BUSINESS is good in Ekurhuleni, according to the metropolitan council's latest marketing campaign which is aimed at luring investment to the East Rand.

But the campaign does not tell prospective investors that Ekurhuleni failed to spend 70% of its R757m capital budget in the financial year ending this month. The funds were earmarked for infrastructure development and maintenance.

Failure to spend 70% of a capital budget goes against the local government white paper and the constitutional obligations placed on metropolitan councils to deliver services and stimulate local economic development.

The reasons for the failure to spend the money range from a lack of project management skills within the council, late approval of loans by funders like the Development Bank of Southern Africa, to staff shortages.

Ekurhuleni, which amalgamated 11 former local authorities on the East Rand after the 2000 local government elections, is a microcosm of the challenges faced by this level of government as it transforms itself.

The challenges are not insurmountable but require a special breed of managers and politicians who have the technical know-how and understanding of what the concept of developmental local government entails.

Ekurhuleni executive mayor Duma Nkosi says the municipality "is still evolving".

"Most of our plans and programmes are still dealing with the backlogs of these towns and the efficiency of our 15000 employees gets slowed down in the process," he says.

Nkosi says the delivery system needs to be improved and a process of identifying backlogs and bottlenecks, for example, in planning and implementation, is already under way.

"We do not just want to take the view that the organisation is new. We are asking departments to tell us how they did for the 2002-03 financial year in terms of their priorities, because we made financial allocations for these," says Nkosi.

There is still a big gap between the Integrated Development Plan process, which is a municipality's business plan, and the budgetary process. Emphasis in the new financial year would be on how to align the two.

"Once we get that right, we will be able to monitor implementation. The role of the community is also very important because they are the ones who will be able to tell us if there is no activity on the ground," Nkosi says.

This, he says, will affect service delivery for now.

But it will improve drastically if communities get more involved in the Integrated Development Plan and budget processes.

The Democratic Alliance (DA) leader in Ekurhuleni, Eddie Taylor, says the reason for the nonexpenditure is understaffing in departments such as roads and civil engineering.

Although a new structure for the council was approved last year, many positions had not been filled.

Taylor also blames the slow process of intergovernmental allocations for the council's failure to spend its capital budget.

"Their budget cycle does not coincide with ours. We tend to get money from January and we have six months to spend it. It's a serious structural problem," Taylor says.

Another problem, says Taylor, is bad budgeting. The council has set aside R1bn for capital spending in the next financial year, beginning in July, despite the fact that it did not have the capacity to spend R757m.

He says Nkosi procrastinated on filling positions in the new council structure. "It is not high enough on his agenda. We have to make sure that service delivery departments are fully up to staff complement."

Nkosi says the council is busy with placement of its 15000 employees before it can recruit from the outside. This process is expected to be 80% completed by the end of this month.

"We lack people with appropriate skills and this does affect service delivery. These people who we are placing need to be appropriately skilled. The challenge is to skill and capacitate them in terms of their work," Nkosi says.

"Another risk is that we would have to get people with potential and skill them, and this process will impact on service delivery. If we go outside, then we will have to retrench people who have worked for the council for more than 20 years."

Jackie Manche, deputy director-general of institutional reform and support in the provincial and local government department, says the problems faced by Ekurhuleni are transitional.

As a result of amalgamating 11 former local authorities, planning processes are taking longer than in other municipalities.

"Ekurhuleni has much more prolonged transitional effect. There is bound to be a lag in spending capacity."

She says Ekurhuleni has a good leadership and is very stable. "Our monitoring tells us that this is not going to be experienced again. There is stability in the system."

The first two years following the first democratic local government elections were difficult for municipalities and it is only now that there is an upsurge in capital spending for most of them.

"The problem is not peculiar to Ekurhuleni. All the country's municipalities experienced it. We are not terribly worried, but concerned, " says Manche.