rights standards and principles to take into account when monitoring and evaluating SER.

In the Resources step, measurable elements include the allocation, generation and expenditure of financial resources. This is relevant because an IDP is informed by the resources which can be allocated through the municipal budgetary process and subsequently realised by appropriate utilisation of financial resources.

In line with the OPERA framework, resources and revenue generation can be used as a tool to measure whether a municipality is delivering on its mandate to realise human rights to the maximum of its available resources. Although a municipality receives its share of national revenue, its main source of revenue is effective taxation, accurate billing of services and adequate collection by way of service fees.

This, however, can be seen as a polarising process because municipalities with a dense and wealthy suburban population benefit immensely from this scheme as there is a larger taxation base for property taxation and electricity levies, thus translating into more revenue. Rural municipalities have a dense population that generally access free basic services and subsidised services such as electricity. This leaves rural municipalities wholly dependent on their share from National Treasury.

These municipalities are also where indigence is highest and access to services is at its lowest. For example, in the Eastern Cape, the Amathole Municipality 2022 IDP notes that a large portion of its population is indigent and cannot pay for services. Therefore its revenue base is composed of 69% from National Treasury and 31% of its own revenue. However, it also notes that the needs of its municipality far exceed its available resources.

An inefficient taxation system negatively impacts revenue generation capacity. To close this gap, municipal economic development can promote economic growth and employment, which may result in probable higher revenue generation and probably better services and audit outcomes.

When one looks at the audit assessment system, a disclaimer is the worst finding a municipality can obtain because it means the financial statements of that municipality have no value. In the Eastern Cape, the Makana Local Municipality has, for the last three consecutive reporting and assessment periods (2018/2019 to 2021/2022), been issued disclaimer findings by the Auditor-General. The AG also noted poor mechanisms of prevention of irregular expenditure and poor financial management controls.

Effectively, these are irregularities in revenue generation and revenue expenditure. Unfortunately, this is the status quo across many of the municipalities in the Eastern Cape, where 47,1% of the population is unemployed, thus registering the highest unemployment statistics in the country. The poverty level in this province is 70,3%.

Under these circumstances of constrained resources, it behoves the local sphere to ensure that every cent is optimally deployed to the benefit of those whom they serve. Yet, the AG’s report indicates the province’s audit outcomes have regressed, where 56% of municipalities have material findings.

Analysing the audit outcomes and the socio-economic statistics, it is conclusive that municipalities are mismanaging finances and still not providing services or fulfilling their IDPs. Cumulatively, this is a sure indication that local government is not operating in the manner or style that it was meant to by the crafters of the Constitution.

This translates to the Human Rights Commission’s Eastern Cape Provincial Office receiving numerous and overwhelming complaints related to socio-economic rights, such as access to water and sanitation, poor conditions of healthcare facilities, poor roads and access to housing. In cases of service delivery failures, oversight bodies such as the SAHRC can use reports from the AG to hold municipalities accountable, particularly where municipalities point to a lack of resources as the cause of these failures.

As such, investigations on a wide range of human rights violations are continuously under way to ensure accountability and secure redress for the residents affected by municipal failures.

* Thembelihle Links is the Intake Officer at the South African Human Rights Commission in the Eastern Cape Provincial Office.

Source: Independent Media Online

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