Abstract
M.Com. (Economics)
The primary purpose of this study is a theoretical analysis of the allocation of the primary functions of the authority, with specific reference to the distribution function in a system of fiscal federalism in South Africa. An effort is made to find an answer to the question: On what level of government should the various functions of authorities and, in particular, the distribution function, be executed? South Africa is on the threshold of a new democratic system with an interim constitutional dispensation and for this reason, existing views concerning the distribution function in South Africa were also briefly investigated. The method of research comprised a literature study. In chapter two the rationale for government functions I in other words, the allocation, distribution and stabilisation functions, are theoretically analysed. The analysis also defines the nature of collective goods and services. This definition is essential because it has to serve as a point of departure in the discussion of the spatial dimension of government
functions. Since the distribution function represents the central theme of the study, this function is discussed in more detail than other functions. It appears that there are different approaches to the distribution function and that it can be implemented in numerous ways. The approaches can be classified into two theories: Firstly, there is the theory which advocates equity in the execution of the distribution function. This view requires the centralisation of authority in a system of fiscal federalism. The second theory is in favour of the promotion of decentralisation of authority on the basis of economic efficiency. In chapter three the spatial aspects of government functions
are concentrated upon more specifically. The spatial aspects of the allocation function indicate that economic efficiency is promoted by effective decentralisation so that autonomous sub-authorities can accept responsibility for the provision of collective goods and services with limited geographical advantage. According to this, the national government will only be responsible for services which have a national tenor, such as defence and foreign affairs. An analysis of the stabilisation function indicates that subnational authorities cannot apply stabilisation management in an effective manner. There is considerably less consensus about the allocation of the distribution function. Various reasons exist as to why the distribution function should be vested in the central authority. The possible mobility of individuals, the necessity for the establishment of minimum standards of service and the desirability of central control over fiscal resources are the primary motivation for the execution of the distribution function to be vested in the central authority.