CONCEPTUALISATION OF VIALIBITY AND SUSTAINABILITY IN LOCAL GOVERNMENT

CONCEPTUALISATION OF VIALIBITY AND SUSTAINABILITY IN LOCAL GOVERNMENT IN SOUTH AFRICA (SA) Stanley Ngobeni Faculty of Economic and Management Sciences School of Management Sciences 11 March 2019

Agenda 1. Introduction 2. Purposes of Study 3. Approach 4. Findings 5. Key Recommendations 6. Practical Implications 2

Introduction ► Sustainability and Viability has become an important topic of discussion in South African Local Government Institutions (SALGIs) ☒Due to the current debate of what exactly does the two concepts mean in local government concept. ☒More than half of SA municipality are currently under administration or facing financial challenges or cannot exist without government grants or dysfuntion. ► It is a legal requirement for municipalities in South Africa to be sustainable and viable. ► Despite the reality that the concepts are a legal imperative, local government sector is characterised by municipalities that are not viable and sustainable. 3

Introduction ► According to Pienaar & Bester (2008), Sustainability of a municipality means conducting operations in a manner that meets existing needs without compromising the ability of future generations to meet their needs. ► It means having regard to the impact that the business operations have on the economic life of the community in which it operates. ► Sustainability includes environmental, financial, social and governance issues. ☒Is about long-term 4

Introduction ► In general terms, people use sustainable to mean that we can continue our current practices (LGA, 2012). ► The term sustainability was introduced into the public context by World Commission on Environment and Development in 1987 (World Commission on Environment and Development, 1987) ☒It is often used in the context of environment management. ► For the purposes of this study, sustainability has number of components, namely: Economic/Financial sustainability (include governance), Social and Environmental ☒From the definition, key features’elements are society, economy and environment. I. E. Three P- People, planet, and Profit ☒Impact on stability 5

Introduction ► From the definitions provided by Louw & Venter (2018: 50), for local government to be called a sustainable organisation it must proactively design and implement financial viable business models that simultaneously contribute to solving some of the complex social and environmental problems the faces. These efforts includes corporate social responsibility, corporate citizenships and social entrepreneurship. ☒These efforts includes corporate social responsibility, corporate citizenships and social entrepreneurship. ► Blaine (2010) and Mouton (2010) mentioned that an organisation is viable where, given normal service conditions, the organisation will produce sufificient inflow of resources to at least cover all operating costs, strategic outflows and forecasted risks to achieve strategic plans. ☒It is about current, short to medium term 6

Cont… ► Local government viability is multifaceted and has mainly three components: Service delivery viability, Governance Viability, and Financial/Economic viability. ► Causes of financial non-viability can classified into two external and internal. ► Internal causes namely: declining revenue bases, escalating expenditures, increasing debts, ► External causes namely: growing socio-economic problems, dwindling subsidies and grants, 7

Cont… ► Current viability assessment is limited to financial performance and management which falls short of meeting the definition of viability. ► Review of Integrated Development Plans, Back to Basics from COGTA and Circular 71 from Treasury together with the other available literature revealed that municipality views viability in terms of financial performance only which is a concern and thus, the study recommend that the position should be revisit. ► In past four decades, several laws were passed affecting local government viability and sustainability, namely Constitution of RSA, Municipal Finance Management Act, Municipal Systems Act, Code of Corporate Governance, National Treasury Circulars, National Treasury Regulations, Municipal Performance regulations to name 8

Purpose of the study ü The main aim of this study was to respond to the debate amongst the local government leaders in so far as what exactly does viability and sustainability in a local government context mean. ü The divide in the conceptualisation of the terms viability and sustainability is not clear and this paper explored the concepts of viability and sustainability in a local government context. 9

Approach ü The approach of the study followed a synthesis review and content analysis was applied to settle the debate and provide some clarity on what viability and sustainability mean in the local government context in South Africa. ü A synthesis review and conceptual analysis were considered to be most appropriate approaches for this study as it is a conceptual study. 10

Approach ü As proposed by Babbie(2007) & Creswell (2009), a literature search followed by researcher was a basic and common typical format of a literature review. ü The search was of current literature, from 1994 to 2019. Databases consulted were Emerald, EBSCOHost, Google. Scholar, SABINET, and Pro. Quest using the terms such as viability, business validity, sustainability and sustainable organisation. 11

Findings ü The findings of literature review demonstrated that the concepts viability and sustainability are not the same, however might be interchangeable and intertwined. ü In the local government context, the word viable means municipalities are able to function independently, and sustainable is an adjective and more about municipalities being able to continue for a long time on their own. ü Viability is more about the independence of local government and at best described as municipalities expenditure will not outstrip own revenue. Not ignoring the clarity above, the two concepts are synonymous and imply some kind of symbiotic relationship, and 12 falls within what the local government in South Africa should

Key recommendations-Summary Amongst the key recommendations of this study are: ü development and implementation of Integrated Validity and Sustainability Assessment Model, ü amendments of current legislative framework, and ü introduction of the new reporting framework. ü Funding Model 13

Key Recommendations Source: Adapted from Thompson(2005: 8 -9) • Integrated Validity and Sustainability Assessment Model (IFVAM), consisting of: ü Dimensions Descriptions or elements Environment -Administration -Political -Socio/Cultural -Economic -Stakeholders (including competitors) Organisational Performance -Economic and Financial viability -Efficiency, Economic and Effectiveness -Relevance -Service delivery performance Organisational Capacity -Strategic leadership -Structure -Talent Management -Infrastructure -Business model viability -Management model 14 Organisation Motivation -History

Practical Recommendations (continued ü Amendments: There is a strong case to be made to review the current legislation and policy imperatives namely Performance Management regulations for Key Performance Indicator Financial viability and management to be replaced by Municipal viability and sustainability, and to integrated sustainability and viability into the business operations of the municipality. ü This amendment has a potential of affecting the current monitoring dispensation of municipality by COGTA, National Treasury and Provincial Treasury. ü For these amendment to a success or to hold, current monitoring tools by the three stakeholders must be reviewed such as Section 15 71, Back-to-Basics, and Circular 71 on financial norms and ratios.

Practical Recommendations (continued ü Reporting: As proposed in King iv, the study recommends that every municipality should report at least annually on the nature and extent of its social, transformation, ethical, safety, health and environmental management policies and practices. ü Funding Models: Continuous engagement in this regard including looking at ways to increase alternative revenue streams and managing current expenditure level. ü Structure: For one to talk complete sustainability, there is a need for reforms. The study proposes reforming the current rule-based hierarchical, governance and bureaucratic structures to structures that can facilitate flexibility, responsiveness, 16 addictiveness and seamless decision making process with the

Practical Implications ü Implications of the study include amongst others how local government stakeholders can make municipalities viable and sustainable, and paper include a more detailed debate regarding how stakeholders can know what is expected of them if there unclearity on the distinctions between the two concepts. 17

Key conclusion FNo common understanding of the concept of viability and sustainability among stakeholders and this should be addressed. FViability and sustainability is largely based on maintaining stakeholders’ reasonable expectations, forecasts and confidence in the future. FOnce viability is assessed, in essential element in determining sustainability is long-term FEquation: S+ V= LG FWho is responsible: Council 18

Cont… Qualitative Data Analyses ☒Theme analyses will be used to analyse the data obtained. ☒The researcher will analyses the data to identify themes and subthemes. ☒This process is a good method of creating an initial framework to attach an analysis of the research outcomes (Ramsey & Barkhuizen, 2010). ☒The content analysis chosen and employed in this study, as suggested by Berelson and Bernard (1952). Strategies to ensure quality of data R The researchers will continually deployed reflexivity and evaluative skills to data analysis and to decisions concerning the direction of the steps to be taken in the research. R In addition, the respondent's confidence in the researcher is of equal importance to the sufficiency of the research procedures themselves. 19

Ethical considerations FEthical consideration covers issues of plagiarism & honesty. FThis study is governed by the ethical codes as stated within the ethical codes; and reinforced by the “ethical committees”. FMouton (2001) indicates that ethical consideration comes into play because of the interaction a researcher has with other people or the environment. ìTo address the issues of conflict of interest, which seems to be the most fearing factor, in research. 20

Conclusion We are Reaching for the Stars of Tomorrow 21

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