2007/08 Municipal Performance Reports: Briefings by MECs and Departments, Western Cape and KwaZulu Natal

Meeting report

2007/08 Municipal performance reports: Members of Executive Council (MEC) briefings
KwaZulu Natal briefing
Ms Nomusa Dube, MEC for Local Government and Traditional Affairs, KwaZulu Natal, gave a report on municipal performance, and focused on the interventions that the Provincial Executive Council had made into the worst-troubled municipalities of Indaka, Umhlabuyalingana, and Okhahlamba. She detailed the reasons for the interventions as follows:

Indaka Municipality
The annual financial statements for 2008/09 were not submitted on 31 August 2009. There was non-compliance with Section 121 of the Municipal Finance Management Act (MFMA). The Auditor-General reported that for 2005/06, 2006/07, and 2007/08 financial years there were serious deficiencies in the management systems and financial controls. The municipality received a qualified audit opinion. The total liabilities of the municipality exceeded its total assets by R1.9 million. The salary costs were standing at 51% of the total operating expenditure. The Council failed to exercise effective oversight over administration. Political and administrative leadership was non-existent when the mayor passed away, and when the municipal manager was suspended for financial mismanagement. The problems dated back to the 2005/06 financial years. This compromised the municipality financially.

As a result of this, the Provincial Executive Council of KwaZulu-Natal met Indaka Council on 14 December 2009. Mr Roger Ferguson was appointed as the Ministerial Representative. He started his work in January 2010. An Imbizo at Indaka was held on 22 January 2010. The community highlighted the lack of poor service delivery relating to basic needs such as water, sanitation, electricity, clinics, and access to Further Education and Training Colleges and housing. The Status Report by the Ministerial Representative confirmed serious deficiencies.

Umhlabuyalingana Municipality
There was a serious and persistent breach of legislation. Allegations of misadministration, fraud and corruption surfaced. The municipality incurred irregular expenditure amounting to approximately R16 million relating to the Municipal Infrastructure Grant (MIG) as well as other conditional grants. Irregularities in supply chain management were recorded. There was a decline in financial management and administration. An assessment of the annual financial statements and audit report indicated cash flow problems with an accumulated deficit of R8,9 million as of June 2009, unspent grants totalling R13 million, and a shortfall of R14 million in financing of fund reserves, creditors and provisions. An unauthorised expenditure of R2,5 million allocated for capital grant funding was utilised for operating expenditure.

The lack of accountability led to weak performance. The Auditor-General reported difficulty in conducting the audit for 2008/2009, since the Municipal Manager and Chief Financial Officer were not available, documents were also not available, and there was lack of cooperation from officials. It became difficult to communicate with the municipality because both landlines and cell-phones were sometimes switched off or unanswered, and the management was unavailable. This was a major hindrance to monitoring of performance and meetings.

The Council, for two consecutive years, condoned irregular, fruitless and wasteful expenditure. For example, despite being cash strapped, EXCO approved attendance at a Swiss International Exhibition trip by the mayor, municipal manager and Chairperson of Planning, Local Economic Development and Infrastructure Development Portfolio Committee. Travel costs were sponsored but the trip did not materialise. The Council paid 4 000 Euros for its stand, which was construed as fruitless and wasteful expenditure. The Council therefore was deemed not to have exercised oversight over administration and finances, and had taken decisions not in the best interests of the community.

The MEC met Umhlabuyalingana Council on 13 December 2009 to inform it of the decision of the Provincial Executive. Mr Bamba Ndwandwe was appointed as the Ministerial Representative, and commenced duties in mid-December 2009. An Imbizo was held at Umhlabuyalingana on 17 December 2009. The community highlighted the lack of basic needs.

Okhahlamba Municipality
This was the only municipality in the KwaZulu-Natal Province to receive an adverse audit opinion. Problems dated back to 2005/2006.  There was no functional management team for a year, and this placed the administration in a precarious position that resulted in it being dysfunctional. The report of the Auditor-General pointed to serious financial problems such as poor cash flow; an unaudited deficit of R17 963 025, while the accumulated deficit as at June 2009 totaled R24 517 042. Grant funding allocated for housing was used irregularly to finance the operations, resulting in a shortfall of over R20 million in the housing fund. There were unspent conditional grants of R20 196 551. General expenses increased by 407% from 2006/07 to 2008/2009, whilst the municipality failed to make payments to its creditors.

The Council had no conception of its primary responsibility to deliver basic services and ensure sound management and administration. For instance, it was noted that some projects it undertook were not part of functions of local government. These included assistance to education, unfunded mandates such as primary healthcare, hosting of arts and culture projects at cost, and agricultural projects. The Council and administration did not have capacity to correct the institutional problems, and thus had no capacity to exercise oversight and implement the necessary reforms. In addition, political interference of the Council had a negative impact on the functioning of the municipality. The Service Delivery and Budget Implementation Plan (SDBIP) indicated the Council was not aware of its role and had incurred expenditure on unfunded mandates. It was given six months to improve the situation, and the MEC for Co-operative Governance and Traditional Affairs commissioned a forensic investigation into these matters in terms of Section 106 of the Municipal Systems Act, No. 32 of 2000.

The MEC met Okhahlamba Council on 14 December 2009 to inform it of the decision of the Provincial Executive.  Mr Clermont Sithole was appointed as the Ministerial Representative, and started his duties in January 2010. An Imbizo at Okhahlamba was scheduled for 20 February 2010. A Status Report by the Ministerial representative confirmed serious deficiencies.

Ms Dube noted that in respect of all three municipalities, the ministerial representatives were required to report monthly. If municipalities did not, or could not, approve necessary measures to give effect to any intervention activities, the Executive Council could take a decision to dissolve the respective municipal councils. She added that detailed recovery plans in respect of the Indaka, Umhlabuyalingana and Okhahlamba municipalities would be finalised by 28 February 2010 and would be considered by the Department.

Western Cape submission
Mr Lesley Jacobs, Director: Monitoring and Evaluation, Western Cape Department of Local Government and Housing, spoke about the challenges that the Department had faced in compiling the Section 47 Report on municipal performances in the Western Cape. The quality of data received still remained problematic especially with regard to service delivery. Some assessments were hampered due to incomplete and poor quality of information received on filled and vacant posts. No data was received on provincial support from any other provincial department. Despite these challenges, the Department had recorded some improvements in reporting format.

The period 2007/08 was marked with slight improvements in service delivery initiatives and huge improvements in audit outcomes. The turnover in personnel at council leadership levels in municipalities was around 60%, whilst that in administrative municipal management and leadership was at 27%. Although there was a high level of technical and administrative compliance with regards to integrated development planning, there were clear areas for improvement. The lack of financial resources and the shortage of skills at municipal level remained a challenge.

An analysis of municipal statements indicated that municipalities were reliant on capital grants to fund their capital expenditure. This meant the revenue base of municipalities was insufficient to generate enough funding for provision and maintenance of basic infrastructure. Most municipalities submitted their financial statements on time and there had been a huge improvement in the audit outcomes for the 2007/08 municipal financial years with three disclaimers.

The average percentage of capital budget spent for the province had improved to 76.24% in 2007/08, but the average percentage spent on the Municipal Infrastructure Grant (MIG) had declined from almost 100% in the 2005/06 financial year to 84% in the 2007/08 financial year. The main reason cited by municipalities for underspending their capital budgets and MIG was the lack of capacity and technical skills in the engineering and technical departments.

Mr Jacobs then reported that only three of the thirty municipalities had not achieved fully credible Integrated Development Plans (IDPs). There was a high level of technical and administrative compliance with regards to IDP. However, there was a lack of internal municipal ownership of the IDP across the administration and leadership, with thirteen municipalities indicating that the engagements did not positively contribute to their IDPs. Closer scrutiny of the eight municipalities that received IDP support during 2007/08 indicated implementation and operational constraints that pointed to deficiencies in internal staff capacity and how the IDP was managed within the municipality.

In respect of Institutional Development and Transformation, vacancy rates in financial and technical posts were reportedly high and municipalities were experiencing huge challenges in the filling of these posts on all levels. The employment of female employees in Section 57 management positions remained a challenge in all the municipalities. All the municipalities submitted their skills development plans but 1% of their budgets was expended to develop the skills of their employees. Budgetary constraints and capacity hampered the implementation of these plans.

The main challenges with the delivery of services related to the escalating costs of service provision and infrastructure development and maintenance, as well as the costs of backlog eradication. Service delivery was also hampered by lack of sufficient and credible information submitted about the situation in rural areas. There was a considerable shortage of funds for maintenance, mainly for roads, storm water drainage, and sewerage. Capital spending improved from 66.67% in 2005/06 to 76.24% in 2007/08.

Mr Jacobs discussed the financial performance. The average performance for the past three financial years against revenue and expenditure operational budgets was 99.3% and 96.6% respectively, of which salary bills accounted for around 30%. Overall spending in respect of conditional grants decreased from 73% in 2006/07 to 66% in 2007/08. There had been huge improvements in achieving unqualified financial reports, from 11 in 2006/07 to 23 in 2007/08. The Auditor-General had, where reports were qualified, indicated non-compliance with laws and regulations and internal control/internal audit weaknesses.

In respect of governance and public participation, Mr Jacobs reported that 98% of Municipal Council and Executive/Mayoral Committees achieved the requisite quorums for meetings. Most municipalities adopted codes of conduct for Council and staff. Eleven municipalities reported councillor and staff arrears, and noted that mechanisms were being put in place to resolve arrears. There had been a general improvement of 97% in the development of Anti-Corruption strategies and plans across municipalities in the province.

Mr Jacobs then noted that Local Economic Development (LED) had been hampered by the unavailability of a majority of LED plans. Although all municipalities had an approved LED Plan to inform the 2007/08 IDP, which were universally accepted as resulting from a transparent formulation process, the actual implementation of these plans was limited because of a shortfall in available funds, lack of co-operation between stakeholders, low economic development potential and capacity. More emphasis was now placed on facilitating economic development by assigning the responsibility to specific individuals at 87% of the municipalities.

Discussion
Mr M Makhubela (COPE) asked how far the investigations had gone in the cases of alleged fraud and corruption, so that those implicated could be brought before the courts of law.

Ms Dube stated investigations usually took three to six months. The investigators were making use of the powers of the forensic commission, so that this could be used as evidence in court. For instance, in Umhlabuyalingana Municipality, arrests were pending, and charges had been submitted.

Mr R Liptak (IFP) wanted to know if it was the Council or municipality who paid for the many bodyguards of the Okhahlamba Municipality mayor.

Ms Dube replied that the municipality paid the bodyguards.

Mr Liptak asked for the financial implications for all these interventions in the three KwaZulu Natal municipalities.

Ms Dube noted that a sum of R400 000 for the next six months would be made available to each municipality to implement the turn-around strategies and ensure that they could stand on their own.

Mr C de Beer (ANC) enquired about the kind of assistance given to these municipalities.

Ms Dube responded that Municipal Assistance Programmes were in place to support the municipalities, with considerable funds having been spent to support them. Officials were trained on compliance issues. Information would be shared with mayors and councils.

Mr G Matila (ANC) suggested the municipalities should be dissolved if senior managers could not run them and were refusing to cooperate with the Department. He commented that whilst the Constitution gave powers and rights to municipalities, at the same time the Constitution must protect the communities from suffering should performance not be acceptable.

Ms Dube commented that dissolution was not a simple thing. The correct processes had to be followed and it was necessary to be realistic, looking, firstly, at the possibilities of success for the interventions, and later on looking at the election issues, to ensure that poor councillors should not be re-elected.

Mr D Bloem (COPE) asserted that mayors and councilors were not doing their work; hence the rot in municipalities. As a result, the taxpayers’ money was being wasted. He said the Committee should take a decision to have any people who were implicated in corruption arrested.

Mr T Mofokeng (ANC) enquired what the MEC was doing to ensure law-breakers were brought to book.

Ms Dube responded that in Umhlabuyalingana and Indaka Municipalities, the Chief Financial Officers and Municipal Managers had been fired. Even if officials resigned, criminal proceedings would be instituted to ensure that any money misappropriated would be paid back. Furthermore, a stronger approach was being taken with all municipalities, and her office had identified immediate interventions of training councillors on MFMA and on the calendar of compliance issues.

Mr A Watson (DA) expressed the view that the MEC had waited for too long before intervening, and asked why those who were incompetent were not fired.

Ms Dube explained that it was not possible simply to fire a person; the labour laws and the correct routes must be respected and followed. She further indicated that it had been discovered that political interferences played a role in the hiring and firing of personnel, and that governing political parties would tend to hide incompetence from being fully exposed, and reshuffle people around. Lastly, she reminded the Committee that her office had not in fact waited too long, because the last municipal elections were in 2006, and that was when the Municipal Assistance Programmes were implemented.

The Chairperson asked the MEC to send the Committee a report on what had been done, and what had been achieved.

Mr Makhubela asked the Western Cape Department how it had compiled its data if information was received very late, and how it was going to deal with this issue of late information insofar as providing services to the people were concerned. He also enquired what strategies were in place to fill the large numbers of vacancies.

Mr Jacobs responded that the Department had embarked on signing of Memoranda of Understanding with municipalities regarding data issues. On numerous occasions the Department had also raised the matter with Statistics South Africa, asking for updated statistics because the Department could not respond properly to matters of service delivery if it was using old information. Some municipalities did not have staff and researchers skilled in statistics. In regard to the vacancies, he said that the Department would first look at the nature of vacancies. If the vacant posts required highly skilled people, the Department would know that it was unlikely to be able to source this in rural areas, and so would advertise the posts. He also noted that, most of the time, political influence stood in the way of the appointment of skilled individuals.

Mr Watson enquired if there were municipalities that seemed to be in decline, and what interventions would be employed in this case. He further wanted to know about the impact of political instability in municipalities. He also enquired about the drought problem in the Southern Cape.

Mr Jacobs replied there were municipalities in trouble, like Kannaland. A Municipal Support Plan was in place for each municipality in trouble. The National and Provincial Strategy, and Development Bank of Southern Africa (DBSA) were attending to these matters. Once the problem was identified, all the bodies would be consulted where there were serious issues of service delivery. He agreed that political instability had a huge impact on service delivery, especially when senior officials had to be employed. It was noted that drought had been identified as a serious problem for future years, and the matter was being remedied. Water would be secured for the Knysna area soon.

Mr de Beer questioned why the report had not been dated and signed by the MEC, and what interventions would be implemented to the troubled municipalities of Saldanha, Kannaland and Breede Valley, as identified in the reports by the Auditor-General.

Mr Jacobs said the document sent to the National Council of Provinces was signed and dated. He explained that there was some positive progress in those affected areas. A turnaround strategy was in place and support was given to these municipalities. Some of these municipalities were without Chief Financial Officers but the Department was trying hard to fix the problem. The provincial department had set up a task team to look into the matter and all the affected stakeholders were meeting regularly on the problem.

Lastly, he promised that a comprehensive report on the drought and water problems would be compiled by the Disaster Management unit, and forwarded to the Committee.

Dismissal of the Northern Cape delegation
Mr Bloem asked the Northern Cape delegates why the MEC was absent, because he had assured the Committee that he would attend the briefing.

The delegates informed the Committee that the MEC had attended the State of the Province Address the previous day. Because there were no flights from Kimberley to Cape Town in the morning, he had been unable to attend this morning.

Mr Bloem noted that Gauteng was allowed to present without its MEC, because this MEC had forwarded reasons for not being able to attend a long time in advance.

The delegates stated that they were only informed of the situation of the MEC on 17 February 2010. They promised that the head of the Department would be sent.

Messrs Bloem and Matila felt that the Northern Cape had undermined the Committee and it was clear that they had not made thorough preparations. They suggested, and the remaining Members concurred, that the Committee refuse to accept the report.

The meeting was adjourned.