On March 29, 2016, Forum of Federations with School of Public Leadership, Stellenbosch University and the Konrad Adenauer Foundation jointed hosted a seminar titled: Financial Governance Reform In Multi-Level Systems of Government. This forum was located in Stellenbosch, South Africa as a pre-conference event prior to the bi-annual International Winelands Conference.
While the focus was on financial governance during the seminar, it was interesting to observe the links with some of the discussions dealing with local government during the main conference that focused on governance transitions in a complex world. The day was organised in a way that provided the participants with some international comparative perspectives on the broad financial governance topic. During the afternoon session specific attention was given to a selection of individual areas in need of reform. A dinner where the Western Cape Minister of Finance, Dr Ivan Meyer, presented his views on needs and opportunities for financial governance reform in South Africa, was a fitting conclusion to a day of interesting presentations and discussions.
Prof Wolfgang Renzsch (Germany), Dr Constantino Mendes (Brazil) and Dr Dirk Brand (South Africa) each presented their perspectives on the current situation in these countries, including an overview of the reform opportunities and initiatives. From the presentation of Prof Renzsch it is evident that the cooperative federal model in Germany is again in need of some financial governance reform. The current financial equalisation arrangements will terminate in 2019 and new legislation has therefore to be adopted before then. While the primary idea of a federal reform process was to strengthen the Länder, the recent proposals by a group of Ministers-President of the Länder did not achieve that. Further proposals and discussions are therefore needed to reform the current system.
The overview of the current situation in Brazil provided by Dr Mendes clearly indicated the significant economic and social disparities in Brazil. Local government depends very much on transfer funding to finance their functions, and the per capita expenditure in small and large cities is quite high. In his recommendations for reform he suggested that there should be more cooperation and coordination in Brazil and that more focused attention to medium sized cities can make a useful contribution to reduce inequalities. Future financial reform should create some flexibility to provide focused attention to poorer regions.
In the presentation by Dr Dirk Brand an overview of the current financial governance realities in South Africa was provided, with a focus on the dire needs in local government. It is evident that in multi-level systems of government there are no simple solutions to financial governance reform questions. He suggested a comprehensive reform package dealing with both income and expenditure as well as functional and institutional reform measures to improve financial governance in South Africa. It is clear that a multi-dimensional reform process that includes inter alia more access for citizens and better responsiveness by government is indeed required.
Selected financial issues
In the afternoon session a selection of topics relating to areas of potential reform was addressed by a diverse group of speakers. Deon van der Westhuizen showed the importance of proper costing of services in municipalities as part of good financial governance. Individual municipalities can improve cost effective delivery of services as well as their overall financial profile and thus ability to attract capital and investment if they ensure a proper costing of services.
Maloba Tshehla from GreenCape gave an interesting presentation on green energy and the potential for doing more in local communities. This also includes new approaches to the funding of electricity in municipalities. Two representatives from the Financial and Fiscal Commission, Ghalieb Dawood and Sabelo Mtantato, are working on reform proposals for infrastructure funding in South Africa. They clearly indicated the current challenges, which include the need for proper maintenance of infrastructure while also developing new infrastructure that could stimulate much needed economic growth. They proposed a new funding strategy for the National Infrastructure Plan, an improved system of financial infrastructure grants and an inclusive approach to the development of infrastructure in support of the National Development Plan.
In conclusion, the presentations and discussions during this seminar confirmed the value of comparative experiences and approaches to questions of financial reform, as well as the need to be innovative in finding new funding solutions for some of the problems of societies around the globe today.