BASIC SOCIO-ECONOMIC INDICATORS
INCOME GROUP: UPPER MIDDLE INCOME
LOCAL CURRENCY: RAND (ZAR)
POPULATION AND GEOGRAPHY
- Area: 1 219 090 km2 (2018)
- Population: 59.309 million inhabitants (2020), an increase of 1.4% per year (2015-2020)
- Density: 49 inhabitants / km2
- Urban population: 67.4% of national population (2020)
- Urban population growth: 2.0% (2020 vs 2019)
- Capital city: Pretoria (1.3% of national population)
- GDP: 792.4 billion (current PPP international dollars), i.e., 13 361 dollars per inhabitant (2020)
- Real GDP growth: -6.4% (2020 vs 2019)
- Unemployment rate: 33.6% (2021)
- Foreign direct investment, net inflows (FDI): 3 200 (BoP, current USD millions, 2020)
- Gross Fixed Capital Formation (GFCF): 13.7% of GDP (2020)
- HDI: 0.709 (high), rank 114 (2019)
MAIN FEATURES OF THE MULTI-LEVEL GOVERNANCE FRAMEWORK
South Africa is a quasi-federal State that is divided into three spheres rather than tiers of government (Section 41 of the 1996 Constitution). This distinction forms the basis of the intergovernmental relations between national, provincial and local government. In 2009, the Ministry of Cooperative Governance and Traditional Affairs (COGTA) was established to coordinate the system of cooperative governance. The Department of Cooperative Governance and Traditional Affairs supports the state governments or “provinces” and the local governments or “municipalities” in fulfilling their constitutional and legal obligations. The national legislature has 400 seats at the National Assembly and 90 seats at the National Council of Provinces (NCOP). The head of State and government is the president, who is indirectly elected by the National Assembly for a five-year period. The National Assembly seats are allocated using a proportional representation system with closed lists. NCOP members are indirectly elected by the provincial legislatures.
The country’s quasi-federal status grants it both federal and unitary features, and acts as the bedrock of the system of cooperative governance. The features of the multi-level governance framework are enshrined in the country’s Constitution, which was adopted after the Apartheid era, in May 1996. The Constitution is supported by various legislation.
Local government is enshrined in chapter seven of the South African Constitution. Prior to the 1996 Constitution, local governments had no legal or constitutional backing. National and provincial laws had the authority to establish or abolish municipalities. Section 151(3) grants local governments the right to govern and manage the affairs of their own communities, subject to national and provincial legislation. The functions of municipalities are set out in Part B of Schedule 4, and Part B of Schedule 5 of the Constitution. The main legislation and regulatory frameworks for local government are the Municipal Structures Act of 1998, the Municipal Systems Act of 2000, the Municipal Finance Management Act of 2003 and the Municipal Property Rates Act of 2004.
In most parts of the country there is a two-tier system of local government, named district municipalities and local municipalities. The Municipal Structures Act of 1998 outlined the roles of district municipalities to be regional service providers, particularly in relation to the provision of the water and sanitation services. Most local municipalities fall within district municipalities, although the large cities in the country have a single tier of local government, called metropolitan municipalities.
The Municipal Structures Act of 1998 established districts as municipalities that would provide regional services. However, these were new institutions with little to no experience in service delivery comparing to local municipalities. Besides, the lack of clear regional role for district municipalities that defines them as separate from local ones creates conflict between the two municipality categories. The concurrency of functions which are shared between the different local authorities also tends to create ambiguity on which responsibilities are aligned to which local authority. The introduction of districts resulted in a shift with some functions that were previously provided by local municipalities now being provided by the districts (e.g. water and sanitation). The 1998 Act was amended in 2011 to consider professional qualifications and experience as a criterion for the appointment of senior management positions in local government.
|Municipal Level ||INTERMEDIATE LEVEL||REGIONAL LEVEL||TOTAL NUMBER OF SNGs (2021)|
|8 metropolitan municipalities,
205 local municipalities,
44 district municipalities
|Average municipal size:
234 019 inhabitants
 Name and number of sub-municipal entities:
4 468 wards
OVERALL DESCRIPTION: South Africa is a quasi-federal state that is divided into three spheres of government (Section 41 of the Constitution). The first sphere of subnational government consists of nine provinces that cover the whole country. Within each province there are local governments – 257 in total, which also cover the entire country. In some areas of the country there are two tiers of local government (district municipalities and local municipalities), while in other areas of the country there is a single tier of local government, known as metropolitan municipalities.
REGIONAL LEVEL: Section 125 of the Constitution vests the executive authority of the province in the premier of the province. Provincial elections are held using a list system of proportional representation. The premier shares this authority with the executive council in fulfilling the responsibilities of the provincial government. The premier is elected at the first sitting after elections from members of the provincial legislature, which must be presided over by the chief justice. The term of the premier commences when the premier takes office and ends when the next premier is elected to assume office. The Constitution limits each premier to two terms. Depending on the population of the province, the provincial legislatures generally vary in size from 30 to 80 members. The executive council consists of between five to 10 members appointed by the premier from members of the provincial legislature.
MUNICIPAL LEVEL: The South African local government structure is divided into three categories: category A for metropolitan municipalities, category B for local municipalities and category C for district municipalities. The metropolitan municipalities are found in large metropolitan areas and big cities and function as a single layer of local government (although they still fall within the boundaries of the provincial government). The non‑metropolitan areas which are towns and rural areas are governed by a two-tier system consisting of district and local municipalities. Each district (category C) is composed of several local (category B) municipalities. This categorisation grants metropolitan municipalities exclusive municipal executive and legislative authority within their areas while districts and local councils share jurisdiction.
In total there are 257 municipalities in South Africa. All local governments in South Africa are governed by municipal councils, constituted through a proportional representation system. Metropolitan and local municipalities are divided into wards, with each ward electing one councillor to the municipal council. At municipal level, the municipal council manages and oversees the administration of the municipalities. There is a total of 4 468 wards. The municipal council holds the executive accountable and the executive has the authority to establish committees that address different issues. The number of municipal councillors is determined by the number of voters registered in that municipality. For local and district municipalities there may not be less than three or more than 90 councillors, while for metropolitan municipalities there may be no more than 270 councillors. Councillors are elected for a five-year term.
South Africa has a legislated candidate quota at the subnational level of government. Schedule 1 (11) (3) of the Municipal Structures Act requires parties to “seek to ensure” that 50% of their candidates on the party list are women during the elections of local councils, and for the even distribution of men and women candidates on the list throughout the country.
South Africa has legislation in place that provide a platform for engaging in the planning, budgeting, service delivery and evaluation of municipalities. There are three legal tools used to ensure citizenship participation at the local level of government. Section 152 of the Constitution obligates local governments to encourage community involvement in matters pertaining to the local government. Section 73 of the Municipal Structures Act further creates provisions for the establishment of ward committees to enhance participatory democracy in local governments. Lastly, the Municipal Systems Act of 2000 encourages the involvement of local community and to consult the community about the quality and impact of municipal services.
HORIZONTAL COOPERATION: The South African Local Government Association (SALGA) was established in 1996 and is a network of municipal and provincial governments. Its official recognition by the central government through the adoption of the Organised Local Government Act of 1997 has led way to give SALGA a strong role in multilevel governance and intergovernmental relations. The Intergovernmental Relations Framework Act of 2005 further reinforced its role as a representation body of subnational governments. Among its main objectives are to: (i) represent local governments in law-making and decision-making processes at the national level and to (ii) strengthen local government administration capacities.
Subnational government responsibilities
The Constitution delineates public functions into two categories: those that are concurrent (shared among different spheres) and those that are exclusive (performed by one sphere only). The national government is exclusively responsible for national defence, national fiscal policy, foreign affairs, the criminal justice system, higher education and certain administrative functions. The national, provincial and municipal governments share responsibilities for primary health care, health protection, housing, public transport, environmental protection, local economic development and tourism.
Provinces are mainly responsible for the provision of basic services such as education, health and social economic development, economic functions (agriculture and roads), human settlements and managing governance and provincial administration. Provinces have exclusive legislative competence over provincial roads, ambulance services and provincial planning.
There are very few exclusive local government functions. Part B of Schedule Four and Part B of Schedule Five of the Constitution outlines the powers and functions of local governments. All metropolitan and some district and local municipalities have all the functions, with some functions (notably water provision and the sanitation service), given to either local or district municipalities. Section 84 of the Municipality Structures Act divides the powers and functions between districts and local municipalities. Some concurrent functions have resulted in ambiguity in the division of powers and functions between district municipalities and local municipalities.
Main responsibility sectors and sub-sectors
|SECTORS AND SUB-SECTORS||Regional level||Municipal level|
|1. General public services (administration)||Administration and operation of general services (non-assigned to specific functions)||Administration and operation of general services (non-assigned to specific functions)|
|2. Public order and safety||Civil protection||Police (discretionary service); Firefighting; Civil protection & emergency services|
|3. Economic affairs / transports||Road networks and facilities (regional); Public transport (shared); Support to local enterprises and entrepreneurship; Tourism||Road networks and facilities (urban roads); Public transport (shared); Airports (shared); Support to local enterprises and entrepreneurship; Manufacturing and construction; Tourism; Commerce, Energy distribution (shared) (electricity, gas, etc.)|
|4. Environment protection||Environmental protection||Parks & green areas; Nature preservation; Noise and vibration abatement; Air pollution; Soil and groundwater protection; Climate protection; Waste management (collection, treatment and disposal of waste); Sewerage (waste water management); Street cleaning|
|5. Housing and community amenities||Housing (shared responsibility in some municipalities); Regional planning||Housing (sole responsibility in some municipalities, shared responsibility in others); Urban and land use planning; Town planning|
|6. Health||Primary healthcare (shared); Hospital services (general and specialist); Preventative healthcare||Primary healthcare (shared); Preventative healthcare; Public health services|
|7. Culture & Recreation||Sports and recreation (shared); Libraries; Museums; Cultural activities (theatres, exhibition halls, zoos, botanical gardens, etc. Shared function)||Sports and recreation (shared); Libraries & Museums (discretionary service); Cultural activities (botanical gardens, parks and open space etc. Shared function)|
|8. Education||Pre-primary education (shared); Primary education; Secondary education||Pre-primary education (shared)|
|9. Social Welfare|
Subnational, state and local government finance
|Scope of fiscal data: Provinces and the three different types of local governments, combined||SNA 2008||Availability of fiscal data:
|Quality/reliability of fiscal data:
GENERAL INTRODUCTION: Fiscal arrangements are set out in Chapter 13 of the Constitution, and are supported by an advanced set of national acts. National and provincial government finances are governed and regulated by the Public Finance Management Act, and local government finances are regulated by the Local Government Municipal Finance Management Act (MFMA). The MFMA is also used to establish National Treasury norms and standards for the local governments’ management of their finances.
The Municipal Systems Act ensures that municipalities have service tariffs and credit control policies in place for the provision of services. The MFMA enables the secure and sustainable management of the financial affairs of municipalities and other institutions within local government and establishes Treasury norms and standards for the local government sphere. Finally, the Municipal Fiscal Powers and Functions Act regulates the power municipalities have to impose surcharge on fees for services provided under section 229 of the Constitution.
The Intergovernmental Fiscal Relations Act promotes cooperation between the three spheres of government on fiscal, budgetary and financial matters. This Act prescribes a process of determining an equitable sharing and allocation of revenue raised at a national level and provides for matters related to intergovernmental fiscal relations. The Division of Revenue Act provides for the equitable division of revenue raised nationally among the national, provincial and local spheres of government for the ﬁnancial year.
Subnational, state and local government expenditure by economic classification
|2020||Dollars PPP / inhabitant||% GDP||% general government||% subnational, state and local government|
|Total expenditure||2 521||1518||1003||18.9%||11.4%||7.5%||52.9%||31.8%||21.0%||100.0%||100.0%||100.0%|
|Inc. current expenditure||2 312||1445||867||17.3%||10.8%||6.5%||32.3%||32.4%||19.4%||91.7%||95.2%||86.5%|
|Compensation of employees||1 219||930||289||9.1%||7.0%||2.2%||67.6%||51.6%||16.0%||48.4%||61.3%||28.8%|
|Subsidies and current transfers||-||61||-||-||0.5%||-||-||30.7%||-||-||4.0%||-|
|Incl. capital expenditure||209||73||136||1.6%||0.6%||1.0%||68.9%||24.1%||44.9%||8.3%||4.8%||13.6%|
|Direct investment (or GFCF)||209||73||136||1.6%||0.6%||1.0%||69.5%||24.3%||45.2%||8.3%||4.8%||13.6%|
% of general government expenditure by level of government (state/local)
- State government
- Local government
- 80% 100%
SNG expenditure by economic classification as a % of GDP
- Compensation of employees
- Intermediate consumption
- Current social expenditure
- Subsidies and other current transfers
- Financial charges + other current expenditures
- Capital expenditure
- 15% 12%
EXPENDITURE: South Africa has a well-developed subnational government system, with high levels of devolved functions in a quasi-federalised set of provinces. The constitutional distribution of powers and functions to subnational government has a direct impact on the fiscal framework of provincial and local governments. Subnational governments (in particular, provinces) are responsible for labour intensive functions such as healthcare, social development, and education, therefore there is a relatively high proportion of expenditure on employees. Subnational governments spend USD 2 521 PPP per inhabitant, representing a total expenditure equivalent to 18,.9% of the country’s GDP. Current expenditure far outstrips capital expenditure, with staff expenditure making up almost 50% of subnational government expenditure in 2020.
DIRECT INVESTMENT: Direct investment by subnational governments represents 69.5% of general government direct investment and 1.6% of South Africa’s GDP. State (provincial) governments have relatively low levels of capital investment, due to the allocation of functions that are typically staff intensive. Local governments incur proportionately higher levels of capital expenditure than state governments due to the devolution of the capital-intensive water, sanitation, electricity distribution and solid waste management services. Generally, this direct investment is funded through conditional grants. At municipality level, grant transfers from the central government are often earmarked for direct investments in infrastructure, municipal systems improvement, integrated national electrification programme, rural roads asset management systems, water services infrastructure and regional bulk infrastructure. These grants are typically investments that would provide social or economic infrastructure for poor households. Municipalities are expected to fund infrastructure for businesses and high-income households through non-grant means.
Subnational, state and local government expenditure by functional classification
ⓘ No detailed data available for this country
SNG expenditure by functional classification as a % of GDP
- General public service
- Public order and safety
- Economic affairs / Transport
- Environmental protection
- Housing and community amenities
- Recreation, culture and religion
- Social protection
- 20% 16%
SNG expenditure by functional classification as a % of SNG expenditure
- General public service : 14,71%
- Defence : 0%
- Public order and safety : 2,77%
- Economic affairs / Transport : 20,23%
- Environmental protection : 3,58%
- Housing and community amenities : 9,32%
- Health : 20,39%
- Recreation, culture and religion : 1,9%
- Education : 24,98%
- Social protection : 2,12%
The majority of local government expenditure is on general public service (28.9%), economic affairs/transport (which includes electricity distribution, 36.6%) and housing and community amenities (which includes water supply, 17.8%).
Subnational, state and local government revenue by category
|2020||Dollars PPP / inhabitant||% GDP||% general government||% subnational, state and local government|
|Total revenue||2 564||1 536||1 028||19.2%||11.5%||7.7%||63.0%||37.8%||25.3%||100.0%||100.0%||100.0%|
|Grants and subsidies||1 778||1 485||294||13.3%||11.1%||2.2%||-||-||-||69.3%||96.6%||28.6%|
|Tariffs and fees||465||9||457||3.5%||0.1%||3.4%||-||-||-||18.1%||0.6%||44.4%|
|Income from assets||8||7||0||0.1%||0.1%||0.0%||-||-||-||0.3%||0.5%||0.0%|
% of subnational, state and local government revenue by category
- Local government
- State government
- Subnational government
- 100% 80%
SNG revenue by category as a % of GDP
- Tax revenue
- Grants and subsidies
- Tariffs and fees
- Property income
- Other revenues
- 20% 16%
OVERALL DESCRIPTION: Subnational governments in South Africa are primarily funded by grants and subsidies from the central government, which account for 69.3% of subnational government revenue in 2020. However, for provinces, this value is much higher, at 96.6%, showing that the revenue-raising ability of provinces is highly constrained. Thus, the revenue raising ability of the central government is an important factor which contributes to the amount of resources that can be put into health, education and social development. Local governments are less revenue-constrained, with grants and subsidies making up 28.6% of their revenue and with 44.4% of their revenue coming from tariffs and fees levied for services rendered, particularly electricity, water and sanitation service provision. The levels of the tariffs are determined and approved by municipal councils and should be cost-reflective. However, within local governments, the predominately rural municipalities are heavily reliant on transfers from the central government, as their revenue-raising ability is constrained by the socio-economic profile of their populace.
TAX REVENUE: Tax represents 8.3% of subnational government revenue, 83% of which is collected by local governments. Provinces are allowed to raise certain taxes, levies and duties but their ability to do so is very limited. The bulk of their tax revenue comes from motor vehicle licences and casino taxes. The only tax that local governments levy are property rates. The tax base that these property taxes are levied off varies significantly between municipalities. The tax was reformed in 2014 with the Spatial Planning and Land Use Management Act. Local municipalities are largely autonomous in the rates that can be set, although there is a very low exemption level set by federal government. Section 229(2)(a) of the Constitution, in conjunction with section 16 of the Municipal Property Rates Act 29 of 2014, imposes limitations on levying rates. This regulates the municipalities’ power and autonomy to levy rates to ensure that property rates do not materially and unreasonably prejudice economic activity or national economic policies. The rates are approved by the democratically elected local municipalities’ councils.
GRANTS AND SUBSIDIES: The central government’s primary equalisation grant is the equitable share grant. This is a formula‑based grant which takes into account demographic and developmental factors in geographic areas. The local government equitable share grant was introduced to address the lack of revenue base in some municipalities, and to account for the expenditure taken to provide minimum basic services to poor or indigent municipal residents. The National Framework for Municipal Indigent Policies provides municipalities with the foundation and guidelines to developing their indigent policies to ensure that they meet their responsibilities to providing basic municipal services for all as required by the Constitution. The Indigent Policy and by-law further ensure that households that qualify for free basic services gain access to them. The equitable share transfer system is therefore a predictable source of revenue to assist municipalities, particularly in rural areas, which have challenges in raising sufficient revenue to fund their Constitutional obligations and general operational costs. Provincial governments also receive an equitable share contribution.
There are also conditional grants which are designed to meet specific developmental goals and are usually allocated to a specific sector and are only received if criteria are met by the province or municipality. The largest conditional grant for municipalities is the municipal infrastructure grant (MIG), which was introduced in 2004. MIG is aimed at assisting municipalities to upgrade and build infrastructure. Prior to the introduction of MIG, infrastructure grants were managed by different national departments, but this was consolidated to one grant in line with the principles of devolved decision-making. Almost 80% of municipal conditional grants are targeted at capital investment in infrastructure and urban development, with the remainder being targeted at systems and capacity support, particularly in previous disadvantaged areas. Provincial conditional grants focus on human settlements development, health related functions, roads and education. The transfers from the central government are outlined and quantified in the Division of Revenue Act.
OTHER REVENUE:Other revenue for local government consist mainly of fines, licenses and permits, which make up almost 10% of local government revenue in 2020.
Subnational, state and local government fiscal rules and debt
|2020||Dollars PPP / inh.||% GDP||% general government debt||% SNG debt||% SNG financial debt|
|Total outstanding debt||501||-||501||3.8%||-||3.8%||5.2%||-||5.2%||100.0%||.||100.0%||-|
|Currency and deposits||-||-||-||-||-||-||-||-||-||-||-||-||-|
|Bonds/ debt securities||-||-||-||-||-||-||-||-||-||-||-||-||-|
|Other accounts payable||429||-||429||-||-||-||-||-||-||85.6%||-||85.6%||-|
SNG debt by level of government as a % of GDP and as a % of general government debt
- Local government
- Subnational government
- 10% 8%
FISCAL RULES: South Africa has a number of state institutions that support constitutional democracy and provide independent scrutiny, including the public prosecutor and the auditor general. The public prosecutor has the power to investigate the conduct of public administration in any sphere of government and to take remedial action. The auditor general is required to audit and report on the accounts and financial management of all local authorities. Fiscal responsibility laws are outlined in the Public Finance Management Act and the Municipal Financial Management Act as well as in different sections of the Constitution. Local governments are required to enact balanced budgets. In case a province (or a municipality) fails to deliver on these mandates, the national government (or a province) can intervene through Sections 100 and 154 of the Constitution. It is the responsibility of national departments to implement ‘emergency’ measures to bring local government spending and revenue into balance.
DEBT: The national government continues to work to achieve fiscal sustainability, measured as debt-to-GDP stabilization, and reduce the budget deficit. This requires significant spending cuts and moderate tax increases in the upcoming medium-term budget framework.
Provinces are not allowed to incur debt, unless it represents small amounts. Section 230 of the Constitution empowers municipalities to borrow, while the 2003 Municipal Finance Management Act regulates such powers. In South Africa, only four metropolitan municipalities (City of Johannesburg, Cape Town, Ekurhuleni and Tshwane) are currently issuing and participating in the government bond market listing at the Johannesburg Stock Exchange. The bonds are mainly used to raise capital for infrastructure expansion. Some of the bonds raised have been labelled ‘green’ bonds and tied to specific climate change mitigation projects. Bonds only represent a very small portion of total municipal debt. Municipalities can borrow from registered commercial banks or other approved financial institutions to fund capital expenditure only. The central government does not guarantee debt at subnational level, due to the independence of the spheres of government. There is a move towards the financing of infrastructure for economic purposes from debt, and infrastructure for the poor from federal government transfers. While the central government cannot veto a municipality’s intention to borrow, it may comment upon it. The central government recommends that the local government debt (total borrowings) to total operating revenue-ratio does not pass over 45%, although this is not enforceable.
FISCAL COORDINATION: Two fora were established by the Organised Local Government Act; the Budget Council (made up of the minister of finance and members of the executive council responsible for finance in each of the provinces) and the budget forum (comprising the budget council and representatives of the South African Local Government Association), in which local government issues are discussed as part of the national budget process. According to the Organised Local Government Act, the minister of finance has a legal obligation to convene the udget council twice a year and the budget forum once a year.
The Financial and Fiscal Commission (FFC) is an independent constitutional institution. It provides recommendations to parliament, provincial legislatures, organised local governments and other organs of state on financial and fiscal matters as envisaged in the Constitution and other national legislation, in particular on the division of nationally collected revenues.
The impact of the COVID-19 crisis on subnational government organisation and finance
TERRITORIAL MANAGEMENT OF THE CRISIS: A case of COVID-19 was first identified in South Africa by the National Institute for Communicable Diseases (NICD) on 5 March 2020. The South African president Cyril Ramaphosa, declared a national state of disaster on 15 March 2020, which required the central government to provide relief, protect property, combat disruption, deal with the destructive and other effects of the disaster, and protect the public — only to the extent that “it is necessary for the purpose”. A 21-day national lockdown was declared on 26 March 2020 to achieve these objectives. Essentially, the purpose of lockdown was to drastically reduce the movement of people to prevent the spread of COVID-19 and to allow the government to plan and effectively prepare for the impact of the pandemic. The president also established a Coronavirus Command Council who adopted a risk adjusted strategy that includes an alert system with different levels of restrictions, level 5 being the one with the most restrictions and level 1 the one with the least restrictions. The Department of Corporative Government was responsible for drafting the regulations and coordinating the activities of the different spheres of government. The country’s response to the COVID-19 pandemic was centralised around the Coronavirus Command Council, which made recommendations that the Cabinet deliberated on, and implemented if appropriate.
The lockdown measures were mostly imposed equally across the country, with small differences at various times throughout the pandemic (for example, isolated lockdowns in Gauteng and the Garden Route District Municipality). The first level of subnational government in South Africa, the provinces, are responsible for the healthcare function, and therefore played a large role in responding to the health needs of the population. Metropolitan municipalities have primary healthcare, sanitation and hygiene functional responsibilities and therefore played an important role in ensuring that there are preventative measures in place. All local municipalities have a community safety responsibility and, under instruction from the central government, were tasked with ensuring that the public adheres to emergency measures (such as the wearing of masks and social distancing).
The allocation of the healthcare function to state governments (provinces) in South Africa has meant that there has been a devolved approach to the management of the country’s healthcare response, although there were aspects that were re‑centralised during the state of disaster. For example, to ensure that there was fair access to personal protective equipment (PPE), the central government assumed the responsibility for the purchase of PPE, which was previously allocated to the provinces. This was not the case prior to the pandemic. In many places, local governments have worked with the provincial governmentS to ensure a coordinated response to the pandemic.
EMERGENCY MEASURES TO COPE WITH THE CRISIS: Prior to the COVID-19 pandemic, the South African economy was relatively stagnant, but the national state of disaster restrictions and lockdown regulations further weakened the economy, resulting in business failures, job losses, and negative economic growth. The government of South Africa announced fiscal support package of revenue and expenditure measures, as well as loan guarantees, with the aim of stimulating equitable and inclusive growth. Additionally, in July 2020, loan guarantees amounting to R 500 billion (~USD 72 billion PPP or about 9% of GDP) were provided to support the recovery of households and businesses. Private sector businesses and wealthy individuals contributed over R 4.5 billion (~USD 650 million PPP) to a mix of grants and concessionary loans to individuals and businesses in need as part of a recovery plan to resuscitate the economy and alleviate the burden from the loss experienced by both households, individuals, and business. During the pandemic, a special COVID-19 "Social Relief of Distress Grant" of R 350 (~USD 50 PPP) per month was paid out to unemployed people who did not receive any other form of social grant. 10 million people accessed the Social Relief of Distress Grant, and it is expected to terminate in March 2023. Tax relief in the form of payment holidays were granted to businesses to allow them to defer corporate income tax and value added tax payments.
Local municipalities were responsible for enacting regulations, as they are at the forefront of service delivery. Municipalities had to follow directives for local governments as issued by the Department of Cooperative Governance and Traditional Affairs (CoGTA). Some of the measures included: identification of isolation and quarantine sites, identification and making available facilities for shelter for the homeless, monitoring and enforcement, decontamination and sanitisation of public transport facilities, cleansing and sanitisation of public space facilities, availing facilities for use for the payment of social grants, health education, and the issuing of permits to informal food traders.
National Treasury granted approval for funds transferred to municipalities (not contractually committed) could be reallocated to respond to the COVID-19 pandemic. The reallocation included an additional R 2.4 billion in urban settlements development grant allocations to metropolitan municipalities. These funds were used for providing water and sanitation, primarily in underserviced informal settlements. An additional R 1.5 billion in municipal infrastructure grant allocations were also allocated for provision of water and sanitation in non-metropolitan municipalities, including addressing urgent maintenance needed to restore functionality of water infrastructure. In 2019/20, R 306 million from the indirect regional bulk infrastructure grant were reallocated and transferred to Rand Water, an entity responsible for the provision of bulk potable water to much of South Africa’s most populous province, Gauteng. It was put in charge to fund a roll-out of water tanks to supply communities without reliable access to water services. Local governments were also allocated COVID-19 related grants to assist with the procurement of PPE. Local governments had discretion to respond to the pandemic as they felt was appropriate, within their delegated powers and functions. Some municipalities provided property rates relief to affected businesses and households, provided food parcels to those in need, as well as hygiene infrastructure.
An example of a provincial response to the pandemic, is the Western Cape government’s adoption of a ‘hotspot strategy’ to assist in specific areas of the province. Each hotspot had a team, led by a member of the provincial executive committee, to ensure that the community in that area is managed appropriately, provided with appropriate humanitarian relief, transporting of positive cases to hospital and quarantine facilities, and that there is civil compliance with the prevailing law. The provincial governments worked with the local governments to provide additional healthcare facilities in the community centres that are owned and managed by local governments.
IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: During the pandemic, revenue collection levels deteriorated across all subnational governments. The impact of COVID-19 on households affected their willingness and ability to pay for municipal services, therefore the actual cash received for water services, electricity and property rates were reduced, even though the demand for the services remained high. Local governments also experienced an overall reduction in nominal expenditure by approximately 7%, as expenditure on large capital projects or non-essential projects were delayed.
Provinces and district municipalities were less affected by the impact of the pandemic on households, as they are less reliant on households for revenue for services rendered. The level of transfers from national government to local government is likely to increase by 2% over the coming three years due to constraints on the central government’s revenue-raising ability. Provincial governments received an increase in transfers from the central government due to their role in the healthcare response to the pandemic.
ECONOMIC AND SOCIAL STIMULUS PLANS : On 5 October 2020, president Cyril Ramaphosa presented the Economic Reconstruction and Recovery Plan to the joint hybrid sitting of Parliament. The Economic Reconstruction and Recovery Plan forms part of extraordinary measures that the government is taking – after extensive consultation with the business, labour and community sectors as social partners – to restore the economy to inclusive growth, following the devastation caused by the COVID-19 pandemic. This Plan directly responds to the immediate economic impact of COVID-19 by driving job creation and expanding support for vulnerable households. The government aims to do this primarily through a major infrastructure programme and a large-scale employment stimulus, coupled with an intensive localisation drive and industrial expansion. The plan focuses on four main priorities: infrastructure, energy generation, employment and reindustrialising the economy. R 100 billion were committed by the government over the period 2020-2023 to create jobs through public and social employment as the labour market recovers.
|World development indicators||World Bank|
|World population prospects||United Nations|
|Demographic and Social Statistics||United Nations|
|Unemployment rate by sex and age||ILOSTAT|
|Human Development Index (HDI)||United Nations Development programme; Human Development Reports|
|2021 Budget Review||National treasury|
|Local Government Financial Database||National Treasury|
|Financial census of municipalities||Statistics South Africa (StatsSA)|
|Financial statistics of provincial government||Statistics South Africa (StatsSA)|
|Financial statistics of consolidated general government||Statistics South Africa (StatsSA)|
Other sources of information
|The financial impact of COVID-19 on district and local municipalities: A national perspective||Dullah Omar Institute||2021|
|South African Cities Network||State of City Finances 2020||2021|
|Economic Relief Measure during Covid19||Government of South Africa||2020|
|-||Government of South Africa||2020|