Cape Town: New legislation is being prepared to link the powers of municipalities to their ability to deliver services, Co-operative Governance Deputy Minister Yunus Carrim said yesterday. Speaking at a Helen Suzman Foundation roundtable discussion on local government, Mr Carrim gave the clearest signal yet that a major overhaul of local government structures is on the way. The changes would include increased funding to local councils, which would be linked to their capacity to deliver.

An African National Congress summit on local government last year heard that some district and local municipalities were unable to provide services to their communities, supporting the government's contention that they were not financially viable.

District municipalities in poor areas are often unable to raise sufficient revenue to provide services and many are increasingly dependent on national government grants to fund their operations.

Admitting that he was in "full election mode" with the local government poll less than two days away, Mr Carrim confined himself to replying to questions. The first was, "Does local government have the capacity to meet its objects as outlined by the constitution?"

He replied: "The financial capacity of municipalities is hindered both by the lack of adequate funds and financial management skills. But there is also a more fundamental issue: we opted for a local government model in which essentially all municipalities exercise the same powers and functions, irrespective of their capacity. There has to be a better correlation between a specific municipality's capacity and the powers and functions it exercises."

Mr Carrim also took aim at provincial and national government for not monitoring and supporting local government as required in the constitution. He said this failure had further impaired the capacity of municipalities to deliver.

Legislation was being prepared - the Monitoring, Support and Intervention Bill - that would stress the crucial role of provincial and national government in assisting municipalities to be more effective, without eroding their powers, he said.

In response to a question about funding issues for local government, he said: "The very premise of the current financial model is wrong. It's based on the presumption that municipalities can raise 95% of their own revenue. But this was the case before 1994, when municipalities had much smaller boundaries, mostly excluded the African majority, and had a limited service delivery role," Mr Carrim said.

"It cannot apply to the new municipalities, with their larger boundaries, significantly bigger numbers of residents and expanded developmental role."

Mr Carrim said despite its huge responsibilities, local government was currently allocated only 8,7% of the national revenue. "There needs to be an expeditious and significant overhaul of the current intergovernmental fiscal system, including the formula for the ‘equitable share' - the allocation of money from the national budget to each sphere of government," he said.

He acknowledged that many municipalities were unable to spend the money they had - "the answer is not to constrict national allocations to local government, but to allocate adequate funding and assist with capacity-building so that the funds can be effectively and productively spent".

Democratic Alliance local government spokesman James Lorimer said on the face of it, a differentiated model raised the question of who would decide where and when a municipality had the capacity for more powers. "Would it be central government that decides? If it is, then this further erodes the powers and functions of local government and would probably need a constitutional amendment."

Mr Lorimer said the envisaged changes should be published for comment so that debate on the issue could begin. The constitution should not be changed because political parties were failing to run their councils properly, he warned.