What is at stake for new councils in South Africa?

Depending on coalition outcomes, the ANC may have lost outright control of large portions of the total local government budget.

Published on 17 August 2016 in ISS Today

By

Carmen Abdoll

Chandré Gould
Senior Research Fellow, Justice and Violence Prevention

Conrad Barberton

The 8% decline in the voters’ support for the ruling African National Congress (ANC) party between 2011 and 2016 represents a fundamental shift in South African politics.

Much has been written on the implications for the ANC and the country, but a significant and underreported short-term impact relates to the implications for budget expenditure and service delivery at a local level.

Few know that depending on the outcome of coalition negotiations, there could be significant changes to who is responsible for the governance of a very large portion of the R287 billion local government operating budget, and the R57 billion capital budget. Who will be responsible for overseeing the management of key municipal services such as water, electricity and roads? Who will be directing future investments in city infrastructure? These areas are both critical to the development of the economy, the creation of jobs and the ability of the country to alleviate poverty.

Following the 2011 local government elections, there were 35 hung councils (where no single party achieved a majority). These were mostly small or smaller councils located in KwaZulu-Natal (18 councils), the Western Cape (12) and Northern Cape (five).

There are 27 hung councils in SA: a big issue since several large metros are affected

Based on the 2015/16 municipal budgets published by National Treasury, we have calculated that the 35 hung councils in 2011 collectively only affected 2.63% of the total consolidated operating expenditure budgets of local government; and 3.03% of the total consolidated capital expenditure budgets. So although there were more hung councils in 2011 than there are in 2016, this was a political side show for small-town politicians. If there were stasis in the functioning of these hung councils, it would not have affected the core functioning of the South African economy.

But since 3 August 2016, things have changed – and drastically so. There are now 27 hung councils, and although fewer in number, they are now a big issue – affecting the metros Johannesburg, Tshwane, Ekurhuleni and Nelson Mandela Bay, as well as large city municipalities like Rustenburg and Mogale City.

After 2011, the ANC had control over 82.1% of the R287 billion local government operating expenditure budgets, but this has now been reduced to 41.73%. The Democratic Alliance has expanded its outright control of operating budgets very marginally, from 14.95% in 2011 to 15.63% in 2016. The percentage of operating budget in municipalities with hung councils, however, has increased from just 2.63% in 2011 to a massive 41.31% in 2016.

R118 billion in operating budgets is located in SA councils to be governed by coalitions

Operating budgets are used to pay the salaries of councillors and municipal staff, buy bulk water and electricity for distribution to households and businesses, and pay for the operating costs of the actual provision of local government services. They are also used for items such as sponsorships for golf tournaments and overseas travel for councillors.

A similar picture emerges if one looks at who controls municipal capital budgets. In 2015/16, the local government capital expenditure budgets totalled about R57 billion. These budgets are critical for putting in place the roads, electricity and water infrastructure essential to sustaining and growing the economy. They also support the building of houses, installing electricity and water connections and the creation of sustainable settlements. Budgeted medium-term revenue and expenditure framework figures show these capital budgets increasing to R64 billion in 2017/18 – although it is expected that they will, in fact, grow faster as national government seeks to boost economic growth by investing in city infrastructure.

In summary, as far as capital expenditure budgets are concerned, the situation is that firstly, the ANC’s outright control of local government capital budgets has declined from nearly 83% in 2011 to about 45% in 2016. Second, the DA has expanded its outright control of municipal capital budgets very marginally, from 13.90% in 2011 to 14.22% in 2016. And lastly, the percentage of local government capital budgets in municipalities with hung councils has increased from just 3.03% in 2011 to over 39% in 2016.

A great deal is at stake for SA's political parties, the national economy and job creation

In other words, the ANC has lost outright control of about half the local government operating and capital budgets it controlled in 2011. Some R118 billion in operating budgets and R22 billion in capital budget is now located in councils that will be governed by coalitions. A great deal is thus at stake – for the political parties, for households and businesses, and indeed for the national economy, job creation and poverty alleviation.

What the above figures don’t show is the full extent of the impact of the 2016 local government election outcomes on Gauteng specifically.

After the elections in 2011, the ANC controlled all the metro and municipal councils in Gauteng, with the exception of Midvaal. This meant that between 2011 and 2016, the DA controlled just 0.9% and 0.5% of the local government operating and capital budgets in Gauteng.

Since the August elections, the DA still controls Midvaal, while the ANC now only has full control of the municipal councils of Emfuleni, Lesedi, new Randfontein and Merafong City. Together, these four municipalities control just 7.6% and 4.3% of the respective local government operating and capital budgets in Gauteng.

This means the ANC has lost outright control of the remaining 91.5% and 95.3% of the local government operating and capital budgets respectively in the province – which are now located in the four hung councils, but primarily in Johannesburg, Ekurhuleni and Tshwane. The actual numbers at stake are as follows: 

The budgets of Johannesburg, Ekurhuleni and Tshwane are very large and very important for the smooth functioning of the economy of Gauteng and of South Africa generally. The country needs the governance of these metros to improve: they are critical to driving economic growth and job creation in the country.

This should be the primary concern of the political parties currently negotiating coalition deals, and should inform the behaviour of all parties taking up the responsibilities of governance and of opposition in the new councils.

Conrad Barberton and Carmen Abdoll, Senior Economists at Cornerstone Economic Research; and Chandré Gould, Senior Research Fellow, Governance, Crime and Justice Division, ISS Pretoria

This article was first published in its original, longer format by Business Day