Municipal Budgeting and Planning during Covid-19

Jaap de Visser and Tinashe C Chigwata, Dullah Omar Institute, University of the Western Cape

Relevance of the Practice

A municipality’s Integrated Development Plan (IDP) is a five-year strategic plan, where the many interests, wishes and preferences of a municipal community are mediated and put into action. The municipality’s budget allocates resources to this plan. Each year, municipalities review their IDPs and pass a budget for their financial year, which runs from 1 July to 30 June.[1] The IDP is an important decision-making process in which municipal councils are legally obligated to enable the participation of the local community, which comprises of residents, ratepayers, civil society and visitors in terms of Section 1 of the Municipal Systems Act. [2] As will be shown below, the disruptions flowing from Covid-19 have had differential impacts between and within urban and rural local governments and have significant implications for inclusive participation and good governance. 

Description of the Practice

This practice note highlights how the legal framework for the IDP process has changed during Covid-19 and what this has meant for public participation. The focus is on the overarching principle that municipalities must encourage and create conditions for local communities to participate in the formulation (and review) of the IDP and in the adoption of budgets, including budget related policies (Section 16(1) Municipal Systems Act (MSA), Act 32 of 2000).

Municipal Budgets

Municipal Budgeting in Normal Times

The process of reviewing the IDP is coordinated by the mayor who must work closely with the Municipal Manager (MM) on this in terms of Section 21(1) Municipal Finance Management Act (MFMA), Act 56 of 2003.[3] This is governed by the Municipal Systems Act and its regulations, which provide that changes to the IDP must be published for public comment for at least 21 days (Regulation 3(4)(b) Municipal Systems Regulations, 2001). This IDP (revised or not) must inform the municipality’s budget.

The budget process,[4] also coordinated by the mayor (working with the MM and the chief financial officer) is governed by the MFMA. This Act instructs the mayor to table a budget in the council before the end of March of each year (Section 16(2) MFMA). It must be accompanied by key policies and resolutions, for example any IDP amendments, rates and tariff increases, and indigent policies. All of this must be published and the local community must be invited to comment (Section 22(a)(i)(ii) MFMA). The Municipal Systems Act identifies rate payers, residents, civil society and visitors as constituting ‘the community’ as noted above. [5] The Municipal Systems Act places a special focus on vulnerable groups within the community such as the poor and disadvantaged, which brings the homeless and informal residents into the definition of community.[6] Section 19(3) of the Municipal Structures Act requires municipal councils to develop mechanisms to consult the community, and especially to consult community organisations, and where necessary to consult traditional authorities.[7] Further, in Matatiele,[8] the Constitutional Court rejected the argument that elected officials can speak on behalf of the electorate and thereby fulfil the requirements of participatory democracy. Therefore, the courts recognise the rights of communities, including ratepayers associations, to comment, and if they are denied the opportunity to comment, to litigate.[9] The budget must also be submitted to other stakeholders, such as the National Treasury and the provincial treasury (Section 22(b) MFMA). The council must consider all the submissions on the budget (Section 23(1) MFMA) and must allow the mayor an opportunity to respond to the submissions. The entire council is expected to engage with the budget tabled by the mayor and the inputs of the community. When necessary, the mayor may revise the budget and table an amended budget to the council for consideration (Section 23(2) MFMA). The council must meet to consider the budget before 30 May (Section 24(1)(2) MFMA). If the council does not approve the budget, it must reconsider and take another vote within seven days (Section 25(1) MFMA). This must be repeated until a budget is approved. If by 1 July (the start of the financial year for municipalities), a municipality does not have an approved budget, the provincial government intervenes. Section 139(4) of the Constitution requires that if a municipality fails to approve its budget, the provincial executive must intervene by taking appropriate steps to ensure the adoption of the budget, such as by dissolving the municipal council, and appointing an administrator and approving a temporary budget.

The 2020-2021 Municipal Budget Process

It is clear from the above that the period between the end of March and the end of May is a crucial time in the municipal calendar. Preparations for the budget start much earlier but these two months are very intense, particularly when it comes to (1) public participation and (2) the council engaging with the budget. Covid-19 hit South Africa’s shores in March. As a result, this crucial period for municipalities coincided almost precisely with an unprecedented lockdown. It was therefore impossible for municipalities to adhere to the above regime. The legal regime itself also underwent many changes.

Shortly after the lockdown was announced on 23 March 2020, the Minister of Cooperative Governance and Traditional Affairs (COGTA) issued regulations and directions in terms of Section 27(2) of the Disaster Management Act of 2002. These prohibited municipalities from convening council and community meetings. This immediately made all physical community engagement on the proposed changes to the IDP and 2020-2021 budget impossible. The Minister instructed all municipalities to cede all executive authority related to the pandemic to the mayor and the municipal manager, who were to report to council after the state of disaster.

On 30 March, the National Treasury exempted all municipalities from undertaking actions required by the MFMA during the period of the national state of disaster. Municipalities and municipal entities will instead be required to undertake such actions within 30 days after the national state of disaster lapsed or is terminated. While the MFMA exemption freed municipalities of many strictures related to budgeting and financial management, there was no similar exemption in terms of the Municipal Systems Act. When it came to the review of the IDP, therefore, municipalities were still required to comply with the act and facilitate public participation in the IDP review process, including the abovementioned 21-day consultation period.

With the slow easing of the lockdown, the legal regime for municipal governance and budgeting was changed again on 7 May 2020. The Directions were amended to provide that municipalities were required to perform various legislated functions including the adoption of IDPs, deliver municipal services and collect revenue (Amended Direction 6.7.1). They were instructed to ensure, that, in doing so ‘there is strict adherence to all Covid-19 public health and containment prescripts, especially those relating to gatherings, physical distancing, health and safety’ (Amended Direction 6.7.2).

The ban on council meetings was lifted and municipalities were now instructed to convene meetings via online platforms, such as teleconferencing and video conferencing (Amended Direction 6.7.3). This inevitably brought the digital divide to the forefront. When reviewing IDPs and drafting budgets, municipalities were still required to consult communities despite the ban on gatherings. They were directed to replace contact sessions for such consultations with alternative methods of consultation, including the media (Amended Direction 6.7.4(b)). Council meetings are required to be open to public participation, therefore Amended Direction 6.7.4(b) presents a big hurdle for inclusive participation especially for community members who do not have access to digital devices such as smart phones, and computers, or who do not have access to data. Consequently, a process that would have enabled communities, especially vulnerable members of communities, to share their views, inevitably became an elitist affair, and a further barrier to public participation in council meetings. Further, the practical experiences in municipalities highlight that although the digital divide is typically associated with the urban and rural cleavage, in practice, the digital divide within urban centres meant the provision or denial of public participation in council meetings where crucial processes such as the budget and IDP were discussed. There is economic inequality within urban centres which perpetuates the digital divide within urban centres, in addition to the digital divided between urban and rural areas. In terms of municipalities themselves, urban areas comprise of metropolitan cities, secondary cities, and small towns which all have different budgets and different financial and human resource capacities, and these factors can influence their use of digital platforms. Additionally, the communities living within the urban centres and rural areas also experience inequalities and the digital divide. Disadvantaged communities (such as low-income earners, the indigent and the homeless) tend to have less access to digital devices, and also less access to money to pay for internet access, which is exacerbated by the relatively high costs of data from telecommunication service providers in the country keeping in mind that over half of the population – that is 30.4 million, live below the poverty line.[10] This meant that the majority of the population would not have been able to participate in online processes, and it is the minority that would have been able to participate on digital platforms. This also means that communities’ space for contestation was limited as they could not participate in meetings where they could hold their municipal councillors accountable, further embedding inequalities between those who can speak out about their frustrations because they have data and phones or computers, and those who cannot, because they do not have data, smart phones or computers.

The prohibition on community gatherings meant that contact sessions to consult communities on the IDP and the budget remained impossible. This would have excluded communities from the budget process if municipalities did not seek alternatives. Some municipalities used community radio and social media to broadcast their tabled budgets. There were also municipalities that used email or messaging services (WhatsApp) to solicit inputs, or even developed dedicated apps to receive inputs. However, these innovative methods varied across municipalities, and depended on the creativeness of the municipality, its access to resources, and the capacity of the municipality including human resources.

The Special Adjustments Budget

During Covid-19, municipalities were given an additional opportunity to pass an adjustments budget. Municipalities were permitted to pass a special adjustment to their 2019/20 budgets. These have to be tabled by 15 June 2020. This enables municipalities to legalise expenditure related to Covid-19 which had not been catered for in their 2019/20 budgets. These adjustments may only relate to funding for Covid-19 related responses. The law does not compel municipalities to undertake public participation with respect to the adjustment budget.

Council (and Committee) Meetings

Budget and IDP processes are tabled and debated in council meetings. As mentioned above, municipal councils were initially prohibited from convening any council and committee meetings. On 7 May, government changed direction and instructed all municipalities to conduct virtual meetings using online medium platforms (Amended Direction 6.7.3. and 6.7.4 (a)). During the second half of May, municipalities across the country thus held their first-ever virtual meetings. It was a baptism of fire, given the fact that this first-ever virtual meeting was perhaps the most important meeting of the year, namely the adoption of the 2020-2021 budgets. Municipalities were therefore thrust into a new era of virtual council meetings with little time to adjust.

An example of this was that few, if any municipality had made provision for virtual meetings in their rules of order, i.e. the rules that govern council and committee meetings. SALGA assisted by developing generic rules for online meetings and sittings, by way of the SALGA ‘General Rules for Virtual Meetings or Sittings’, Circular no 18/2020, 11 May 2020. It invited its members to consider, customise and adopt these rules. These draft rules cover issues, such as notice of meetings, decision-making and voting, and the facilitation of public involvement.

What does this new way of conducting council meetings mean for transparency and public participation in local government? The legislation is clear: municipalities must be transparent about their meetings and allow public admission into their meetings. In short, these are the rules:

The Municipal Systems Act requires all meetings of the municipal council to be open to the public. Municipalities may provide for limited circumstances when it is reasonable to close the meeting to the public (Section 20(1) Municipal Systems Act). In any event, meetings on the IDP and the budget must always be open to the public (Section 20(2) Municipal Systems Act). The same rules apply to meetings of committees of the council (including executive committees and mayoral committees). The Municipal Systems Act also directs municipalities to provide space for the public in council chambers and in any other places where the council and its committees meet (Section 20(4)(a) Municipal Systems Act). Municipalities are required to build the capacity of their respective communities, councillors and staff to foster effective community participation. Every municipality must set aside a budget every year to fund this (Section 16(1)(b) Municipal Systems Act).

What does this mean in the era of virtual meetings? Virtual council meetings were a necessary innovation to counter the challenges presented by Covid-19. However, there is more to it. They present both opportunities and challenges for transparency and public participation. Virtual meetings can undermine transparency and public involvement when they are not livestreamed and the public is excluded. On the other hand, if they are livestreamed, do they perhaps open up local democracy for the local community? If so, this could be a positive development coming out of our experience with Covid-19 and would meet dual purposes, information sharing by municipalities, and taking up both information from the local community through online platforms including social media. When being physically present is not required, members of the public no longer need to navigate distance and competing diaries, to be part of a council meeting. Instead, it is possible to attend council meetings from anywhere. However, in light of the lack of access to digital devices, high cost of data, and poor telecommunications infrastructure in rural areas, it is more likely for municipalities in rural areas to be unable to make use of this opportunity, and if members of the community do not have data and/or devices to view the meetings, it has the opposite effect, namely making access something for the privileged few. In large urban centres such as metropolitan cities and secondary cities on the other hand, there could be positive outcomes in terms of participatory democracy.

In this context, the abovementioned instruction on municipalities to build capacity for community participation takes on a new form. Now that we are in the world of virtual meetings, what forms does such capacity building take? Should this include municipalities reprioritising their budgets to fund innovative ways of enabling and promoting community participation and transparency during Covid-19 times and beyond?

Assessment of the Practice

The Covid-19 pandemic, and the measures to contain it, are testing the ability of municipalities to comply with the rules and principles for transparency, participation and oversight applicable to planning and budgeting. The Covid-19 directions aimed to enable municipalities to continue functioning by allowing them to conclude IDP and budget processes and circumventing the ‘normal’ legislative requirements under the MFMA and the MSA. To this end, the implementation of the directions was successful as municipalities successfully passed municipal budgets and special adjustment budgets. However, the directions perhaps overlooked the implications of these aims on other crucial policy aims of inclusive participation and good governance, especially in terms of accountability and transparency of municipalities to their local communities. The digital divide within and between urban and rural municipalities, inadvertently reduced the space for public participation for vulnerable groups such as those in the lower income brackets as the costs of data, and access to digital devices such as phones and computers proved to be restrictive. As noted above, there is inequality between urban and rural municipalities in terms of their access to digital devices, network systems and infrastructure, distance, skills and capacities, and further, there is inequality among urban municipalities and among rural municipalities. Some rural municipalities are located at the fringes of urban centres and therefore can benefit from linkages to telecommunications infrastructure, which can make it easier for these rural municipalities to adjust to making use of digital platforms during the Covid-19 pandemic, and may therefore be able to maximise local participation in online platforms. However, other rural areas are quite remote and lack sufficient infrastructure for the municipality itself and for the local community to access online municipality platforms and meetings. It is also in these very remote rural areas that local community members are least likely to have access to digital devices and stable internet access. In the end it could be that the wealthy are favoured by the digital divide and can profit from increased ease of public participation through digital platforms, whereas the poor, the rural and the remote can be further excluded.

Municipalities were forced to ‘think on their feet’ and respond to a rapidly changing governance environment. At the same time, the crisis is not an excuse to compromise on inclusive participation and good governance. The local community members (residents, rate payers, civil society and visitors) are entitled to information about municipal finances, to make inputs into municipal budgets and to observe council and council committee meetings. Furthermore, the crisis may have jolted municipalities out of the ‘tried and tested’, and into a new era of responsive budgeting.

References to Scientific and Non-Scientific Publications

Constitution of the Republic of South Africa, 1996

Municipal Structures Act 117 of 1998

Municipal Systems Act 32 of 2000

Municipal Systems Regulations of 2001

Disaster Management Act of 2002

Municipal Finance Management Act 56 of 2003

Regulations and Directions in terms of Section 27(2) of the Disaster Management Act of 2002

SALGA, ‘General Rules for Virtual Meetings or Sittings’ (Circular no 18/2020, 11 May 2020)

Traditional Leadership and Governance Framework Act 41 of 2003

Matatiele Municipality and Others v President of the Republic of South Africa and Others 2007 (1) BCLR 47 (CC)

Stellenbosch Ratepayers’ Association v Stellenbosch Municipality 2009 JOL 24616 (WCC)

[1] See report section 5 on Intergovernmental Relations of Local Governments.

[2] Sections 5(1)(c) and 16(1) Municipal Systems Act 32 of 2000.

[3] See report section 5 on Intergovernmental Relations of Local Governments.

[4] See report section 5 on Intergovernmental Relations of Local Governments.

[5] Nico Steytler and Jaap de Visser, Local Government Law in South Africa (Juta 2018) 6-5.

[6] ibid.

[7] Also see Section 17(2)(d) Municipal Systems Act, and the Traditional Leadership and Governance Framework Act 41 of 2003.

[8] Matatiele Municipality and Others v President of the Republic of South Africa and Others 2007 (1) BCLR 47 (CC).

[9] For example, see Stellenbosch Ratepayers’ Association v Stellenbosch Municipality 2009] JOL 24616 (WCC) para 17.

[10] 55.5% of the population is below the poverty line as at 2015. The figures are calculated using the upper-bound poverty line (UBPL) of R992 per person per month (pppm) in 2015 prices. See Statistics South Africa, ‘Poverty Trends in South Africa An examination of absolute poverty between 2006 and 2015’ (2017) Statistics South Africa: Pretoria.