Managerial capacity as a prerequisite for fiscal decentralisation

Abstract

Section 152 (1) of South Africa’s Constitution states that one of the aims of local government is to ensure sustainable service provision to communities. Section 152 (2) states that municipalities must strive, within their financial and administrative capacity, to achieve the objects in subsection (1). In reality, municipalities struggle to provide services because of substantial infrastructure backlogs, high levels of indigence and a limited revenue base. Section 214 requires revenue to be equitably divided among the national, provincial and local spheres of government, as determined annually by a Division of Revenue Act that depends on consultation with the Finance and Fiscal Commission, organised local government and the provincial governments. This article investigates whether South African local government has the capacity to fulfil its constitutional mandate and how current fiscal arrangements among the different spheres of government affect its ability to perform its duties. The capacity of the South African government is contrasted with the model adopted by the Rwandan government, where central government transfers funding directly to local government. Consequently local government is directly accountable to central government for performing its mandate. In particular, the capacity challenges at the local government level are analysed and discussed.