The Constitution sets out the functions of each sphere of government in Schedules 5 and 6. Part B of these Schedules spells out the services that local government must provide including, for example, electricity, water and sanitation services and roads. Some functions are “shared” meaning that the different spheres of government must cooperate in order to deliver them.

Municipalities vary greatly meaning that their ability to generate income and the costs they encounter also differs. All municipalities have to generate their income from grants, loans and user charges.

How are Municipal Services Funded?

Municipalities receive grants from the taxes that the national government collects. There are two types of grants, namely the municipality’s Equitable Share Grant and the Municipal Infrastructure Grant. The Equitable Share grant is used to help pay for basic services for people whose income is below a certain threshold. The Municipal Infrastructure Grant helps to pay for the construction costs of basic infrastructure services. Municipalities often have to loan money from a back which they have to repay with interest from the income received from taxes and charges. Municipalities, other than District Municipalities, also impose taxes on properties such as houses and businesses based on their values allowing them to subsidise the costs of services. Municipalities also collect fees for the usage of services such as electricity, refuse collection and water and sanitation services.

The resources are spent for the planning, construction, running and maintenance of the services provided. If users who do not qualify for free services don’t pay for them, municipalities don’t have the resources to continue providing the services.

Find out more about municipal finances here: //municipalmoney.gov.za/ OR

Find out more about the state of municipal finances here //municipaldata.treasury.gov.za/

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Read about the state of municipal finances here: //www.fin24.com/Economy/17-district-municipalities-in-financial-distress-treasury-20180522