Municipalities urged to spend unallocated budget maintaining infrastructure

Colly Mata, Executive: Commercial and local authorities sales at Lion of Africa Insurance

In the run up to Wednesday’s municipal elections, municipalities, which recently had billions withdrawn for failing to spend budgets allocated to them, should start using this cash to maintain their infrastructure. This will save them millions in potential claims and can also reduce insurance premiums.

This is according to Colly Mata, Executive: Commercial and local authorities sales at Lion of Africa Insurance, who says failing to upgrade infrastructure may leave many municipalities open to sizeable liability claims. “Municipalities should also take advantage of the discounts offered by some insurance companies to encourage large-scale maintenance of national infrastructure.”

“Many insurance companies implement a special discount for municipalities that contract with private maintenance partner. This saving is over and above the savings that are as a result of the reduction in claims and is further justified by the significant financial benefits brought about by regular maintenance.”

Treasury recently withdrew R2.5bn in infrastructure grants from eight provinces because of their inability to spend the money in the 2010-11 financial year. The unspent funds amounted to 22% of the total R11,3bn grant allocation to provinces for infrastructure, which is intended for the construction, maintenance, upgrading and rehabilitation of new and existing infrastructure in education, health, roads and agriculture.

Mata says the majority of claims on municipal infrastructure arise as a result of insufficient maintenance. “This is not necessarily due to negligence on the part of municipalities but simply infrastructure failure as a result of lack of maintenance.”

“It is very much in the interests of municipalities to allocate some of this budget to ongoing maintenance of infrastructure. This will this help to avoid paying for costly large-scale replacements. The fact is that maintenance is far cheaper than replacement. On top of this, municipalities will also pay cheaper insurance premiums due to their proactive management of the risk,” says Mata.

He explains that many South African generators are fitted with switch gear which is designed to protect the transformer from lightning strikes. “As soon as the switch gear detects lightning within a certain radius of the transformer, it automatically shuts down the transformer – thereby protecting it from collateral damage in the event of a direct lightning strike.”

However, due to a lack of maintenance in many areas, these switch-gears have fallen into disrepair and are no longer working, resulting in unnecessarily high costs when entire transformers need to be replaced.

Mata believes that the upgrading and maintenance of infrastructure should become part of the municipality scorecards in order to be truly effective. “It is important that there is regular assessment of the state of infrastructure – and it needs to become a strictly enforced measure of a municipalities’ performance. It is not a simple case of finding ways to spend the money. It is an effort to improve the quality of life of people living in poorly maintained environments.”