Provinces and municipalities will get a large slice of the extra R48 billion the government has found through cutting back on inefficient spending and redirecting funds to priority areas like basic services and bulk, health and education infrastructure.
Finance Minister Pravin Gordhan said in his Medium-Term Budget Policy Statement on Tuesday the provincial share would increase by R20.2bn and for local government by R5bn as spending was shifted to frontline services.
He warned that the underspending of capital budgets by provinces and municipalities, up to 16 percent and 25 percent respectively this past financial year, was holding up progress.
The government would help municipalities plan and manage infrastructure better in a bid to reverse this trend.
Provinces, which deliver education, health, welfare services, housing, agricultural support and provincial and rural roads, would receive extra funds to boost education and health services, in particular, and to cover public-sector wage increases.
Gordhan warned that rising wage costs, a major driver of spending growth, strained provincial budgets and limited the ability to improve infrastructure and services.
The provincial equitable share had been boosted by R13.4bn, partly to cover “higher than anticipated wage agreements” for 2011/12.
The money would also go towards increasing the subsidy for non-profit organisations providing early childhood programmes, equalising the subsidy paid per pupil to the poorest 60 percent of schools and to expand Grade R provision.
Conditional grants to provinces would increase by R6.8bn.
This would go towards covering wage increases in further education and training colleges, expanding access to HIV and Aids treatment and upgrading informal settlements in municipalities that lacked the capacity to do the work themselves.
More money would go to fixing the widespread flood damage from the earlier this year.
Provinces would also receive funds for piloting district-based health services ahead of the planned National Health Insurance.
Gordhan said the priority was to provide municipal infrastructure such as water and sanitation, electricity, storm-water management and municipal transport and roads to poor households.
Poor municipalities also needed help to cover institutional and governance costs.
Gordhan said funding priorities for metropolitan municipalities and larger cities would include upgrading informal settlements, social housing and bulk infrastructure.
In rural municipalities, the service delivery backlogs, which have increasingly pitted residents against the councils, would be a major focus.
The R2.2bn equitable share boost for local government would help municipalities to provide free basic services to the poor and to cover administrative costs.
Gordhan said the results of the 2011 census, due in March 2013, would be used to revise the equitable share formula, which had been adjusted to increase allocations to poor rural municipalities, which struggle to raise sufficient revenue on their own.
Conditional grants for local government would get a R2.8bn top-up.
An increase to the urban settlements development grant would help speed up the delivery of serviced land for poor households.
The electrification drive would also be boosted to support the upgrading of informal settlements in cities and metros.