Local Government: Municipal Systems Amendment Bill [B22-2010]: deliberations, Department's Turnaround Strategy and Operation Clean Audit briefings

Meeting report

Proposed Amendments to Local Government: Municipal Systems Amendment Bill [B22-2010]
The Chairperson tabled the proposed amendments to the Local Government: Municipal Systems Amendment Bill (the Bill) (see attached document).

He then proceeded to go through each clause, calling upon Members to comment on the proposed changes if they wished.

Clause 2
The Chairperson noted that there was no discussion on the proposed changes.

Clause 3
The Chairperson noted that there was a proposal to include a 7-day time frame within which the MEC should respond to the Municipality who had given notice in clause 3(4)(c).  The Chairperson stated that although time frames were important, he thought that seven days was too short a period, and he would recommend replacement of this with a reference to fourteen days.

Other Committee Members indicated their agreement.

The Chairperson noted that the Department of Cooperative Governance and Traditional Affairs (COGTA or the Department) would have to communicate this to everyone necessary. 

Clause 6 and the new section (57A)(3)
The Chairperson stated that the Department wished to introduce this provision that when a person was dismissed from a position for reasons of financial misconduct, corruption or fraud, he or she may not be re-employed in any municipality for a period of five years. The Chairperson stated that the Committee had wanted to hear what the Department of Public Service and Administration (DPSA) said on this matter.  

A member of COGTA noted that the DPSA was busy with amendment of the regulations to make a differentiation between categories of misconduct. The proposed amendment to this Bill was therefore in line with the proposal being considered by the DPSA. 

The Chairperson asked for clarity, and the Departmental representative confirmed, that the Department was in agreement with the latest amendment preventing re-employment for a period of five years. 

A Member of the Committee proposed that this period should be ten years. 

The Chairperson noted that the point of the amendment was to send a message that particular behaviour was not acceptable. 

Mr J Matshoba (ANC) believed that the minimum period should be ten years.

Nkosi Z Mandela (ANC) also emphasised the minimum period should be ten years.

Mr J Lorimer (DA) noted that it would send a stronger message not to allow re-employment at all, but he stated that if the Committee felt that ten years was the best compromise, he could agree with that.

The Chairperson stated the Committee had therefore taken the position that a cooling-off period of ten years would be appropriate.

Clause 10
Mr Mohammed Bhabha, Advisor to the Deputy Minister of Cooperative Governance and Traditional Affairs, noted that the Chairperson had asked the Department to review this clause. He stated that the South African Local Government Association (SALGA) felt that the proposal of the Department would encroach constitutionally on the autonomy of local government. This was particularly so if the Minister ha to be consulted after negotiations but before the final signature of agreements. The Department ha discussed this with the legal drafters, who had also considered the technicalities around SALGA. He said that, to place it in context, the concern of national government was that negotiations at local government might not take full account of the macro-economic consequences of those agreements.  In particular, it was concerned that wage agreements might be entered into that government would not be able to sustain. SALGA, on the other hand, was concerned that the Minister was being given too much power and this was infringing on the autonomy of the municipalities.

Mr Bhabha noted that the wording in the proposed new section 71(1) was exactly the same as the original introductory wording that had been used in the original Bill. He noted that the Department had then introduced the phrase "with regard to wages and macro benefits" as a new term, because the negotiations were very wide and the concerns of the Ministry pertained in particular to the macro economic impact of wages, so that there was a limitation then placed on this area in particular. He further noted the new reference to the Financial and Fiscal Commission (FFC).  One of the terms of reference for the FFC was to check if municipalities were able to deliver on their services.  If the nature of the negotiations impeded the ability of a municipality to deliver on its services, the argument was that there was responsibility on the FFC to verify this aspect.  This did not impinge on the autonomy of municipalities, SALGA, or organised local government, because this would be done before any negotiations. The introduction of the new sub-section (2) created a guide for the negotiators, indicating that they had to be mindful of what they were negotiating and what the consequences would be. 

Mr Lorimer stated that he had a problem with the proposed section 71(2). He also asked if the word “consult”, in the proposed section 71(1), implied that a decision could not be made without the agreement of the FFC and Minister.

The Chairperson stated that it did not. 

Councillor Clarence Johnson, National Executive Committee Member, SALGA, asked for clarity on whether this section of this clause was a new amendment or a new proposal. He asked what the exact wording would be.

The Chairperson stated that he had ruled on this earlier.

Mr Johnson suggested that if the Department was permitted to motivate its views, then SALGA should also be permitted to have this opportunity.

The Chairperson stated that it was a procedural matter.

Ms D Nlhengethwa (ANC) explained that procedures in Parliament allowed all the stakeholders to make submissions during public hearings.  SALGA had had several opportunities during meetings to make inputs and to emphasise what was contained in its submission. The procedure had now reached the stage where the Committee, having considered all the submissions that were made, was looking at the wording. At this stage, stakeholders were not allowed to contribute further. 

The Chairperson asked if the Committee would be prepared to make an exception today and allow SALGA to contribute to the meeting.

The Committee agreed.

Mr Johnson then asked that what SALGA originally agreed to should be considered by the Committee, alternatively, that SALGA could be given a six-week period to consult with all municipalities around the addition of the phrase 'with regard to wages and macro benefits'.

Mr Bhabha proposed that it would not make a significant difference if the phrase 'wages and macro benefits' were to be removed.

The Chairperson stated that originally the phrase referring to 'consultation' was not specific. He explained that SALGA had then asked what the purpose of the 'consultation' would be. The answer was consultation would take place on matters that related to wages and macro benefits, because of their effect on the fiscus.  He noted that the FFC made recommendations that were not binding, and that could therefore be accepted or rejected. 

Mr Johnson stated that SALGA already took these matters into consideration when entering into negotiations. SALGA participated in budget forums. A Member of SALGA also sat on the FFC, and SALGA was aware of the national economic policies. These provisions were outlining what was already being done.  When discussing wages and macro benefits, he noted that these specific areas currently had a negative impact on municipalities.  SALGA did not know what the future impact would be, without consulting all municipalities.

The Chairperson asked Mr Johnson for his suggestions on this phrase.

Mr Johnson stated that he would like it to be amended to state that there would be consultation with the Minister.

The Chairperson asked if the Committee agreed. He stated that leaving this phrase out did not mean that the actions described in it could not happen.

Ms W Nelson (ANC) agreed with this interpretation. 

Ms Nlhengethwa suggested that a reference to wages should be left into the clause.

The Chairperson stated that it made no difference if it was there or not, so if parties would be satisfied by precluding it, then he would suggest that this route should be followed.

Mr Matshoba asked why this should be precluded if it was not a material phrase.

Mr Johnson referred to a decision by the National Treasury (NT) to grow the budgets of municipalities by 3%. These municipalities had no other source of income, so there would be no need to legislate for consultation on wages and macro benefits before bargaining. 

The Chairperson stated that the intent was not to confine SALGA into adopting any position.  The Committee understood that SALGA wanted consultation to be confined to these areas.

Mr Johnson stated that he did not have a mandate to enter into agreements at this meeting. 

The Chairperson recommended that the phrase be removed. 

Mr Lorimer stated that the Bill would help solve some of the problems in municipalities, but he felt that it underestimated the extent of the problems.  He made two suggestions for additions into the Bill. Firstly, he thought that any municipality that was put under administration must, as a first step, have fresh Integrated Development Plans (IDP) drawn up by a panel of experts, and an administrator should be appointed to fulfill these plans. Secondly, after administrative help was provided to a municipality, a test must be conducted within a stipulated period, for example six months, as to whether that municipality was now delivering certain basic services.  If it could not deliver after the prescribed period, then the Minister should be held accountable.

The Chairperson stated that this Bill was only one of a series of interventions from the Department, and it was not designed as a panacea for all deficiencies. The problems on the ground could not be solved by legislative means only. 

The Chairperson noted that in the following week the Committee would be presented with a revised Bill, which would contain these amendments, and the Committee would again discuss the contents.  The Chairperson noted that there were no disagreements with the proposed amendments so far.

Local Government Turnaround Strategy (LGTAS): Department of Cooperative Governance and traditional Affairs (COGTA) briefing
Mr Muthotho Sigidi, Acting Director General, Department of Cooperative Governance and Traditional Affairs, tabled the presentation.

Mr George Seitisho, Portfolio Manager: Local Government Turnaround, COGTA, stated that his  presentation would cover the Local Government Turnaround Strategy and Delivery Agreement, which incorporated the Programme of Action on Outcome 9. He would also give an overview of the progress from April to December 2010 and strategic recommendations that had already been submitted to the Cabinet Committee. 

Mr Seitisho outlined the vision for local government (see attached presentation).  There were seven outputs as part of the Delivery Agreement. Progress on Output 1: A Differentiated Approach to Municipal Financing, Planning and Support, included the reaching of consensus amongst key stakeholders on the development of a policy framework for differentiation.  The Department of Human Settlement (DHS) had also initiated the first level of accreditation in the current six metros.  Output 2 related to Improved Access to Basic Services. Here, he noted the current figures for national access to basic services. 93% of total households had access to water, 70% of total households had access to sanitation by 30 September 2010, 82% of total households had access to electricity by  30 November 2010, and 69% of total households had access to refuse removal services as at 30 June 2010. He also noted that another achievement under Output 2 was that the business case for the establishment of the Special Purpose Vehicle (SPV) had been approved by the Minister, and the concept paper and framework for the 'Business-adopt-a-municipality' was drafted.

Progress on Output 3: Implementation of the Community Work Programme, included creation of 81 412 work opportunities, and implementation of the programme in 56 sites in nine Provinces, across 46 Municipalities, covering over 400 wards.  However, the current financial allocation over the Medium Term Expenditure Framework (MTEF) was unlikely to sustain the momentum of job creation in the future. 

Progress on Output 4: Initiatives Supportive of the Human Settlements Outcome, included consultation being initiated with the Department of Human Settlement, in regard to densification.  The process was identified as a grey area in which COGTA had a leading role.  The project would be assigned to a lead department once the Sustainable Human Settlement and Basic Services Task Team was in place. 

Progress on Output 5: Deepen Democracy through a Refined Ward Committee System, included consultations on the draft proposal for ward committees.  Provinces were required to adopt provincial frameworks for the determination of out-of-pocket expenses for ward committee members, as other measures of support for ward committees had proved unacceptable.  The majority of provinces had not adopted these frameworks, due to the financial implications of implementation in municipalities. There would be engagement with National Treasury on possible funding mechanisms to give effect to the national and provincial frameworks for the ward funding model. 

The progress on Output 6: Improved Municipal Financial and Administrative Capabilities, included convening workshops on the establishment of Municipal Public Accounts Committees (MPAC) in all provinces.  All MPACs had been established in Mpumalanga and Gauteng provinces.  MPACs had not been established in Free State, Northern Cape, Eastern Cape, and North West provinces.  Some municipalities had established MPACs in KwaZulu-Natal, Western Cape, and Limpopo provinces.  All nine provinces had established Provincial Coordinating Committees and had developed provincial action plans for Operation Clean Audit. 18% of municipalities were not adhering to the principle of sound financial management, and this was compared to the baseline of 8% and the target of 4% for 2014. 73.1% of municipalities had spent less than 25% of the budgeted amount for capital expenditure in the first quarter.  The target was to reduce the baseline for under-expenditure from 63% to 30%, although it was accepted that first quarter figures for capital expenditure would generally be less than 25% of the appropriation. 

Progress for Output 7: Single Window of Coordination, included the production of analysis papers on new bills and policies, leading to amendment of legislation that impeded service delivery.  Reforms focused on the Municipal Systems Act, the Municipal Property Rates Act, a new bill on Support Monitoring and Interventions in Provincial and Local Government, the Green Paper on Cooperative Governance and a review of the Equitable Share formula. 

Mr Seitisho then outlined the recommendations that were made to the Governance and Administration Cabinet Committee. Work would be done on adopting a differentiated approach to municipal planning, financing and support, and this was prioritised and should receive attention by March 2011. It was identified that lack of technical capacity, infrastructure funding, and operations and maintenance were still major challenges faced by municipalities hindering access to basic services. The fact that the SPV would be put into operation on 1 April 2011 would address some of these challenges.

Mr Seitisho noted ongoing discussions with the National Treasury regarding the establishment of the Bulk Infrastructure Fund (BIF). A protocol on conflict of interest was being developed as an intervention to fast track the adoption of municipalities by the private sector and State Owned Enterprises (SOE). Provinces and municipalities were required to support the national job creation targets by prioritising labour intensive projects. It was recognised that the current allocation of financial resources for the Community Work Programme (CWP) was unlikely to sustain the momentum of job creation in the future.  Additional funds would therefore be requested. He added that a high level task team and a Joint Work Programme between key stakeholders was being finalised, to deal with accelerated development of sustainable human settlements and universal access to basic services. There continued to be engagement with National Treasury on possible funding mechanisms to give effect to the National and Provincial frameworks for the ward funding model. It was agreed that the provincial COGTA departments would cooperate with, and fully support, the work of the inspectorate around fraud and corruption in the provinces and municipalities.

It was also agreed that the finalisation and implementation of the Revenue Enhancement Strategy would be fast tracked. COGTA would work closely with municipalities to ensure that monies owed by provinces, national departments and SOEs were paid. Provinces would particularly assist in monitoring the municipal indicators on operational and capital expenditures. A programme would be communicated soon to MECs on plans to revitalise LGTAS across the country, so as to seize opportunities that would be presented following the election of new councils after the 2011 municipal elections. Provinces must also start developing their own plans and initiatives to revitalise LGTAS and to communicate the successes of the programme more intensively.

Discussion
A Member of the Committee asked if the Department would be giving a follow-up to the Committee on the implementation of the recommendations made to the Governance and Administration Cabinet Committee.

Mr Seitisho stated that once the Governance and Administration (G&A) Cabinet Committee had reviewed the recommendations, the Department could report back to the Committee as to which of those recommendations had been adopted.

The Member asked how many engineers were transferred to the Department and what would happen with the budget for these people.

Mr Seitisho noted that there were 136 engineers transferred to the Department.  The budget was transferred with these engineers, amounting to R138 million. 

Mr Lorimer asked what how many days per year of access qualified households to be listed as having access for basic services to water. 

Mr Matshoba asked where the figures for access to basic services statistics came from. 
Ms I Ditshitelo (UCDP) asked for clarity on the areas that were covered by the service delivery figure of 69% of households that had access to refuse removal services. 

Mr Seitisho noted that the criteria for having “service delivery” included areas where there were water pumps, which were assumed to have been working, although he conceded that this did not necessarily mean that they were currently working. Water works or sanitation works that were known not to be functional were not included in the count. This information was dependent on figures received from the Department of Water Affairs.  COGTA would have to report back to the Committee regarding rural access to basic services that were not being provided by the conventional means. 

Nkosi Mandela asked what was being done to speed up service delivery of basic services to rural households. 

Mr Lorimer asked for a complete breakdown of the access to basic services figures.

The Chairperson agreed. 

Nkosi Mandela asked in what fields or spheres of work were the 81 000 jobs created, and in which provinces.  He asked how jobs would be created in the future if the Department was predicting that existing funding levels were insufficient to maintain the current job creation momentum.

Ms Ditshitelo asked how many of the 81 412 workers were appointed to permanent or temporary positions, and in what provinces these workers were located.

Mr Matshoba reiterated her point about permanency of jobs and asked who was creating those jobs.

Mr Matshoba asked what the Department meant by prioritising labour intensive projects. 

Mr Seitisho stated that there was considerable detail on these matters and he would prefer to bring statistics back to the Committee at a later date. He added that the statistics presented here were national statistics and did not represent a particular province or municipality.  The Department would break these statistics down for the Committee in the future.

A member of the COGTA delegation added that most jobs in the work programme fell broadly into a few categories, including agriculture and food security, construction, and community services.  Work project sites were spread throughout the Provinces.  However, when the initial funding allocation was received, there were no established targets.  Following the signing of the Delivery Agreement, there was a decision made to implement two work sites per municipality, although with hindsight the budget did not allow for this in all 237 municipalities.  The Department was now looking at reducing the scope of each work site in order to reach more municipalities.  There was also a wage increase that was not accommodated in the budget. 

The Chairperson asked for a list of where the Community Work Programmes were taking place to be submitted to the Committee.

Nkosi Mandela reiterated his request for an indication of where the jobs were created in each Province and whether they were permanent or temporary. 

The Chairperson stressed that when statistics were provided, they should be provided as accurately as possible and with a proper explanation of their meaning.

Mr Matshoba asked for an explanation on the point made under bullet 2 of slide 5, and what was meant by the sixth metro.

Mr Sigidi noted that the figure of “6 + 2” metros reported in the presentation should have read “5 + 2”.   

Ms M Wenger (DA) asked for clarification of the use of the term `revitalise` used on slide 20 of the presentation. 

The Chairperson asked what was meant by the reference to “revitalising” IDPs.

Mr Seitisho noted that “revitalisation” was used in the presentation, for lack of a better word. The intention was to ensure that new councillors were orientated to the progress of the turnaround strategy.

Ms Nelson stated that she would like to see time frames attached to the recommendations presented so that the Committee could hold the Department accountable. In particular, she noted the point that municipalities tended not to spend 25% of their appropriation by the end of the first quarter, and enquired when COGTA would intervene.  She wanted to know if the Department had received the recommendations that Parliament approved regarding municipal oversight and service delivery. 

Mr Sigidi noted that the issue of municipalities spending less than 25% of their capital expenditures in the first quarter related to their planning.  An infrastructure project usually lasted a minimum of 18 months. The Department was proposing that municipalities should adopt a 5 year IDP plan so that capital projects could be planned accordingly. 

Ms I Ditshitelo asked what was preventing COGTA from achieving uniform Municipal Standard Chartered Accounts in all municipalities.

Mr Seitisho noted that the time frames for collection of money from provinces, national departments and SOEs were difficult to predict.  He noted that the larger the organisation, the harder it was for municipalities to collect.

The Chairperson suggested that the Department was responsible for providing the weight that the municipalities did not have.  He asked for responses from the Department, within the next two weeks, on how far along the Provinces were in paying the municipalities.   

Ms D Nlhengethwa (ANC) asked what the problems were in those Provinces that had not established MPACs.  She also enquired as to why the functionality of the established Internal Audit Units had not yet been assessed.

Mr Seitisho noted that the Department was finalising the deployment of technical support units in the Provinces to address the issues on the ground.  Many councillors did not want to see MPACs established.  Within MPACs, colleagues and counterparts of the councillors would hold them responsible. Thus MPACs need to be legislated as quickly as possible so that there was no choice in the matter of their establishment.   

The Chairperson noted that the presentation provided a good overview of progress.  However, he noted that it would have also been useful to provide an evaluation of how this report had differed from the previous reports.

Mr Seitisho noted that a comparative presentation would be available within the next six weeks for the Committee. 

The Chairperson asked if the Department had a programme for the induction of newly elected councillors of municipalities. He also asked for clarity on the programme for businesses adopting municipalities.  He asked what businesses might be invited to do once they had adopted a municipality, and what COGTA hoped to get from these businesses.

Mr Sigidi responded that the induction of new councillors would be conducted with SALGA and representatives from both organisations could report to the Committee regarding issues that needed to be addressed with new councillors.

Mr Seitisho explained that the “business adopt a municipality” project hoped that businesses could provide expertise for short periods of time in areas where the municipality was lacking.  They would also provide support and mentorship in such areas as accounting and engineers.

The Department expected municipalities to do the following: come up with a turnaround strategy, ensure that there was a council resolution adopting the turnaround strategy, and incorporate it into the Integrated Development Plan (IDP). Turnaround strategies were not free-standing legal documents but had to be incorporated into the IDP.
 
Ms Ditshetelo asked if COGTA was suggesting that there was no monitoring of service delivery to detect when services were not working.

Nkosi Mandela noted that the issue of measuring basic services was a challenge. He asked how the Department could measure its goals if it could not properly measure basic service delivery now, and how the Committee, for its part, could hold the Department accountable if the latter did not know where it stood.

The Chairperson noted the importance of inviting other relevant departments to present accurate information to the Committee.

The Chairperson asked what stage the Land Use Planning Bill had reached, and when the Committee could expect to review it. 

Mr Brutus Malada, Senior Researcher: Office of the Deputy Minister, COGTA commented on the Land Use Management Bill.  Land Use Management was found to be a key impediment to service delivery.  COGTA had been interacting with the Department of Human Settlements as well as the Department of Rural Development and Land Reform.  Recently, the Planning Commission had taken over the task of drafting the Special Planning and Land Use Management Bill.  COGTA had delivered its comments to the Planning Commission.  A Constitutional Court ruling had set aside the provisions of Chapter 4 of the Development Facilitation Act.  The ruling centred on the independence of municipalities for development planning.  The Constitutional Court had given government a deadline of June 2012 to either repeal this legislation, or to introduce a new framework for land use management.  It had also indicated, however, that the effect of the judgment would be suspended until June 2010, recognising that certain municipalities did not have the capacity for development planning, so that until then, Provinces would still take the responsibility for planning.  The Department of Rural Development and Land Reform would be responsible for introducing the Bill to Parliament.
 
The Chairperson asked if the Department had followed up on a question raised in the previous week about the nature and relationship of the World Bank`s input in the area of improved municipal financial capabilities.  He did not understand how the World Bank could be involved in municipal funding without the Department being aware of it. 

Mr Malada said that COGTA had engaged with National Treasury to determine the status of the project.  National Treasury had then approached the World Bank to solicit support from the Like Cities Support Programme.  This project was still at a planning stage.  It should be implemented in August 2011.  COGTA would be participating in the steering committee. 

The Chairperson asked for a copy of the briefing that was provided to the World Bank to be delivered to the Committee.

Mr Chris du Plessis, Senior Manager, COGTA, commented on the method that the Department used to report to the Committee. He noted that COGTA only reported on the requirements for this period.  The second progress report was due in April 2011, covering the targets that were set for that period according to the Delivery Agreement and Programme of Action.

Mr Matshoba asked how much of this reporting to the committee was provided by consultants.

Mr Sigidi stated that there was nothing in this report that had been completed by consultants. 

Operation Clean Audit: COGTA briefing
Mr M Manyike, Executive Manager, Department of Cooperative Governance and Traditional Affairs, gave a briefing on “Operation Clean Audit”, reporting that it was launched in 2009, with the aim of ensuring that, by 2014, all 283 municipalities and 9 provincial departments would have achieved clean audits of their Annual Financial Statements, and were maintaining systems for sustaining quality financial statements and management information.  He presented targets for both municipalities and provinces for each year until 2014.

He noted that the Auditor-General had still to publish the Consolidated General Report on the Local Government Audit Outcomes for 2009-10, and that information pertaining to 47 municipalities was still outstanding at this stage.  He presented a slide of the audit outcomes for the municipalities for 2008/09 and 2009/10.  In respect of that portion of the information that was available at the time, he noted that 62 municipalities had improved their audit outcomes, 15 municipalities had regressed, and 159 municipalities remained unchanged.  Individual Audit Units had been established in 246 municipalities and audit committees were now established in 252 committees.

Mr Manyike presented a slide of the provincial audit outcomes for 2008/09 and 2009/10.  The audit outcomes of provincial departments showed a steady reduction in audit qualifications.  However, there was a continued deterioration in the education, health, and public works sectors in five provinces which lead to an increase in disclaimers and adverse opinions from five% to eight percent.  Overall provincial departments showed an improvement in clean audits to 11 percent.  Capital assets remained the major reason for qualifications, constituting 79% of departments qualified.  Other areas that were qualified and required attention at provincial departments included disclosure notes (59%) and reporting on unauthorised, irregular, fruitless and wasteful expenditure (53%).  He concluded that the targets for Operation Clean audit were ambitious, but a concerted effort was being exerted towards realising them. 

The Chairperson asked for a comprehensive response to the Committee on recommendations that were given to the Department following a Committee presentation to MinMEC.

Mr Sigidi indicated that he was aware of the presentation that the Committee made to MinMEC and the Department would provide a response to the Committee on the recommendations.

The Chairperson noted that the Committee would be voting on the Local Government: Municipal Systems Amendment Bill next week.  He asked the Acting Director General if he had any closing remarks.

Mr Sigidi thanked the Committee for its engagement with the Department.

The meeting was adjourned.