Department of Cooperative Governance: 1st quarter 2011 performance & Millennium Development Goals & State of Nation Address progress reports

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Cooperative Governance and Traditional Affairs

13 June 2011
Chairperson: Mr L Tsenoli (ANC)
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Meeting Summary

The Department of Cooperative Governance (the Department) gave three separate briefings to the Committee. The first, covering its responses to the State of the Nation imperatives, noted the creation of the “Business-Adopt-A-Municipality” programme, in response to the call for integrated work between local government, labour and business. To curb the problem of corruption, the Department had established an anti-corruption inspectorate, which, although not having its own prosecutorial powers, would refer suspected corruption to the relevant agency. The recent amendments to the Municipal Systems Act prohibited senior municipal officials from holding executive positions in political parties, which should curb corrupt practices and ensure that constituency, rather than party, interests were paramount. The Department aimed to ensure that all 278 municipalities received unqualified audits by 2014. The continued progress on provision of basic services was outlined, together with the projections for services in the current financial year.

The Department then outlined its contribution to achieving the eight Millennium Development Goals (MDGs) set by the United Nations. The Department was involved in the attempts to eliminate poverty and hunger, specifically by working to achieve a responsive, accountable and efficient local government system. It had also instituted the Community Work Programme, which thus far had involved 89 689 participants, on 56 sites, and had created 23 693 full time equivalent jobs and 54 494 jobs based on the poverty-measure of 100-day opportunities. The Department also planned to upscale Local Economic Development (LED) by calling on the private sector to work with and invest in local towns and municipalities. However, the Department recognised that a major challenge to achieving the MDGs was the slow infrastructure development caused by too little investment and insufficient maintenance of existing structures. South Africa needed a highly
efficient logistics system, but this in turn required more investment and political recognition of the need for greater efficiency, as also better coordination within government and across state-owned enterprises. The Department believed that the MDGs would be achievable if these challenges were addressed in a more integrated manner.

The Department then gave its first quarter of 2011 performance and expenditure report. Of the total allocation of R1.4 billion, it had spent R46 million thus far, with R1.3 billion unspent as yet. It had also received R47.9 billion for municipal transfers, fiscal transfers to bodies such as South African Local Government Association, the Municipal Demarcation Board and South African Cities Network, the Community Work Programme, and compensation for thefts and losses. R139 million of the allocation had been spent, but municipal transfers were normally made in July. The individual programme spending was outlined, with explanations given for over and under expenditure.

Members sought clarity on the Community Work Programme and compensation provided by the programme, commenting that the compensation seemed to be insufficient and they were not sure that the number of work days would contribute to skills development. They asked what the Department was doing to eradicate corruption, whether the goals were achievable and realistic, and why proposals were made for LED initiatives to be integrated in districts. They also asked that the Department should not overlook the power and capacity of local small businesses, and asked how the Department would encourage self-sufficiency in the smaller towns. They felt that it was necessary to ensure that houses constructed by government should be energy efficient, and that better linkages must be found between green energy policies and LED initiatives. Members also asked whether the Internal Audit manager had been appointed, and what the Department was doing to speed up the filling of vacancies. Other questions related to whether the supply management chain issues and asset register had been corrected, the monitoring of municipal transfers, the need to fill the Disaster Management Centre positions and the need to do more at district and municipal level with disaster management.  

Meeting report

Department of Cooperative Governance: Plan of Action to address State of the Nation Address imperatives
Mr Seabelo Molefi, Executive Manager, Department of Cooperative Governance, outlined the action plan of the Department of Cooperative Governance (DCOG or the Department) in relation to the imperatives set out in the State of the Nation Address (SONA).

In response to the President’s call for integrated work between local government, labour and business, the Department had created the Business-Adopt-A-Municipality programme. This programme would ensure that business was mobilised to participate in government initiatives. The Department was in the process of signing memorandums of understanding with the identified businesses who were to participate in the programme.

Mr Molefi noted that the Department had created an anti-corruption inspectorate to deal with corruption. Although this inspectorate did not have prosecutorial powers, it would work closely with law enforcement agencies, and refer corruption cases to the relevant agency. Proposed amendments to the Municipal Systems Act had been forthright in prohibiting senior municipal officials from holding executive positions in political parties. This would help to prevent corrupt practices and would ensure that municipal managers worked for their constituents, rather than addressing party interests.
 
In line with the President’s call for increased service delivery, the Department aimed to increase provision of water to 1.4 million households, provide sanitation to 808 070 households, provide road access to 1.1 million more people, and community lighting to 540 186 more households in the 2011/12 financial year. The Department also aimed to ensure that all 278 municipalities received unqualified audits by 2014, in line with the call for improving basic administrative systems and financial management.

This Department had undertaken joint work programmes with other departments, in keeping with its coordination role. Specifically, it had worked with the Departments of Water and Environmental Affairs, and of Human Settlements, in order to improve on formerly imperfect aspects of delivery. A report, outlining the legislation that was currently adversely impeding progress on service delivery, had been prepared.
 
The Department had also made progress on some of the issues raised in the 2009 State of the Nation Address, including the provision of basic services. Figures quoted included provision of water at 93% nationally, sanitation at 70%, electricity at 82% and refuse collection at 69% nationally. The Department would continue to improve on the provision of those services. It aimed to increase water provision from 93% to 96%, sanitation from 70% to 88%, electricity from 82% to 87%, and refuse collection from 69% to 70% by the 2012/13 financial year. However, deteriorating infrastructure that was badly in need of maintenance posed a major challenge to achievement of those goals.

The Department had received R47.9 billion for municipal transfers and fiscal transfers (to bodies such as South African Local Government Association (SALGA), Municipal Demarcation Board and South African Cities Network), the Community Work Programme, and to compensate for thefts and losses. The Department had thus far spent R139 million of the allocation. It was yet to make the allocations of municipal transfers, as that was ordinarily done in July. It had R47.7 billion which was yet to be spent.

Department of Cooperative Governance: Progress on Millennium Development Goals
Mr Ricardo Hansby, Deputy Director-General: Infrastructure and Economic Developments: Department of Cooperative Governance, briefed the Committee on the Department’s progress in achieving the Millennium Development Goals (MDGs).

He tabled the eight MDGs set out by the United Nations (see attached document), and explained that the Department must become directly involved in working towards fulfilment of some that he would outline. The first MDG that involved DCOG called for the elimination of extreme poverty and hunger. DCOG would seek to achieve this through the provision of access to basic services and job creation interventions to alleviate poverty. South Africa, as a whole, had responded to the goal through the provision of social services, social welfare support, broad based employment creation via the Extended Public Works Programme (EPWP) and major infrastructure programmes with a strong housing focus. MDG 1 was also linked to government’s Outcome 9, which called for a responsive, accountable and efficient local government system.

Three of the outputs required of DCOG under government’s Outcome 9 related directly to achieving MDG 1. These were output 2, which mandated an improvement in access to basic services, output 3, which called for the implementation of the Community Work Programme (CWP) and increased use of cooperatives, and output 4, which called for actions supportive of human settlement outcomes. The South African MDG report, published in 2010, highlighted progress made on achieving MDG 1. There had been an overall decrease in absolute poverty, with the proportion of people living below the poverty line having dropped, from 53% in 1995, to 48% in 2008. However, relative inequality of living conditions remained high in the country. The global financial crisis of 2008 had contributed to low employment rates, and had had a negative impact on the attempts to achieve the MDGs on the African continent.

A key facet of the Department’s approach to achieving the MDGs was the CWP. This programme aimed to provide an employment safety net, by providing a minimum level of regular work opportunities to participants, with a predictable number of days of work provided each month. Under this programme, participants would be provided with 2 days of work a week, 8 days of work a month, and 100 days of work a year. They would be offered a wage of R60 per day. A target of 237 000 jobs, for the Medium Term Expenditure Framework period up to 2013/14, was set.

Mr Hansby said that this programme currently had 89 689 participants. 56 sites had been established. The programme had created 23 693 full time equivalent jobs, and 54 494 jobs which were based on the poverty measure of 100 work-day opportunities. The CWP’s wage rate had increased by 20% in November 2010.

Mr Hansby moved on to describe how, under the New Growth Path (NGP), DCOG planned to upscale its Local Economic Development (LED) initiatives, towards the creation of sustainable jobs on a large scale. It would promote and support business ventures that were driven by the private sector and which had the potential to create job opportunities on a large scale.

The next MDG directly involving the Department was MDG 7, which related to environmental sustainability. South Africa’s current
dependence on environmentally harmful coal-based energy production could adversely affect its ability to deliver on this MDG. Sustained investments in strengthening environmental monitoring systems remained essential.

MDG 8 related to progress in establishing global partnerships for development. South Africa had made great progress in telecommunications, and was rapidly approaching a 9 out of 10 rating in terms of quality and service provision.

There were still factors that militated against South Africa’s ability to achieve the MDGs. Poverty and inequality remained high, and were largely driven by high unemployment. Real per capita income had increased by only 2% per annum, since 2001. At this rate, it would take South Africa 35 years to reach Poland’s income level. The proportion of people below the poverty line had dropped from 53% in 1995 to 48% in 2008. However, a high share of income for the poorest 40% had remained stable since 1994, although it was noted that this income now took the form of social grants rather than earned income and remittance.

Mr Hansby also reiterated that South Africa faced challenges in regard to infrastructure development. Development was being held back by insufficient investment in new infrastructure, and a failure to maintain existing infrastructure. Modernisation of infrastructure was complex and costly, and there was also a need to shift towards a more labour-absorbing and knowledge-intensive economy. The costs were further affected by the huge distances within South Africa, and between this country and its trading partners, with many African infrastructure networks also being weak. South Africa thus needed to have a highly efficient logistics system, and this would require more investment (including private investment) and a political understanding of the need for super-efficiency. Better coordination within government and amongst state owned enterprises was also needed.

Mr Hansby concluded, however, that the MDGs could be achieved, with more integration and improvement of weak areas.
 
Discussion
Mr N Nonkonyana (ANC) asked why the Department of Cooperative Governance had not included members from the Department of Traditional Affairs as part of its delegation.

Mr Elroy Africa, Director-General: DCOG responded that the Ministry of Cooperative Governance and Traditional Affairs was responsible for two Departments – the Department of Cooperative Governance, and the Department of Traditional Affairs, which were two separate departments under one Ministry. Many of the deliverable goals were tasked to the Department of Cooperative Governance, under Outcome 9 of the government. He assured Members that the Department of Traditional Affairs was not being overlooked, nor was it shying away from its own responsibilities.

Mr Nonkonyana asked who was in charge of co-ordinating responsibility for the Community Work Programme (CWP). He commented that the responsibility for co-ordinating intergovernmental relations fell on the shoulders of DCOG.

Mr Africa agreed that the main role of DCOG was to coordinate intergovernmental relations and to ensure that different stakeholders came together to contribute in a manner that was helpful to different provinces and local government structures. Development planning legislation should be strengthened so as to improve integration and coordination. As part of the attempts to achieve the goals set for this Department, a task team, involving all the major delivery departments in government, had been formed. The Director General of the Department of Human Settlements and Mr Elroy co-chaired that task team.

Mr Nonkonyana asked what the Department was doing to eradicate corruption.

Mr Elroy responded that the Department had established an inspectorate, which would ascertain where there were cases of corruption, and then refer those cases to the relevant law enforcement body. The DCOG’s inspectorate did not have any prosecutorial powers itself, but would refer cases of suspected corruption to its partner law enforcement agencies.

Mr Nonkonyana asked whether the Department’s goals were seen as achievable and realistic.   

Mr J Lorimer (DA) asked why the Department was proposing to integrate local economic development (LED) initiatives with districts, and whether that would be prudent. He said that he did not understand how the LED initiatives were going to be paired with the private sector and asked how this Department would convince the Department of Public Enterprises to facilitate such a deal.

Mr Hansby responded that the private sector had responded positively and displayed good will toward the initiatives to stimulate LED. The Department was attempting to harness that goodwill, and get the private sector actively involved in creating LED opportunities. The Department was also attempting to assist districts by integrating LED, again also involving the private sector. Districts could not attract the private sector by themselves but needed national government’s assistance.

Mr Africa added that the LED initiatives had already come a long way and would continue to grow over time. The new Departmental framework would assist in further improving LED. LED would be tailored to specific towns and municipalities, as opposed to trying to make a general broad approach fit all districts.

Mr J Matshoba (ANC) expressed his displeasure that the CWP projects were paying R60 per day to employees. He felt that the pay for the jobs should be higher, since this sum was not sufficient, particularly over a longer period of time. He asked how this was justified. He also sought clarity on the work on roads, mentioned in the MDG presentation.

Mr Hansby responded that the CWP payment plan of R60 per day was worked out in conjunction with the Department of Public Works, and tied in with that Department’s Extended Public Works Programme. It would not be affordable to increase the amount of money paid to the CWP workers.

Mr Matshoba contested the response, saying that there were middlemen involving in the payment process, and if they were removed from the process, if they were removed from the process, it would make more available for the end-workers.

Mr Hansby replied that it was a major task to manage the number of workers under the CWP, and it was necessary to use implementing agents to organise the projects. Government could not compete with the private sector in payments made for workers on projects such as the CWP. The private sector had the ability to build sustainable employment, which was capable of spurring growth.

Mr Africa urged the Committee to try to arrange a visit to some of the CWP sites in the country, and said that the work being carried out at some of the sites was highly impressive. The Department was not trying to privatise municipal services through the CWP.

Ms D Nhlengethwa (ANC) expressed her appreciation for the implementation of the CWP project. She asked whether those employed permanently under the CWP worked for five days a week, and whether they received a salary of R60 per day. She asked who was responsible for administering the CWP projects.

Mr Hansby replied that the CWP project provided employment for two days in a week and did in fact pay R60 for each day. He reiterated that there were implementing agents responsible for administering the CWPs.

Ms M Wenger (DA) commented that the Department should not overlook the power and capacity of local small businesses, when formulating the LED initiatives. She said that bigger corporations and organisations were not necessarily the best route to stimulate development, but local small businesses should be given a role in stimulating LED.  

Mr Hansby replied that it was not possible to rely on small businesses alone to spur local economic development. Small businesses had a limited ability to grow beyond one-person operations, especially those located outside the larger productive sectors of the economy. Therefore the Department focused on involving big businesses to spur LED, and to address chronic unemployment.

Ms Wenger commented that she thought that the Department was underestimating the abilities of businesses. She further commented that she did not think that providing CWP employees with work for two days out of the working week did not really help in creating capacity and skills development.  

Mr T Botha (COPE) asked how the Department intended to upgrade towns to become self-sufficient as opposed to constantly relying on government funding.  

Mr Africa replied that the Department was looking specifically at the manner in which money was distributed at a rural municipal level. It had instituted a number of projects to deal with the issue of creating sustainable towns that could survive without government funding. One such project was the Small Towns Regeneration Project. That Project worked to establish a relationship with small towns that could look at suitable ways to develop infrastructure and stimulate economic development. In the long term, those sorts of projects would be beneficial to small towns and assist them to gain more autonomy and higher levels of development.   

Mr Hansby added that most urban towns and centres were already economically self dependent. For this reason, the Department would mostly be focusing on rural towns and less developed municipalities. Infrastructural development would be important in forming the backbone for less developed towns, in order to attract business investment so that they could become economically self-reliant.  

The Chairperson said that the presentation on MDG 7, on environmental sustainability, lacked any mention of integration. The houses constructed and provided by government should be built to be more energy-efficient. There needed to be a stronger linkage between green energy policies and LED initiatives. Environmental protection was an essential issue, which should not be overlooked by this Department.

The Chairperson noted that the issues surrounding the CWP project and the administrators of that project needed to be looked into more seriously, and that where any corruption was indicated, it should be strongly addressed. The Department should also be cognisant of the impact of the 2008 economic crisis on the achievement of the MDGs. The Department’s strategy on MDGs should be developed so that it could both assist at a local level but take international challenges into account. He commented that the relationship with rural leaders needed to be better cultivated and managed by the Department.

Mr Hansby replied that the impact of the global recession had affected the distribution of resources, and there were constraints placed on all departmental budgets. The Department was aware of that impact and was cognisant of international issues as well, when approaching its future work. He agreed that a green economy focus needed to be incorporated into whatever plans were made for building housing and addressing unemployment.

Mr Matshoba asked the Department how it gathered its statistics around the provision of basic services.

Mr Africa said that the response to that question would be provided in writing to the Committee.

Department of Cooperative Governance Expenditure Outcomes as at 31 May 2011
Ms Lerato Thwane, Executive Manager, DCOG, briefed the Committee on the Department’s expenditure outcomes as at 31 May 2011.

She noted that the DCOG was required to report quarterly on its expenditure, as set out in Section 32 of the Public Finance Management Act (PFMA). The Department had been allocated a total of R1.4 billion for the 2011/12 financial year. It had spent R46 million of its allocation thus far, with R1.3 billion unspent. Of this, the Department had spent R20 million (out of a total allocation of R212 million) on administration, and R4.8 million (out of its allocated R46 million) on policy, research and knowledge management support. R2 million (out of the allocated R36 million) was spent on governance and intergovernmental relations. It had spent R2.5 million (out of the allocated R821 million) on the National Disaster Management Centre, R5.6 million (out of its allocated R28 million) on provincial and municipal government systems, and R4.1 million (of its allocated R216 million) on infrastructure and economic development. R6 million out of its allocated R83.7 million had been spent on traditional affairs.

Ms Thwane went on to give more details. Under the Administration programme 1, payments for compensation of employees were, at 17%, slightly over the projected 16%, but this was still
within the benchmark set by the National Treasury. Goods and services actual expenditure reflected 4 % spending against the 18% projected. This was because the implementation of some projects had not yet started as planned. There was no spending under capital payments, as opposed to the projected 16% projected, and the non-spending was due to the fact that procurement processes for office furniture were not completed.
In the next programme,
Policy, Research and Knowledge Management Support, the compensation of employees expenditure was on target, at16 %. Under goods and services, there was 3% actual expenditure, as opposed to the projected 19%. The cost drivers according to the projected expenditure were computer services, consultants, contractors, and travel and subsistence. In most, there had been under spending, due to the appointment of service providers still being in the process of completion.  Capital payments expenditure was at 11 % against the 12% projection, within the National Treasury benchmark.

Under the programme for Governance and Intergovernmental Relations, compensation of employees
was at 13% instead of the 16% projected, mainly due to a few posts that were still vacant. Goods and services expenditure stood at 2%, far below the bench mark of 16%, because project plans were still at early stages, and procurement of services for these had not yet taken place.

Under the National Disaster Management programme the compensation of employees was
8%, against the projection of 15%, because some posts were still vacant, after the sub-programme was elevated to a programme level. Goods and services reflected 4% spending against the projected 18%, because there was not yet a dedicated programme manager to manage the spending trends. Capital expenditure was at 0%, against 9.5% projection, because the office equipment to upgrade the Disaster Management infrastructure had not yet been procured. Transfers and subsidies showed an allocation of 775 million which had been appropriated to National Disasters if disasters were incurred and provinces declared their need of the funds.

Under the programme for Provincial and Municipal Government Systems, compensation of employees was 26%, measured against 16% projection, mainly due to appointments to provincial technical unit posts. Goods and services
reflected 4% spending against the projected 17%, because some projects were not started as planned. Capital expenditure was at 0% instead of the 8% projected, because of the ongoing procurement of equipment for new officials.

Under the Infrastructure and Economic Development Programme, there was 15% spending on compensation of employees, which varied marginally but was still within the allowable figure.  Goods and services showed 16% expenditure, instead of the projected 18%. Households expenditure was 11%, as projected by the Community Works Programme Wage costs.

There were still some outstanding appointments to be made under the Traditional Affairs programme, which accounted for the 14% spending on compensation of employees, against the 16% projections.
Goods and services actual expenditure reflected 6%, against the 16% projected, because certain projects and committee meetings had not taken place as planned. Capital payments expenditure was at 2%, instead of the projected 25%, because some procurement processes were still in the pipeline and some orders had not yet been paid. Transfers and subsidies showed a 25% transfer to the Commission on the Promotion and Protection of Cultural, Religious and Linguistic Communities (CRL Commission), as projected.

Ms Thwane reiterated the figures for transfers, as given earlier, and repeated that the Department would still be making transfers in July (see attached presentation).

Discussion
The Chairperson asked whether the Department had filled the post of internal audit manager. He also asked about the Department’s supply chain management issues and whether it had sorted out its asset register.

Ms Thwane responded that the Head of Internal Audit position had been filled in March 2011. The Department had carried out work on its asset register and the Auditor-General was assessing the level of the work done. The Department had conducted work to deal with irregular expenditure in relation to the supply chain management. Disciplinary measures were in place to deal with people who were involved in irregular expenditure and corruption.

Mr Matshoba asked about the vacancy rate in the Department and whether more was being done to fill those vacancies.

Ms Thwane replied that the bulk of the Department’s vacancies that had arisen from restructuring had been filled.

Mr Matshoba asked what structures the Department had in place to manage natural disasters. He asked specifically about a case in Northern Cape in 1996.

Ms Nhlengethwa asked why the Department had not mentioned the recent disasters in the portion of the presentation relating to the disaster management fund. She asked whether the Department had been out to assist people in disaster-struck areas.

Mr Africa replied that the Department had attempted to assist with the recent disasters affecting the country. He conceded that the Department had not initially been efficient in dealing with the disasters.  A national disaster was declared, after the December / January flooding, and a special budget was given by National Treasury. The Department had requested affected provincial governments for an estimate of the financial cost of the damage caused by the natural disasters, so that the Department could pay disaster relief funds. However, those recent disasters were yet to be fully quantified. He said that the Department would provide a fuller response in writing.

Mr Africa also added that the Department would look to appoint a person to deal specifically with disaster management. Seven of the nine provinces in the country had disaster management centres, although Mpumalanga and the Northern Cape did not.

Mr Botha asked whether the Department monitored municipal transfers up to the end of July. He commented that the Department seemed to be assisting some districts and municipalities to an extent that he thought was outside the realm of the budget. He asked whether there was scope in the budget to allow for what he described as ‘handholding’.

Ms Thwane responded that municipal transfers were undertaken in July. The Department received reports from the municipalities on their third quarter expenditure, as the new municipal financial year began, and later also received fourth quarter reports, which it would then synchronise to get a picture of how the transfers had been spent. The Department had developed ways to assist other departments in particular areas, and each project received funding and was duly monitored. The projects were provided for in the Department’s budget.

Mr Hansby added that the Department was trying to supplement the existing budget with donor funding, and was trying to get businesses to pool funds to assist with the projects mentioned by Ms Thwane.

The Chairperson commented that the disaster management position needed to be filled soon. More needed to be done at a district and municipal level to assist with disaster management. Other areas of Departmental focus would be negatively affected if the issue of disaster management was not addressed. 

The Chairperson commented that there was marked improvement with the handling of the Department’s finances and financial practices, which was encouraging. The Auditor-General had been complimentary about the Department’s attempts to clean up fiscal mismanagement.

He thanked the Department for its attendance and input.

The meeting was adjourned.

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