Conditional grants are allocations of money given to local government, with the condition that certain services be delivered or if the municipality complies with certain specified requirements. Equitable share transfers are funds that the national government gives to local government from a pool of national taxes, with no conditions. The terms grants and transfers used in this article refer specifically to conditional grants and equitable share transfers.

Equitable share transfers are largely concentrated on metropolitan municipalities. In 2006/07, Some 41% of transfers were given to the six metros, and the remaining 59% shared by the district and local municipalities. In 2003/04, metros received only 20% of the equitable share given to local government.

Local, district, and metropolitan municipalities are becoming more dependent on on trasfers from national government. The total transfers to municipalities increased by almost 300% from R6.3 billion in 2003/04 to R18.1 billion in 2006/07. The total transfers are estimated to increase to R30.2 billion in 2009/10.

Inequalities are also evident in the type of revenue sources in different municipalities. Small, often rural, district and local municipalities do not have the same capacity as the metros to raise revenues from their communities because of high levels of poverty, and weak economies.

In order to illustrate these inequalities, the three biggest sources of income for two metros and two district municipalities are analysed.

The City of Cape Town receives most of its income from service charges and property rates. In 2007/08, some 31% of the city’s operating revenue was from service charges. The second biggest source of operating revenue in the city was grants, which accounted for 23% of operating revenue. Property rates contributed 21% to operating revenue. The remaining 25% was in the form of investment revenue, public contributions and donations, and other own revenue.

The three biggest contributors for the City of Ekurhuleni, as in the City of Cape Town, were service charges, government grants, and property rates. Service charges were 48% of operating revenue, followed by property rates at 18%, and government grants at 14%. The remaining 20% was in the form of investment revenue, public contributions and donations, and other own revenue.

The remaining four metros also share similar profiles of primary sources of income. The district municipalities on the other hand are more dependent on government contributions.

The Cacadu district municipality in the Eastern Cape, with its headquarters in Port Elizabeth, received 79% of its operating revenue in the form of government grants in 2007/08. It raised 16% of its income from revenue sources other than service charges, property rates, and investment revenue; such as fines.

The Bojanala district municipality (Rustenburg) in the North West also depended heavily on grants. About 66% of its revenue was in the form of government grants in 2007/08. The remaining 34% was raised by the municipality through means other than service charges, property rates, and investment revenue.

The allocation of grants to local government, and a municipality’s ability to raise revenue from its people, are significant determinants of whether or not a municipality will be able to deliver on its responsibilities as set out in the Constitution - to ensure the provision of services to communities in a sustainable manner.

The municipal outreach project aims to provide extensive research to municipalities covered by the Municipal Outreach Project. This will be done by means of publications, the project website, and workshops. A monthly publication called Fast Facts for Local Government (F3LG) is sent to local councillors, officials, and development organisations in the eight municipalities covered by the project. A weekly newsletter is posted on the project website on Fridays, and e-mailed to project beneficiaries. The annual South Africa Survey, published by the Institute, will be posted to municipalities and extracts posted on the project website.

-Nthamaga Kgafela