Committee Report on Provincial & Local Government Budget Vote 5: adoption

PROVINCIAL & LOCAL GOVERNMENT PORTFOLIO COMMITTEE
10 June 2002
COMMITTEE REPORT ON PROVINCIAL & LOCAL GOVERNMENT BUDGET VOTE 5: ADOPTION

Chairperson: Mr Y Carim (ANC)

Relevant Documents:
Report dated 10 June 2002 - Appendix 1

SUMMARY
The Committee adopted its report on Budget Vote 5: Provincial and Local Government.

MINUTES
The Chair tabled an amended report. All the bold print reflects the changes from a previous draft. The Chair went through all the changes and asked the members for comment.

Mr Kompela (ANC) referred to paragraph C 3 that reads - ' The Department has three disabled staff members …'. He said that the sentence should rather read that 'The Department has three staff members with disabilities…'.

The Committee agreed to the above amendment.

The Chair pointed out that in paragraph O 1 there is an error. Currently a sentence reads 'between 1.3% - 1.7% of the total…'. It should read '1.3% and 1.7%…'.

There were no further comments.

The report was put before the committee and adopted.

The meeting was adjourned.

Appendix 1

Report of the Portfolio Committee on Provincial and Local Government on Budget Vote 5: Provincial and Local Government dated 10 June 2002.

1.The Portfolio Committee on Provincial and Local Government, having considered Budget Vote 5: Provincial and Local Government, reports as follows:

A. Introduction

1. The budget review of the Ministry and the Department of Provincial and Local Government was undertaken from 23 to 26 April 2002.

2. Those who appeared before the Committee included Minister F S Mufamadi, Deputy Minister N Botha, Acting Director-General Mr C Clerihew, Deputy Directors-General Mr E Africa and Ms J Manche, Chief Directors Mr L Buys, Ms G Oumbi-Masilela, Ms T Mketi, Ms B Mogane-Ramahotswa, Ms L Mosia, Mr D Powell, Mr T Seboka and Mr S Selesho, Directors Mr A P B Botha, Ms S Dzengwa, Ms K Harrison, Mr T S Malaka, Mr B Marrian, Mr R Mosiane, Mr M Nkasawe, Mr Y Patel and Ms Y Silimela.

3. The National House of Traditional Leaders was represented by its Chairperson Inkosi M B Msimela, Deputy Chairperson Morena M Mopeli, and members Kgoshi M Malekane, Kgoshi C Mathebe, Nkosi M Matanzima and Chief Executive Officer Mr L Molubi. The delegation from the Municipal Infrastructure Investment Unit (MIIU) consisted of the Chairperson of the Board, Ms M Hesketh, Acting Chief Executive Officer, Mr J Leigland, and Project Manager, Ms D Magugumela The Municipal Demarcation Board was represented by its Chairperson, Dr M Sutcliffe and Manager, Mr H Monare. Local Government Water and Related Services SETA was represented by its Chairperson, Mr S Mqaka, Deputy Chairperson Mr J Mohlala and Chief Executive Officer, Mr A Machin. The South African Local Government Association (SALGA) was represented by Councillor I Mohlala, CEO Mr T
Mokwena and Managers Mr M Mabusela and Mr J Mettler.

4. A Full-day workshop was held with the Department on 26 February 2002, at which the programme, plans and strategies of the Department were discussed. This served as a precursor to the budget review.

B. Minister's Overview

1. The Minister explained that the President's "State of the Nation address informs the Ministry's and the Departments programmes for the year. The Department's work would contribute to advancing government's work which is centred around the interrelated themes of (i) pushing back the frontiers of poverty; (ii) overcoming underdevelopment; and (iii) achieving higher rates of investment and growth.

2. The Minister explained that the President's Co-ordinating Council (PCC), which met in December 2001, enabled the three spheres of government to review progress on the establishment of the new system of local government. The PCC noted appreciable progress in this regard, but also identified
challenges which require immediate attention. Consequently, the Department is drafting a revised programme of support for local government for adoption by Cabinet. The key elements of the programme include:

i. Facilitating greater national and provincial government assistance to municipalities to cope with the transformation.

ii. Ensuring greater co-ordination between the programmes and projects of
national and provincial departments and IDPs.

iii. Ensuring that programmes such as LED (Local Economic Development) and CMIP (Consolidated Municipal Infrastructure Programme) contribute more to stimulating local economies.

3. The Minister emphasised the importance of the ISRDP (Integrated Sustainable Rural Development Programme) and the URP (Urban Renewal Programme) and the need for effective co-operation between all three spheres of government and traditional leaders to ensure their successful implementation.

4. The Minister explained that discussions were underway to explore the possibilities of including municipal staff as part of the country's public service. This would encourage mobility between the three spheres of government.

5. The Minister stressed the importance of "volunteerism" in this "The Year of the Volunteer" and the need for ordinary people to take greater control over their own lives. For its pan, the Department would be taking a much more "hands-on" approach to delivery in future.

C. Strategic Planning Process and Restructuring of Department

1. Consistent with the requirements of the PFMA (Public Finance Management Act), the Department has finalised a Strategic Plan for 2002-2005. This will be followed by a Business Plan.

2. The further restructuring of the Department will take place in terms of the Strategic Plan. Then has been a significant increase in staff. However, the Department has "underspent" on its personnel budget for 2001102 by 23,7%. The maim reason for this was the delay in filling vacant posts caused mainly by the need to conduct job evaluation for every management pout

3. The Department has a current staff complement of 20& 56% of the Department's staff is female. However, at senior management level, women make up only 20%. White and African women make up almost 50% each of this 20%. The 80% men in senior management comprise 35% African, 35 % White and 10% Coloured. The Department has three disabled staff members, which falls short of the 5% target government has set for departments. The Department is finalising its internal employment equity plan as part of its strategic planning process.

4. The Department's internal drills audit has just been finalised and the Department is now developing an internal capacity-building programme.


5. The Committee welcomes the Strategic Plan as it provides a clearer form and structure for the Department's programmes and activities and for the Committee's oversight role. The Committee feels however that the Strategic Plan needs to be more specific, especially in turns of measurable objectives and outcomes. The Plan should also be more explicit about how the Department's work contributes to the key goals of government as a whole, including economic growth' job-creation, development and redistribution.

6. The Committee welcomes improvements in the social composition of the Department. ft notes with concern, however9 the inadequate representation of women in the senior management echelons.

7. The Committee notes that the post of Director General of the Department has not yet been filled, and urges that this be done expeditiously.

8. The Committee welcomes the Department's commitment to strengthening its capacity-building programme. The majority in the Committee feels that it is not just technical capacity that must be developed, but also a better understanding of the goals, political values, perspectives, strategies and programmes or the government as a whole that is urgently necessary. The Committee welcomes the Minister's statement that the department needs to have a more "hands-on" approach to its responsibilities.

D. Overview of Budget and Programmes:

1. The Programmes of the Department are: (i) Administration; (ii) Governance and Development; (iii) Institutional Reform and Support; and (iv) Auxiliary and Associated Services.

2. The Ministry and the Department of Provincial and Local Government have been allocated R6385 million for the 2002/03 financial year, which is an increase of 34,8% in nominal terms (30'A in real terms). The increases are 34,8%, 22,4% and 8,1% over the MTEF (Medium Term Expenditure Framework) period.

3. Most significant is the increase to local government. Transfers to local government go up by 18,3% over the three-year MTEF period. The allocation for the current financial year rises to R8.5 billion from last year's R6,4 billion. Included in this is the "equitable share" of R3,8 billion and conditional grants of R2, 4 billion. The 2002-3 budget shifts resources towards the provision of basic infrastructure and services at local level. The Department therefore has to facilitate significantly more service delivery.

4. The Committee welcomes the increases in the budget, particularly for local government. The Committee is pleased too that, unlike last year, district municipalities will be receiving funds from the "equitable share". Of course, the allocation to local government is still not adequate. The Committee does not believe, however, that the answer lies in flinging more money at local government. Municipalities have to make more effort to raise the revenue due to them from their own sources, spend money more strategically and productively, and manage their finances better. Over time, however, national government will have to allocate more money to local government if local government is to fulfil its increasing responsibilities. The Department too now has more responsibilities to fulfil with its bigger budget, and needs to further develop its capacity to spend and allocate its budget more effectively.

5. In future budget oversight hearings, the Committee would like the Department to more clearly set out the relationship between its Strategic Plan and its budget.

6. The Committee welcomes the "clean bill of health" for the 2000/01 financial year the Department received from the Auditor General's Office.

E. Legislative Programme

1. The Department hopes to Introduce the following legislation this year:

i. Disaster Management Bill.
ii. Property Rates Bill.
iii. Municipal Structures Amendment Bill
iv. Legislation on Traditional Leadership and Institutions.
v. Local Government Laws Amendment Bill.
vi. Amendment .to Sections 100 and 139 of the Constitution.
vii. Legislation emanating from section 41 of the Constitution
viii. Repeal of Outdated Local Government Legislation.


F Integrated Governance: Intergovernmental Relations (IGR), co-operative Governance, Provincial Systems

1. The Department emphasised the importance of integrated governance to ensuring improvements in planning, service delivery and development.

2. The Department is preparing legislation on IGR (Intergovernmental Relations) and co-operative governance, as required by section 41 of the Constitution. Among other things, the legislation will deal with enhancing the role of local government in executive intergovernmental process. The Department is also working with National Treasury to prepare constitutional amendments relating to interventions in municipalities experiencing major financial difficulties within a framework for monitoring, support and interventions.

3. The Department is to review the Schedule 4 and 5 powers and functions of the spheres of government set out in the Constitution.

4. The Committee feels that integrated governance is key to achieving the major goals of government. while it notes the progress in this regard, it feels that more needs to be done. The Committee feels that the success of the ISRDP and URP depend crucially on integrated governance - and the success of these programmes will also serve to enhance integrated governance. An important barometer of integrated governance therefore will be progress on the ISRDP and URP. The Committee believes that a review of the Schedule 4 and S powers and functions of the spheres of government is important, and is to seek a briefing from the Department on the matter later in the year.

G. ISRDP (Integrated sustainable Rural Development Programme) and URP (Urban Renewal Programme)

1. To oversee the implementation of the ISRDP and URP, provincial political
structures made up of premiers and MECs, and nodal political structures consisting of Executive Mayors have been established.

2. Over 120 ISRDP projects worth R3.7 billion were identified in November
2001 using the Interim IDP (IDPs) processes and through consultative workshops. A further 122 priority projects worth R584 million were identified for this financial year. Of these, 48% are currently being implemented while 52% are in the planning stages. The Department of Labour has made available R18 million for skills development. UNDP provides assistance with monitoring and evaluation to the tune of US$350 000. Various parastatals and donor agencies have shown interest in supporting the programme.

3. Of the 110 anchor URP projects compiled by the Department, 63,6% are still in the preparatory stage, 29% are completed and 7,4% are still to commence. Examples of planned URP projects include Galeshewe Cultural Village in Kimberly, Mitchell's Plain Town Centre and Alexandra Jukskei Greening.

4. Part of the funding for the ISRDP and URP comes from the Consolidated Municipal Infrastructure Programme (CMIP) and the "equitable share". Each project is separately administered and has to have a business plan. For instance the Alexandra URP nodal project is audited with World Bank assistance. The Department has also embarked on mobilising private sector and other stakeholders to assist with the programmes.

5. The Committee feels that it is vital that the ISRDP and URP are a success. Their effective implementation requires not just the involvement of government, but public representatives in all three spheres, the private sector, trade unions' community organisations, non-governmental organisations and a range of civil society organisations, as well as ordinary people. The Committee believes that MPs living in or servicing the nodal areas should actively monitor and contribute to the implementation of the ISRDP and URP. The Minister should also consider writing to the relevant MPs to seek their appropriate contribution. The Committee also feels that there should be more communication through the media about the ISRDP and URP.

6. The Committee feels that it is difficult to evaluate progress on the ISRDP and URP at this stage. It accepts that these are complex and challenging programmes that cannot be implemented overnight. The Committee is keen to consider a more comprehensive progress report on the ISRDP and URP later in the year. It is also keen to get a better sense of the funding arrangements for these programmes. The Committee will also consider visiting the nodal areas next year.

H. CMIP (Consolidated Municipal Infrastructure Programme), LED (Local Economic Development) and Social Plan Fund

1. The CMIP was established in 1998 as an infrastructure programme to address backlogs in service delivery. The LED was established in 1999 as a poverty alleviation programme to facilitate local economic growth. The Department has decided to merge the two programmes to have a co-ordinated approach. The allocation to CMIP has increased from R1034m last year to R1769,5m this year, an increase of 71%.

2. The LED Fund has financed 186 projects to the value of R186 million. It has created 3 215 permanent jobs. Through the fund, 99 738 person days of temporary employment have been created and 8293 people trained on various projects. The Department has identified over 80 new projects for the 2002/03 financial year.

3. The Social Plan Fund is an outcome of the 1998 Presidential Job. Summit It was established in 1999 to provide municipalities with financial assistance to undertake local economic regeneration studies. During the last financial year, the Plan provided funding to six municipalities. Following a review of the fund, eight rural nodes have been allocated money for this financial year.

4. The combined CMIP and LED funds will be utilised to develop a National Infrastructure Investment Framework; strengthen the role of the Municipal Infrastructure Task Team; provide national strategy for addressing infrastructure backlogs; and facilitate a single infrastructure funding mechanism. Both programmes will undergo extensive external evaluation to consider their impact.

5. The Committee welcomes the merging of the two programmes. The committee is pleased that the CMIP budget has been increased by 71%. It is concerned, however, about whether the Department will be able to allocate its full CMIP funds to municipalities, especially in view of its inability to allocate its full CMIP budget in the past two financial years. The Department explained that there were many sound reasons for this "under-spending", including the slow process of project approval and implementation by both provincial government and municipalities. However, the Department is determined to overcome the obstacles and allocate the full CMIP budget during this financial year. The Committee is keen to see this happen and will be monitoring the progress.

I. Local Government Transformation

1. The Department reported that it is constantly monitoring and actively contributing to the local government transformation process. Among the many areas in which it is working are the consolidation of IDPs (Integrated Development Plans), establishment of performance management systems. finalisation of the division of powers and functions between local and district municipalities, determination of the fiscal powers of local and district municipalities, and review of the local government financial system (including the "equitable share", the property rates system, the RSC levy, and the implications of the restructuring of electricity industry).

2. The Department accepts that the transitional arrangements in regard to the division of powers and functions between district and local municipalities, while necessary, make for uncertainty. The finalisation of the division is necessary to ensure proper planning, budgeting, setting up institutional structures and attending to other key aspects of the transformation. The Department has set up an Inter-Departmental Task Team (IDTT), including SALGA, the Finance and Fiscal Commission, and Municipal Demarcation Board to undertake a detailed assessment of the capacities of municipalities and their service delivery arrangements. The IDTT report has taken into account the views of all stakeholders. The Department is presently undertaking a series of bilateral consultations with the Departments of Health, Water Affairs and Forestry, Minerals and Energy, and National Treasury. Through this process consensus is emerging. It is envisaged that the division of powers and functions will be finalised by May 2003.

3. The City Support and Learning Network has been established to bring together the 9 major municipalities, including the 6 metropolitan municipalities, so that they can learn from each others' experiences and support each other.

4. The Department is developing guidelines on the establishment of ward committees. It recognise; of course, that a number of ward committees have already been established. The Department is looking into the possibility of the Imbizo concept used by provincial and national government being extended to local government.

5. In co-operation with the MDB, the Department is investigating the specific problems of cross-boundary municipalities and exploring various options to deal with the problems.

6. About 55% of the country's population is receiving free basic water services. There are 10 pilot projects on the provision of free basic electricity. The Department explained that there are problems of logistics, infrastructure, capacity and funding that are determining the pace of progress, especially in respect of electricity.

7. The Department is to develop policy frameworks to regulate the remuneration of councillors and senior managers of municipalities. This will be an interactive process with the relevant role players.

8. The Committee recognises the magnitude of the local government transformation underway and the many challenges that have to be contended with. It is acutely aware that the Department alone cannot meet these challenges. SALGA, provincial governments, public representatives, municipalities, trade unions, the private sector, NGOs, CBOs, local government professionals and other sections of civil society, as well as ordinary residents, have important roles to play. The Committee itself should be doing more to contribute to the transformation.

9. While recognising the challenges, and the important role of other stakeholders, the Committee feels that the Department should be contributing more effectively to the local government transformation. There is a need for greater clarity on issues around the strategy, programmes, targets and time-frames of the Department's local government transformation work. The Department could also be playing a more effective co-ordinating role of the key stakeholders in the local government transformation process. The Committee is pleased to learn that there has been significant progress in finalising policy on the distribution of powers and functions between local and district municipalities and that the Department has the support of all the key stakeholders. As this is a matter of such importance, this progress should be communicated publicly.

10. While it is understandable, given the infrastructure disparities, the Committee is concerned that the free basic water service is being provided largely to urban residents, and hopes that more rural residents will receive the service soon as well. The Committee is also concerned at the cutting off of water services to residents who cannot afford to pay, and urges the Department to contribute to exploring practical ways of resolving the issues of arms in payments and free services. The Committee will seek to arrange a joint meeting with the Waters Affairs and Minerals and Energy Portfolio Committees.

11. While recognising the sensitivities of the issues, the Committee feels appropriate consideration should be given to reviewing the boundaries of the provinces as a way of resolving the difficulties posed by cross-boundary municipalities.

12. While recognising the restraints of funds, resources and capacity, the Committee feels that provincial governments could do more to assist municipalities to effect transformation.

13. The Committee believes that the Department should do more to assist SALGA to play a more effective role - and that this can be done in a way that does not intrude on SALGA's autonomy.

14. The Committee believes that it is absolutely crucial for the success of local government transformation that an effective capacity-building strategy is implemented and that an appropriate system of local government finances is developed. Theses are urgent needs and the Committee believes they should be expeditiously attended to. The Committee, once again, expresses its concern about the financial implication. of the restructuring of the electricity industry - and requests the Department to intervene appropriately.

15. The Committee feels that there is not a sufficiently concrete sense of progress in regard to the local government transformation process - and is keen to pursue this further with the Department later in the year. The Committee is also to undertake a study tour of municipalities in the second half of the year.

16. The majority in the Committee feels that there is a need for further careful consideration of councillor remuneration. One of the issues that needs to be addressed is the significant gap in remuneration between full-time and part-time councillors. There are also difficulties that flow from ward councillors being part-time while PR councillors are full-time. Obviously the national budget is under considerable strain, but over time, consideration has to be given to whether it might be appropriate for councillors remuneration to be paid for either in full or part from the national budget. Over the longer term, with increasing responsibilities being imposed on local government to ensure delivery and development, there also needs to be an open debate about whether the gap between public representatives in the local, provincial and national spheres should not be significantly reduced, so as to allow for easier mobility of representatives between the three spheres (although this will serve to increase the gap between full-time and part-time councillors). Of course, in suggesting these debates occur over time, the Committee is acutely aware of the stringent constraints on the budget and other difficulties, and that it will take quite some time before these issues can be really addressed.

J, Local Government Capacity-Building

1. The Department explained that it recognises the importance of having an intensive local government capacity-building programme to ensure that the new local government model is effectively implemented and is working with other relevant stakeholders in this regard. The December 2001 meeting of the FCC resolved that municipalities should receive "hands-on support from national and provincial governments within a framework of clear transformation targets and deadlines". (Deleted reference to joint World Bank project - it could not be verified). The Department is also finalising special support programmes for the two new metropolitan municipalities -Ekurhuleni and Nelson Mandela - with the assistance of the Cities Network programme.

2. The Committee believes that it is extremely vital that the capacity-building programmes for local government be intensified and more effectively implemented. The success of the local government transformation depends crucially on a significant improvement in levels of capacity. It is not only technical capacity that has to be improved, but there also has to be a focus on political capacity and the need for a particular work-orientation. The Committee repeats its concern that at the lack of co-ordination between all the stakeholders responsible for local government capacity-building, and urges that this be attended to expeditiously. The Committee feels that it might be appropriate for the Department to see its role as primarily that of co-ordinating. SALGA should take primary responsibility for building the capacity of councillor and the LGWSETA (Local Government, and Water Sector Education Training Authority) should focus primarily on personnel training. The Committee is keen to organise a full briefing on local government capacity-building with the key stakeholders in the second half of this year.

K . Traditional Leadership and Institutions

1. The Department explained that it recognises the importance of finalising policy and legislation on traditional leadership and institutions. The President, in his "State of the Nation" address made it very clear that there will be significant progress in this regard this year.

2. The Department intends to finalise the White Paper on Traditional Leadership and Institutions by July 2002 and to introduce legislation later this year. The interim bill on the powers and functions of traditional leaders in local government will not be re-introduced. National framework legislation will be introduced, which will allow provinces to formulate their own legislation.

3. The Department continues to offer support to the National House of Traditional Leaders and recently established a task team to address the specific concerns of the House. The term of the House is to expire soon and the Department is assisting with preparations for the inauguration of the new House.

4. The Department is at present considering a report dealing with the Khoisan communities.

5. Of course, the majority in the Committee appreciates the complexities and difficulties in attending to issues of traditional leaden and institutions, but would like to see significant progress this year, and urges that the Department fulfils the deadlines ft has set in this regard. The Committee would also like to see greater progress in addressing the concerns of the Khoisan communities as well.

L. Disaster Management

1. The Department expects that parliament will pass the Disaster Management Bill by June this year. The bill seeks to provide a uniform and co-ordinated approach to disaster management in the county. It shifts the focus from managing disasters to prevention and mitigation. It is envisaged that the Disaster Management Framework as required by the Bill will be developed by February 2003. By March 2003 a process of assessing capacities of municipalities and provinces will be launched with a view to implementing sections of the Bill. SALGA has commissioned a study to determine which sections of the Bill can be immediately implemented.

2. The Department is negotiating for some sections of the Fundraising Act to be transferred to it for easy access during disasters. NGOs have been approached to provide relief operations on agency basis when the need arises. The Department will also be in consultation with the LGWSETA on disaster management capacity-building and training.

3. The Department is part of developing a SADC Cross-border assistance framework, a Standing Operational Procedures Manual for Relief Operations, and an initiative to relax protocols that pose logistical cross border constraints.

4. The Committee welcomes the progress on disaster management.

M. South African Local Government Association (SALGA)

1. SALGA's allocation has increased from R16 million last year to R22 million this financial year. SALGA explained that the EU2 million will serve merely to meet the expenses of personnel, travelling, and meetings. According to a tentative budget it had drawn to meet the costs of its proposed programmes, SALGA needs R120 million. It intended to draw these extra funds from its provincial affiliates. At present the provinces raise R30 million.

2. SALGA is undertaking an audit of municipalities to establish progress on the local government transformation process and the report on this will be presented to Parliament. SALGA is embarking on a plan to play a more active role in the implementation of the ISRDP and URP. SALGA is actively engaged with the Department of Minerals and Energy on the financial implications of electricity restructuring. SALGA is concerned about the possible adverse effects of the restructuring of electricity on the finances of municipalities and is working with the Department on how to respond to this.

3. SALGA undertook a major organisational analysis and identified, among other things, that its work is being hampered by its lack of both administrative and technical support In response to this SALGA is undergoing a major restructuring process, central to which is the alignment of the organisational structures with overall strategy. The objective of the restructuring process is to create cohesion within the organisation. The core elements of restructuring process include determining strategy, performance goals and budget allocations nationally. SALGA believes that both the envisaged cohesion and the injecting of more human and financial resource capacity into the organisation will assist SALGA to execute its constitutional mandate, and accelerate service delivery.

4. SALGA recognises that k lacks the necessary profile it needs, especially during these challenging times of local government transformation. SALGA will also take initiatives to raise funds and not be dependent only on national allocations.

5. The Committee appreciates the difficulties SALGA has to contend with. but believes that ft can and must be more effective. The Committee finds it difficult to appreciate how SALGA will be able to raise a budget of R120 million. Notwithstanding resource and other limitations, the Committee feels that SALGA needs to be monitoring and contributing to the local government transformation more effectively. SALGA's participation in parliament is far from adequate, and the Committee appeals to it to appoint a permanent parliamentary liaison officer. The Committee also feels that the public profile of SALGA needs to be enhanced. The Committee feels that it needs to pursue many more issues with SALGA and will seek to meet with SALGA's representatives to take this further in the second half of the year.

N . Notional House of Traditional Leaders:

1. In executing its constitutional mandate, the National House has established 6 standing committees: Management; Internal Rules; Constitutional Development; Social and Traditions, Customs and Culture.

2. The House has established an HIV/AIDS task team, in co-operation with the Department of Health. The House also participates in a rural safety project in co-operation with the Department of Safety and Security.


3. As part of its plans for the next financial year, the House has drawn up a strategy to ensure more effective service delivery. Other identified activities for the 2002103 financial year include participation in the White Paper process' building structures and partnerships with potential investors and donors, and capacity building workshops for the members of the House.

4. Inkosi Mzimela expressed the House's deep disappointment in the government's failure to address the concerns of traditional leaders. The House objected to the control the Department has over its budget. It wanted to "de-link from the administration of the Department". The House would like to be part of the Presidency as it considers that its work cuts across all Departments. The House feels that the Department is not responsive to its capacity-building needs. The House wants to be involved in the drafting of the White Paper on Traditional Leadership and Institutions.

5. The Committee feels that the report submitted by the House is not satisfactory, and requests the Department to assist the House in preparing an adequate report for the next financial year. In particular, the Committee has to have a better sense of how the House is spending the budget allocated to it, what the House's programmes and activities are, what outcomes it is seeking to achieve each year9 and how it measures its progress. The Committee suggests the Department meets the House and resolves outstanding issues regarding a capacity-building programme within three months. As for the other issues raised by the House, the Committee Chairperson will meet with the Department and Ministry and provide a response to the House within three months. The majority in the Committee feels that the House should continue to negotiate with the Department and Ministry around its concerns. There is steady, if slow, progress on the concerns of traditional leaders - and the House is encouraged to constantly negotiate to further its interests.

O. Local Government, Water And Related Services Sector
(LGWSETA)

1. The LGWSETA draws its funds from the skills levy paid by the employer. In the last financial year it received R121 million. For this financial year it expects to receive R120 million. In terms of the relevant funding regulations only 60% of this is available as grants to employers to fund learning activity in local authorities and water companies. According to the LGWSETA, this falls far short of its needs. Proper training is not possible with these funds. The learning costs aft estimated to be between R15,000 and R20,000 per learner per learnership. On this estimate, if the total available grants aft claimed by employers, the maximum number of learners that can participate in full time learnerships is estimated to be between 3600 and 4800 learners per year, which is between 1.3% -1.7% of the total employees in the local government and water sector. The learnership course development costs aft estimated to be between R1.1 and R1.4 million each. The LGWSETA needs to develop a minimum of 40 learnerships with a total estimated development budget of between R44 and 5156 million over the next three years, an amount greater than the total estimated discretionary grant funds available to it over the first five year period (2000-2005).

2. The LGWSETA feels there are at least four options to increase the funds it gets:

i. To increase the levy from 1% to 4% of payroll. This would have to be a voluntary undertaking by employers in the sector because an amendment to the Skills Development Act is unlikely to find political support from employers generally;

ii. To broaden the scope of coverage of the sector to become a local government and utilities sector including for example electricity generation. This would involve an amalgamation of some existing SETA's that would require amendments to regulations and the approval of the Minister of Labour;

iii. To allocate a much larger percentage of the further and higher education budget to vocational training, as happens in the Netherlands and other European countries.

iv. To access donor funds to meet learning development costs as a short-term intervention.

3. The LGWSETA explained that as a relatively newly created structure it was experiencing certain teething problems that it would, over time, overcome. Its CEO was only appointed in Nov6mber 2001 and the new skills manager will start only in August 2002. The CEO conceded that the LGWSETA report to parliament may not be satisfactory, but next year the report will reflect an increased level of development and delivery activity.

4. The CEO explained that there were no intakes for learnerships during the last financial year. The LGWSETA hopes that there will be eight learnerships by the end of this financial year. The LGWSETA has decided to focus its development activity on shorter skills programme to address urgent needs for service delivery.

5. The Committee find. it very difficult to get a clear sense of the value of the LGWSETA's work. While appreciating the difficulties the LGWSETA confronts, the Committee feels that it can be more effective than it is. The Committee felt that the previous Local Government Training Board was very ineffective, and hoped the LGWSETA would be a significant improvement At this stage, regrettably, there is no sign of this. The Committee, as explained above, is very concerned about the inadequacy of capacity-building and training programmes in the local government sphere, and feels that LGWSETA should be working with other stakeholders and doing more to contribute to the local government transformation. The Committee is especially concerned about the lack of co-ordination between the relevant capacity-building and training stakeholders, and would like to see LGWSETA playing a more active role in contributing to the necessary co-ordination being effected. The Committee will seek to convene a meeting of all the relevant stakeholders later in the year.

6. The Committee is not dear about how effectively and productively the LGWSETA has used the funds allocated to it thus far. The Committee does not feel competent to evaluate the LGWSETA's proposals on options to increase its funds, but will refer this to the Labour Portfolio Committee and the Department of Labour.

P. Municipal Demarcation Board (MDB)

1. The budget of the MDB has been reduced from 15,8 million last year to R11,6 million this financial year. The Board had a shortfall of R3,5 million last year, which was funded by the Department. The Board consistently relies on the Department for supplementary funding. The Board expressed concern at the reduction of its budget. Although the boundary determinations have been essentially completed, the Board still has a lot of outstanding work to attend to, and the budget allocated is not adequate.

2. The main activities of the Board have centred around: (i) boundary categorisation, (ii) powers and functions of municipalities, (iii) alignment of service delivery boundaries and (iv) improvement on the functioning of its administration. During this financial year, the Board will consolidate its work around the areas outlined above and will also be part of finalising the outstanding issues of local government transformation.

3. The majority in the Committee feels that the Board still has important responsibilities to fulfil and should be funded adequately. The Board has been extremely frugal and productive in its use of its budget and other resources. In view of its exemplary use of funds, its case for more funds carries a certain credibility with the Committee.


Q. Municipal Infrastructure Investment Unit (MIIU)

1. The MIIU was established in 1998 for a five-year term mainly to assist municipalities to secure private sector investment in municipal services. Its term comes to an end in April 2003 but cabinet is likely to renew it.

2. The MIIU allocation has increased from R6 million last year to R7 million this year. The MIIU overall budget is R17, 5 million. This budget is also being financed with surplus Rinds carried forward from the previous financial year plus anticipated interest on investment and success fees. The financial year of the MIIU ends in February of each year but will change as required by the PFMA to align with the financial year of government. The consolidation of newly-demarcated municipalities slowed down requests for assistance from MIIU last year, but the demands on MIIU are expected to increase in this financial year.

3. In the past financial year, MIIU completed MSPs valued at R6, 7 million.
433, 445 households benefited from this. In the past financial year the Unit managed to sign five major MSPs, including the Kelvin Power Plant Sale in Johannesburg and Uthukela Water Partnerships Multi-Jurisdictional Municipal Service Districts. The latter, which is the first of its kind in the country, is a very innovative water distribution service involving three district municipalities.

4. The MIIU has conducted a series of diagnostic studies of municipalities to investigate potential successes, constraints and challenges for the MSPs.

5. The Committee welcomes the clear and precise report from the MIIU and feels that the MIIU has been effective. The Committee supports a renewal of MIIU mandate. of course the Committee recognises the obvious challenges in securing private sector investment for more rural municipalities, but feels the MIIU should be seeking more creative ways of achieving this, especially with the increasing importance of the ISRDP and the long-term benefits for the private sector if it became appropriately involved in this programme.

R. Conclusion

1. The reports of the Department to the Committee were better this year than last year. Of course, they could be better.

2. The Department has major responsibilities. It has to contend with budgetary, resource, personnel and other limitations. In the circumstances, it is coping reasonably. Notwithstanding the constraints, the Department has to be far more effective in fulfilling its responsibilities.

3. The Committee has identified its concerns in different sections of this report. Fundamentally, these revolve around two inter-related themes:

i) the need for greater co-ordination and Integration in the many senses identified in this report; and

ii) the need for major capacity-building initiatives in the many senses suggested in this report.

4. Within limitations of time and capacity, the Committee will follow up on the issues raised in this report before the end of the financial year. The Committee expects the Department and above statutory bodies to respond to the issues raised in this report in their presentations to next year's budget hearings.

5. Within the contort of the separation of powers between the executive and legislature, the Committee would like to co-operate more effectively with the Department contribute more to addressing the challenges identified in this report.

6. The Committee recognises that it too needs to improve its capacity to fulfil it oversight role.

7. The reports provided by SALGA, LGWSETA, and the National House of Traditional Leaders were not satisfactory and have to be better next year. Where possible, the Department should offer appropriate assistance to these organisations.

8. The Committee expresses its appreciation to researchers - Ms D Hene and Mr C Sibanyoni and Committee Secretary, Mr L Brown for their assistance in the preparation of this report.

9. The Committee expresses its appreciation to the Minister, Deputy Minister, Acting Director General, other representatives of the Department and representatives of the statutory bodies for their co-operation with the Committee in respect of the budget hearings.