Research Report A FUNDING MODEL FOR THE DISASTER RISK MANAGEMENT FUNCTION OF MUNICIPALITIES

Transcription

1 Research Report A FUNDING MODEL FOR THE DISASTER RISK MANAGEMENT FUNCTION OF MUNICIPALITIES JULY 2009

2 Document Information Document Version Number Document Type Short Title Long Title Applicability Status Main Contributors Author(s) Date of this Compilation Contact information Client Copyright Version 1 Research Report Funding model: DRM A funding model for the disaster risk management function of municipalities Local government, South Africa Final African Centre for Disaster Studies Southern Business School Mr. Riaan Visser Prof. Dewald van Niekerk July 2009 [email protected] or [email protected] South African National Disaster Management Centre 2009 South African National Disaster Management Centre 2

3 Reducing disaster vulnerability in developing countries may very well be the most critical challenge facing development in the new millennium it is an issue of doing development right, and making sure that activities contribute to reducing disasters rather than exacerbating them. James Wolfensohn, former President of the World Bank Group,

4 TABLE OF CONTENTS 1 BACKGROUND PROBLEM STATEMENT RESEARCH QUESTIONS OBJECTIVES OF THE STUDY RESEARCH METHODOLOGY INTERNATIONAL AND NATIONAL DEVELOPMENTS AND VIEWPOINTS REGARDING DISASTER RISK MANAGEMENT FUNDING International developments and viewpoints National developments and viewpoints Legislative framework for funding arrangements Funding options for disaster risk management in general Considerations regarding the design and structure of funding arrangements Recommended funding options for each disaster risk management activity Assessment of the funding arrangements included in South Africa s disaster risk management policies FINDINGS SUMMARISED Funding for start-up activities The case of Stellenbosch local municipality The case of Dr Kenneth Kaunda district municipality The case of the City of Cape Town The case of the Western Cape s Provincial Disaster Management Centre Funding for on-going activities The case of Stellenbosch local municipality The case of Dr Kenneth Kaunda district municipality The case of the City of Cape Town The case of the Western Cape s Provincial Disaster Management Centre Funding for disaster risk reduction The case of Stellenbosch local municipality The case of Dr Kenneth Kaunda district municipality The case of the City of Cape Town The case of the Western Cape s Provincial Disaster Management Centre Funding for response, recovery, rehabilitation and construction efforts The case of Stellenbosch local municipality The case of Dr Kenneth Kaunda district municipality The case of the City of Cape Town The case of the Western Cape s Provincial Disaster Management Centre Funding for education, training, capacity-building and research The case of Stellenbosch local municipality The case of Dr Kenneth Kaunda district municipality The case of the City of Cape Town The case of the Western Cape s Provincial Disaster Management Centre CONCLUSIONS REGARDING FINDINGS Conclusions: Funding for start-up activities Conclusions: Funding for on-going activities Conclusions: Funding for disaster risk reduction Conclusions: Funding for response, recovery, rehabilitation and construction efforts 68 4

5 8.5 Conclusions: Funding for education, training, capacity-building and research RECOMMENDATIONS: A PROPOSED FUNDING MODEL FOR MUNICIPALITIES Description of the funding model Funding for start-up activities Funding for on-going activities Funding for disaster risk reduction Funding for response, recovery, rehabilitation and construction efforts Funding for education, training, capacity-building and research MECHANISMS TO ENTRENCH THE RECOMMENDED MODEL The municipality s disaster risk management policy The municipality s disaster risk management plan and the IDP CONCLUSION REFERENCES ACKNOWLEDGEMENTS Annexure A: INTERVIEW SCHEDULE

6 1 BACKGROUND The South African Disaster Management Act (Act 57 of 2002) heralds a new era as far as the way in which disaster risks, hazards and vulnerability will be perceived in South Africa in the future. As one of the finest pieces of legislation ever promulgated in South Africa, the Disaster Management Act brings the functions and activities of Disaster Risk Management right into the backyard of each and every province, metropole, district and local municipality, as well as all the organs of the state and entities in the public sector. It calls for the establishment of structures, frameworks, plans, procedures, and strategies that cut across all government sectors. It introduces a new way of managing the complex and perilous society in which we find ourselves. It further gives the responsibility of managing disaster risks to the highest political authority in each sphere of Government. The cornerstone of successful and effective disaster risk management is the integration and coordination of all the role- players and their activities into a holistic system aimed at disaster risk reduction. Disaster risk reduction in South Africa consists of a variety of cross- cutting facets requiring the participation of a host of sectors and disciplines, not only from within the spheres of government (national, provincial and local), but involving the private sector, civil society, non- governmental organisations (NGOs), community- based organisations (CBOs), research institutions, and institutions of higher learning, to name but a few. In the context of disaster risk management, none of these role- players can act in isolation from the other. Disaster risk management in South Africa has been established as a public sector function within each sphere of government. But disaster risk management goes beyond pure line function responsibility. Disaster risk management as an activity at all levels of government is defined by the Disaster Management Act (Act 57 of 2002) as an integrated, multi- sectoral, multi- disciplinary approach aimed at reducing the risks associated with hazards and vulnerability. It therefore needs to become an integral part of the development planning 6

7 process in order to be successful. For this reason disaster risk management plans form an integral part of the Integrated Development Plan (IDP) of each and every municipality. In the light of the IDP and the budgeting process within the local government sphere in South Africa, aiming at sustainable development within local government, the direct link with disaster risk management is undeniably of strategic importance. Development planning should therefore be assessed according to its contribution towards either disaster risk reduction or disaster risk augmentation. Unfortunately, the current policy and legislation do not provide adequate guidance to municipalities in terms of their funding arrangements for disaster reduction, response and recovery. Various funds and funding mechanisms are available; this leads to a considerable amount of confusion. The need to consolidate all disaster reduction and response- related funding into one funding pool is well known and has been already discussed within the disaster management fraternity. Although this would be the ideal situation, it is not realistic to assume that an all- inclusive fund would be in any way possible given the public financial infrastructure of South Africa. In the interim it would make more sense to ensure that at least the major components of disaster risk management which require funding are properly covered. 2 PROBLEM STATEMENT The Disaster Management Act (Act 57 of 2002) makes specific provision in, Chapter 6 of the Act, for the funding of post- disaster recovery and rehabilitation. The Act also requires that a disaster management plan should be prepared for a specific municipal area and should form an integral part of the municipality s overall integrated development plan (IDP). Such a disaster management plan must indicate measures to reduce the vulnerability of disaster- prone areas, communities and households, as well as the appropriate strategies for prevention and mitigation. 7

8 To implement these provisions of the Act, guidelines were provided in the National Disaster Management Framework for South Africa, issued in terms of the Disaster Management Act 57 of Section 7(2)(k) of the Act therefore stated specifically that the legislation must provide a framework within which organs of the state may fund disaster management, with specific emphasis on preventing or reducing the risk of disasters, as well as providing grants that can contribute to post- disaster recovery and rehabilitation. Such a framework or guidelines for its implementation are therefore included in Table 7.1, as recommended funding arrangements in the Framework document which is supposed to cover all the expenditure associated with the following disaster management activities: The so- called start- up activities; The continuous disaster risk management operations; Disaster risk reduction; Response, recovery and rehabilitation activities; and Training and capacity- building programmes. Although these provisions in the Act and the guidelines in the Framework exist, it is not always clear which processes should be followed by municipalities to access this funding, especially when it should be provided by the other two spheres of government (national or provincial). It is also not clear to what extent municipalities should fund disaster risk management out of there own budgets. In the case of this research project the research problem can therefore be stated as follows: Municipalities, especially district municipalities, experience difficulties in making funding available for establishing and maintaining the disaster risk management function that is their responsibility in terms of the given legislation. In order to address the problem a number of questions, as stated in the next paragraph, need to be answered. 8

9 3 RESEARCH QUESTIONS The following key questions will be answered by this research project: What type of funding can be made available by the other two spheres of government and how can it be accessed by municipalities? For what purposes should municipalities provide funding in their own budgets for disaster risk management? The answers to the above- mentioned questions will determine the gap between the provisions in the Disaster Management Act and the guidelines provided in the National Disaster Management Framework. These form the theoretical basis and point of departure for this study, and the practical realities of disaster risk management funding as experienced by municipalities. 4 OBJECTIVES OF THE STUDY The primary objective of this research project is: To develop a funding model for the disaster risk management function of municipalities. This primary objective can only be achieved if certain secondary objectives are accomplished. The secondary objectives of this research project are the following: i. To determine what funding for best practices in disaster risk management are followed internationally that can be utilised within the South African local government context. ii. iii. iv. To determine the type of funding that can be made available by the other two spheres of government and how can it be accessed by municipalities. To determine how the existing municipal budget votes can directly and indirectly provide funding for disaster risk management. To ascertain to what extent local and district municipalities can work together to enhance the availability of funds for the establishment and maintenance of a Municipal Disaster Risk Management Centre. 9

10 5 RESEARCH METHODOLOGY A literature study of the primary and secondary sources was undertaken to provide a sound basis for this study. From the literature study a theoretical foundation was established and the best practices were determined in terms of which the findings of the study may be evaluated and put into perspective. As far as the collection of data is concerned a qualitative research approach was used for this research project. In terms of this approach, three case studies were identified to cover the three categories of municipalities in South Africa, namely a metropolitan municipality (category A), a district municipality (category C) and a local municipality (category B). In order to ensure that the appropriate data were collected, specific municipalities with a known record in good financial management had to be selected. The City of Cape Town was used as a case study of a metropolitan municipality, the Stellenbosch municipality was used as a case study of a local municipality and the Dr. Kenneth Kaunda District Municipality was used as a case study of a district municipality. For each case study semi- structured interviews were conducted as part of an action- research process, involving different functionaries within each municipality as participants. For this purpose, the interview schedule, attached as Annexure A, was used. The benefit of action research for this project was that the research design evolves as the project progresses and it does not have to be finalised in advance. Some elements of historical research were also utilised to a certain extent as far as the analysis of planning documents (Integrated Development Plan (IDP) and Service Delivery and Budget Implementation Plan (SDBIP)) and the approved annual and medium- term budget documents are concerned. The information obtained from these three municipalities was also verified by having interviews with the following persons: 10

11 The Chief Director responsible for the Provincial Disaster Management Centre in the provincial Department of Local Government of the Western Cape Provincial Government; The Chief Director: Budget Planning at the National Treasury; and The Director: Intergovernmental Relations Policy at the National Treasury. 6 INTERNATIONAL AND NATIONAL DEVELOPMENTS AND VIEWPOINTS REGARDING DISASTER RISK MANAGEMENT FUNDING The international and national developments and viewpoints regarding disaster risk management will subsequently be discussed to provide a theoretical basis for the studying of this topic that could also influence the design and development of a funding model for the disaster risk management functions of South African municipalities. 6.1 International developments and viewpoints Based on an analysis of the economic and insured losses due to natural disasters worldwide, Ghesquiere and Mahul (2007:2) indicated in a research working paper, issued by the World Bank, that there is growing evidence that the frequency and severity of natural disasters is increasing. As a result, the fiscal and economic exposure of developing countries increases every year. This can be due to a variety of reasons, ranging from the growing concentration of populations and assets in high risk areas to increases in climate variability. Both Olokesusi (2005:17) and Ghesquiere and Mahul (2007:2) have indicated that disasters have serious implications for long- term development efforts if risk management is not actively applied. As such, this issue poses an increasing threat to poverty reduction and sustainable development. Although the emphasis in disaster risk reduction should be on risk mitigation, Ghesquiere and Mahul (2007:2) found that the focus is lately on the capacity of government to react in the aftermath of a major disaster, specifically regarding government s capacity to finance 11

12 relief and reconstruction costs after disasters. This development is confirmed by the growth in literature pertaining to disaster response, recovery and relief. Ghesquiere and Mahul refer specifically in this regard to the articles of: Freeman, Keen and Mani, 2003, entitled, Dealing with Increased Risk of Natural Disasters: Challenges and Options (IMF Working Paper WP/03/197); The article of Hofman and Brukoff, 2006, entitled, Insuring Public Finances against Natural Disasters: A Survey of options and recent initiatives (IMF Working Paper WP/06/199); and The article of Mahul and Gurenko, 2006, entitled, The Macro Financing of Natural Hazards in developing Countries (World Bank Policy Research Working Paper 4075). If the fiscal and economic risk exposure of developing countries to catastrophic events is considered, then it becomes clear that it has increased significantly as a result of the increased concentration of the world s population in vulnerable urban areas, substandard construction practices and low insurance coverage. According to Ghesquiere and Mahul (2007:2), the average damages from large disasters faced by developing countries represented 7,1% of GDP over the period 1977 to Ghesquiere and Mahul (2007:3) stated that a quick analysis of recent catastrophes shows that funding for relief and reconstruction in developing countries generally comes from different sources than is the case in developing countries. In more developed countries losses from natural disasters are typically funded through a combination of private risk financing arrangements and an efficient public revenue system that relies on wide and deep taxation systems. In middle and low- income countries, which have relatively low tax ratios and ongoing fiscal policy- funding sources for post- disaster reconstruction tends to be more varied, with strong reliance on ex- post borrowing and assistance from international donors. Assistance from multilateral financial agencies plays a particularly important role in middle- income countries, while support from bilateral donors is generally predominant in low- income countries. 12

13 It is, however, important to note that economic theory suggests that countries should ignore uncertainty for public investment and behave as if they are indifferent to risk because they can then pool risks to a much greater extent than private investors. Ghesquiere and Mahul (2007:3) refer specifically to Arrow and Lind (1970) in this regard. These authors have formulated the Arrow- Lind Public Investment Theorem, and have demonstrated that when the risks are publicly borne, the social cost of risk- bearing is insignificant. Consequently, the government should ignore uncertainty in evaluating public investment, because it can distribute the risks associated with any investment among a large number of people. According to Ghesquiere and Mahul (2007:4), a key assumption underlying this theory is that returns from a given public investment are independent of the other components of national income. In the case of the financing of natural disasters, the theory of Arrow and Lind suggests that governments should act as being risk- neutral towards natural disasters and should not invest in any risk- financing strategies that are more expensive than the expected losses caused by any particular disaster. This theory has already been implemented by a number of large developed countries that rely on post- disaster financing, including budget reallocation and tax increases, to finance catastrophic losses. When this theory of Arrow and Lind is applied to developing countries it has been discovered that there are several cases where the assumption of the government s policy of risk neutrality does not hold (Ghesquiere & Mahul, 2007:4). It therefore requires in those cases the use of ex- ante- risk- financing instruments that could include sovereign insurance. Sovereign insurance is normally provided by a regional body, established by international donors, to a number of participating countries. These countries may require catastrophic or disaster risk insurance (Ghesquiere & Mahul, 2007:18). There are, however, a number of reasons why the above- mentioned theory cannot be applied in developing countries. 13

14 Firstly, the small size of some states prevents them from efficiently pooling natural disasters. The passage of a hurricane, for example, is a systemic risk that affects the entire economy of the country. Secondly, the high level of indebtedness of some countries governments does not allow them to access capital markets in the aftermath of a disaster, thus preventing them from transferring some of the risk to future generations. This is also referred to as inter- temporal diversification. In the third instance, post- disaster risk financing instruments may not provide quick liquidity after a disaster. This creates in most cases a so- called liquidity crunch or bottle- neck. Under these circumstances the most cost- effective risk financing strategy that can be developed by a government is to secure funds ex- ante through reserve funds, insurance or contingent debt (unless the level of debt is already very high). If the government uses ex- ante risk financing instruments, such as sovereign insurance, it should mainly cover the immediate needs, since it is usually more expensive than post- disaster financing. In this case it should be kept in mind that long- term expenditure should be financed through post- disaster financing, including ex- post borrowing and tax increases. In other words, sovereign insurance should not finance the long- term resource gap, but only the short- term liquidity gap. In this case, the liquidity gap can be defined as the potential lack of funds for the financing of government deficit losses at different periods after the occurrence of a natural disaster. It presents a matrix of fiscal vulnerability that should help governments analyse potential liquidity gaps and devise optimal insurance strategies. This concept differs from the standard concept of a resource gap; this is usually defined as the long- term gap between financial needs and post- disaster financing instruments. The World Bank has lately been promoting a country risk management framework to assist countries in reducing their reliance on external assistance. According to Gurenko and Lester (2004, in Ghesquiere & Mahul, 2007:9), this framework is partly based on corporate risk management principles, but also on certain factors found in the key economic and social 14

15 context, such as fiscal profiles, the living conditions of the poor, and investment in risk mitigation. This risk management approach relies on the identification of potential resource gaps between potential losses and the capacity of a country to finance relief and reconstruction needs in times of crisis. This approach is, however, based on a static framework for the financing of catastrophic risks that focuses on the total losses caused by a potential event and the determination of funding arrangements to recover the losses. Unfortunately, this approach falls short of providing a practical framework for action; and it may lead to sub- optimal use of risk financing instruments. While losses resulting from a major disaster can occur in a very short space of time, the resulting financing needs can be spread over a much larger period. It is therefore important to keep in mind that although the losses are immediate, relief and reconstruction operations can be spread over several years. An analysis of the resources needed after a disaster that takes this timeframe into account should allow for the development of a more efficient risk financing strategy for countries exposed to natural disasters. Ghesquiere and Mahul (2007:9) therefore present a catastrophic risk financing framework for countries and sub- national entities, such as municipalities that are exposed to adverse natural events that integrate the dynamic aspects of risk financing needs and resources. In this case the concept of dynamic liquidity is relevant and can be defined as the potential lack of funds for financing public expenditure at different periods (short, medium and long- term) after the occurrence of a natural disaster. This framework make provision for the financing of the liquidity gaps by using a combination of ex- ante risk financing instruments, including reserves, budget reallocations, contingent debt and insurance, and ex- post financing instruments, such as borrowing, donor assistance and tax increases. In terms of the resource and liquidity gap that needs to be addressed, attention should be given to the budgetary impact of such natural disasters. Natural disasters generally put enormous strain on the budget of an affected country. The budgetary implications are based 15

16 on the financing needs faced by a government during the three main phases in the post- disaster period. These are namely: during the relief operations, early recovery operations and reconstruction operations. Ghesquiere and Mahul (2007:9-10) have indicated that it can be difficult to provide an ex- ante estimate of the cost of relief operations, since it depends on the specific characteristics of the catastrophic event (location, intensity, period of the year [winter or summer], time of the day [day or night]), but it is relatively small compared to the cost of subsequent recovery and reconstruction operations. Relief operations usually include emergency assistance provided to the affected population to ensure that the basic needs, such as the need for shelters, food and medical attention are adequately addressed. These costs can be estimated based on a scenario analysis. It is important to bear in mind that although relief costs are limited, they should be able to be financed in a matter of hours after a disaster event occurs. The capacity of governments to mobilise resources for relief operations at short notice should therefore be a key component of their risk financing strategies. As far as early recovery operations are concerned, several techniques exist to estimate the likely cost of such. Catastrophic risk models can simulate the impact of natural disasters, such as earthquakes, on the infrastructure and thus provide rough estimates of the lifeline infrastructural requirements (e.g. water, electricity and key transportation lines) that are likely to be damaged in the event of a major disaster, as well as the removal of debris and the establishment of basic safety nets. Such models can also be used to assess the number of people that are likely to be homeless and the number of buildings that will have to be rebuilt. One of the important purposes of the early recovery operations is to limit secondary losses and to ensure that reconstruction can start as soon as possible. The early recovery stage can also be used as an opportunity to appoint engineering firms that can start the design of infrastructure works that will have to take place during the reconstruction phase. 16

17 In the case of reconstruction operations, catastrophe risk modelling techniques can be used to estimate the potential damage to the infrastructure, as well as to any public and private property. These techniques can provide risk assessments for each group of assets, such as the probable maximum losses during a given return period. This can help the authorities determine the budgetary needs caused by any such potentially catastrophic events. Reconstruction operations generally centre on the rehabilitation or replacement of assets damaged by a disaster. These include public buildings and infrastructure which are the direct responsibility of the state. It is, however, important to note that national or municipal authorities generally have to face obligations that go beyond their own assets. In most cases, government will have to subsidise the reconstruction of private assets, and in particular the housing for low- income families who could not otherwise afford to rebuild their houses. It is important to note that the use of scenario analysis coupled with risk models, can also help authorities to understand their potential needs better over time. In all three phases, the capacity to provide relief, carry out recovery works and complete reconstruction operations will also depend on the absorption capacity of the affected economy. In the cases of major disasters, all the damaged assets cannot be rebuilt at once and the government will have to establish priorities according to which key assets can first be rebuilt or rehabilitated, while other assets may be restored at a later stage. These choices made by the authorities will influence the timing of financing required for any reconstruction operations. According to Ghesquiere and Mahul (2007:11), it is important to consider local budget appropriations and executive regulations when analysing budgetary requirements. While some countries have developed emergency legislation that allows for emergency procurement before a financing source has been identified, most countries have maintained more conservative legislation. In some countries, for example, tenders for emergency works cannot start until full budget appropriations have been approved by parliament. 17

18 An optimal risk financing strategy will need to ensure that funds are available at the appropriate time in a post- disaster situation, but should also aim at amending outdated legislation that may prove to be a burden in the aftermath of a major catastrophic event. As far as disaster risk reduction is concerned, a variety of measures can, according to Freeman et al. (2003:14-16), be applied to reduce the physical destruction caused by natural disasters. These measures include: land- use planning to reduce construction on seismic fault lines, coastal regions subject to storm damage, and river shorelines subject to frequent floods; building standards aimed at ensuring some level of robustness against earthquakes or hurricanes; mitigating environmental degradations, such as soil erosion, that can worsen the impact of disasters; and by means of engineering interventions, such as the creation of dams for flood control, dikes to reroute flood waters, fire breaks and seawalls to break storm surges. In one of the recent World Disaster Reports (2001), the Red Cross indicated that investments of US$40 billion in disaster preparedness, prevention and mitigation would have reduced global economic losses in the 1990s by US$280 billion. This means that for every US$1 spent on disaster risk reduction, US$7 could have been saved in terms of post- disaster expenditure on recovery, rehabilitation and reconstruction. Structural measures might therefore be necessary in sectors such as agriculture, water and construction. These structural developments will have significant fiscal consequences, as a result of both explicit public policy commitments and the implicit responsibilities of the state in the context of such disasters. Government, therefore, has an important role to play in disaster risk reduction, not only in terms of safeguarding its own property, but also in respect of measures, such as coastal defences and early warning systems for detecting timeously any developing weather risks, and the implementation of appropriate regulatory controls, for example, on land use. 18

19 Infrastructure planning too needs to be sensitive to risks of extreme weather events. There is, however, a marked difference in the extent of risk reduction measures in developed and developing countries. In the USA expenditure on preparedness and mitigation measures has significantly increased over the past years. In contrast, in many developing countries, the financial resources, technical knowledge and political will to mitigate physical vulnerability are often absent. This situation in developing countries seems to prevail because little incentive exists to mitigate damages with ex- ante measures, since such damages are in many cases largely paid for by the national government. In the case of sub- national governments, such as municipalities, or in the case of the national government itself, this is done by foreign donors. This is sometimes also referred to as the Samaritan s dilemma (Freeman et al., 2003:17). In other words, governments of developing countries or sub- national governments in those countries believe that they can rely on disaster relief from the national government or foreign donors without taking any ex- ante measures to deal with disaster risks themselves. This situation with regard to developing countries has been confirmed by Mahul and Gurenko (2006:2), who indicated that the availability of free or inexpensive post- disaster funding discourages proactive ex- ante risk management on the part of developing countries, such as looking into market- driven risk transfer solutions, including reinsurance. In addition, there has been a willingness on the part of rich, developed countries and other donors to provide post- disaster funding for vulnerable, developing countries that are subject to frequent catastrophic events. It is, however, reasonable for the developing countries to rely largely on free ex- post aid and the post- emergency lending of development banks given the high cost of disaster risk financing solutions offered by the private markets. Other reasons for specifically low insurance penetration rates are the underdeveloped state of domestic insurance markets, which lack the necessary capital base, low underwriting expertise, a common mistrust in the formal insurance sector by consumers, and a weak regulatory capacity that can control the insurance industry. 19

20 Mahul and Gurenko (2006:3) also maintain that when it comes to funding natural disasters ex post financing is not the right approach. They proposed a formal country risk financing framework that would provide tangible incentives for proactive country risk management and promote market risk financing. This approach should include developing risk funding solutions that would provide developing countries with strong economic incentives to engage in active risk management and to therefore achieve significant reductions in their growing vulnerability and levels of exposure. Such a major turnaround would, however, require linking, at least to some extent, donor s post- disaster reconstruction grants and emergency loans from major development banks to facilitate the progress achieved by countries in ex- ante catastrophic risk management. This approach also rests on the notion of leveraging the World Bank s emergency funding with that of international reinsurance and capital markets. Developing countries would therefore only be in a position to adequately meet their demands for capital to fund the residual risks that occur after major catastrophic events, by combining the funding capacity of donor countries, development banks and global reinsurance and capital markets. Caballero (2003:37, in Mahul & Gurenko, 2006:3) is, however, of the opinion that, Even in the best- managed emerging economies, aggregate risk management is being done with stone- age instruments and methods. This view is supported by the findings of Mahul and Gurenko (2006:4). They are of the opinion that governments in developing countries generally rely on their domestic budgets, including the diversion of resources from other projects, and on extensive financing from international donors to absorb the losses caused by natural disasters. It must, however, be realised that historically most governments have not taken much interest in the ex- ante management of disasters, because of a perception of low vulnerability levels and the fact that most severe hazards manifest themselves very infrequently (Kaplow, 1991 and Kunreuther, 1996, in Mahul & Gurenko, 2006:7). 20

21 The literature does, however, show that disaster risk reduction is becoming more and more important. This is emphasised by a global review of disaster reduction initiatives of the United Nations Inter- agency Secretariat of the International Strategy for Disaster Reduction (2004:345). This organisation has pointed out that the mounting costs of disasters, the huge losses that have to be covered by insurance companies, and the fiscal pressure on government in undertaking post- disaster recovery and reconstruction measures have called for sustainable financing arrangements to address disaster risks. Financing disaster risk reduction has become a critically important issue in view of the increasing need for investment in disaster mitigation and for preparedness at national and local levels. Recent developments have encouraged disaster risk reduction to become embedded in development projects, particularly as risk assessments are taken into account. These developments has been supported internally by the OECD (Organisation for Economic Cooperation and Development), the World Bank and the IMF (International Monetary Fund), as well as other development banks (UN/ISDR, 2004: ). In addition, as governments also require resources to deal with small and medium- size disasters, they have to depend on domestic resources for financing disaster risk management schemes. Domestic financing for disaster risk management has been slow to develop, owing to institutional ignorance and a weakness in addressing disaster risks. National budgets that usually make provision for disasters focus mainly on relief and emergency response activities. Prevention and mitigation, on the other hand, have not yet become an integral part of public financing, nor have institutional channels for mitigation investments been developed. A number of special funds have now been set up in many countries for the financing of disaster risk reduction, namely the so- called calamity funds, reconstruction, mitigation and vulnerability reduction funds, as well as social funds and public works programmes (UN/ISDR, 2004: ). 21

22 Market- based instruments that have been developed are insurance, catastrophe bonds and weather derivatives and microfinance services. Closer to home in Africa, Professor Femi Olokesusi (2005:17) of the Nigerian Institute of Social and Economic Research in Abadan, Nigeria, also maintains that adequate funding is required for both ex- ante and ex- post facto disaster risk reduction activities. He specifically indicates that on the African continent it is clear that there are competing demands for the resources required to achieve the Millennium Development Goals (MDGs). Olokesusi therefore states that such a trend indicates that existing disaster mitigation financing mechanisms should be critically examined. In Nigeria, for example, the Federal Government is responsible for the financing of disaster management programmes, but their funding depends to a large extent on the fluctuation in oil prices on the international markets. At the same time, the other tiers of government in Nigeria are also not yet fully committed to disaster management. Olokesusi (2005:17) therefore suggests that a number of funding alternatives for disaster risk management should be explored in Nigeria, including the following: Public- private partnerships; A disaster risk insurance pool for households; A Disaster Risk Mitigation Fund managed by the State through a formal institutional structure; A Disaster Mitigation Trust Fund managed by the private sector; Lotteries and fund- raising events; Bilateral and multilateral assistance at international level; Special taxes and levies; and Accessing the Global Environmental Facility (fund of the World Bank). These developments worldwide, including in Africa, also have a specific bearing on local government (municipalities) and local authorities. The irony is, however, that disaster risk management strategies have usually focused on mitigation at a national or country level and 22

23 less frequently on the vulnerability and needs of villages, towns and cities of all sizes (UN/ISDR, 2004:125). At the same time, fewer resources are allocated to the local level or sphere of government to be utilised for routine hazard identification or to support sustained community- based risk management strategies, despite some evident advantages in seeking to do so. The Global Review of the UN/ISDR (2004:126) highlights the fact that urban vulnerability is one of the most underestimated issues, specifically in urban development. It is estimated that by 2050, the world population is expected to grow by three billion more people. Almost all of this growth will take place in developing countries, and particularly within their cities or metropolitan areas and towns. The urban infrastructure is itself vulnerable to natural hazards because inhabitants are more dependent on increasingly sophisticated, but also often poorly maintained, infrastructure. The Global Review of the UN/ISDR (2004:127) therefore indicated that with the growth and importance of cities and local areas as the basis of national and local economies in developing and industrialised countries alike, the reduction of vulnerability to disasters in towns and metropolitan areas is one of the critical challenges now facing development. Experience and modern risk management practice do, however, recognise the importance of a strong and well- structured local disaster risk management capacity. As a result, the introduction of a specific disaster risk reduction programme in a growing number of countries has been able to provide an umbrella for local authorities to work in a coordinated fashion, often at first informally and then with a more structured approach, that relates to disaster risk management. The underlying reason for this approach is that municipal authorities are well placed to reduce the human and financial costs of disasters by establishing a competent disaster risk management plan. Eventually, the implementation of such plans relies, however, on the fact that central governments have to establish a national strategy that enables decentralised 23

24 decision- making, as well as providing resources for local planning, assessment and intervention (UN/ISDR, 2004:128). As such, there is a need to promote the development of strong expressions of political will at local levels which will create the necessary interest in institutionalised knowledge and help to mobilise resources. To ensure success, all of these efforts should be based on cooperative arrangements, extended partnerships and a broad local community input. 6.2 National developments and viewpoints The developments and viewpoints on disaster risk management, specifically the funding arrangements in South Africa, will subsequent be outlined to indicate what can be expected as far as funding is concerned A legislative framework for funding arrangements As far as national or domestic developments and viewpoints are concerned, municipalities in South Africa have to adhere to the provisions of the Disaster Management Act (Act 57 of 2002). The provisions of the Act are elaborated on in further detail in the National Disaster Management Framework, which was issued during The Act, with the exception of Chapter 6 on the funding of post- disaster recovery and rehabilitation, does not provide clear guidelines for the provision of funding for disaster risk management. As far as disaster risk reduction is concerned, section 7(2)(k) only refers to the fact that the Framework must provide a framework in which organs of the state may fund disaster management with specific emphasis on prevention or reducing the risk of disasters. In order to give effect to the requirements of the Act, four key performance areas and three enablers have been identified in the National Disaster Management Framework to guide the implementation of the Act. As a result, funding from a range of sources for the different 24

25 aspects of disaster risk management, are outlined in the key performance areas and enablers are included. The National Framework therefore make provision for the funding arrangements for disaster risk management in terms of start- up activities, the ongoing disaster risk management operations, disaster risk reduction, response, recovery, rehabilitation and reconstruction efforts, as well as education, training and capacity- building programmes. It also indicates which funding source and funding mechanism should be used for each of these activities. Based on the suggested funding arrangements, municipalities have a responsibility for the funding of most of the disaster risk management activities, except as a funding source for start- up activities which are supposed to be the responsibility of national departments/government. These funding mechanisms indicate that the national and provincial spheres of government obviously have a bearing on the funding that should be provided by municipalities (local government). In other words, funding at the local level will also be influenced by the arrangements within the South African government regarding intergovernmental relations. Although schedule 4 of the Constitution of the Republic of South Africa, Act 108 of 1996, designates disaster risk management as a concurrent national and provincial competence, section 23(7) of the Disaster Management Act (Act 57 of 2002) places the responsibility for certain disaster risk management activities squarely within the local government sphere by stating that, Until a disaster is classified as either a national or a provincial disaster, it must be regarded as a local disaster. This provision is supported by section 10A of the Municipal Systems Amendment Act 44 of 2003, which imposes new constitutional obligations on local government. In terms of this provision, the Cabinet member, MEC or other organ of the state initiating an assignment of a function or power to a municipality in terms of section 9 and 10, must take appropriate steps to ensure that sufficient funding is available and capacity- building initiatives are undertaken as may be needed for the performance of the assigned function. 25

26 This is especially necessary if the assignment of the function or power imposes a duty on the municipality which falls outside the functional areas listed in Part B of Schedule 4 or Part B of Schedule 5 to the Constitution, or is not incidental to any of these functional areas, and the performance thereof has financial implications for the municipality. It is, however, important to note that Chapter 6 of the Disaster Management Act outlines two principles that should be applied to funding the cost of a disaster when such an event is declared. The first principle provided for by section 56(2) of the Act is that in the event of a disaster, National, provincial and local organs of the state may financially contribute to response efforts and post- disaster recovery and rehabilitation. The second principle is supported by the Act assigning the responsibility for repairing or replacing infrastructure to the organ of the state responsible for the maintenance of such infrastructure. However, to allow for some flexibility, section 57 of the Act states that a municipality or provincial government can request financial assistance for recovery and rehabilitation from national government. In general, the Act attempts to encourage budgeting for disaster recovery and rehabilitation through threshold funding, because section 56(3) allows the Minister for Provincial and Local Government to prescribe a percentage of the budget of a provincial or municipal organ of the state as a threshold for accessing national funding for disaster response efforts. The extent to which an organ of the state has implemented disaster risk reduction efforts will be taken into account when requests for disaster response and post- disaster rehabilitation funding are considered. In this way, national government does not implicitly guarantee the provision of financial assistance to organs of the state for disasters that could have been reasonably prevented or reduced in some way. It is important to note at this stage that section 56(4)(d) of the Act states that any applicable post- disaster recovery and rehabilitation policy of the relevant sphere of government may take into account whether the damage caused by the disaster is 26

27 covered by adequate insurance, and if not, the reasons for the absence or inadequacy of such insurance cover. The use of municipal funds for disaster response, relief and recovery efforts is, however, regulated by section 29 of the Municipal Finance Management Act (MFMA) 56 of In terms of this section, the mayor of a municipality is allowed to authorise unforeseeable and unavoidable expenditure arising from an emergency situation. Such expenditure must be ratified by the council in an adjustments budget within 60 days after the expenditure has been incurred. In addition, section 29(2) of the MFMA states that unforeseeable and unavoidable expenditure may not exceed a certain percentage of the budget. This restricts the amount of funds available to respond to emergencies. Such a percentage must be determined by the National Treasury and prescribed through regulations, which have not so far been issued. As far as funding is concerned, it should be kept in mind that disaster risk management has certain unique characteristics which differ markedly from other public services. The reason for this is that disasters are by their very nature unpredictable and require an immediate and decisive response. The National Framework has therefore acknowledged that it is crucial that a balance be struck in the financing framework between the need for financial controls and oversight on the one hand, and the need to ensure that rapid response and recovery are not compromised, on the other hand. Section 214(2)(j) of the Constitution therefore explicitly refers to the requirement that, The need for flexibility in responding to emergencies should be used as one of the criteria for the equitable division of nationally collected revenue among the three spheres of government Funding options for disaster risk management in general 27

28 The National Framework (2005:91) indicates that the responsibilities imposed by the Disaster Management Act on provincial and municipal organs of the state require substantial start- up costs, including investment in infrastructure for provincial and municipal disaster management centres, as well as adequate funding for capacity building. Given the start- up costs involved, it is unlikely that all the provinces and municipalities will be able to fund these amounts from their own budgets. According to the National Framework (2005:91-92), the national government has the following two options when addressing this issue: It can fund disaster risk management through a centralised mechanism; or It can decide not to fund any disaster risk management activities, thereby placing the onus on provincial and local government to finance expenditures for disaster risk management activities from their own existing equitable share transfers or own revenue. Under the first option, national government would have to fund certain costs associated with particular disaster risk management activities. It can either use conditional grants or the equitable share, or a combination of both, to fund disaster risk management by the provincial and local spheres of government. The advantage of this option is that it ensures that disaster risk management is implemented evenly within the provincial and local spheres, especially since fiscal capacity varies markedly across provinces and municipalities. Funding from national government to cover start- up costs could also serve as a catalyst for the institutionalisation of disaster risk management in provincial and municipal organs of the state. Once the institutional structures are established, provinces and municipalities can then plan and budget for the costs as part of their operational activities. The primary disadvantage of this approach is that it might require national government either to redirect resources from other priorities to disaster risk management or to increase total expenditure through the funding thereof by additional taxation or borrowing. 28

29 The latter could, however, compromise fiscal policy and discipline. A further limitation of this approach is that the ability to access national funds might create a perverse incentive for provinces or municipalities to budget for disaster risk management activities from their own resources. Perverse incentives can, however, be reduced through the design of a funding mechanism that should make provision for matching funding by the provincial or municipal organs of the state. The second option, of providing no funding for disaster risk management, is also a legitimate choice of national government. However, it can have far- reaching consequences. In the first instance, it may prohibit provincial governments and municipalities from complying with the Disaster Management Act and its focus on disaster risk reduction. It may also result in a lack of capacity to respond effectively to disasters. In the long run, the absence of comprehensive and pervasive disaster risk reduction measures in the provincial and municipal spheres may place additional pressures on the national budget when disasters actually occur. Furthermore, the lack of adequate preventive measures and expenditures in one jurisdiction could well heighten the probability of disasters in neighbouring jurisdictions, which creates negative externalities. Since it is a constitutional imperative to ensure that lives are safeguarded, the non- funding of disaster risk management may be regarded as the relinquishing of that constitutional responsibility. If municipalities are unable to perform the disaster risk management function because of a lack of institutional capacity, the responsibility for managing disasters becomes those of the provincial government. The option of providing no funding will create inefficiencies in the intergovernmental system, since it will limit the ability of provincial and municipal organs of the state to respond effectively to disasters, although they are the closest and can respond the fastest. 29

30 6.2.3 Considerations regarding the design and structure of funding arrangements According to the National Framework (DPLG, 2005:92), it is important to contextualise the design and structure of the funding arrangements for the national disaster management framework. Distinguishing between two timeframes, namely the short term and the long term, is an important consideration in the design of funding arrangements. Any funding mechanism should be structured in such a manner that it is flexible enough to adapt to changes. In relation to disaster risk management, the start- up costs and initial capital outlays required to implement the Act are incurred in the short term. In many instances provincial and municipal organs of the state responsible for disaster risk management activities may be unable to fund these costs. Long- term costs include the operational costs involved in disaster risk reduction activities. These costs must be included in the budget once disaster risk management is integrated into routine planning and budgeting activities. In the case of municipalities, the Municipal Systems Act 32 of 2000 consolidates disaster risk management planning as part of integrated development planning. Accordingly, funds allocated to disaster risk management planning form part of the funds allocated to the IDP process. Currently, phased- in provisions are included in the funding arrangements to bridge the gap between the short term and the long term. These provisions are specifically aimed at assisting low- capacity, resource- poor municipalities to implement the Disaster Management Act in a sustainable manner. The Act requires a paradigm shift from recovery and rehabilitation to one of disaster risk reduction; this has a profound influence on the funding arrangements. In general, budgeting for disaster risk reduction activities imposes new expenditure pressures on the budgets of public institutions. Although international experience has shown that risk reduction measures reduce the costs of a disaster, the lack of information on the cost of past disasters 30

31 in South Africa makes it difficult to convince public institutions of the necessity to budget for disaster risk reduction. Unfortunately, if both the direct and indirect costs of disasters are not quantified, the financial and other benefits of risk reduction measures cannot be compared against it. Ultimately, the funding arrangements should create positive incentives for public institutions and other stakeholders to undertake proactive steps towards disaster risk reduction. The National Framework (DPLG, 2005:93) acknowledged in this regard that until minimum guidelines are issued and costed, it will be difficult to design specific mechanisms indicating how funds should flow from one public institution to another. It is, however, recommended that public institutions or entities regularly affected by disasters should analyse the available data on the frequency and severity or magnitude of past disasters and use this information as a basis for projecting the potential costs of such disasters. These projections will be the most reliable estimates of the likely costs of future disasters, and should therefore form the basis for disaster risk management budgeting Recommended funding options for each disaster risk management activity The National Framework (DPLG, 2005:93) has recommended the funding arrangements for the different disaster risk management activities. These are shown in Table 7.1, based on a submission to the Financial and Fiscal Commission on the Division of Revenue, 2003/4. To make this table more specific to municipalities, Table 6.1 is included below as a point of departure for a description of the funding arrangements. 31

32 Table 6.1 Funding arrangements for disaster risk management by municipalities Activity Funding sources Funding mechanism Start- up activities National government Conditional grant for local government district and metropolitan municipalities, where necessary On- going DRM operations Disaster risk reduction Response, recovery, rehabilitation and reconstruction New assignment to local government Districts municipalities Low- capacity, resource- poor municipalities 1 Local government Increase in the I (institutional) component of the equitable share of local government Own budget can be augmented by application for funding to the NDMC for special national priority risk reduction projects Additional funding provided by the NDMC Access to central contingency fund once threshold is exceeded Conditional grant, i.e. Municipal Infrastructure Grant (MIG) Education, training and capacity- building programmes Local government Own budgets and reimbursement through SETA s Public awareness programmes and research activities can be funded by private sector, research foundations, NGOs and donor funding Note: 1. Low- capacity, resource- poor municipalities identified through the creation of a composite index that takes into account the operating income of municipalities and their capacity to classification, as determined by the National Treasury Funding options for start-up costs According to the National Framework (DPLG, 2005:95), the start- up costs of disaster management centres can be funded through two mechanisms: a conditional grant from national government or through a municipality s budget. 32

33 Use of conditional grants for start-up costs The use of conditional grants as a funding mechanism is supported by the theory of intergovernmental fiscal relations. Conditional grants must provide provincial and municipal organs of state with adequate resources to cover the start- up costs of disaster management centres. Guidelines produced by the NDMC for the minimum infrastructural requirements for disaster management centres can form the basis for the conditions attached to the grant. In this regard, it is important that these minimum guidelines be costed in order to establish a reliable estimate of the total cost of the conditional grant to the national budget. It is, however, important to bear in mind that the conditional grant will also allow municipalities to streamline their existing fragmented response and recovery activities. Local government conditional grants must be disbursed to district municipalities to cover the start- up costs involved in establishing municipal disaster management centres. Given the existence of an infrastructure for disaster risk management, metropolitan municipalities should only receive funding to cover the additional costs required to establish their centres. Conditions for access to the grant must be linked to the minimum infrastructural requirements for the setting up of municipal disaster management centres. Given the heterogeneity of the local government sphere with regard to fiscal capacity, it is not practical to apply the principle of matching funding. Rather, the implementation of the conditional grant must be monitored through the reporting cycle described in sections 71 and 72 of the MFMA, and through the statutory reporting requirements in the Division of Revenue Act, which is enacted annually. The main disadvantage of introducing a conditional grant is that it might not be administratively efficient in creating a new conditional grant to fund a one- off cost. 33

34 However, given the tight deadlines by which municipal disaster management centres should be made operational, it is impractical to have a conditional grant transferred over a specified period of time Use of municipal budgets for start-up costs At the local level, metropolitan municipalities may be able to accommodate their disaster risk management centres (MDRMCs) within existing institutional structures. However, it is difficult to ascertain whether metropolitan municipalities would be able to meet all the minimum requirements for setting up disaster management centres through their own budgets. It is important to note that the start- up costs for a metropolitan municipality may be affected by its specific geographical location. For example, a district municipality may require substantial investment in communication technology in order to allow its MDRMC to fulfil the responsibilities set out in the Act. Depending on their financial positions, district municipalities may be able to fund some of the start- up costs of MDRMCs. However, this solution has several drawbacks and is therefore not recommended. Firstly, because district municipalities may not be able to fund all of the start- up costs of MDRMCs, they may not meet the minimum requirements for MDRMCs, as set out in guidelines issued by the NDMC. Secondly, there are disincentives for districts to fund all of the start- up costs because of the problem of free- riding: the presence of well- equipped MDRMCs is a positive externality for local municipalities, which will benefit from the activities of the district municipality without contributing to any of the costs involved. Finally, the identification of competing local priorities and development initiatives may result in a smaller portion of the budget being allocated to disaster risk management. 34

35 Funding options for ongoing DRM operations Expenditure incurred in monitoring disaster risk should be part of the routine operation of the relevant organs of state and disaster management centres, and should be budgeted for accordingly. At the municipal level, there are two options with regard to funding disaster risk assessments. The first option allows for the initial disaster risk assessments to be included in the start- up costs of MDRMCs. Thereafter disaster risk assessments can be funded through the local government conditional grant. The conditions of access to grant funding should be linked to national guidelines setting out the norms and standards for disaster risk assessments. The benefits of this option are that disaster risk assessments are standardised across municipalities and the data produced at local government level are aligned with any current and future information needs of the NDMC and PDRMCs. In addition, with sufficient resources, district municipalities could provide their local municipalities with the technical support needed to integrate risk assessments in sectoral plans, thus facilitating disaster risk management planning. The costs associated with updating relevant hazard and vulnerability information should be budgeted for by the respective district municipalities. The second option is to allow districts to fund the initial disaster risk assessments and any subsequent assessments and updates themselves. However, this can compromise disaster risk management planning. Without a comprehensive disaster risk assessment, disaster risk reduction planning becomes an ineffective tool. An unreliable risk assessment can result in resources being redirected from high- priority risks to low- priority risks. In addition, variations in the content, methodologies and quality of the initial disaster risk assessments could compromise the effectiveness of provincial and national level functions. The differentials in fiscal capacity across municipalities may also pose problems for the implementation of the Act as a whole. In certain instances, district municipalities particularly those in poor areas with little economic activity may be unable to fund 35

36 the ongoing operations of their disaster management centres. Therefore, it is recommended that the local government conditional grant for disaster risk management should include a component for funding the ongoing costs in low- capacity and resource- poor district municipalities for a maximum of two years. The development of a plan for covering the ongoing costs beyond the two- year period must be a condition of this component. It is hoped that at the end of this phase- in period, municipalities would be able to cover the operating costs of their disaster management centres Funding options for disaster risk reduction In terms of funding arrangements, disaster risk reduction can be separated into disaster risk management planning and disaster risk management implementation. The Act requires all spheres of government to develop disaster management frameworks that guide disaster risk management activities, including planning and implementing disaster risk reduction projects and programmes. Disaster risk management planning must be included in the IDPs of municipalities. Sectoral plans must also include specific disaster risk management plans for the relevant departments within all municipalities. These planning processes must be funded through the budgets of the relevant organs of state. If disaster risk management planning is integrated into general IDP processes, then little or no additional budgetary allocation for disaster risk management will be required. When additional expenditure is required to develop a structural mitigation infrastructure, provincial and municipal organs of state must establish whether they could fund such projects from their own resources. If they lack the necessary funds to implement these projects, they must include the costs of a structural mitigation infrastructure in their three- year capital plans. 36

37 Municipalities must prioritise these projects in their IDPs. Section 19 of the MFMA requires that a municipality conduct a feasibility study before it can budget for a capital project. The feasibility study must include risk assessment findings and recommendations for disaster risk reduction. If the project goes ahead, the cost estimate of mitigation infrastructure or measures should be included in the total cost of the project. Funds can be accessed either through the B component grant for basic services infrastructure, or through the P component grant for any additional funds required to reduce risks associated with the existing infrastructure. The benefit of this option is that the conditionality of the grant can help to ensure that disaster risk reduction is integrated into infrastructure development, thus reducing the risk of disasters in the long term. In the case of activities or projects aimed at preventing or reducing a national priority disaster risk, provincial and municipal organs of state may apply for additional funding from the NDMC. The NDMC may choose to place a limit on the funding available per project. The NDMC should develop clear and unambiguous criteria for evaluating applications for funding and distribute these to provinces and municipalities. The NDMC and PDRMCs are required to provide technical assistance in disaster risk management planning to municipalities. Technical assistance forms part of the routine activities of the NDMC and PDRMCs and should therefore be funded through their budgets. In terms of the Act, section 53(j) states that municipal disaster management plans must facilitate maximum emergency preparedness. The Act prescribes one of the means through which this can be done in section 58(1), which provides metropolitan or district municipalities with the option of establishing units of volunteers to participate in disaster management. The FFC has noted that there are costs involved in emergency preparedness, such as the costs of recruiting, training and mobilising volunteers. Since disaster management is deemed to be a new constitutional function for local government, strong arguments 37

38 can be made for funding the costs associated with preparedness, including the recruitment and training of volunteers, through an increase in the equitable share. Alternatively, the costs may be funded through the budgets of municipal organs of state. However, a drawback of this option is that preparedness activities may be underfunded. In addition, municipalities may not have sufficient resources to fund the extra costs associated with preparedness Funding options for response, recovery, rehabilitation and reconstruction Section 56(3) requires that organs of state set aside a percentage of their budgets for post- disaster recovery efforts. Access to national funding is dependent on whether the organ of state affected by the disaster had taken sufficient risk reduction measures to reduce the severity and magnitude of the disaster. The main activities that should be funded within the broad scope of disaster response and recovery include the following: early warnings; disaster response and recovery operations; relief measures; and rehabilitation and reconstruction Early warnings The development, implementation and dissemination of early warnings form part of the routine planning processes undertaken by organs of state and must therefore be funded through their existing budgets. The NDMC plays a significant role in identifying and monitoring potential hazards and disseminating early warnings. These activities must be funded through the NDMC budget Disaster response and recovery operations Currently, there are no dedicated funding mechanisms for disaster response and recovery operations, and resources are not released quickly enough to maximise the effectiveness of response activities. The use of section 16 of the PFMA as a mechanism 38

39 to release emergency funds from the central contingency fund is problematic, in that it requires ministerial authorisation and thus increases the lead time between the declaration of a state of disaster and access to emergency funds. The fundamental principle underpinning provisions relating to funding in the Act is that all organs of state must budget for the costs involved in disaster response and recovery. This principle places the onus for funding the initial costs associated with a disaster on the organs of state involved in response and recovery operations. Once budgets for response and recovery activities have been exhausted, the relevant organ of state may request financial assistance from national government. Financial assistance will only be provided after taking into account the disaster risk reduction measures taken prior to the onset of the disaster. National guidelines for the classification and declaration of states of disaster issued by the NDMC will help to reduce the incentive for provincial and local governments to declare disasters with the intention of getting financial assistance from other spheres of government. The Act entrenches this principle of self- funding by allowing the Minister designated to administer the Act to prescribe a percentage of the budget of a provincial organ of state or a municipal organ of state that will act as a threshold for accessing future funds from the central contingency fund. When prescribing thresholds for provincial and municipal organs of state, the correct basis for calculating the budgetary allocations needs to be identified. The correct basis and reasonable threshold percentages will help organs of state to sustain these budget allocations over time. Therefore, it is recommended that different threshold percentages be prescribed for different organs of state. Municipalities, on the other hand, raise a substantial portion of their own revenue. The operating revenue is a good indicator of a municipality s relative fiscal capacity. 39

40 Given the significant differences in revenue- raising capacity across municipalities, the threshold percentages should vary accordingly. It is therefore proposed that municipalities be categorised according to their own reserves of revenue. Information on own revenue per municipality can be accessed from National Treasury s annual Intergovernmental Fiscal Review. The proposed percentages are shown in Table 7.2. categorised according to their own revenue (DPLG, 2005:104). This table is adapted and presented below as Table 6.2. Municipalities can be categorised in terms of their own revenue collected. Table 7.2 in the National Disaster Management Framework, and Table 6.2 below, show four categories of municipality, each category having a different threshold percentage. In order to ensure that municipalities make meaningful provisions for disaster response and recovery operations, municipalities with a lower amount of revenue collected have been assigned higher percentages. Table 6.2 Proposed threshold percentages for local government budgets Classification of municipality Basis for calculation Threshold % Metropolitan municipality Own revenue 0,5 Municipality with own revenue of over R150 million (excluding metros) Municipality with own revenue of R50 million to R150 million Municipality with own revenue of R1 million to R50 million Own revenue Own revenue Own revenue 0,6 0,8 1,0 Metropolitan municipalities with large operating revenues should allocate at least 0.5 per cent of their own revenues to disaster response and recovery activities. Once municipalities have exhausted their thresholds, they should then be able to request financial assistance from their provincial governments. If the equitable share increases, 40

41 then the basis for determination of the threshold percentages can be changed to the total revenue received by a municipality, in which case the suggested threshold percentages shown in Table 7.2 should change. These thresholds are the minimum amounts budgeted for disaster response and recovery. The DPLG can implement mechanisms within the existing reporting cycle prescribed by the Division of Revenue Act to monitor whether or not municipalities are adhering to their respective thresholds Relief measures The aim of relief measures is to provide immediate access to basic necessities for those severely affected by disasters. Most municipalities have a mayoral discretionary fund aimed at providing relief to local communities. The current mechanisms seem adequate to fund the cost of relief. The challenge is to co- ordinate the inputs of these different spheres of government to ensure that relief measures flow rapidly to communities Rehabilitation and reconstruction The Act places the onus for the rehabilitation and reconstruction of infrastructure on the organ of state responsible for maintaining such infrastructure. However, rehabilitation is not only limited to infrastructure repair, it also includes rehabilitation of the environment and communities. Rehabilitation and reconstruction projects can be funded through: own budgets conditional grants reprioritisation within existing capital budgets access to the central contingency fund. The methods of funding rehabilitation and reconstruction are complementary rather than competitive. 41

42 Own budgets Ideally, organs of state should fund their expenditure on rehabilitation and reconstruction from their budgets up to the threshold. Thresholds are applicable not only to response and recovery operations but also to rehabilitation and reconstruction. Depending on the extent of infrastructural damage, organs of state may be able to fund rehabilitation and reconstruction costs from their own budgets up to the threshold. Rehabilitation and reconstruction costs are generally high, so organs of state may need to fund these costs from a combination of sources, including their own budgets, reprioritisation and the central contingency fund Conditional grants Municipalities can access funding through the Municipal Infrastructure Grant (MIG). The MIG formula differentiates between new and rehabilitated infrastructure in a ratio of 80:20. Since the MIG augments the capital budget as a whole and is not a project- by- project grant, it is possible for municipalities to use part of their allocation for post- disaster rehabilitation purposes Reprioritisation within existing capital budgets The next alternative should be to reprioritise within their capital budgets. Municipalities are required to develop three- year capital plans setting out their capital expenditure over the medium term. They can reprioritise their capital budgets in order to carry out the necessary rehabilitation and reconstruction projects by moving the existing commitments to the outer years of the MTREF, as long as the municipal council approves the reprioritised budget. The council must consider whether reprioritisation of the budget will have any substantial negative implications for service delivery in the long term. Any multi- year appropriations or shifting of funds must comply with the MFMA. This option is likely to be the quickest way to release funds for rehabilitation and reconstruction. 42

43 Access to the central contingency fund The use of funds from the contingency reserve should be considered only as a last resort. Access to the central contingency fund for rehabilitation and reconstruction should only be given for priority infrastructure (in accordance with criteria set by the NDMC) and be used as a source of funding if other alternatives fail. Municipalities may gain access to the central contingency fund for the rehabilitation and reconstruction of assets required to provide the minimum level of basic services. Motivations for such projects must be done on a case- by- case basis and requests for such funding must be submitted to the NDMC Funding options for education, training and capacity-building programmes Education, training, public awareness and research are crucial to the success of disaster risk management and disaster risk reduction strategies. It is envisaged that education, training and research initiatives, as well as broad- based public awareness programmes, will be undertaken by a range of organs of state and institutions. Municipalities, particularly the resource- poor ones, are unlikely to participate in programmes that are not accredited, because they lack the necessary funds to budget for these types of programmes. In general, most of the education and training costs in municipalities have been funded through the Financial Management Grant (FMG). The MIG, along with capacity- building grants, will soon be consolidated into the Municipal Systems Improvement Grant (MSIG). The DPLG must ensure that the new MSIG does cater for accredited disaster risk management education and training. It is envisaged that once this grant has been consolidated, municipalities should be able to access funds for education and training in accordance with disaster risk management unit standards. Municipalities must include public awareness campaigns in community participation processes. In this way, they will not require additional funds for these programmes. Municipalities should also forge links with CBOs, NGOs and the private sector in order 43

44 to share costs for dedicated public awareness programmes that focus on priority risks. The costs associated with accredited education and training must be recovered through SETAs. This should be seen as the funding mechanism of choice. The costs associated with education and training programmes that are not accredited must be funded through the budget of the municipality Assessment of the funding arrangements included in South Africa s disaster risk management policies To merely state the obvious in terms of the requirements for the funding of a municipality s disaster management activities included in the National Framework, would not be enough. It is therefore necessary to consider the assessments and recommendations made by two important public institutions at different stages. In the first instance, one has to take note of the assessment made by the Financial and Fiscal Commission (FFC) of the financial implications of the Disaster Management Bill. This assessment was made by request from the Minister of Provincial and Local Government on 10 October 2001, in accordance with section 9(4) of the Municipal Systems Act, which requires that the Cabinet member initiating the assignment of a function to municipalities must request that the FFC undertake such an assessment. The assessment has mainly dealt with municipal disaster management funding in the context of the intergovernmental system as a whole. According to the assessment of the FFC (2002:1), there were some funding provisions included in the Bill, but it was unclear which funding mechanisms should be catered for in the National Disaster Management Framework and which in the Bill itself. For example, section 56(2) of the Bill states that the cost of repairing public sector infrastructure should be borne by the organ of the state responsible for the maintenance of such infrastructure. On the other hand, the funding of emergency responses is not mentioned, and presumably is to be addressed in the Framework. This recommendation was eventually accepted and the 44

45 funding arrangements were included in the National Disaster Management Framework. It is, however, not clear whether such funding arrangements were properly clarified through a consultation process by the Department of Provincial and Local Government with the National Treasury. The FFC has also indicated that it should not be assumed that all the funding should be derived from nationally collected revenue. According to the FFC, the possibility of leveraging resources from the private sector could also be explored. This could be necessary because both the private sector (in particular, insurance companies) and government could benefit from rapid, efficient and effective responses to disastrous events. The recommendations of the FFC (2001;14-15) were that the major portion of funding for emergency responses, post- disaster recovery, prevention/mitigation, and emergency preparedness should, in the case of municipalities, be funded centrally. As far as emergency preparedness is concerned, the start- up costs of primarily low- capacity municipalities should be funded by means of a conditional grant from the national government that is administered for a limited period until capacity is developed. The on- going institutional or operational costs should be incorporated into the equitable share. The FFC was of the opinion that if disaster risk management is deemed to be a new function assigned to local government, then the quantum of the equitable share should increase and should be informed by a study of the specific financial implications. In the case of prevention and mitigation, it was recommended that municipalities should apply for funding for specific projects, which should be assessed against the national priority list of disaster risks. This funding should form part of the budget of a national department and be provided for on a matching- grant basis. The fiscal capacity of municipalities should be taken into account in determining the matching amount. In the case of emergency responses, it was recommended that the Contingency Reserve should be set aside for immediate responses to emergencies. 45

46 Municipalities should fund emergency response activities up to a financial threshold, after which central funding would be obtained. Central funding is provided to municipalities when disaster management expenditure exceeds a given percentage of their own revenue. When considering funding for infrastructure rehabilitation, municipalities should submit requests for funding to the national government. A budget appropriation would be requested based on the sum of the approved claims. In cases where the funds can be spent in the current financial year, funds could be drawn from the Contingency Reserve. It was also recommended that consideration should be given to evaluating the requests according to whether they constitute essential infrastructure that is necessary for the delivery of constitutionally mandated basic services and for economic activity. As far as relief funding to individuals is concerned, it was recommended that the three relief funds should be combined and administered centrally. The funds should be budgeted for based on past average expenditure. If the budget for this is exceeded, funds should be obtained from the Contingency Reserve. These funds could be made available to municipalities for payment to individuals. At that stage the FFC also recommended that final legal opinion should be obtained regarding whether the function of disaster management constitutes a new assignment to local government, as it will have implications for the quantum of the equitable share. On the side of the National Treasury, Engela (2005:1) made some policy proposals on emergency- related expenditure, which also include to some extent an assessment of the financial implications of the latest disaster management policy for municipalities and the manner in which the funding thereof should be dealt with. As far as the start- up costs, assessment and reduction efforts are concerned, Engela (2005:3), on behalf of the National Treasury, is of the opinion that the proposal that the national sphere has to provide the bulk of those funds, is not supported. According to her, it is unfortunate that the Act and Framework is premised on quite an expensive model of disaster risk management, since funding for such an elaborate and extensive system also has to occur in the context of competing national and local priorities. 46

47 In 2003, the DPLG requested R50 million for a conditional grant to establish disaster management centres in each municipality. Treasury indicated at that time that it was not willing to support such a conditional grant and that local government should, in the first instance, be responsible for the establishment of these centres. The point of departure of National Treasury is that the planning for and the management of risk reduction strategies are normal management functions and should be left to the responsible sphere to implement with consideration to local, variable conditions. It should also be considered as planned expenditure that can form part of the normal budget process. National Treasury therefore proposed that the mitigation aspects of disaster risk management be funded by the sphere responsible for the function and that the creation of conditional grants, or ring- fenced allocations in the equitable share, are not appropriate at this point in time. In the case of response and recovery efforts, Engela (2005:3) agrees that in the event of a disaster, government has to be able to respond rapidly. Depending on the scale of the emergency, either the local, provincial or National Disaster Management Centre (NDMC) has to respond. Funds need to be available to support rescue efforts and to provide immediate basic services, emergency health services and critical infrastructure. Experience has shown that on a national level resources are not released quickly enough to maximize the effectiveness of response activities. As a result, the National Treasury supports the approach, as proposed by the national Framework, that municipalities spend a percentage of their own budgets as a threshold expenditure percentage before additional provincial or national funds be requested (Engela, 2005:7). The fact that government does not have the ability to rapidly acquire the goods needed to respond to emergencies also requires that municipalities (local disaster risk management centres) establish the necessary pre- approved contracts that could be in place in times of such emergencies. 47

48 As far as rehabilitation efforts are concerned, Engela (2005:7) stated that the National Treasury needs to rigorously assess the necessity for funding requests to avoid a situation where emergency rehabilitation requests are loaded with expenses that are not emergency related. Again, experience has shown that on a national level resources are released very slowly. This is partly due to the National Treasury not having clear procedures indicating their requirements with regards to emergency requests, and partly to some contradictions in the financial legislation (PFMA). In the case of training, the Framework also outlines the need to train officials responsible for disaster risk management and proposes that existing budgets be used for this purpose. In the case of municipal officials, it also suggests that the various municipal grants that allow for capacity- building be accessed for this purpose. Similarly, the Framework proposes that public awareness and further research also be funded from existing budgets and that the National Treasury should support this approach. In an investigation conducted by Harrison (2008:19), it was found that the legislative assignment of the disaster risk management function to the local sphere of government failed to comply with section 10A of the Municipal Systems Act because it failed to address the financial and support implications thereof. At the same time Harrison also indicated that the Disaster Management Act failed to address the appropriate roles and responsibilities of category B and C municipalities as far as disaster management is concerned. According to Harrison, category B municipalities have critical roles to play in local planning, public participation, basic service delivery and services such as fire and traffic, which are integral to disaster risk management. Local municipalities are often the first to respond to a local disaster. The focus is currently to a large extent on compliance and there is still a definite bias towards response and recovery and not towards disaster risk reduction. The recommendation made by Harrison regarding this situation is that the provincial government must lobby the national government for: 48

49 adequate financing and capacity for the function; and legislation be amended to recognise more explicitly the role of category B municipalities in disaster management. It was also recommended that additional capacity should also be created at provincial and district levels to deal with the disaster management function. From the assessments of the funding arrangements included in South Africa s disaster risk management policies, it is clear that no final agreement has been reached between the different role- players regarding these arrangements. It was therefore necessary to conduct some research into the current status of the funding arrangements within the local government sphere and the manner in which funds are made available for disaster management activities and functions. 7 FINDINGS SUMMARISED An analysis of the interviews with the role- players at the different categories of municipalities in South Africa and within a specific province will subsequently be provided to outline their experiences as far as the application of the proposed funding arrangements is concerned. 7.1 Funding for start-up activities The experiences of the different categories of municipalities regarding funding for start- up activities, or the establishment of a disaster risk management centre, will be outlined. Hereafter the provincial sphere will enjoy attention. 49

50 7.1.1 The case of Stellenbosch local municipality As far as funding for start- up activities is concerned, the local municipality (Stellenbosch) did not receive any funding from any other sphere of government, because it was not required by the Disaster Management Act that a local municipality (category B) had to establish a disaster risk management centre. In this case the municipality is, however, of the opinion that there is a need for such a disaster risk management centre at the municipality. The reason for this is that the area of the Cape Winelands Districts Municipality is a very large area and is cut off by a mountain (Hex River Mountain). If there is a disaster in the tunnel through the mountain (Huguenot Tunnel), the Disaster Management Centre s staff of the Cape Winelands Districts Municipality is cut off from the towns on the other side of the mountain. As a result they are currently exploring a joint initiative between the local and district municipality through which a joint disaster management centre may be established within the Stellenbosch municipal area that can be used to service the district area on the Stellenbosch side of the mountain. Such a venture will be funded by the district municipality. So far, the disaster management unit of the Stellenbosch municipality has established a control room that can be used as a control centre should such a disaster strike. The establishment of this control room was, however, funded by the local municipality from its own funds (budget) The case of Dr Kenneth Kaunda District Municipality The Dr Kenneth Kaunda District Municipality (category C) is still in the establishment phase. They have requested grant funding and have submitted a business plan for this purpose. In this case, they have explored the possibility of obtaining specifically MIG (municipal infrastructure grant) funding for the establishment of their Disaster Risk Management Centre. 50

51 They have only received a grant from the Provincial Disaster Risk Management Centre for the establishment of their Centre The case of the City of Cape Town The Disaster Risk Management Centre of the City of Cape Town has not received any grants from the national or provincial government to establish their Centre. It was only in the past financial year (2008) that they received funding from the restructuring grant. This was not allocated specifically to the centre, but to the City of Cape Town. Although the district and local municipalities do benefit from grants, the metro does not, due to its size and budget. The view and expectation of the Province is, therefore, that the City Council must provide for this type of funding. The City s Disaster Management Centre has complained about it in the past, but the Province feels that the district and local municipalities have a much bigger need for funding and they must therefore receive preference. The Centre, however, feels that funding for disaster risk management should have a developmental focus, because it is still a developing area The case of the Western Cape s Provincial Disaster Management Centre The Provincial Disaster Management Centre did not receive any start- up funding from the national government for the establishment of a Centre. The National Treasury took the emergency management services (EMS) in the province as a whole into consideration and established an inter- departmental programme during 2004/2005 for the Province, of which the Provincial Department of Health was the coordinator. From the funds allocated to the inter- departmental programme for EMS the Provincial Disaster Management Centre received ±R8 million for the upgrading of an existing building to convert it into a Disaster and Emergency Management Centre. They also received ±R4 51

52 million for expanding their office space (adding another floor to the existing office building), as well as for office equipment, specifically computers at each workstation (not for furniture). 7.2 Funding for ongoing activities The experience of the different categories of municipalities and a provincial centre will subsequently be outlined with regard to the funding for the ongoing activities of the municipal and provincial disaster management centres The case of Stellenbosch local municipality The local municipality (category B) did not receive any grants or subsidies from the national or provincial government for the ongoing activities or functioning of their disaster risk management unit. The only funds that they received were from the district municipality for training and the disaster risk assessments conducted by consultants. The municipality does budget for disaster risk management, but the annual allocations are currently still very small and do not address the requirements within the municipal area. The budget allows mostly for relief or response activities, such as the provision of food parcels and blankets in the event of a disaster, as well as for recovery actions. This should be evident from the fact that the budget for disaster risk management is about R for the current financial year (2008). This relatively small budget was depleted within the first month of the financial year. They hope that this situation will improve in the future, since it was the first year that the disaster risk management unit was included in the integrated development planning (IDP) process. On the other hand, the small amount allocated for disaster risk management should also be seen against the background of the budget for Community Safety that has decreased by 50%, although it has a high priority within the IDP. It seems as if councillors still view disaster risk management and community safety as having lower priorities than housing and 52

53 infrastructure development. They are also not aware of any increase in the institutional or I- component of the equitable share of the revenue collected nationally that has been recommended in the National Disaster Management Framework to be used by the municipality to fund the ongoing operations of the disaster management centre. The fact that the municipality s budget for disaster risk management has decreased also serves as an indication that the I- component has not increased at all, or is being used for disaster risk management purposes The case of Dr Kenneth Kaunda District Municipality The Disaster Risk Management Centre of the district municipality did not receive funding from the Province for any of their ongoing activities. They only received funds in terms of the operating budget of the District. In other words, they are funded through the normal budgeting processes of the municipality, based on the equitable share of the revenue collected nationally and allocated to the municipality. It is, however, necessary to bear in mind that the district municipality s main source of revenue is not rates and taxes and service fees, but this equitable share, as well as grants received from the national and provincial government. They are also not aware of an increase in the institutional or I- component of the equitable share of the revenue collected nationally. During a short interview with the former Chief Financial officer (CFO), it became clear that the institutional (I) component of the equitable share received by the municipality was not, to his knowledge, increased. This was due to the fact that District Municipality must also make provision for the disaster risk management centre The case of the City of Cape Town The Disaster Risk Management Centre of the City of Cape Town did not receive any grant or subsidies directly from the national or provincial government for the ongoing operations of the Centre. They have to compete with all the other Council bodies for funding from the 53

54 restructuring grant that the City received during the previous year (2007). They eventually succeeded in sourcing funding for operational expenditure from the grant. As far as an increase in the institutional or I- component of the equitable share of the revenue collected nationally is concerned, the City s Centre has not received any additional funding. Most of the funds received by the City s Centre are allocated through the budget of the City. The City Council has also transferred 22 staff members from the ex- ambulance services to the Centre, for which the centre had not planned/budgeted. Funding provided for this transfer was then transferred to the Centre s budget, which has immediately expanded their operational budget. This also had implications on the capital expenditure side because the Centre also benefits from this transfer of staff. Funds are provided for 2010 that will also lead to the expansion of the Centre and additional staff will need to be employed. The Centre also has to deal with the risk of flooding in the metropolitan area, which is an additional burden The case of the Western Cape s Provincial Disaster Management Centre Funding received for the ongoing operations of the Provincial Centre forms part of the provincial budgeting process. Each year the disaster management centre has to prepare its budget as part of the system. So far there has been an increase in the size of the allocations to the provincial centre on an annual basis. In general the Provincial Centre normally receives adequate funding from the Provincial Government. The Centre also requested an extra budget allocation two years ago to fund a satellite communication system and other aspects, such as the improvement and renovation of the Centre. These allocations have been received from the Provincial Government/Treasury. As a result, they therefore have extra funding for the next financial year available. It is, however, important to note that the Provincial Centre does not normally provide funding to municipalities to sustain their ongoing operations/activities. 54

55 7.3 Funding for disaster risk reduction It is important to bear in mind that disaster risk reduction refers to all the elements that are necessary to minimise vulnerabilities and disaster risks throughout a society. It includes the core risk reduction principles of prevention, mitigation and preparedness. Based on this definition, the experiences of the different categories of municipalities and a provincial centre will subsequently be outlined The case of Stellenbosch local municipality The Disaster Risk Management Unit currently uses an ad hoc system of early warning and the implementation of preventive measures. During a disaster management review, the unit requested that a workshop be held with councillors and senior management that should include representatives from the district municipality and other departments (e.g. health, social development and engineering section). They hoped that in terms of future planning they would be able to follow the prescriptions of the National Disaster Management Framework. In the interim they have already requested the engineering section to launch a programme to clean the rivers and storm water pipes and to sweep the roads. The effects of these actions are already visible. As far as veld fires are concerned, they have succeeded in making various fire- breaks. Despite the efforts of the Disaster Risk Management Unit, it is still struggling to obtain the co- operation of certain departments within the municipality. It is also clear that those who have already been involved in the cleaning- up programme do not realise that they also contribute to disaster risk reduction. The Disaster Risk Management Unit did identify a need for a consultative forum and aims to establish a section 80 committee of the Council through the disaster management review process. It will be a multi- disciplinary committee consisting of representatives from all the directorates to ensure that they provide inputs in term of preventive planning and not only 55

56 in terms of disaster relief. Hopefully they will then obtain the buy- in from all the role- players and units within the municipality. So far the municipality has not had a situation where the NDMC or PDMC was unwilling to fund special, priority risk reduction projects. They do, however, believe that if they have to get involved in such projects that they have the capacity and skills required to deal with them The case of Dr Kenneth Kaunda District Municipality In terms of disaster risk reduction no funding was received directly from the NDMC or the PDMC for special, priority risk reduction projects. So far, the various departments of the District Municipality did not make provision for disaster risk reduction when planning and budgeting for the different activities and projects for which they are responsible. Normally, these matters are discussed at the IDRMC (Inter- departmental Disaaster Risk Management Committee), but unfortunately the representatives of the departments that attend the meetings are delegated by the HoDs (Heads of Departments) and are not necessarily the decision- makers in the various departments. These representatives can inform and advise the HoDs on the matters discussed, but they do not have any control over the implementation of any decisions taken by the Committee. It is also not known whether they relay all the messages to their HoDs The case of the City of Cape Town Neither the NDMC nor the PDMC provide additional funding for identified special priority risk reduction projects. The City of Cape Town s Disaster Risk Management Centre views the inclusion of disaster risk reduction in the planning and budgeting processes of the different directorates/departments as an ongoing process in the development and understanding of the importance of disaster risk reduction. They frequently address these matters in their Advisory Committee meetings by putting items on the agenda regarding disaster risk management within the organisation as a whole. 56

57 They have also addressed the EMT (Executive Management Team) to try to explain the concept and importance of disaster risk management. The Centre s approach is that disaster risk management is everybody s business and therefore they need to consider what their contribution to disaster risk management should be in terms of their line functions. The Centre also uses the Joint Disaster Management Committee to address the issue of disaster risk reduction and the importance of giving attention to it. By following such an approach they hope to obtain buy- in for this concept. In a recent audit report to the Centre, the auditors recommended that they use the Disaster Management Act to force line- managers to take disaster risk management into consideration and report them to the Executive Mayor should they not comply. The Centre, on the other hand, feel they rather want to develop a good relationship with the line- managers so that when they need their cooperation there will be a willingness from their side The case of the Western Cape s Provincial Disaster Management Centre According to the Provincial Disaster Management Centre, some provincial government departments are taking disaster risk reduction into account when they plan and budget for the different activities and projects for which they are responsible. The Provincial Department of Agriculture can specifically be used as an example. This Department is quite pro- active when considering the impact of climate change on agriculture. In their normal operations, this issue is fundamentally mainstreamed into their other activities. It can therefore be assumed that the Provincial Department of Agriculture is involved in disaster risk reduction and considers it as an integral part of their planning and budgeting processes. They are, however, not aware of specific disaster risk reduction measures that are being implemented in other provincial departments. 57

58 They have indicated that they may be ignorant, and that this is something that they will have to obtain more information about from other departments in the future. The Centre s general impression is that departments are not including disaster risk reduction as part of the planning and budgeting process. They only consider disaster risk reduction when they have to be actively involved in the response to a disaster situation, but not when they have to prevent it. The Provincial Centre also received no additional funding from the NDMC for special national and provincial priority risk reduction projects. They are not aware of any arrangement regarding special, priority risk reduction projects for which they can receive additional funding from the NDMC on a matching basis. 7.4 Funding for response, recovery, rehabilitation and construction efforts The experiences of the different categories of municipalities and a provincial centre will subsequently be outlined with regard to the funding of their response, recovery, rehabilitation and construction efforts The case of Stellenbosch local municipality In the case of floods, funds have been obtained in the past from the Provincial Department of Social Development and not from the PDMC. For example, the Disaster Management Unit handled the xenophobia crisis initially on their own, by using the minimal resources that they had available. When their funds were eventually depleted they requested assistance from the PDMC. In general they can handle small local events without any outside assistance, but larger scale events/disasters are still a problem. In the case of the xenophobia crisis, they had to deal with it within the budget of the municipality, because they did not exceed the threshold of 1% of own revenue collected, based on the calculation of their expenses. They did not 58

59 therefore qualify to claim their costs back from the Province. They did, however, receive financial assistance from the Provincial Department of Social Development and the district municipality. It is important to note that the Disaster Risk Management Unit has in this case an open agreement (emergency procurement) with the Council to incur expenditure during a disaster situation which is then approved afterwards (ex post facto). Fortunately, the local municipality does have a reserve fund from which funds can be transferred to the budgets wherever and whenever they are required. In terms of the MFMA, such transfers must be approved through the adjustments budget within 60 days after they have been incurred. Although they do not have funds that are earmarked in advance for disaster situations, the Council will always make money available for disaster such situations. The Council also does not put a limit to the funds that they make available for disasters. In such cases section 29 of the MFMA is activated and applied. The Disaster Risk Management Unit will also request additional funds when the next adjustments budget is tabled in Council to replace those funds that were used during the xenophobia crisis. This crisis eventually exhausted their budget. They are sure that the funds will be appropriated, since the danger of fires during the summer is looming and they need those funds to deal with such crises/emergencies as well. As indicated earlier, the supply chain management system and their policy make provision to deviate from the normal procedures, with the result that emergency procurement is not a problem. As far as MIG funding is concerned, this normally comprises funds that are utilised by the engineering department and the housing section of the municipality for the development of the infrastructure. Currently, the local municipality receive enough funds to cater for their needs, because they manage and utilise these monies well. In the case of the local 59

60 municipality, the funds are not utilised for disaster response or recovery, but only for larger projects. They realise, however, that such funds can also be utilised for preventive measures The case of Dr Kenneth Kaunda district municipality This district has indicated that they are not sure how to access contingency funding provided for by the provincial or national government once the threshold of 0,5 to 1,0 % of own revenue collected by the municipality has been exceeded, since they have not accessed such funding in the past. They still have to adapt their policy and procedures to cater for such arrangements. They have not used MIG funds in the past, but will consider this as an option in future for the purposes of rehabilitation and reconstruction after any disaster event The case of the City of Cape Town According to the City s Disaster Risk Management Centre, there is no access to contingency funding, unless they apply section 29 of the MFMA. They are therefore of the opinion that the funding arrangements in the National Disaster Management Framework have to be clarified, since such funding also an enabler that needs to receive the necessary attention. They are also aware of the National Disaster Relief Board and Fund- raising Act to which they can have recourse. They are, however, not clear about how those funds can be accessed. Something that should also be considered is the fact that a disaster is differently described in the Fund- raising Act according to how this is done in the Disaster Management Act. For them it is a pity that they do not have clear guidelines on how those funds can be accessed. They have also indicated that they have not received any MIG funds so far for recovery, rehabilitation or reconstruction efforts that the City undertakes after a disaster. If they do receive such funds their approach will be to appoint a project manager on a fixed term contract to manage the recovery, rehabilitation or reconstruction projects. Such a person will have to coordinate, on behalf of the Disaster Management Centre, those activities with the other directorates. 60

61 In other words, such a crisis should be dealt with as a post- disaster management project and managed outside the normal day- to- day running of the Centre, although they will still provide inputs into it The case of the Western Cape s Provincial Disaster Management Centre In the case of the Western Cape Provincial Government, the government departments, specifically those frequently affected by disasters, do not make provision in their budgets for response, recovery, rehabilitation and construction efforts. It is, however, possible for provincial government departments to reprioritise within their capital budget for infrastructure reconstruction. In the case of disaster, the relevant provincial departments have to reprioritise within their capital budgets, because they have to restore some infrastructure immediately. For that purpose, departments must shift funding within their budgets. A department, such as Transport,however, does not make any provision for it, because they may end up having unspent funds in their budget. As a result such a department will have to apply for funding from the national government. In general, one can conclude that departments are not making provision for infrastructure reconstruction. 7.5 Funding for education, training, capacity-building and research The experiences of the different categories of municipalities and a provincial centre will subsequently be outlined with regard to their funding for education, training, public awareness and research undertaken by the municipal and provincial disaster risk management centres. 61

62 7.5.1 The case of Stellenbosch local municipality The Disaster Management Unit of the local municipality is of the opinion that the District Disaster Management Centre only provides funding for training on an ad hoc basis. The reason proposed by the local municipality for this approach by the District Centre is the perception that the local municipality is financially strong and therefore does not have to receive funding from the district municipality. The local municipality, on the other hand, does not have specific funds available for disaster risk management training. The Disaster Risk Management Unit is currently exploring the possibility of learnerships in cooperation with the Human Resources section. The municipality does, however, have a central fund for training and a training committee. It is therefore expected that directorates and departments must indicate their training needs for inclusion in the work place skills plan (WPSP). Training is then provided, according to a plan which is then funded from the central training fund. The fund is therefore not only there to fund specific training, such as disaster risk management, but also to address other training needs within the municipality. As far as research is concerned, the Disaster Risk Management Unit does not have any agenda, plan or programme in place. They do, however, feel that there is a need for research in disaster risk management. If there is a need for research they will make use of consultants or of the services of the researchers at the University of Stellenbosch. The municipality entered into a Memorandum of Understanding (MOU) with the University a year ago to foster closer cooperation between the two institutions. Based on the MOU the University can now use the municipality for research that they want to undertake. The Disaster Risk Management Unit is, however, of the opinion that they should also provide more guidance in future regarding the aspects of disaster risk management on which research needs to be conducted. 62

63 7.5.2 The case of Dr Kenneth Kaunda district municipality Depending on the type of training, the municipality has a Skills Development Facilitator (SDF) that takes care of the training of staff in general. The municipality claims part of its skills levies back from the LGSETA when training is provided. When it comes to external providers, the Disaster Risk Management Centre has a contract with the NWU for conducting their disaster risk assessments and for the development of their disaster risk management plans; these plans also include capacity building. This agreement takes care of the formal training of their staff as well. The district does not have a dedicated budget for disaster risk management research. The risk profile of the district necessitates a variety of research interventions. An identified need is the determining of disaster risk trends and how these may be better managed. Their capacity to deal with some of the disaster management related matters is also not adequate. At the moment all the research that is required is conducted by the NWU in terms of the agreement, but in future more research will still be necessary The case of the City of Cape Town The City s Disaster Risk Management Centre has not received any SETA funding so far for the purpose of education, training and capacity- building. They have a WPSP (Workplace skills plan) and funding for that is included in their operating budget. Due to good planning and budgeting in 2007 for training, the Council allocated additional funding to the Centre in The increased staff component, as alluded to in previous sections, necessitates a much bigger training budget. They further obtain the training needs inputs for disaster management training from the various line- managers in terms of the WPSP. A large portion of the funding is directed at the development of a career path for the assistant disaster management officers. 63

64 In other words, the person comes in as an assistant disaster management officer and exits as a disaster management officer after two years. The programme is composed of various courses that these officers have to attend, as well as practical experience that must be captured in a portfolio of evidence. Research, on the other hand, is an area that is currently quite neglected. They do talk about the necessity for research, but so far they have not really had the time to consider it. Normally, they approach the tertiary institutions to assist them with that, such as the research done by Dr Ailsa Holloway at the University of Cape Town. They feel that more research should actually be done by the disaster risk management practitioners, since they have a lot of practical experience and access to data that can be useful when conducting such research. They also have a need to capacitate their staff to undertake research. As practitioners, they have participated in research projects in the past, but only to provide information. They have not initiated or taken responsibility for conducting any research. They do, however, finance research that has to be done when it is really necessary. It is, however, necessary that they should now consider the appointment of a professional officer who can take responsibility for such research. They would also like to have more guidelines on what constitutes research and how they should approach it. It is also necessary that they receive guidelines on areas of research that they should consider, since they do not have a research agenda or plan. They therefore definitely recognise the fact that research is important, also in the area of fire services. As a result, they envisage the need to work in future in closer collaboration with the HSRC and the CSIR, as far as research for fire services is concerned. The HSRC and the CSIR can then also make provision for the funding of research in their budgets based on topics provided to them by the Disaster Risk Management Centre. 64

65 7.5.4 The case of the Western Cape s Provincial Disaster Management Centre The Province s Disaster Management Centre has managed to obtain funding in the past from the Development Bank of South Africa (DBSA) for training. The DBSA has unfortunately not extended the duration of the funding and they have had to find other sources. As far as research is concerned, the Province does make some funding available to municipalities that have not completed their disaster risk and vulnerability assessments. The province has also commissioned a project to look at the grey areas in legislation in terms of the powers and functions of provinces and municipalities, specifically in terms of disaster risk management as well. Otherwise, they have not done any other research per se. There is, however, a need from the provinces side to undertake research. 8 CONCLUSIONS REGARDING FINDINGS Based on the findings of the research, certain conclusions can be made that should guide the development of a municipal funding model for disaster risk management. These conclusions will subsequently be outlined in terms of each of the funding areas identified in the National Disaster Management Framework. 8.1 Conclusions: Funding for start-up activities From the summary of the findings it should be clear that none of the municipalities, especially the district and the metropolitan municipalities, have received any conditional grants or subsidies from the national or provincial government for the establishment of a disaster risk management centre. In most cases, they have to provide such funds from their own budgets. It is, however, clear that district and metropolitan municipalities can request that MIG funding be provided to establish disaster risk management centres. This view was specifically supported by the Director and the staff of the Intergovernmental Relations (IGR) Unit at the National Treasury, since this conditional grant deals with the 65

66 development and maintenance of municipal infrastructure. Even at the provincial level the Provincial Disaster Management Centre of the Western Cape has a similar situation, since funding was not made available directly for the establishment of the Provincial Centre. Fortunately they could benefit from funding made available by the National Treasury for the improvement of the infrastructure for the emergency management services in the province. This is a good indication that a conditional grant will not be made available to provinces based on a counterfunding component. The ratio for such counterfunding was supposed to be 85 to 15; in other words the intention was that 15 percent of all start- up costs must be funded by the provincial government, and the other 85 percent by the national government. This is not possible, however, because the grant was never approved by the National Treasury. 8.2 Conclusions: Funding for ongoing activities As far as the ongoing activities of disaster risk management centres and units are concerned, it is clear from the findings of this study that all municipalities and provincial disaster risk management centres have to budget for funds (operating expenditure) that is required to sustain their ongoing daily activities and operations. There is definitely no evidence that the I- component of the equitable share of the revenue collected nationally, that municipalities should receive, has increased. It therefore becomes necessary that the planning and budgeting process of the municipal disaster risk management centres form part of the integrated development planning and medium- term revenue and expenditure budgeting process. The same principle applies in the case of the provincial disaster risk management centres, except for the fact that in the case of provincial departments, they refer to the strategic planning process. There is, however, no reason why municipalities should not be able to reprioritise the use of the equitable share that they received from the national government, and also to use a certain portion of it for the funding of any ongoing operations of their disaster risk 66

67 management centres and units. It was also clear that the provincial disaster risk management centre does not usually provide such funding to municipalities. 8.3 Conclusions: Funding for disaster risk reduction It was clear from the data and information obtained at the municipalities, that they do not budget for disaster risk reduction. Although this is an area that should actually be budgeted for by the various line- departments, it was clear that they do not understand how they can indirectly budget for disaster risk reduction and why it is important to do so. The same situation also prevails within the provincial government departments, where, with the exception of the Department of Agriculture, no other department did their planning and budgeting process with disaster risk management in mind, nor did they make provision for disaster risk reduction in their budgets. In the case of the municipalities, it was also clear that the communication and coordination in this regard are mostly done in an ad hoc manner and are not very coordinated, since the forums/committees where budgeting for disaster risk reduction are discussed do not function as well as they should. It was also clear that neither the municipalities, nor the provincial government have any opportunity where they could apply for funds from the NDMC for special, national priority risk reduction projects, which could have augmented their budgets. Since the case studies undertaken did not include a low- capacity, resource- poor municipality, it is not possible to indicate whether these municipalities have received additional funding from the NDMC, although all indications are that they have not. The intention of the National Disaster Management Framework was that low- capacity resource- poor municipalities should be identified through the creation of a composite index that takes into account the operating incomes of municipalities and their capacity classification, as determined by National Treasury. 67

68 Such a classification was made by the National Treasury for the purpose of implementing the Municipal Finance Management Act (Act 56 of 2003) and it can therefore be used to identify such municipalities. It is, however, doubtful that the low- capacity, resource- poor municipalities have received any additional funding from the NDMC for disaster risk reduction. 8.4 Conclusions: Funding for response, recovery, rehabilitation and construction efforts At the publication of this report, the municipalities used as case studies did not have the need to apply for contingency or emergency funding from the national government, since this can only be done once a disaster has officially been declared in terms of the provisions of the Disaster Management Act. In such a case it is also required that their emergency expenditure must exceed the threshold (0,5 to 1,0%), as determined by the National Disaster Management Framework. As a result they have spent these funds on smaller incidents from their own budgets after section 29 of the MFMA has been applied. In some cases, they have also received financial support from other organs of the state that had to deal with such issues as social welfare, the districts municipality, or the provincial disaster management centre, especially in the case of response and recovery. Businesses and the public also contribute to the relief or response efforts of municipalities and as such there should be a drive to establish better relationships with businesses and to involve businesses and the public to a larger extent in these response activities. As far as rehabilitation and (re- ) construction of the infrastructure are concerned, none of these municipalities have utilised MIG funding for rehabilitation or reconstruction purposes after a disaster event. In the case of the provincial government, it was required in the past that government departments affected by disasters need to reprioritise within their capital budgets to enable them to give immediate attention to critical infrastructure rehabilitation and reconstruction. 68

69 Thereafter they have to claim these expenses back from the national government, based on the assessment results provided to the NDMC by the PDMC. 8.5 Conclusions: Funding for education, training, capacity-building and research From the interviews conducted with the role- players at municipalities, it is clear that funding for education, training and capacity- building should be provided for in the budget of a municipality. The funds spent on education, training and capacity- building may be claimed back in terms of the skills levies that municipalities have to pay to the sector education and training authorities (SETAs), in this case the Local Government SETA. It is therefore necessary that municipalities ensure that their workplace skills plan (WPSP) is submitted to the SETA by the skills development facilitator (SDF) of the municipality. As far as research is concerned, municipalities can in many cases enter into agreements with higher education institutions (HEIs) to conduct any research that is required. The respondents at municipalities did, however, feel that research has to be undertaken to assist them in improving disaster risk management at municipalities. They should therefore take the lead or give direction with regard to the type of research that should be conducted and also become more involved in conducting the research themselves. That will also require that they be educated and trained to undertake such research. In the case of the metropolitan municipalities, the idea is that they appoint a professional person to conduct and coordinate the research at the municipality. That would also mean that they have to budget in the future for the execution of research projects, including the equipment and facilities required for such research projects. 69

70 9 RECOMMENDATIONS: A PROPOSED FUNDING MODEL FOR MUNICIPALITIES Based on the findings and conclusions, certain recommendations can be made in terms of a funding model for disaster risk management at municipalities. These recommendations are summarised in Figure 1, and should help to provide a concise overview of such a model. Figure 1 Municipal Disaster Risk Management Funding Model Main Funding Source Supplementary Funding Source Start-up activities MIG Virements On-going operations Equitable share (District) Virements Own budget Disaster risk reduction MIG Virements Response, recovery, rehabilitation and reconstruction Contingency Fund (NT) MIG Insurance Donations (public) Virements Education, training, capacity-building and research Skills levies SETA funding NRF funding Virements 70

71 Although Figure 1 may be self- explanatory to a certain extent, it is for completeness purposes necessary to explain the rationale behind the recommendations included in the model. These recommendations will subsequently be discussed in more detail for each of the funding areas identified in the Disaster Management Framework. 9.1 Description of the funding model It is important to note that in terms of the model a distinction should be made between the main funding source and the supplementary funding sources for disaster risk management at a municipality. Based on the overall findings of the study, it is necessary that municipalities view their own budgets as the main source of funding for all the activities and aspects of disaster risk management. The literature study and the findings of the study also assist in identifying supplementary funding sources for disaster risk management that can be accessed, depending on the circumstances and the level of integrated planning that is undertaken by municipalities, and specifically their disaster management units/centres Funding for start-up activities As indicated earlier, municipalities should budget for the financing of their disaster risk management centre or unit s start- up activities. Such a budget should include capital (facilities), as well as operating expenditure (salaries, stationary). If they have not properly planned for the financing of such expenditure, they may have to consider identifying savings or unspent funds in their budgets that can be allocated to the disaster risk management centre or unit in the form of a virement during the financial year for the start- up activities that must be undertaken. This will require some knowledge about the planning and budgeting processes of the municipality to enable the centre to lobby the top management and the council for the 71

72 allocation of the funds. It is, however, also possible to apply for MIG funding for infrastructure development (facilities) in terms of their integrated development planning process. In the case of MIG funding the municipal disaster risk management centres or units will have to submit a proposal/business plan to the national government according to which the funding may be considered and approved Funding for ongoing activities Funding for the ongoing activities or operations of a municipality s disaster risk management centre or unit should in the first place be the responsibility of the municipality and therefore be included in the budget of a municipality. In this case, most of the expenditure would be classified as operating expenditure and should therefore be catered for in the operating budget of the municipality. Municipalities should also consider using a portion of the equitable share of the revenue allocated to them in the Division of Revenue Act (DoRA) for the financing of expenditure related to the ongoing activities of their disaster risk management centres or units. In those cases where the municipality does not have enough funding available to finance the expenditure of a centre or unit s ongoing activities, they could also consider identifying savings or unspent funds in their budgets that can be allocated to the disaster risk management centre or unit in the form of a virement for the financing of its ongoing activities during the financial year Funding for disaster risk reduction In the case of funding for disaster risk reduction, the expenditure that should be incurred would not be budgeted directly for that purpose. In the integrated development plan of a municipality the development of infrastructure should be considered in terms of the possible 72

73 disaster risks that can be identified. In other words, any costs incurred for the development of municipal infrastructure should be aimed at reducing the disaster risks. As a result, it would not always be possible to calculate the exact amount of money budgeted and spent on disaster risk reduction, because the funding of it becomes indirect or hidden costs that will be incurred by the municipality. It is therefore not possible for the disaster risk management practitioners to budget for disaster risk reduction, unless there are specific projects identified for which such funding will be approved. In this case it is important that line- managers (HODs) (working through an institutional mechanism such as an inter- departmental disaster risk management committee) understand that when they budget for infrastructure development or any other development, they need to keep the disaster risks in mind by ensuring that such developments will reduce the risks. It therefore means that when line- managers apply for MIG funding, they will also consider the disaster risks when preparing their proposal or business plans. Again, MIG funding for municipal infrastructure development indirectly provides funding for disaster risk reduction and is not always seen as funding towards disaster risk reduction. As in the case of the other funding areas of disaster risk management, virements can also be used to fund some shortfalls pertaining to disaster risk reduction. This will also be considered as indirect funding towards infrastructure development projects and not as direct funding that will be included in the budget of the disaster risk management centre or unit. The cooperation of all municipal departments and the integration of all planning in the municipalities become consequently essential for the success of any ongoing projects Funding for response, recovery, rehabilitation and construction efforts Although municipalities cannot budget for contingencies, they can use section 29 of the Municipal Finance Management Act to incur emergency expenditure after approval by the 73

74 mayor. Such expenditure has to be reported to the bid adjudication committee for ratification if it exceeds the threshold amount of R (or if it is less, as stated in the supply chain management policy). The mayor must also report to the municipal council at its next meeting and it must be appropriated in an adjustments budget within 60 days after being incurred. In many instances this will require the re- allocation of funds within the budget votes of the municipality since money was taken from one or more vote to defray emergency expenditure that was not budgeted for at all. In some cases savings or unspent funds can be used as virements to replace the money that was used for emergency expenditure. As far as damages and losses are concerned, municipalities will also have to reprioritise within their capital budgets to make provision for any rehabilitation and reconstruction efforts regarding infrastructure after a disaster event. Obviously, if the costs of rehabilitation and reconstruction exceed the threshold amount (0,5 to 1,0 % of own revenue) municipalities can claim their expenses back from the national government, as soon as a state of disaster has been officially declared. These threshold amounts are not rigidly applied by the National Treasury. They merely serve as a guideline to municipalities, but if they experience problems in dealing with such expenditure they can still submit a motivation to the National Treasury to claim their expenses back. In the case of damages to infrastructure, municipalities can also apply for MIG funding through the normal processes and utilise it to cater for rehabilitation and reconstruction purposes. Such funding will then form part of the next financial year s budget allocations since it has to be included by the national government in the DoRA. It is, however, also important that municipalities consider insuring their infrastructure assets to create back- up financing for them when disasters strike. According to the literature study, this is a practice that is encouraged in many other countries. Although the insurance will cost them a certain amount of money per month or per annum, it will alleviate the pressure on their budgets when they incur expenses for rehabilitation and reconstruction after a disaster event. This could also be seen as a 74

75 legitimate option to make provision for contingencies/emergencies, since municipalities may not budget for contingencies or have any contingency funds. As far as relief or response efforts and recovery are concerned, the disaster risk management centres should also have good relations with the private sector and even the public at large that can donate food parcels, blankets or clothes and provide shelter to those who have lost their personal and household belongings and even property (the need for a detailed relief policy in each municipality therefore becomes crucial in order not to attract unsolicited and unwanted relief aid ). Although these donations received by municipalities are not funds that can supplement their budgets, they can be seen as funding that alleviates the pressure on the municipal budget and as such is important Funding for education, training, capacity-building and research All municipalities should have funding available for skills development, as required by the Skills Development Levies Act. In other words, they have to budget for training and capacity- building, but they can eventually claim a certain percentage of the skills development levies back from the relevant sector s education and training authority (SETA). Municipal disaster risk management centres or units can therefore ensure that they do have some money available for training if they include their training needs in the workplace skills plans (WPSPs) of municipalities. The SETAs also provide other funding for skills development if they are aware of the need and if it is properly motivated, including money for learnerships. In some instances the municipality may also identify savings or unspent funds in their budget that can be utilised for training. It is therefore the responsibility of the heads of disaster risk management centres to ensure that the municipality explore all these avenues for the funding of education, training and capacity- building issues. 75

76 As far as disaster risk management research is concerned, it may be appropriate for municipalities to enter into agreements with higher education (tertiary) institutions (HEIs). These institutions receive in many cases funding for research from the National Research Foundation and can use their postgraduate (Masters and doctoral) students to conduct the research required by the municipality; bursaries are usually available for such research projects. Such an arrangement should benefit both the municipality and the HEI, since the municipality will provide, and open up, its environment for the HEI to undertake the research, while the HEI will provide the expertise and funding to undertake the research. This should be a mutually beneficial arrangement which will also save the municipality money, but at the same time provide the necessary research outputs that are required by the municipality and the HEI. 10 MECHANISMS TO ENTRENCH THE RECOMMENDED MODEL It is important to bear in mind that the recommendations in the form of a funding model will only be implemented if a municipality has sound disaster risk management institutional arrangements, a policy and a plan, which are also included in and aligned with its integrated development plan (IDP) The municipality s disaster risk management policy The main and supplementary funding sources for disaster risk management should be included and described within a municipality s disaster risk management policy to ensure that the Council and officials have a clear understanding of, and mandate for, the utilisation of these funds. The policy should guide the Council and officials in the planning and utilisation of funds that can be made available for the disaster risk management function and activities. 76

77 Without such a policy, the officials responsible for disaster risk management normally find it difficult to obtain funding for this function and its activities The municipality s disaster risk management plan and the IDP Once the municipality s disaster risk management policy is in place, the disaster risk management function should ensure that a disaster risk management plan is developed based on the recommended model, which is aligned with the IDP, the medium- term revenue and expenditure framework (MTREF) of the municipality, as well as its indicated disaster risk profile. The guiding principle in this case is: What is planned for can be budgeted for. In other words, the funding for disaster risk management should be secured through a proper planning process. This includes planning for the funding that should be obtained from other external sources, to ensure that those options and opportunities are also considered. Eventually this funding should form part of the service delivery and budget improvement plan (SDBIP) of the municipality to ensure that the operational activities of the municipality concerning disaster risk management can be executed on an annual basis. 11 CONCLUSION It is clear from the study conducted that the recommended funding arrangements included in the National Disaster Management Framework for South Africa, are needed in order to cover the costs of the different disaster risk management activities. Frequently, these measures are not applied in practice by the different spheres of government. Based on the findings and conclusions drawn from the information obtained during the study a more flexible funding model has been developed to address the problem being experienced by municipalities, namely that: 77

78 Municipalities, especially districts municipalities, experience difficulties in making funding available for establishing and maintaining the disaster risk management function that is their responsibility in terms of legislation. It was, however, very interesting to note that when the data obtained from the different municipalities were analysed, there was almost no difference in the problems that the different categories of municipalities had experienced as far as funding for the disaster risk management function was concerned. This is a clear indication that it was not only an isolated problem within a specific municipality or category of municipality, but a general constraint across the board in all the municipalities. These conclusions were arrived at based on the case studies used for this project. They can therefore be generalised and applied to all municipalities. 78

79 12 REFERENCES Caballero, R., The future of the IMF and the World Bank. American Economic Review, 93(2), DPLG see Department of Provincial and Local Government Department of Provincial and Local Government., National Disaster Management Framework for South Africa issued in terms of the Disaster Management Act 57 of Pretoria: Government Printer. Engela, R., Memo: Policy proposals on emergency related expenditure. Pretoria: National Treasury. FFC see Financial and Fiscal Commission Financial and Fiscal Commission, Assessment of the Disaster Management Bill issued in February Freeman, P.K., Keen, M. & Mani, M., Dealing with Increased Risk of Natural Disasters: Challenges and Options. IMF Working Paper WP/03/197. Ghesquiere, F. & Mahul, O., Sovereign Natural Disaster Insurance for Developing Countries: A Paradigm Shift in Catastrophic Risk Financing. World Bank Policy. Research Working Paper WPS4345. Harrison, K., Navigating the grey areas: Reflections on the Western Cape powers and functions review process. Local Government Bulletin, 10(4), 17-19, Oct. Mahul, O. & Gurenko, E., The Macro Financing of Natural Hazards in Developing Countries. World Bank Policy Research Working Paper WPS

80 Olokesusi, Femi, Financing disaster mitigation in Nigeria: the imperative of public- private partnership. Disaster Reduction in Africa ISDR Informs, (6): 17-19, Dec. South Africa (Republic), Constitution of the Republic of South Africa, Act 108 of Pretoria: Government Printer. South Africa (Republic) Local Government: Systems Act 32 of 2000, as amended by Act 44 of Pretoria: Government Printer. South Africa (Republic) Disaster Management Act 57 of Pretoria: Government Printer. South Africa (Republic) Local Government: Municipal Financial Management Act 56 of Pretoria: Government Printer. United Nations Inter- agency Secretariat of the International Strategy for Disaster Reduction (see UN/ISDR). UN/ISDR., Living with Risk: A global review of disaster reduction initiatives. 80

81 13 ACKNOWLEDGEMENTS The researchers of Southern Business School and the African Centre for Disaster Studies, as authors of this research report, hereby want to thank the respondents of the three municipalities, the Provincial Department of Local Government and the National Treasury for the time they made available and the effort they put into providing meaningful information to conduct and complete this study, especially: Mr. Gregory Pillay (City of Cape Town Disaster Management Centre); Mr. Wilfred Solomons (City of Cape Town Disaster Management Centre); Dr. Martin van der Merwe (City of Cape Town IDP Unit); Mr. Johan Steyl (City of Cape Town Budget and Treasury Office); Dr. Kenneth Kaunda Districts Municipality Disaster Risk Management Centre; Stellenbosch Municipality Disaster Management Unit; Dr. Hildegard Fast (Western Cape Province - Department of Local Government); Mr. Schalk Carstens (Western Cape Province - Disaster Management Centre); Dr. Kay Brown (National Treasury); and Mr. Jonathan Patrick (National Treasury). 81

82 14 ANNEXURE A: INTERVIEW SCHEDULE INTERVIEW SCHEDULE (Municipalities) (Questionnaire for semi- structured, in- depth interviews) 1. Did your municipality receive any grants, including conditional grants or subsidies from the national or provincial government for the establishment (start- up activities) of a disaster risk management unit/function at the municipality? 2. Does your municipality receive any grants, including conditional grants or subsidies from the national or provincial government for the maintenance (ongoing operations) of a disaster management unit/function at the municipality and for disaster risk reduction activities? 3. Are you aware of any increase in the institutional (I) component of equitable shares received by the municipality to cater specifically for disaster risk management? 4. Does your municipality budget for the maintenance (ongoing operations) of a disaster management unit/function? 82

83 5. How much does your municipality budget for the maintenance (ongoing operations) of a disaster management unit/function? 6. To what extent do the different Departments of your municipality take disaster risk reduction into consideration when planning and budgeting for the different activities and projects for which they are responsible? 7. Have your municipality s budgets over the past few years been augmented by the application for funding to the NDMC or PDMC for special national or provincial priority risk reduction projects (do you receive additional funding from the NDMC or PDMC)? (Is the matching principle applied?) 8. Do you know how to access the contingency funding provided by the provincial or national government once the threshold of 0,5 to 1,0 % of own revenue collected by the municipality has been exceeded for response, recovery and rehabilitation and construction efforts in the case of disasters, and have you used this funding option in the past? 83

84 9. Have you used funds received through the conditional municipal infrastructure grant (MIG) for response, recovery and rehabilitation and construction efforts in the case of disasters? 10. How do you arrange for funds to cover the costs of education, training and capacity building for disaster risk management? (Own budget/seta funds?) 11. Have you required funding for disaster risk management research purposes in the past and for what purposes did you use it? 12. District municipalities: How do you co- ordinate funding for disaster risk management in your district? In other words, do you ensure that the local municipalities also contribute funding to the maintenance (ongoing operations) of the disaster management centre and for disaster risk reduction? (IDP process?) 84

85 13. Local municipalities: Do you contribute funding to the maintenance (ongoing operations) of the disaster management centre of the district municipality? (IDP process?) 14. Have you considered leveraging resources from the private sector for the maintenance (ongoing operations) of the disaster management centre and for disaster risk reduction? (PPPs?) 15. Have you considered obtaining funds from other organisations or institutions/public entities, such as the Development Bank of Southern Africa? 16. Have you ever considered the use of virements to defray expenditure in the case of response, recovery and rehabilitation and construction efforts in the case of disasters? 85

86 17. To what extent have you insured the infrastructure within the municipal area, as well as its facilities against disaster risks with an insurance company? 18. Has the mayor of your municipality needed to authorize any unforeseen and unavoidable expenses in an emergency or in any other exceptional cases (i.t.o. s.29 of the MFMA) in the past for which no provision was made in an approved budget, and had to be appropriated in a budget adjustment? 19. Have you ever declared a disaster situation and what procedures did you follow to obtain funding from the provincial or national government/disaster management centre for response, recovery and rehabilitation, as well as for construction efforts? 86