Academic journal article African Studies Quarterly

Financial Performance of Local Government in Limpopo Province, 2010-2012

Academic journal article African Studies Quarterly

Financial Performance of Local Government in Limpopo Province, 2010-2012

Article excerpt

Introduction

The establishment of democratic local government in South Africa in 2000 decentralized the decision-making powers from the center to the periphery. Municipalities are responsible for their own local planning and the preparation of their budgetary processes. The central government, however, remains responsible for providing resources in terms of funding and training and capacity building programs and continues to monitor local government programs or policy implementation. Despite huge investment in terms of resources (funding and capacity building programs), empirical studies suggest that many municipalities in South Africa, especially rural based local municipalities, are struggling to improve their performance in terms of financial management. For example, only two of the thirty municipalities in the Limpopo Province received "clean audit outcome reports" between 2010 and 2012. The performance of the municipalities also has empirical significance in relation to service delivery (e.g. provision of water, electricity, sanitation, infrastructure, etc.) to the local communities. The questions that this paper tries to answer are: why does the poor performance of the municipalities matter; and, why the variation in terms of financial performance between the municipalities in the Limpopo Province and those outside the province?

This paper argues that municipal variation in terms of financial performance within Limpopo and in relation to other provinces can best be explained by the differences in recruitment patterns being adopted by the individual municipalities. That is to say, the municipalities that apply meritocratic recruitment practices to run their administrations tend to be characterized by better institutional performance or quality pertaining to financial management (revenue collection and spending) than the municipalities that adopt a different recruitment approach. It then suffices to say that the two municipalities with clean audit outcomes in the Limpopo Province have adopted a meritocratic recruitment culture, which implies that key municipal officials have appropriate required competencies to discharge their official duties. For example, the Auditor-General has found that key officials in 72 percent of the municipalities in the Limpopo Province lack appropriate competencies and skills. (1) Therefore, the generally poor performance of the province's local government system implies that the national vision of achieving a clean audit by 2014 for all the government institutions including the municipalities throughout the entire South African local government system remains elusive.

Research Design

Limpopo Province is a rural province with approximately 5.6 million people, according to Statistics South Africa, with over 90 percent of the population residing in the rural areas. (2) Limpopo Province's local government has five district municipalities and twenty-five local municipalities. In terms of Section 83(3) of the Local Government: Municipal Structures Act and the South African Constitution, the district municipalities are responsible for building the capacity of local municipalities in their jurisdictions to sustainably delivery services and develop the local economy. (3) The district municipalities are further required to ensure that local municipalities have the necessary capacity to manage their finances in line with the relevant legislation such as the Local Government Municipal Finance Management Act of 2003.

Undoubtedly, Limpopo Province shares many similarities and few differences with some other rural South African provinces. For example, provinces such as the Eastern Cape, Mpumalanga, Kwa-Zulu Natal, the Northern Cape, and the North West are considered as rural and serving mostly rural communities. According to South African Institute of Race Relations, these rural and poor provinces experienced overall higher net out-migration between 2001 and 2011 than net in-migration for the urban provinces of Gauteng and the Western Cape. …

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