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FFC Outlines 2020/21 Division of Revenue Recommendations

July 3, 2019

National Treasury

3 July 2019

A Memorandum of Understanding (MOU) between Eskom and municipalities is needed to improve revenue collection.

This is one of the recommendations put forward by the Financial and Fiscal Commission (FFC) as part of its 2020/21 Division of Revenue Recommendations.

The FFC submission is themed “Repositioning Local Government Public Finances”.

The FFC is an independent and impartial advisory institution that the government consults with regard to the division of revenue among the three spheres of government and in the enactment of legislation pertaining to provincial taxes, municipal fiscal powers and functions, and provincial and municipal loans.

It has the responsibility to advise and make recommendations to parliament, provincial legislatures, organised local government and other organs of state on financial and fiscal matters.

The FFC holds the view that a MOU will restore the constitutional responsibilities of municipalities in terms of electricity reticulation.

In a statement, the FFC points out that the recommendations are released “during a period of negative economic growth, increasing levels of poverty and inequality, with consequential severe distress to households”.

As a consequence, the challenges impact on the revenue-raising and spending capacity of municipalities to deliver on their constitutional and other legislative mandates.

Recommendations include to improve revenue collected that the credit control systems of Eskom and municipalities must be aligned by means of a Memorandum of Understanding and through the pooling of resources to obtain property valuers for the municipalities; development charges, tourism levies, fire service levies and land value capture mechanisms must be added to the list of supplementary allowable local government taxes; technical support should prioritise new systems, innovative business process redesign and change management and a government-wide accepted definition of ‘municipal functionality’ should be drawn up to define the right scoping for local government intervention programmes to cause meaningful impacts.

Key findings in the submission focus on the financial sustainability of municipalities, municipal functionality and interventions to improve performance; local government infrastructure delivery management and efficiency and city-region and its potential to address South Africa’s development challenges.

In terms of financial sustainability, the FFC focused on the performance of property rates and constraints to its optimisation; municipal debt management and supplementary revenue instruments and financing arrangements for local government.

The FFC submission can be viewed at https://www.ffc.co.za/.