Answer to Question #316938 in Management for novi

Question

Outline in detail the constitutional and legislative framework of local government budgeting as provided for in section 215 of the constitution of 1996.

Answer 1

Section 215 of the 1996 Constitution requires all spheres of govern-

ment to have budgets, which must undergo processes, which promote transparency, 

accountability and the effective financial management of the economy and debt in 

the public sector. In terms of the MFMA, municipal budgets must be 

credible. This enforces the aims and the purpose of the budgetary reforms. In simplest 

terms, the MFMA requires that a tabled budget must be capable of being implemented 

without alteration to ensure that proper consultation can take place to build public 

confidence in the municipality. The MFMA requires that municipalities produce multi-

year budgets so as to facilitate the consideration of the medium-term implications of 

expenditure decisions, respond to community needs over time and integrate financial 

planning with their integrated development-planning activities. New budget formats 

assist this process by requiring that budgetary information be presented by revenue 

source and by functional area (The Local Government Budgets and Expenditure 

Review 2008:163).

The Constitution of the Republic of South Africa, 1996, regards local government as a distinct sphere of government in its own right. 

Although this sphere of government is distinct it is interdependent of, and inter-related with, 

the other two spheres of government being national and provincial government. In addition 

a municipality now has the right to govern, on its own initiatives, the local government 

affairs of its own communities including its financial matters (1996 Constitution).

The White Paper on Local Government, 1998, outlines the developmental nature of 

local government in terms of its new mandate. In terms of this White Paper, 1998, de-

velopmental means committed to working with the citizens and with groups within the 

community, in order to find sustainable ways to meet their social, economic and material 

needs and to improve the quality of their lives. This should in turn promote account-

able local government and public participation and it should further deepen democracy. 

Municipalities have been mandated by legislation to progressively exercise their powers 

and functions in a manner, which maximises their impact on social development, local 

economic growth and by managing their own fiscal powers (Hanabe 2016:2).

The financial affairs of municipalities are primarily governed by the Local Government: 

Municipal Finance Management Act 56 of 2003

The 

MFMA, supplements conventional procedural rules with a performance-based system 

that focuses on outputs and measurable objectives to enable municipalities to maximise 

their capacity in terms of service delivery.

The MFMA further prescribes the aims of the local government budgetary reforms to en-

sure that: (a) Municipal budgets and financial-management processes are transparent; (b) 

budgets generally support the provision of basic services to communities; (c) the budget 

and financial information is reliable and timely, and consistent across municipalities; (d) 

the medium-term aim is to ensure that each municipality produces a budget document 

that is aligned with the IDP (Integrated Development Plan); and (e) to improve financial 

governance by clarifying and separating the roles and responsibilities of mayors, ex-

ecutive and non-executive councillors vis-à-vis those of municipal officials. The principles behind these reforms aim to improve the financial 

affairs of municipalities.

The MFMA and its regulations sought to address historical weaknesses in budgeting, 

accounting, reporting and to provide tools for improving efficiency in the use of public