Madam Deputy Speaker and hon members, in terms of section 229(1)(a) of the Constitution of the Republic of South Africa, a municipality is empowered to impose rates on property and surcharges on fees for services provided by or on behalf of the municipality. However, in order to impose other taxes, levies and duties appropriate to local or to the category of local government into which that municipality falls, it requires authorisation by national legislation. This is what this legislation seeks to do.
There are further conditions imposed by subsections 2 and 3 of the same section 229 of the Constitution. In imposing these rates and surcharges or other taxes, levies and duties, this may not be exercised in a way that materially and unreasonably prejudices national economic policies, economic activities across municipal boundaries or the national mobility of goods, services capital or labour. It also has to be regulated by national legislation.
Section 3 also continues to say that when two municipalities have the same fiscal powers and functions with regard to the same area, an appropriate division of those functions must be made in terms of national legislation. This subsection continues to list the criteria that must be taken into account when this division of powers is made. Among others it mentions the need to comply with the sound principals of taxation, the fiscal capacity of each municipality, the effectiveness and efficiency of raising taxes, levies and duties and finally equity. This is the test that the regional services councils levy could not pass and therefore was scrapped in 2005, giving way to a regime that will be in line with our national agenda of a developmental state.
This legislation is one piece in a number of building blocks for this envisaged state machinery that is responsive to the needs of people. As the three-sphere co-operative governance model evolves to meet the new challenges of our democratic state, we need to continually evaluate its effectiveness and whether it is promoting the ideal of a better life for all. While the institutional structures and mechanisms are of primary importance in building the national democratic society, so is our legislative framework.
Because of the strategic positioning of local government that is at the coalface of service delivery, the ANC-led government continues to pay particular attention to this sphere of government. When the regional services council levy was scrapped for the reason I have alluded to earlier and that the Minister has mentioned, a grant was subsequently allocated to municipalities in order to augment the revenue they might have lost as a result. According to submissions received by the committee, we are aware that to some municipalities this grant is inadequate and we urge National Treasury to continue engaging with those municipalities in order to find an amicable solution.
When dealing with legislation in the committee, the stakeholders, in relation to the implementation of this Bill and its implications, raised a number of concerns and I wish to deal with them. The matter of consultation and the processing of the Bill was addressed and the committee is satisfied that adequate consultation did take place and any comments to the contrary have no basis. The issue of the constitutionality of the Bill and whether it does not encroach on the constitutional mandate of another sphere of government, came up sharply in some submissions. The committee took legal opinion on the matter and we are assured that this Bill does not encroach on the constitutional mandate of local government. Instead it does precisely what section 229 of the Constitution requires. The committee, therefore, has no reason to believe that there is any violation of the Constitution. The other matter was that of capacity of municipalities to implement this legislation and that local government is already overregulated. It is the committee's view that this legislation fits perfectly into the existing legislative framework in order to enhance service delivery in the best interest of the national democratic society we seek to build. Accountability, transparency and good governance are at the centre of the developmental state that is responsive to the needs of our people, and therefore this legislation should be viewed in that perspective.
In terms of capacity we urge National Treasury and provincial treasuries to continue their legal obligations in terms of the Municipal Finance Management Act and the Public Finance Management Act of building the capacity required in this sphere of government. We also urge municipalities to adhere to the minimum competency levels for officials when employing and developing existing staff. The committee was recently briefed by National Treasury on these minimum competency levels for different categories of senior officials in municipalities and believes that this will go a long way in dealing with the issue of capacity in local government.
Let me also take this opportunity to thank the Portfolio Committee on Provincial and Local Government for their participation and their co- operation in processing this Bill. I would also like to thank the staff at National Treasury for the wonderful work they have done and trust that this piece of legislation will realise the desired objective.
Lastly, let me mention that this Bill does not impose new taxes and the Minister did allude to this fact. This Bill does not impose new taxes at local government level, but provides for a legal framework within which this sphere may impose these taxes, levies or duties in terms of the Constitution. The ANC supports the Municipal Fiscal Powers and Functions Bill. Thank you. [Applause.]