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National Treasury

National Treasury. Presentation - Portfolio Committee on Water Affairs and Forestry 4 June 2003. 2003/04 Priorities. Review of the equitable share Formula Enhance municipal revenue Property Rates Bill Municipal Finance Management Bill Restructuring Electricity distribution industry

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National Treasury

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  1. National Treasury Presentation - Portfolio Committee on Water Affairs and Forestry 4 June 2003 Draft

  2. 2003/04 Priorities • Review of the equitable share • Formula • Enhance municipal revenue • Property Rates Bill • Municipal Finance Management Bill • Restructuring • Electricity distribution industry • RSC levies • Infrastructure grant reforms Draft

  3. Components of 2003/04 equitable share • Equitable share allocation R6,3 billion • less R293 Allocation R381 million • Amount distributed via formula R5,9 billion • S-grant (including guarantees) R4,1 billion • I-grant R450 million • Nodal Allocation R212 million • Free Basic Services R822 million • Free Basic Electricity R300 million Draft

  4. Free Basic Services • Separate window created for 2003/04 for funding free basic services (FBS) • The aim is to assist municipalities to accelerate the provision of FBS to poor communities • FBS include water, sanitation & refuse removal • Allocation for 2003/04 is R822 million on top of S-grant allocation Draft

  5. Free Basic Services • It is estimated that 76% of municipalities provide the first 6kl of water free • wide ranging levels from 1.2 kl to 12 kl • The free basic services policy does not extend to sanitation beyond basic levels of on-site sanitation (eg. VIP) • Information on how free basic services are provided in rural areas is poor Draft

  6. Division of Revenue Act, 2003 • Section 5(7)(ii) requires municipalities to: • Submit to NT, provincial treasury & provincial local government department not later than 30 June 2003: • budget for the financial year and other budgetary info required by NT on nature and extent of basic services (including FBS), to be provided by the municipality • Section 5(7)(iii) requires municipalities to: • Submit NT, dplg & provincial local government department not later than 10 days after end of each quarter information on actual revenue & actual spending on: • water, electricity, refuse removal, municipal infrastructure and free basic services Draft

  7. Division of Revenue Act, 2003cont. • Section 8: • (1) An organ of state in the national and provincial sphere may only provide funds for a municipal service to the relevant municipality directly • (2) Public entity and municipality must enter into a service delivery agreement by 30 June 2003 • (3) Public entity must also report on a monthly basis on the amount spent on received funds from municipality Draft

  8. Transfer of Water Schemes- Policy Objectives • Constitutional & legislative requirement on municipal authority • Complying with DoRA requiring infrastructure transfers to municipalities to be made in terms of an approved policy framework • Providing a framework within which to achieve measurable outputs identified in DoRA • Enhancing certainty, predictability & transparency of transfers & ensure sustainability without reducing current levels of service • Setting principles to guide the transfer of assets, staff, water services infrastructure and the provisionfunction from DWAF Draft

  9. Transfer of Water Schemes • Water Services Operating Subsidy (via augmentation to the Water Trading Account) provides for operation maintenance and related staff costs of water services works to be transferred • This operating subsidy is treated as a grant in kind whilst DWAF or a water board fulfils the role of WSP, to cover the services provision costs until transfer is effective • The operating subsidy is converted into a conditional grant (direct transfer) once transfer is effective to cover O & M costs plus staff costs • The operations component of the grant is a fixed term grant, which for a period of three years covers 100% of the operation and maintenance costs. Draft

  10. Transfer of Water Schemes • Available to WSAs from 1 July 2003 to 30 June 2006 • Actual time period that the WSA receives 100% of this grant depends on the effective date of transfer • Substantial personnel implications as DWAF expects to transfer approximately 8100 staff to LG Draft

  11. Transfer of Water Schemes -Allocation • Adjustments - Increase for refurbishment of water schemes for 2003/04, 2004/05 & 2005/06 is R60m, R90m and R120m • Aim of the allocation is to refurbish the water schemes prior transfers • Transfers expected to take 6-7 years • The transfer process experienced a delay with the finalisation of Powers and functions to between Category B and C municipalities Draft

  12. Information required • Type of scheme? • Number of beneficiaries? • Number of personnel affected? • Tariff and pricing policy? • Revenue collected? Draft

  13. Cross-Subsidisation of Water Schemes • In cases where: • A water services works is designed for levels of service that are not affordable to the consumers, and/or • Where most or all water provided by the water services works qualifies as Free Basic Water • It may be impossible to recover costs and maintaining the water services works in both cases • If the WSA is unable to cross-subsidise the water services works after phasing out of conditional grant • arrangements need to be made to provide support through an ongoing conditional grant • The conditions of this grant will include measures to improve cost recovery linked to performance targets Draft

  14. THANK YOU Draft

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