- An advisory body has told Treasury that local government needs more funds
- They have urged national government to increase spending on local governments, but acknowledge that local government has financial constraints of its own
- As a result, they have urged municipalities to improve their revenue-collecting capacity
The Financial and Fiscal Commission (FFC) has said that many local governments are underfunded.
The FFC is an advisory body set up to make recommendations to the National Treasury.
The body says that national government needs to allocate more funds to local government to help them operate properly and avoid major debt problems.
While the FFC recommended that national government spend more on local government, it also acknowledged that there are not many funds available for this, especially as GDP shrank in the first quarter of the year and major national government enterprises face debt crises of their own.
To address this, the FFC has suggested that local governments be allowed to impose additional taxes such as tourism levies and fire service levies, according to Business Live. Only 25% of municipal funding comes from national government, Briefly.co.za has gathered. The rest is made from municipal revenue.
The body also pointed out that many municipalities were not collecting revenue properly, only collecting 40% of estimated revenue on property rates in many cases. This compounds their debt problems.
As debts grow, municipalities have less money to spend on collecting revenue, which makes it harder for them to pay their debts, and so on.
The FFC's findings come not long after the Auditor-General's report painted a bleak picture of municipal finances. Of 257 audited municipalities, only 18 receive clean audits, making for a clean audit rate of 8%.
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