Cooperative Governance & Traditional Affairs: Acting Minister's Budget Speech

 

Address by the Acting Minister for Cooperative Governance and Traditional Affairs, Honourable Nathi Mthethwa, on the Budget Vote 2011/2012 in Parliament, Cape Town

31 May 2011

Honourable Speaker, Ministers and Deputy Ministers, Distinguished Members of the House, MECs, Executive Mayors, Mayors and Councillors, Traditional Leaders here today, Chairpersons of Entities, Distinguished Guests, Ladies and Gentlemen.

We are privileged to be afforded the opportunity to present the integrated Budget Vote for the Departments of Cooperative Governance (DCoG) and Traditional Affairs (DTA) for the financial year 2011/2012. This Budget Vote is particularly significant and historic in that it takes place in the context of the successful conclusion of the third democratic local government elections held on 18 May 2011.

Honourable Members, for the first time 10 055 council seats which includes 4277 wards, were contested in 8 metropolitan councils, 44 districts and 226 local municipalities. The number of Councillors from the 2011 election has increased by 12.3% and 8.5% from the 2000 and 2006 elections respectively.

The holding of these elections under free and fair conditions is indeed a true testimony to the enduring and maturing democracy. The voter turnout of 57.54% was the highest ever since 2000 and the most peaceful for local elections. You have all done the country proud! Our appreciation goes to the Independent Electoral Commission (IEC) and all stakeholders in ensuring such successful elections.

Department’s response to the Parliamentary Ad-Hoc Committee Report on Service Delivery

The Department welcomes the report prepared by the Parliamentary Ad-Hoc Committee on Service Delivery. The report is consistent with and confirms the findings of the comprehensive assessment done by the department with regard to the challenges and weaknesses in our system of local government. We will be working closely with Provinces in processing our response to the report.
 
In this regard, the department has presented the Ad-Hoc Committee report with an implementation Plan to the Local Government MinMec in December 2010.  The report was circulated to all provinces for consideration and recommendations. Thus far the Department has only received four provincial reports namely, Limpopo, Eastern Cape, Northern Cape and North-West. In this regard, significant progress has been made on some of the national areas that cover the following areas:

• Governance
• Corruption
• Service delivery
• Finance
• Communication and Sectoral Inputs

The department together with provinces will finalise a comprehensive response to tackle the issues raised in the report of the Ad-hoc Committee.

How has the Department improved since the last Budget Vote

Honourable Speaker, the restructuring process of CoGTA has been completed with most of the posts at the top management structures of both the Departments of Cooperative Governance (90%) and Traditional Affairs (83%) filled. The restructuring exercise provided a unique opportunity to re-organise departmental resources align the programmes and recruiting additional and new skills that are critical in the implementation of the departmental programmes.

Honourable Speaker, in his State of the Nation Address on 10 February 2011, His Excellency, President JG Zuma highlighted the tremendous progress that our country has made thus far in delivering basic services. He also warned that whilst many South Africans celebrated the delivery of houses, electricity or water, there are many others who are still waiting. A stark reality is that the legacy of decades of apartheid underdevelopment and colonial oppression cannot be undone in only 17 years. In this regard, more resources have been made available to address the needs at local government level in order to accelerate service delivery.

Firstly, municipalities are currently receiving 8.7% of the revenue divided between the three spheres of government in 2011/12, which is projected to rise to 8.9% in 2012/13 and 2013/14. National transfers to local government have increased substantially, and will amount to over R70 billion in budgetary assistance and infrastructure grants in the 2011/12 year.

Secondly, the annual expenditure data from National Treasury, on aggregate, suggests that local government is not failing as dismally as perceptions suggest e.g. expenditure in the sphere has increased from R45.8bn in 1997 and most dramatically, to R232.6bn last year. Notwithstanding these improvements, there is still a need to increase both the capacity of municipalities to spend but also the fiscal support to municipalities.
 
Ever since the adoption of the LGTAS by Cabinet in December 2009, indeed significant progress is being made at a municipal level to implement the LGTAS.

Operation Clean Audit 2014

The following municipalities received Clean Audit reports from the findings of the Auditor-General in 2009/2010 financial year, and the AG has commended the active leadership role of Mayors and Councillors in their oversight to improve governance and financial management systems:
 

• Metsweding District Municipality in Gauteng, Ehlanzeni District Municipality, Steve Tshwete Local Municipality and Victor Khanye Local Municipality all in Mpumalanga, Frances Baard District Municipality in Northern Cape, Cape Town in Western Cape and Fetakgomo Local Municipality in Limpopo.
• Furthermore, for the first time all municipalities in KwaZulu-Natal submitted their annual financial statements on time. In total, 53 disclaimers against the 85 reported in the previous year.

Municipal Turn Around Strategies

Over the past financial year COGTA concentrated on providing institutional support to municipalities to develop their municipal specific turn around strategies. To date 90% of municipalities have their own Municipal Turn-around Strategies (MTAS), which have been incorporated in IDP’s.  Part of the management of the transition after the elections is to ensure that the new Councillors implement the MTAS priorities in the IDPs.

The election of new Councillors provides COGTA with an opportunity to accelerate the implementation of the Local Government Turn Around Strategy. In this regard, the department will be undertaking Provincial Road shows/Summits starting in June till October 2011, with the objective of ensuring that the new leadership of LG is thoroughly prepared to lead in the programme of turning around our municipalities into effective, efficient, responsive and accountable institution of government, as expected by our people.

Induction Programme for incoming Councillors

• CoGTA is working in partnership with SALGA to prepare for the Councillor Induction Programme (CIP) for 2011/12 financial year. This is aimed at ensuring that the newly elected Councillors are capacitated with a general understanding of their leadership role, legislation that guides local government, key municipal processes, developmental Local government and service delivery. In addition, COGTA will ensure that newly elected Councillors are equipped to accelerate the implementation of LGTAS so that they can hit the road running.

Clean Cities and Towns

• CoGTA has launched the Clean Cities and Towns pilot programme respectively in Mbhashe Local Municipality (Elliotdale) on 21 April 2011 and Ingquza Hill Local Municipality (Flagstaff and Lusikisiki) on 13 May 2011 in the Eastern Cape Province. A key priority will be to coordinate support from all relevant stakeholders across the country. This will focus on greening initiatives, public education campaigns to promote beautification and cleaning of cities and towns. This campaign is designed to ensuring that we create an enabling environment to attract investors in municipalities, healthy environment for the communities as well as job creation.

Municipal System Amendment Bill
 

• The Municipal System Amendment Bill was finalised by both Houses of Parliament on April 2011. This Bill sends a clear signal that our municipalities must and will be more professional in the manner in which they do their business by ensuring amongst others that competent and well qualified officials are appointed to provide the best possible service to our people; regulates various matters of human resources management in a manner that provides uniformity and predictability; deepen accountability by the senior municipal officials to the Council and by the same token places certain obligations on politically elected officials.
• The Bill also prohibits municipal managers and those directly reporting to them Section 57 employees) from holding any position as office bearers in any political party; and finally it makes the provision for organized local government to consult with the minister responsible for Cooperative governance and Traditional Affairs prior to entering into negotiations with the Local Government Bargaining Council.

Access to Services

In his State of the Nation Address, the President has stressed that service delivery is of pivotal importance. We are happy to report that in this regard, demonstrable progress has been recorded in the provision of water, sanitation, electricity and refuse removal as well as the infrastructure that goes with it. However, it is our considered view that we need to increase the provision and quality of services with specific focus on rural areas. 

The Municipal Infrastructure Grant (MIG) is the key instrument being used by municipalities to access infrastructure funding for their capital expenditure projects.  The vast majority of municipalities in the country have generally improved expenditure on the MIG. We acknowledge that some have challenges and these are the municipalities that we will pay special attention to in the period ahead.

As at the end of April 2011, four (4) provinces have spent over 70% of their MIG allocation with one quarter still to be accounted for. These include the Eastern Cape, Free State, Gauteng and KZN. Provinces lagging including the Western Cape, Northern Cape, North West, Mpumalanga and Limpopo.

The Department will transfer R11.4 billion of MIG to municipalities this financial year. It is however, important for municipalities to maintain their infrastructure to improve the quality and reliability of services. In this regard the Department will be working with the AG, Ministry in the Presidency and National Treasury to strengthen monitoring and evaluation on capital expenditure for bulk infrastructure.

Furthermore, a Special Purpose Vehicle will be implemented in order to accelerate support in the delivery of bulk infrastructure and provision of requisite skills to municipalities.

Job Creation

The creation of jobs as an important priority of government’s fight against poverty is also finding meaningful expression in the CoGTA programmes. The Community Work Programme scaled up significantly in April 2010 to March 2011 with a total number of 89,698 work opportunities created.

Traditional leadership institutions have played a critical role in creating employment and generation of wealth. They have identified land suitable for industrial and agricultural purposes in rural areas and pilots are already being rolled out in the following provinces, KZN, Limpopo and the Eastern Cape.

Supporting the Human Settlement Outcomes

Honourable Speaker, in support to the Human Settlements Outcome, CoGTA will be working closely with municipalities and traditional leaders to release the land for development. We will also provide institutional support to municipalities that have been granted housing accreditation status. The programme will be in the six metropolitans, two districts (Frances Baard and Pixley ka Seme) that were granted Level 2 Accreditation status for housing provision.

Refined Ward Committee Model

In this financial year CoGTA will give particular attention to strengthening the capacity of the Wards.  This will help to enhance meaningful public participation and strengthen democratic and developmental local government system. In this regard engagement with community constituencies and grassroots civil society organisations will be intensified.

Improve Municipal Financial and Administrative Capability

Another key focal area for CoGTA is the improvement of financial and administrative capability of municipalities. 103 Municipal Public Accounts Committees (MPACs) have been established to date. Provinces then developed action plans to address previous audit outcomes and now monitor the implementation of their action plans. Furthermore, individual or shared Internal Audit Units have been established in 263 municipalities, and in 268 municipalities individual or shared Audit Committees have also now been established.

Our commitment as well as capability to uproot any manifestation of corruption continues unabated. An Inspectorate on fighting Fraud and Corruption in Provinces and Municipalities has been established.
We are also proceeding to work closely with law enforcement agencies such as the SAPS and the SIU. Any attempt to steal public money and resources meant for the poor and vulnerable will be dealt with vigorously.

Single Window of Coordination

In our quest, to strengthen the coordination across the three spheres of government as well as move beyond coordination towards better performance, service delivery and accountability, the Department will be processing two critical policy documents, a Green Paper on Cooperative Governance and a Review of the LG White Paper.

Bills for 2011

The following Bills and amendments to legislation will be introduced in Parliament in 2011/12 with the intent of removing all obstacles that hinder service delivery:

• Municipal Property Rates Amendment Bill, 2011
• National Traditional Affairs Bill
• Monitoring Support and Intervention Bill

Policy and initiatives on traditional leadership and institutions

The strategic role of the new Department of Traditional Affairs is to ensure that the institution is transformed and integrated into the democratic governance system.  It will also partner with the Khoi-San leadership and communities.

The members of the Commission on Traditional Leadership Disputes and Claims assumed duty on 1 January 2011 and their term will be for a period not exceeding five years. The Department of Traditional Affairs is tasked with ensuring that the Commission operates well and in close contact with the Provinces. The Commission will be finalising over 100 claims and disputes during this financial year.

The DTA also coordinated the project on the assessment of the state of governance within the area of traditional affairs. To date, six provincial assessments were conducted in Northern Cape, Mpumalanga, Free State, Eastern Cape, Gauteng and Limpopo, whilst the North West and Kwa-Zulu Natal provinces will be assessed at a later date. The preliminary findings from these assessments revealed the following cross-cutting issues:

• Support to the institutions of Traditional leadership is minimal in most provinces;
• Limited resources to support the institutions; and
• Poor relations between elected local government Councillors and traditional leaders, in some provinces amongst other things.

The national composite report will inform a number of the Department’s projects for the next MTEF, including a sector wide strategy.

The Department of Traditional Affairs has commenced with the work to consolidate the Traditional Leadership and Governance Framework Act, 2003 and the National House of Traditional Leaders Act, 2009, into a single piece of legislation. This has resulted in the drafting of the National Traditional Affairs Bill which will ensure an integrated approach in dealing with matters relating to traditional affairs. In addition to the consolidation of existing laws, the Bill seeks to provide for the recognition of Khoi-San communities, their structures and leadership positions.

Local Government is Everybody’s Business. Be Part of It!!

In conclusion, we can say that we will achieve a better life for all our people if national and provincial government work together to support local government in achieving service delivery outcomes. We recently visited Dipaliseng in Mpumalanga and observed that an integrated approach of government can indeed ensure effective delivery of services and we call upon Members, the media and all stakeholders to visit that area to see for themselves.  Most of the demands by the local community have been met but more still needs to be done.

Lastly, Local government has also a responsibility to work better with communities to ensure that all South Africans are active participants in the development of the areas where they live. We owe it to our children and future generations to make Local Government Work. Local Government is Everybody’s Business. Let us all Be Part of It.

Issued by: Department of Cooperative Governance and Traditional Affairs
31 May 2011

 

Yunus Carrim Deputy Minister of Cooperative Governance and Traditional Affairs
 
Need for more integrated cooperative governance system Theres plenty talk about the need for changes to the current local government model within CoGTA, other organs of state, the media and the public. This has intensified with the local government elections. And so it should, so it should!
 
Most of us agree there should be changes to the model. What we may disagree about is exactly what these changes should be and at what pace they should be effected. We may also disagree about to what extent, if at all, the Constitution should be changed. But if any new model consensually decided on is to work, a fundamental aspect would have to be a new local government financial system. It is on this and other financial issues that I will focus.
But we need to be clear at the outset. Of course, municipal councilors and officials must take their fair share of blame for the inadequacies of local government. But so too must provincial and national government.
We have failed to assist local government effectively. Moreover, some of the key issues that municipalities have to respond to are more structural in nature and far more the responsibility of national government.  This would include the slow-down in the economy, high unemployment, population changes, in-migration to urban municipalities, the high number of indigent residents, and aspects of climate change.
 
Municipalities bear too much of a burden for what are mainly thechallenges of national government.        
We are not a federal state. We are a unitary state with some federal features. Fundamentally, we have forged our own, unique cooperative governance system in which there are three interrelated and interdependent, if distinct spheres. 
And, given the structural challenges confronted by the country as a whole, and the nature of our three-tier government system, ultimately, the inadequacies of local government are a reflection of the failures of the cooperative governance system as a whole. So all three spheres of government have to work far more effectively together to ensure that local government significantly improves service delivery and development.
 
Part of this entails shaping a new local government financial system in which national government assists local government with both more funds and developing the capacity to more effectively spend the funds.
 
Some challenges with the current financial system So what are some of the challenges of the current local government financial system? A key premise of the current financial model is wrong.
 
Its based on the presumption that municipalities can raise 95% of their own revenue. But this was the case before 1994 when municipalities had much smaller boundaries, mostly excluded the African majority, and had a limited service delivery role!  It cannot apply to the new municipalities, with their larger boundaries, significantly bigger
numbers of residents, and expanded developmental role.       
 
Clearly, local government needs to be allocated more funds from the national budget. But this, in itself, will not solve its financial problems. Local government will have to be assisted with capacity to spend its funds more productively and effectively.  A key part of the extra funds to municipalities can be allocated for capacity-building.
 
Many municipalities do not have sufficiently qualified people to manage their funds effectively. Poorer municipalities are unable to pay for the technical skills they need. In the 2009/10 financial year, municipalities were unable to spend 17,1 % of their capital expenditure.
 
Some municipalities also mismanage their funds, using them unproductively or for purposes that do not serve service delivery and development goals.
 
But municipalities also need to raise more of the reven ue due to them, especially from those who can afford to pay. By December 2010, the municipal debt had reached R62.3 billion. 61.9 % (R38.3 billion) of the debt owed is owed by residents, 20.7 % (R12.8 billion), by businesses,
5.1 % (R3.1 billion) by national and provincial departments and 12.4 %
(R7.6 billion) by others. These others refer to, among others, debtors in respect to traffic fines, dumping sites and cemeteries.
 
Some municipalities, especially in the rural areas, are technically unviable  they do not have a minimal economic, financial or revenue base. The majority of the people living in these municipalities are indigent. These municipalities depend substantially on intergovernmental transfers to survive.
  
Then there are the unfunded mandates  municipalities fulfill provincial functions like libraries, aspects of health and social services, including early childhood development, and homes for the elderly, disabled and abused women. Municipalities get no or little money for this from the provinces!  
 
District municipalities are seriously hampered by the withdrawal of the Regional Services Levy from businesses which has not been effectively replaced.
 
Despite its huge responsibilities, local government gets at present only 8,7% of the national revenue. While this represents a significant increase from the 4,7 % of the budget local government received in 2006, it is still not enough. There are inadequacies in the formula used to decide the equitable share allocation to municipalities.
 
So there are these and other challenges. What then do we do?
 
Responding to the Challenges
  
REVIEW OF INTERGOVERNMENTAL FISCAL SYSTEM The first most fundamental aspect is to acknowledge that even if municipalities were to raise all the funds due to them and effectively spend all their money, they would still not be able to properly fulfill their expanded responsibilities. The answer is not to constrict national allocations to local government  but to allocate adequate funding AND assist with capacity-building so that the funds can be effectively and productively spent. Moreover, an important chunk of the extra funds should be allocated for capacity-building and a reasonable system can be found to allocate the funds incrementally, and at different times to different municipalities as their capacity develops. This funding approach would also be consistent with the differentiated local government model that is likely to emerge.
 
There needs to be an expeditious and significant overhaul of the current Intergovernmental Fiscal System, including the formula for the equitable share  the allocation of money from the national budget to each sphere of government. But there also needs to be a review of the formula used to distribute the equitable share among the
278 municipalities. The formula needs to directly take into account the specific spatial development patterns, extent of indigent residents, capacity to raise revenue and cost of providing services of a municipality.
 
INTENSIFYING CAPACITY-BUIILDING PROGRAMMES The financial and other capacity-building programmes of municipalities need to be intensified. CoGTA is working with National Treasury, the Auditor Generals Office, SALGA (South African Local Government
Association) and other institutions to ensure this. Among other aspects are the following: 
 
▪ Cooperation with National Treasury and University of Witwatersrand to provide a Certificate Programme in Management Development for Municipal Finance.
 
▪ Cooperation with the South African Institute of Chartered Accountants on  the Local Government Accounting Certificate targeted at municipal finance officials below accountants  - debtors' control clerks, tender staff, cashiers, bank reconciliation administrators and others.  This is a SAQA (South African Qualifications Authority) recognised qualification at NQF (National Qualifications Framework) level 3. The current intake is 2000 learners in the 12 months pr ogramme which involves both contact training and workplace practical training.
 
▪ An advanced certificate at NQF level 4 is being piloted for learners who have already completed the certificate. There were 110 learners last year in this programme, which seeks to provide a more in-depth knowledge and competence of key technical areas of accounting e.g presentation of financial data, operating a computerised accounting system, recording and evaluating costs and revenues, etc.
 
The Municipal Systems Amendment Bill, recently passed by parliament, which is aimed at the greater professionalization of the administration in municipalities, including through providing for minimum qualifications for senior managers, will also assist in strengthening the financial capacity of municipalities.
 
The private sector can also play a useful role in assisting municipalities with their financial management challenges, as is happening in some municipalities. CoGTA will be intensifying our Business Adopt a Municipality campaign.
 
 
DEBT COLLECTION, BILLING AND REVENUE-ENHANCEMENT As part of the LGTAS, (Local Government Turnaround Strategy), CoGTA is in the process of developing a revenue enhancement programme to support municipalities to improve their revenue collection. The revenue enhancement programme is to seek to:
 
As part of local government turn-around strategy, we are in the process of developing a revenue enhancement programme to support municipalities to improve their revenue collection. The revenue enhancement programme is to seek to:
 
▪ Ensure municipalities have credit control and debt collection
policies that have been through a public consultation process
▪ Support municipalities to develop billing systems with accurate
property data and customer information
▪ Ensure that municipalities improve customer care management by
responding timeously to queries.
▪ Provide guidance to assist municipalities to write off
irrecoverable debt 
▪ Implement a code of conduct to ensure that officials and
councilors are not in arrears in payment of municipal bills. As government we need to provide leadership to citizens in payment of our municipal bills.
 
As government we also need to organize ourselves better to ensure that all government debt owed to municipalities is paid.  COGTA is in discussions with the Presidency, National Treasury and Public Works Department to find ways to address the challenge of municipal debt owed by government departments. These issues are also to be taken to the Presidential Coordinating Council for action.
 
IMPROVING AUDITS
The Operation Clean Audit campaign, which is aimed at ensuring municipalities receive unqualified audits by 2014, needs to be intensified. The campaign aims to strengthen the capacity of municipalities to ensure efficient financial management, accountability, transparency and value-for-money activities. Improved financial systems will lead to greater service delivery and development.
 
As part of the campaign 103 municipalities have now established Municipal Public Accounts Committees. Individual or shared Internal Audit Committees have been established in 263 municipalities.
  
There has certainly been some progress in the audit outcomes of municipalities, even if there is still a long way to go. During the
2008/9 financial year, 103 municipalities received disclaimers, but in 2009/10 it was 53. Municipalities with adverse audit reports were reduced from 10 to 7 in the same period. Importantly, the number of municipalities that received financially unqualified reports with findings has increased from 113 to 120. Municipalities with completely
clean audits  increased from 4 to 7 in the same period.   Of course, the
performance of municipalities in the 2010/11 financial year is yet to be finalised, but these figures hold some promise.
 
Obviously, more needs to be done to strengthen the campaign. This
includes:
 
▪ Establishing more and more effective Municipal Public Accounts Committees.
▪ Strengthening the capacity of internal audit units and audit committees,
▪ Implementing  municipal audit remedial action plans to address audit findings,
▪ Recruiting and retaining critical skills.
 
Some of these measures are also going to be effected through amendments to legislation and regulations. 
 
Consideration also needs to be given to appointing chartered accountants in as many municipalities as possible. Of course, there will be financial costs to bear in this regard, but the benefits will surely outweigh the costs.
 
SPECIAL PURPOSE VEHICLE
The Department is in the final stages of setting up a Special Purpose Vehicle (SPV), the Municipal Infrastructure Support Agency (MISA)to accelerate municipal infrastructure delivery. Particular attention will be paid to the weaker municipalities.The SPV would aim to: 
 
▪ Support comprehensive infrastructure planning at municipal level
▪ Support municipal infrastructure development, maintenance,
operations and service provision in low capacity municipalities through the procurement of relevant service providers,  and ensuring performance as contracted
▪ Support the management of operations and ensuring a proper
maintenance programme for municipal infrastructure
▪ Coordinate a focused technical support programme with existing
support partners (national sector departments, provinces and service
providers) in terms of an agreed Support Plan to assist municipalities to deliver on their comprehensive infrastructure plan, its delivery modalities and funding streams
▪ Monitor the quality of infrastructure provided
▪ Develop and coordinate the implementation of an appropriate
sector-wide capacity development initiative and assist municipalities to develop a capacity development plan to strengthen their institutions over the long term
 
In view of the pending establishment of the SPV, funding for the infrastructure component of the Siyenza Manje project currently run by DBSA has been transferred to CoGTA, while funding for financial management support will be administered by National Treasury. A Task Team comprising senior officials from CoGTA, DBSA and National Treasury are working on ensuring a smooth transfer of aspects of the project. If necessary, this will take place in a phased manner.
 
ACCELERATING LGTAS
Obviously, addressing the financial challenges of municipalities cannot be separated from dealing with the overall challenges of municipalities.
These overall challenges are going to be dealt with more actively through the consolidation and acceleration of the LGTAS (Local Government Turnaround Strategy).    
We have just emerged from the most remarkable elections in this country since 1994. The 57% poll, the highest ever for local government elections, in very difficult circumstances, is very encouraging. But if people were enthusiastic to vote, they are even more determined that their conditions must improve. We are all under pressure. More than ever before! We simply have to work more actively with communities to significantly accelerate service delivery and development. These elections have given us a  new impetus. Lets make the most of it!