Finance Minister Nhlahla Nene has called on municipalities to play their part and assist government in reforms that will enable economic growth.

Speaking at the Municipal Innovative Infrastructure Financing Conference (MIIF) on Wednesday the minister said his department was aware of the constraints to growth and would be redoubling its efforts to enact reforms that would raise the pace of economic growth.

Nene told delegates that municipalities have a role to play in the reform agenda through the provision of urban infrastructure services such as water and sanitation, electricity as well as contributing directly to the cost of doing business.

“When municipalities carry out this regulatory and administrative function ineffectively and inefficiently, they retard economic growth. The building of new and the maintenance of infrastructure talks to these two contributions by municipalities to economic growth,” he said.

Maximising resources for infrastructure funding

Government transfers more than R40 billion annually to municipalities to assist them to fund infrastructure investment.

Nene urged municipalities to maximise resources to fund infrastructure, which include grants from national government, borrowing and internally generated funds.

“The focus of this gathering is on municipal borrowing. Government policy and legislation supports prudent and long-term borrowing by municipalities. This is an efficient and equitable mechanism for financing capital investment by local governments. We have a sound legal and regulatory framework for municipal borrowing.”

Freeing up funds for municipalities in financial distress

Nene said the national fiscus is constrained and that creditworthy municipalities should look to debt markets and other revenue sources to fund a greater proportion of capital investment.

“This will free up a greater proportion of the infrastructure grant to be used to fund municipalities that have less capacity for generating their own revenue. Government is also committed to supporting the turnaround of municipalities that are in financial distress,” the minister noted.