GAUTENG wants a change in the funding model for provinces, and it will, on the political front, take this battle to the African National Congress (ANC) national policy conference next week.

The ANC conference is also expected to decide whether to retain or reduce the number of provinces, amid reports that provincial party bosses are generally reluctant to surrender their power bases.

An earlier ANC summit on provincial and local government concluded that the status quo was not viable.

The Treasury's revenue division prioritises provinces with a higher rural density, leaving Gauteng lagging, despite its 34% contribution to SA's gross domestic product. Gauteng Premier Nomvula Mokonyane said on Friday the province could claim only 4% of peri-urban - not rural - settlements.

Statistics appear to support the argument for a different provincial funding model, which could include allowing the provinces to raise capital from the market. About 41,9% of Gauteng's 11,3-million inhabitants originate from beyond the province, Ms Mokonyane said. The population was growing at nearly 3% a year, while the available resources were shrinking - mainly linked to the 2009 global economic recession.

Gauteng had overtaken KwaZulu-Natal in terms of population size, but KwaZulu-Natal got the larger budget, Gauteng finance MEC Mandla Nkomfe told Business Day last week. Gauteng's R73bn this year is SA' s second-highest budget.

Mr Nkomfe said the province was not being compensated sufficiently as the economic engine of the country. "You need a national government that accepts that for the country to move forward you have got to support provinces like Gauteng."

Mr Nkomfe said the capacity of provinces to borrow was limited by law, particularly the Public Finance Management Act.

But the Treasury's spokesman, Jabulani Sikhakhane, said the level of underspending by provinces and municipalities showed that they did not have the capacity to absorb and spend bigger budgets.

"National government would love to increase transfers to provinces for investment in infrastructure, however, such transfers must be matched by increased spending capacity," Mr Sikhakhane said.

Mr Nkomfe said there could be an increase in the levy for gambling and tourism in the near future, in a bid to grow provincial revenue.

But while this move was likely to bring more money, it could also affect the cost of doing business in Gauteng.

The auditor-general business executive in Gauteng, Mabatho Sedikela, said there were plans to look into the long-term financial health of provincial departments, in a bid to assess their sustainability.

stones@bdfm.co.za