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SA’s rural areas and smaller municipalities need national support to tackle poverty

29 Aug 2022

By Yuri Ramkissoon

Poverty in South Africa’s rural areas and smaller municipalities is exacerbated by their small revenue base. Immediate targeted interventions by the national government are needed for severely impoverished areas in less populated provinces.

Poverty is one of South Africa’s most salient social problems. Its persistence and expansion demonstrate that the policies, programmes and strategies that the government has employed to alleviate poverty have been mostly insufficient and/or poorly implemented.

The racial and gender-based character of deprivation resulting from the apartheid government’s racist economic policies worsens the impact of poverty. Apartheid entrenched an oppressive, patriarchal system, placing women under even greater subjugation.

The post-1994 South African state has been largely unsuccessful in eliminating the gendered and racial structural legacy of apartheid, leaving black people, and particularly women, most deprived.

According to Statistics South Africa, in 2015 more than 13 million people in South Africa were living below the food poverty line of R585 per month, which means that about 25% of the people in South Africa were unable to purchase or consume enough food to supply them with the minimum per capita per day energy requirements for good health — a staggering indication of impoverishment.

The study indicated that the three consistently poorest provinces were Limpopo, the Eastern Cape and KwaZulu-Natal. North West and Mpumalanga showed slightly lower poverty rates.

According to sections 214 and 227 of the Constitution, each sphere of government is entitled to an equitable share of revenue raised nationally to enable it to provide basic services and perform the functions allocated to it.

The purpose of this equitable share is to enable different spheres of government to discharge their respective mandates in terms of service provision, through a vertical division (between spheres of government) of revenue. Revenue is also allocated horizontally across South Africa’s nine provinces and 257 municipalities.  

In South Africa, because of the revenue-generating potential of local government, for example, through rates and tariffs, this sphere receives the smallest share of the pool of funds intended for vertical distribution.

This local government equitable share (LGES) is allocated to municipalities based on three main components:

    A basic services component, which refers to the cost of provision of basic services to indigent households;
    An administrative and governance component, which provides funds for administrative costs and core services excluded under basic services; and
    A revenue adjustment, which provides funding to municipalities that have limited income-generating capacity.

Using this formula, the larger metropolitan municipalities, such as the City of Joburg and the City of Cape Town predictably receive the lion’s share of the LGES, due to their population and the number of households that require free basic services. However, these metropolitan municipalities will receive limited funding for administrative functions and revenue adjustments.

Theoretically, this funding model seems equitable, noting that metropolitan municipalities have larger populations than local municipalities and that all municipalities have income-generation capacity through property taxes, service charges, traffic fines, and alternative funding such as grants. In addition, much revenue is “wasted” on heavy personnel costs. If these costs could be recouped, municipalities would have greater resources for basic services and other provisions.

The poorest province

According to a community survey conducted by Statistics South Africa in 2016, the poorest province in the country is the Eastern Cape, where almost 900,000 people, mostly in rural areas, live in poverty.

Similarly, there are about 840,000 people living in poverty in KwaZulu-Natal, and 680,000 living in poverty in Limpopo.

Not only are these provinces the poorest in the country, but the measures of multidimensional and pervasive poverty are also high. These areas were previously designated as “apartheid homelands/Bantustans”, which during apartheid were densely populated with little or no infrastructure development and service provision.

Additionally, the poorest municipalities in the country are found in these provinces. Revenue generation in these areas has been overestimated. Clearly, while poverty in populated metropolitan areas is important, multidimensional, persistent and pervasive poverty in local municipalities, particularly in rural and outlying areas, is equally critical given the systemic issues and failures experienced at a local government level in these areas.

According to a 2017 report by the Department of Cooperative Governance and Traditional Affairs on the State of Local Government Finances and Financial Management (as at 30 June 2017), 66 municipalities (24% of all municipalities) collected less than 80% of the revenue owed to them.

Municipalities that were identified as especially struggling included those in the Eastern Cape, Northern Cape and Limpopo. Additionally, 64 municipalities had negative cash balances as of 30 June 2017, none of which was a metropolitan municipality.

Reasons cited for this included a deterioration in revenue collection, emergencies, disasters such as floods and drought, and a major breakdown in service delivery resulting in non-supply and a loss of revenue.

Some local municipalities underspent their budget due to weak multiyear budgeting, limited planning, project preparation and project management, poor asset management and poor contract management. The report also showed increased reliance by non-metros on conditional grants.

Results from the above, and additional studies, indicate that greater support is required for district and local municipalities, particularly in rural areas.

While the LGES is structured to provide the greatest proportion of funds to areas with high populations, a similar grant is required to support areas of extreme impoverishment. In addition, greater support in terms of capacity building, skills transfers, filling vacancies, oversight and accountability is required to stabilise these municipalities and ensure their long-term sustainability.

On top of this, a basic income grant is urgently required to assist, in the short term, families that have no access to food and other basic services. In the long term, more sustainable poverty alleviation strategies will be required.

If the state is committed to long-term, sustainable reduction in poverty and inequality, greater direct interventions are required for district and local municipalities.

Given that local government is tasked with the provision of most basic and essential services, and that it is this sphere of government that will bear the brunt of service delivery protests and climate change, immediate targeted interventions are required for severely impoverished areas in less populated provinces.

Unless greater attention is given to such persistently poor areas, national and provincial poverty alleviation strategies will not have a significant impact on overall poverty, especially when one views the disaggregated picture of poverty in South Africa.

Yes, the health of metropolitans is important. But so too is the health and sustainability of rural and outlying areas, which at present lie forgotten.

Source: Daily Maverick

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