An assessment of capital budgeting spending challenges on service delivery in a municipality

Abstract

Mogale City Local Municipality, like all municipalities in South Africa is tasked by the Constitution of the Republic of South Africa with the right to govern the communities within its boundaries. The objective of local government, which is the sphere in which Mogale City Local Municipality falls, is: to provide a democratic and accountable government for local communities; to ensure the provision of services to communities in a sustainable manner; to promote social and economic development; to promote a safe and healthy environment; and to encourage the involvement of communities to provide services to the people. A municipality is obliged to ensure that within its available financial resources the needs of the people are prioritized, and the internal administrative processes provide for sound financial management and decision making. Yet, in every financial year, the National Treasury is obliged to withhold, stop and divert grants from municipalities due to failure of municipalities to comply with grant conditions mainly relating to slow spending, non-spending or even not reporting on grant funded projects. Mogale City Local Municipality is one such municipality whose grants have been withheld or stopped by the National Treasury. Considering the fact that South Africa has a backlog on implementation of service delivery. It is concerning that funds that are freely availed from National Government must be returned to the National Revenue Fund at the end of each financial year and these funds do not serve the purpose for which they were meant, which is to bring service delivery to the people! Municipalities also take out long term loans to fund their capital projects as a means of fast tracking service delivery to the people. As part of applying sound financial management principles, loan funded projects should be planned for properly. This planning enables efficient and prompt spending of loan funds to ensure that they don't lie idle in the municipality's bank account attracting interest. The purpose of this research is to identify and assess the challenges that exist in Mogale City Local Municipality, which cause the underspending of the capital budget and consequently the grant and loan funded projects. The study is conducted in Mogale City Local Municipality using mainly the quantitative research approach.