Support to and interventions in local government: Financial and Fiscal Commission, Department Cooperative Governance, National Treasury, SA Local Government Association briefings

NCOP Appropriations

28 January 2014
Chairperson: Mr T Chaane (North West, ANC)
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Meeting Summary

The Financial and Fiscal Commission (FFC), Department of Cooperative Governance & Traditional Affairs (CoGTA), National Treasury (NT) and South African Local Government Association briefed the Committee on the type of support offered to municipalities. FFC summarised that whilst it could not isolate and offer assistance directly to municipalities, it could do so if approached, which it had done for six in 2010. It listed the type of collaboration and guidance, which had related to National Development Plan assistance, reviews of the local government fiscal framework, training to Councillors on budgets and mergers. It had made recommendations on unfunded mandates and gender-budgeting, and had sat with others to review the Local Government Equitable Share formula. It cited the need to improve its relationship with SALGA. Public hearings that it held on housing had been very useful, and demarcation issues were also important. Members asked for clarity on the National Development Plan and difference between spending on bulk infrastructure and top housing structures, cited instances of continued improper behaviour by Councillors, and asked what was still hindering viability of municipalities.

CoGTA outlined the work done under the Local Government Turnaround Strategy that had commenced in 2009 and said that there was renewed commitment to pursuing it. It had more focused plans for municipal support and intervention for 2014-2019. It had managed to customise Integrated Development Planning (IDP), which was working better, and it was busy with the Integrated Urban Development Framework. Many government breakdowns were ascribed to legislative weaknesses, but amendments had either been proposed or made to various listed pieces of legislation. Work had been done with other departments to alleviate problems with electricity, water and climate change. It was acknowledged that vacancies for development and planning professionals had to be filled to try to avoid breakdowns that could lead to service protests. Although the target of clean audits had not been reached, work was ongoing. The Municipal Infrastructure Support Agency (MISA) was supporting 66 municipalities in facilitating basic services infrastructure projects, whilst the Community Works Programme had created 186 363 work opportunities by March 2013. The fight against corruption was intensified by a multi-agency working group focusing on local government investigations. However, the challenges were that municipalities had perceived that the Turnaround Strategy would direct more money to them, and had a perception that there were unfunded mandates. Various reports were required that did not link with each other. Weak intergovernmental relations resulted in uncoordinated support to local government, and data gathering and analysis remained poor. Members asked why some municipalities performed well but others did not, and suggested that the Turnaround may not specifically recognise their differences. The lack of consequences for incorrect actions or poor management at municipalities remained a concern. Members urged that the sections of the Constitution be read inclusively insofar as the role of national and provincial departments assisting municipalities was concerned. Members raised particular problems at Northern Cape municipalities, and said poor management must be urgently and effectively addressed, to ensure that the same issues did not crop up time and again, a concern raised by all members. They asked what CoGTA’s role was in enforcing the Municipal Finance Management Act, whether it had capacity itself to monitor and if value for money was achieved, and if individuals who had been appointed were actually leading any change and responding to challenges, for even with new appointments, some municipalities experienced financial collapse. It was suggested that the support offered by CoGTA was not having the desired effect. Another Member thought the whole issue revolved around political will of Councillors to improve and appoint the right people. They questioned whether, and why, Oudtshoorn had been placed under administration. The Department agreed that CoGTA was not achieving what it should, but said that many of the criticisms in fact fell outside its scope, and believed it was not the function of the national Department to micro-manage municipalities. The problem was that some simply did not implement recommendations. However, CoGTA did hold provinces accountable and made sure they had plans. Sometimes, municipalities barely tolerated the interventions ad made no conscious effort to improve or buy in to the process, whilst continuous turnarounds in staff created the proper transfer of skills. The Municipal Infrastructure Support Agency also proffered some comment on what it was doing. The Chairperson was of the view that political interference did not have to be tolerated but should be brought to the attention of the political parties.

National Treasury noted that section 216 of the Constitution allowed it to stop the transfer of funds if municipalities committed serious or persistent or material breaches of the MFMA, and portions of the equitable share had been withheld from named municipalities. It had issued a guide to support municipalities to coordinate better, and worked with CoGTA, at times offering direct support, through its Municipal Financial Recovery Service (MFRS) Unit, to develop financial plans aligned to the specific challenges of a particular municipality. However, there was a gap in that this could only be done when municipalities requested. The slow pace of reform was often to do with Councils failing to take decisive action, but it said that a turnaround generally took longer than anticipated. NT also said that municipalities should be held to account themselves, and NT or other stakeholders should not be blamed when they did not perform. One unfortunate reality was that municipalities expected support but objected to meeting the necessary conditions. Not enough budget was put to train incumbent municipal officials, The training offered by NT was described. implementation. Mr Pillay stated that accountability should remain within the municipality, and not be directed at National Treasury or any other stakeholder, when the municipality failed to perform. Once support was provided then implementation was absorbed. Municipalities should take stock of implementation and ensure that they were functional. If this was not the case, then a radical change in legal framework was required.

Mr Pillay noted that NT had provided over 4 534 training and development interventions, across ten areas in financial management, including budgeting, cash management and banking, financial reporting, assets and liabilities, revenue and expenditure, supply chain processes and procedures. Over 3 730 officials had registered for the formal Minimum Competency programmes nationally, at various service providers. The most popular training areas for informal training were on budgeting (16%), revenue (16%), accounting / reporting (14%), and supply chain (14%).

Mr Pillay stated that when National Treasury cautioned municipalities that it would remove support then it received motivations from Mayors suggesting why that support should not be removed. Municipalities expected support but were unwilling to meet the necessary conditions, and he appealed to the Committee to do something to correct this unfortunate reality. The Financial Management Grant Expenditure Support plans for 2013/14 revealed that 41% of resources went toward the appointment of interns, whilst only 17% was spent in support of training of municipal officials, and too much work was outsourced.

SALGA noted that SALGA also had developed a guideline for political office bearers and Municipal Managers on their responsibilities, had conducted workshops and offered hands-on support. It was working hard to combat corruption, with 230 municipalities having pledged their support. The establishment of the Municipal Public Accounts Committee was another form of intervention. It had engaged with 75 municipalities showing poor audit outcomes, and helped them to develop credit control and debtors management policy. Some municipalities were helped to appoint officials in financial positions. It was offering workshops and awaiting funding approval to commence capacity building programmes. Members asked why, when so many different stakeholders were offering support, improvements were so slow in coming.  They suggested that instead of concentrating on passing on skills, officials would tend to lead projects. The high turnover and poaching of skills by the private sector was a problem, and getting municipalities to implement was another. SALGA was asked how it would ensure implementation of findings, and NT was urged to monitor the finance divisions at local and provincial government. A proper balance had to be found between budget for staff and budget for service delivery.

The Chairperson concluded that CoGTA was expected to do still more to improve coordination and ensure that interventions were not duplicated, and that interventions actually achieved their desired aim.
 

Meeting report

Support to and interventions into local government
Financial and Fiscal Commission
briefing
Mr Bongani Khumalo, Acting Chairperson, Financial and Fiscal Commission, stated that the Financial and Fiscal Commission (FFC) has achieved substantial impact in collaborating with different stakeholders and providing them with the technical capacity to understand the many challenges that local government faced. It had, for instance, provided advice and guidance to state organs on issues related to the National Development Plan (NDP) and fiscal landscape. It had also reviewed the local government fiscal framework, to try to consolidate the work done by stakeholders such as National Treasury (NT) and the Department of Cooperative Governance & Traditional Affairs (CoGTA), to develop a set of recommendations to strengthen local government. It had developed training manuals for councillors and had participated in the training of councils to understand budgets. When requested, it provided advice to municipalities; for instance, Xhariep municipality in the Free State met with the FFC to discuss matters relating to funding and its inability to deliver services. FFC had done extensive research on this municipality, brought together different stakeholders to solve the challenges and also received feedback on where the municipality was headed. It was currently dealing with issues in the Tshwane municipality, which recently merged with a number of other municipalities but no increase in resources was provided.

FFC wanted to solidify its relations with the South African Local Government Association (SALGA) to better implement the recommendations of the Commission. During 2010 the FFC investigated and made recommendations on the impact of unfunded mandates in six municipalities in particular, and Mr Khumalo explained that in some cases municipalities were compelled to perform duties not allocated to them by way of the Constitution. FFC had further made recommendations on gender-budgeting in local government, but not much movement was seen on these recommendations. Usually, FFC would not have direct contact with municipalities, unless it was approached. It had formed part of the steering committee and technical task team that reviewed the Local Government Equitable Share (LGES) formula. A team also discussed the cost of basic services.

Public hearings had been very useful for the FFC, as they had highlighted individual cases around housing finance. The demarcation process was another matter that has been raised in many forums. When municipalities were merged, a number of issues were not taken into consideration, which resulted in the failure of municipalities. The FFC was a member of the Demarcation Process Review Task Team set up by CoGTA. The FFC also sat on various Municipal Demarcation Board (MDB) Committees and provided advice on quality assurance for demarcation applications and on the MDB’s Capacity Adjustment Reports.

Discussion
Mr D Joseph (Western Cape, DA) asked for clarity on the National Development Plan and whether the FFC had any examples of how it applied to various municipalities. He thought more information was needed on the discussions between SALGA and FFC to enhance local government. Referring to the public hearings, he asked whether the FFC itself, or the public, had come up with the idea that there was a difference between money which went towards infrastructure such as pipes, and money to actually build a house, for more was seemingly being spent on overall bulk infrastructure. He asked if FFC had reviewed the proposals discussed at the public hearings.

Mr B Mashile (Mpumalanga, ANC) mentioned that there had been many cases of councillors behaving improperly, especially on financial matters. A senior representative had been removed, and the fact that existing councillors would serve up until 2016 made it imperative to train them fully now. He wondered if FFC could engage CoGTA on funding for councillors’ training to enable them to effectively manage the budget and determine how council funds were spent. He said that South Africa did not have a crisis of money, but a crisis in finding suitable and good avenues in which to invest its financial resources. He asked that FFC convey what may still be hindering viability of municipalities, and state if its proposals were receiving enough attention.

Mr Khumalo said that the NDP was still work in progress, and he would answer it later. He agreed that SALGA and FFC needed to consolidate their relationship so that when government processed the recommendations of the FFC, there would be a way to prioritise the issues. The weaknesses in the FFC / SALGA implementation processes had to be strengthened. He agreed that the difference between money spent on houses themselves, and money spent on infrastructure to support more housing was discussed during the public hearing, and an FFC submission in May 2013 highlighted the crisis of underground infrastructure, or more specifically the crisis of maintaining and rehabilitating existing infrastructure was a challenge. New infrastructure erected in rural areas had been disappointing, with instances of toilets in schools having collapsed, despite the fact that there was money available to rectify. He said that the Municipal Infrastructure Support Agency (MISA) could also reflect on the support it was offering to struggling municipalities.

Mr Khumalo confirmed that training of councillors was done on specific request from stakeholders; the FFC did not act on its own. National Treasury did have funds and facilities available to train councillors but the final decision on training lay with SALGA. FFC would like to see all resources pulled together to assist local government and would be willing to assist municipalities when called upon. He explained that the mandate of FFC only allowed it to speak to local government issues in general, but it could assist specific municipalities, when asked to do so. Demarcation and legislative issues rested with CoGTA, but FFC was aware that there were reports available in that Ministry although FFC could not address them specifically. At the end of February, FFC would formulate a draft report and provide the Committee with updates on any outstanding issues.    

Dr Mkhululi Ncube, Manager, Financial and Fiscal Commission, stated that the Commission had formulated a five-year research strategy around the NDP, where it had identified areas of focus for local government issues, so that FFC could improve the implementation of the MDB.

Department of Cooperative Governance & Traditional Affairs briefing
Mr Vusi Madonsela, Director-General, Department of Cooperative Governance & Traditional Affairs, noted that the first set of documentation provided by this Department provided a focused discussion, and the second provided additional information on the type of support offered to municipalities over time. He noted that the presentation would start by outlining work done 2009 under the Local Government Turn Around Strategy (LGTAS), which was the framework for offering support to municipalities and provincial government.

Ms Shanaaz Majiet, Deputy Director-General, Department of Cooperative Governance & Traditional Affairs, said it was necessary to detail what the Department had achieved with the LGTAS, what it comprised and what support work the Department had delivered. CoGTA had a renewed commitment to get the LGTAS back on track, given the Select Committee’s dissatisfaction that insufficient attention was being paid to implementation of the LGTAS. In December 2012  CoGTA assessed its actual progress, and had also gathered fresh data showing more progress, and had drawn a report and held a series of consultations with different stakeholders which led to adoption of that report by the Adjudication Committee.  CoGTA had more focused plans for municipal support and intervention for 2014-2019.

The Report on the State of Local Government of 2009 proposed interventions that were meant to improve municipalities. The achievements of the Department included the customisation of Integrated Development Planning (IDP). There were clear signs that provinces and sector departments were doing their part to ensure that IDPs were now working better than in previous years. CoGTA was also currently busy with the Integrated Urban Development Framework, to deal with legacy issues of apartheid spatial planning. CoGTA and NT had reviewed and implemented a new Local Government Equitable Share (LGES) formula.

The State of Local Government Report acknowledged that many government breakdowns within the system were caused by legislative weaknesses. On 5 July 2011, the Municipal Systems Act (MSA) was amended. The Municipal Property Rates Amendment Bill was currently being discussed in public hearings. CoGTA had worked with the Department of Rural Development and Land Reform (DRDLR) on the Spatial Planning and Land Use Management (SPLUM) Act No 19 of 2013, and ensured that municipalities were being prepared on the implementation of this Act. Other pending legislation included the Draft Intergovernmental Monitoring Support and Intervention Bill (IMSI), amendments to the Intergovernmental Relations Framework Act (IGRFA) the Fire Brigade Services Act of 1987 and development of a National Fire Services Framework, and amendments to the Disaster Management Act of 2002.The Department had worked with other national departments, such as the Department of Energy, to reduce electricity backlogs in Gauteng, Kwazulu-Natal and the Eastern Cape. Through work done with the Department of Water Affairs, dams were built and water was provided. Work was also done with the Department of Environmental Affairs on climate change and capacitating municipalities.

It was acknowledged that one of the key priority areas where more work was needed related to the filling of vacancies for Development and Planning professionals. Progress had been made on Ward Level Operation plans. Ms Majiet explained that a breakdown in governance in a municipality carried the risk also of service delivery breakdown, and then service delivery protests, although the latter were not an inevitable result.

In regard to the target to have sound financial management, she noted that the audit outcomes for the past four years indicated that between one and nine, out of 278 municipalities, received clean audits for the 2008/9 and 2011/12 financial years.

At the end of 2013 the MISA was supporting 66 municipalities in facilitating basic services infrastructure projects, and with financial and administrative requirements. The Community Works Programme (CWP) had,  by the end of March 2013, created 186 363 work opportunities, of which 58% were for women and 54% were for young people. The Department was involved in intensifying the fight against corruption through partnerships with the HAWKS and Special Investigating Unit (SIU) to form a Multi-Agency Working Group that focused on local government investigations.

Ms Majiet then noted the major challenges. Municipalities still tended to view the LGTAS as a programme that would result in greater money directed to them, but later, when that money did not materialise, perceived it to be requiring them to perform unfunded mandates. The lines of reporting on the Service Delivery Budget and Implementation Plan (SDBIP), such as LGTAS, on Outcome 9 and other sector-specific reporting requirements were not coherence or inter-linked, so municipalities were not overly supportive of the LGTAS programme. Weak intergovernmental relations resulted in uncoordinated support to local government. There was also a shortage of central clearing houses that would analyse and coordinate data on the impact of sector legislation and policy development linked to the Multiple Reporting plans, which undermined the potential partnerships with municipalities.

Discussion
Mr R Lees (Kwazulu-Natal, DA) asked why some municipalities performed well while others performed poorly. The presentations had seemed to suggested that general interventions would apply, without a consideration of the municipalities’ differing problems. There did not appear to be a focus on addressing one municipality, and then moving to the next municipality. Another issue of concern was that disciplinary consequences seldom ensued for individuals responsible for poor management of municipalities.

Mr C De Beer (Northern Cape, ANC) stated that people should not ask why it was necessary to appear before the Select Committee on Appropriations regarding the issues discussed. This Committee, in terms of the Division of Revenue Act, monitored the spending of the conditional grants, which were also made to local government. National Treasury made it clear, in its resource document on the State of Local Government Finances and financial legislation, that sections of the Constitution dealing with national and provincial departments and their role to assist local government must be read comprehensively and inclusively. He noted issues of underspending in Mier Municipality in the Northern Cape, and issues of poor management at Nama Khoi, on which he had written a letter, in 2013, to the former Minister of Local Government in 2013 and the former MEC in the Northern Cape. The last council meeting convened by this municipality was in June 2013. He asked CoGTA to expand upon the capability of provinces to deal with underperforming municipalities. He commented that the LGTAS had resulted in policy shifts. Since June 2013, in Nama Khoi no decisions had been taken by that Council on the annual financial statements, appropriations, the budget and other matters. Various matters were being taken to court in Kimberley, with only the legal representatives deriving any benefit and profit, whilst people at the grass roots level were paying the price. He asked CoGTA to report on implementation of sections 154 and 155 of the Constitution, as poor management was a serious issue which needed to be addressed effectively. He believed that urgent interventions were needed in Nama Khoi and that the Select Committee on Appropriations, together with the Select Committee on Cooperative Governance and the Select Committee on Finance should do an oversight visit to Nama Khoi. He wanted to know specifically what advice CoGTA was providing to municipalities experiencing poor management. He agreed that they would have to be taught how to plan and handle the finances for the next three years. He pleaded that CoGTA must determine whether municipalities understood the NDP, for if they did not, then the same issues would be repeatedly raised before this Committee. The Municipal Finance Management Act (MFMA) specified what was expected of a Mayor, Municipal Manager and a Chief Financial Officer. He asked what the role was of CoGTA in enforcing the MFMA and its consequences.

Mr Mashile stated that Committee was essentially raising the question whether CoGTA had the capacity to ensure that supervisors, monitors and provincial components were doing their work. However, he highlighted a lack of supervision at the different levels of CoGTA itself, which made it unable to respond to specific issues in time. It was stated that Intergovernmental Relations (IGR) was not working, as local municipalities did not give space to provinces to influence their activities. Despite the support offered by the Department, they did not receive any value for money. He asked why there were still problems of service delivery despite MISA operating. Mr Mashile stated that the support to municipalities was not being received well, and was not being effectively utilised to ensure that municipalities functioned. Infrastructure remained a big challenge, with numerous instances of roads with many potholes and street lamps without globes. It took too much time to resolve these issues. There were continuing problems with water delivery in Bushbuckridge. A central problem in municipalities was the maintenance of existing infrastructure, not to mention providing people with basic services and infrastructure. Service delivery protests resulted when people had been used to receiving a service, but it was suddenly stopped. He asked what the impact was of filling senior positions in municipalities, and whether the individuals appointed were leading any change and responding to challenges. He noted that in some cases, Councillors had been trained but the municipalities still experienced financial collapse. For this reason, he opined that the support CoGTA was offering to municipalities was not having its intended effect. Despite the amount of support also from the Department of Public Service and Administration (DPSA), the FFC and SALGA, municipalities did not appear to be much closer to obtaining clean audits. He thought that when municipalities were audited, the solutions proffered must talk specifically to service delivery.

Mr Joseph acknowledged the work put into this presentation by CoGTA, and encouraged it to speed up accreditation, which was intended to upgrade the delivery of housing. He believed that the issues around service delivery protest and governance did not necessarily link directly to the appointment of Municipal Managers and Chief Financial Officers, but rather had to do with whether there was political will, what political alliance appointments were made, and what professional appointments were being made under the relevant legislation.

Mr Joseph asked for clarity whether Oudtshoorn was placed under administration in terms of section 139 (10) and section 136 (3) of the MFMA.

The Chairperson stated that he appreciated the report and the work put into it by the Department. It had been stated that lack of capacity was amongst the many challenges that municipalities faced. He asked how CoGTA could ensure that knowledge was put to good use when people were trained, or when intervention teams left municipalities. In many cases the municipalities simply seemed, on conclusion of the intervention, to revert back to their old ways.  In some municipalities, especially in small rural areas, there was a lack of discipline, for example, for collecting refuse. He asked if the CoGTA had a rapid response team that would ensure that municipal matters were addressed. He wanted to know what the Department had achieved so far on its 2014-19 plans.

Mr Madonsela stated that many of the questions and criticism directed at the Department were matters beyond CoGTA’s scope, as they were essentially political issues with which the political parties in municipalities must tackle. CoGTA was concerned with improving the overall administration of local government, ensuring that municipal managers and senior managers had the necessary skills to do their work. The turnaround rate depended on whether politicians respected the interventions. Mr Madonsela acknowledged that the interventions of his Department had not always achieved the desired outcome at the administrative level.

Ms Majiet added that the Department held provinces accountable, so that each provincial MEC and each provincial Head of Department (HoD) had a plan of action for municipalities in distress. In December 2013 the Minister of Cooperative Governance had held talks with MECs and SALGA for the purpose of gleaning information on what type of interventions were provided, and the impact of those interventions. There were some provinces providing much support, but it was in turn often being undermined by governance problems, where support was simply tolerated, without the Council and administration fully adopting and buying in to the process. It was expected that provincial departments should be fully aware of the challenges that municipalities faced. Each provincial team had a support, monitoring and intervention focus for each municipality, to assist turnaround. Each municipality was unique and turnarounds may vary in duration. There were municipalities that had problems in filling vacancies, this created a challenge and prevented intervention teams from passing on skills.

Ms Majiet did not have the specific details on Nama Khoi and would take a closer look at that municipality.

She said that the Department had looked at sections 154 and 155 of the Constitution, and had isolated the gaps in legislation and regulations that would have to be addressed to improve the oversight and supervisory and monitoring role over provinces and municipalities. CoGTA would also roll out a tool-kit and a guideline to strengthen intervention and support around section 154 and 155.

In answer to the contention that some municipalities were not viable, she said there needed to be a political policy decision that carefully evaluated the future of municipalities. She reiterated that there was sometimes a lack of political will to make the necessary decisions concerning the future of municipalities. CoGTA would conduct a survey to determine whether individuals in municipalities had the necessary skills - for example whether already appointed town planners in fact had town planning skills. In the case of Madibeng, the Council did not take the necessary advice offered by the Department at the time, in relation to suspending certain individuals and investigating allegations of corruption, and this explained why this municipality failed to perform. There was a trend where officials placed more attention on compliance as opposed to ensuring service delivery, although compliance in the sense of obtaining good audits and complying with service delivery needs could be said to be linked. The amendment to the Municipal Systems Act in 2011 ensured that political appointments would not go unnoticed, thus dealing with any conflict of interest. She said that Oudtshoorn was under a section 136, not a section 139, intervention. She said that poor discipline should be addressed by the Municipal Manager supervising properly, to ensure that work was being done, and the Council also had a role to play. However, she wanted to state that a national Department could not be expected to provide constant supervision over the local level, when there were various other structures tasked with that responsibility.

Finally, she clarified that the 2014-19 report had not yet been launched.

Mr Tshepo Khasi, Senior Manager, Department of Cooperative Governance & Traditional Affairs, added that at the moment the Department could provide a general overview of interventions but once the IMSI Bill was enacted there would be greater targeted support to municipalities. There were instances where provincial Departments of Cooperative Governance did not have the capacity to deal directly with the challenges of municipalities. The Department was currently busy compiling its IGR Report to Parliament, and that would reflect on all the successes and challenges the Department had experienced for the period from 2009 to 2014.

He expanded that in relation to Oudtshoorn, this municipality was unable to pass its budget as at 1 July 2013, which resulted in the provincial department invoking section 139(4), not to dissolve the Municipal Council but to take over its administrative functions and have the budget passed. In three districts in Oudtshoorn by-elections had taken place, and the previous majority coalition became the minority. The operation of subsection (4) was extended in Oudtshoorn up until March, to correct the budgetary issues.

Ms Majiet indicated that the Minister of Cooperative Governance would convene a meeting with the MEC for Local Government, Western Cape, on the Oudtshoorn issues.

Ms Lerato Thwane, Executive Manager: Finance, Department of Cooperative Governance & Traditional Affairs, expanded upon “Operation Clean Audit” and stated that CoGTA was aware that this could not be achieved by the targeted date, a point also raised by Committee Members. There was much work around capacity building needed in municipalities, for intervention and support to municipalities would have limited results if there was little ability to receive and sustain the changes brought about. There were issues of stability and interventions often did not result in long lasting change in municipalities. Clean audits and service delivery progress should go hand in hand, but audit outcomes created a sense of accountability and transparency.

Mr Madonsela stated that the rapid response teams were still active, but focused on hot spot areas where problems were visible. More recently the Department utilised service delivery facilitators who were deployed in areas before municipalities were regarded as hot spots.

Mr Ongama Mahlawe, Acting Chief Executive Officer, Municipal Infrastructure Support Agency, stated that the support offered by the Department was customised for each municipality, mapping out specific responses that should be implemented. When integrated support plans were developed, the sector departments, SALGA, CoGTA and the province would all be asked to give input. Commenting on governance aspects, he confirmed that where the Mayor and Municipal Manager were actively involved in implementing, the interventions would have greater impact. CoGTA decided that it would only go into a municipality once the Council took ownership and adopted the integrated support plan, and there would be regular consultation with the Mayor and the Municipal Manager. He reiterated that in Madibeng, the Council did not implement the recommendations made by the Department, and this municipality failed. Previously the technical support programmes by CoGTA had focused on high level skills in municipalities such as engineering, and in this process perhaps there had not been sufficient attention to operation maintenance and rehabilitation of infrastructure, thus not addressing challenges of municipalities. MISA had a programme that specifically dealt with operations and maintenance. CoGTA planned, by the end of 2014, to address all the 24 districts identified by Cabinet. CoGTA had provisions to ensure that once it provided technical skills to municipalities, a long term plan would be developed, so that the municipality could function after the Department had left. A follow up would be done on the issue of the Mier Municipality mentioned in Northern Cape. MISA would assist in issues of under-spending in municipalities that were brought to its attention by the Department
  
The Chairperson stated that the CoGTA had not answered on the issues identified in Bushbuckridge and Nama Khoi municipalities, and assumed that this was because interventions may be needed in future. This Committee would follow up on those. He was not convinced on the point that political interference continued to hinder intervention support, and stated that in the past, where this had happened, CoGTA had brought such obstruction to the respective political parties, who could discipline their members. There were ways to “remove political problems” and the Department should not try to work around certain politicians.

National Treasury briefing
Mr TV Pillay, Office of the Accountant General, said that section 216 of the Constitution gave the National Treasury the ability to stop the transfer of funds if municipalities committed serious or persistent or material breaches of the MFMA. National Treasury had looked at alternative measures also to alter the behaviour of municipalities, by proposing that if fundamental issues were not addressed, such as financial statements not released on time, NT could withhold some of the equitable share allocation. NT had in fact delayed the transfer of funds in Nala, Bela Bela, Swellendam, Kannaland, Renosterberg, Joe Morolong,! Kai! Garib, Kgatelopele and Mier.

He added that the NT, through its Municipal Financial Recovery Service (MFRS) Unit, also issued a guide to support municipalities to improve coordination. It had worked with CoGTA to strengthen its work in municipalities. When requested, the MFRS offered direct support to municipalities and provinces in the development of a financial plan, in places such as Madibeng, Mahikeng, Msunduzi, Naledi and Bushbuckridge. These plans covered institutional, technical and elements of service delivery components and addressed the specific challenges in each municipality. The MFRS was established to help municipalities in the development of a financial recovery plan. However, municipalities had to ask for assistance; it was not automatic, and that was one gap in the system. The slow pace of reforms was attributed to Councils not taking the necessary decisions on the action plans. Mr Pillay stated that expectations on turnaround times in municipalities were perhaps too high, as intervention took time to be effective. Further challenges related to the fact that there were no mechanisms in place for intervention to be lifted, which resulted in continued intervention.

The MFMA guided support plans through establishing institutional and technical reforms. The MFMA placed expectations on the Mayor, the CFO and others, and tasked them with monitoring progress in the municipality. The Council was expected to make its own decisions and to be fully aware of the status of implementation. Mr Pillay stated that accountability should remain within the municipality, and not be directed at National Treasury or any other stakeholder, when the municipality failed to perform. Once support was provided then implementation was absorbed. Municipalities should take stock of implementation and ensure that they were functional. If this was not the case, then a radical change in legal framework was required.

Mr Pillay noted that NT had provided over 4 534 training and development interventions, across ten areas in financial management, including budgeting, cash management and banking, financial reporting, assets and liabilities, revenue and expenditure, supply chain processes and procedures. Over 3 730 officials had registered for the formal Minimum Competency programmes nationally, at various service providers. The most popular training areas for informal training were on budgeting (16%), revenue (16%), accounting / reporting (14%), and supply chain (14%).

Mr Pillay stated that when National Treasury cautioned municipalities that it would remove support then it received motivations from Mayors suggesting why that support should not be removed. Municipalities expected support but were unwilling to meet the necessary conditions, and he appealed to the Committee to do something to correct this unfortunate reality. The Financial Management Grant Expenditure Support plans for 2013/14 revealed that 41% of resources went toward the appointment of interns, whilst only 17% was spent in support of training of municipal officials. For the three years between 2010-2012, there had been a marked increase of interns in municipalities. The numbers of Chief and Acting Chief Financial Officers in municipalities had increased, and there had also been an increase in internal audit units in municipalities. However, there did remain challenges around absorption and appointment of skilled officials, and municipalities needed to be committed and fully implement reforms. The over-reliance on service providers was another issue and a long term plan was needed to ensure that all financial management reforms were implemented. Mr Pillay asked if expectations were not too high on what could be achieved in a short time. However, South Africa clearly currently did lack implementation capacity.

South African Local Government Association briefing
Mr Reuben Baatjies, Director: Intergovernmental Relations, South African Local Government Association, stated that SALGA had developed a guideline for political office bearers and Municipal Managers on their responsibilities. Since 2011, training workshops in all nine provinces had assisted to bring capacity to municipalities and councils and strengthened the oversight function. SALGA had further provided guidelines on enhancing public participation in municipalities, had provided hands on support and offered municipalities legal opinions on key issues when requested.

Much work had also been done on anti-corruption, in collaboration with CoGTA. SALGA had convened an Anti-Corruption Summit in 2013, at which more than 230 municipalities pledged to institutionalise the fight against corruption and maladministration.

SALGA had achieved improved oversight and accountability mechanisms in municipalities through the establishment of the Municipal Public Accounts Committee (MPAC), which assisted municipalities in the development of their own anti-corruption strategies and policies. In addition, dedicated portfolio-based financial training was provided to Councillors, and SALGA participated in the development of a Credit Control and Debtors Management Policy and training. In October 2012, SALGA engaged 75 municipalities on poor audit outcomes and municipalities had identified the root causes of poor audit outcomes. Four municipalities in Limpopo were assisted with regard to the filling of CFO and Supply Chain Management (SCM) vacancies and four municipalities in Mpumalanga were assisted in addressing the findings of the Auditor General in action plans.

SALGA convened a programme called “Execute Local Leadership and Governance Coaching” which targeted political leaders and senior officials. This programme was launched from 21 to 23 January 2014, with a workshop for Eastern Cape municipalities. This workshop would also take place in Limpopo, North West, Mpumalanga and KwaZulu-Natal municipalities.

Mr Baatjies noted that SALGA awaited funding approval by the Local Government Sector Education Training Authority (LGSETA) so it could commence various capacity building programmes which included an Executive Local Leadership and Coaching Programme, a Portfolio Based Councillor Development Programme, Media Liaison and Communications Programme for Municipal Leaders, and the establishment of a SALGA centre for Leadership and Governance.

He reported that Competition Commission had done an investigation into bid-rigging, and 15 companies were fined a collective penalty of R1.46 billion. The settlement agreement was tabled before the Competition Tribunal for confirmation.

Discussion    
Mr Mashile asked why National Treasury indicated that support intervention achievements took a long time to materialise, if so many stakeholders were indeed offering their support on a daily basis. He noted that it seemed to be that once technical support was provided, whether by MISA or National Treasury, engineers or technicians soon no longer became concerned with transferring skills, but instead wanted to lead projects for the Municipal Infrastructure Grant (MIG) funding and he saw this as one of the problems in municipalities. It was stated that National Treasury had in some cases made short term/short cut decisions and avoided making the right decision. In regard to the prioritised issues, he said that there was always hailed as a cause for celebration when vacancies in municipalities were filled, but this did not always result in improved financial management. The other issue was the fact that engineers in the local government field were underpaid and this created an opportunity for service providers to poach them away by offering them more money, creating a skills shortage. It was clearly noted that government was used as a stepping stone for individuals to identify service providers, and there was greater prevalence on turnaround of technical staff instead of trying to retaining skills. He asked how SALGA fought corruption, as it appeared that SALGA was rather defending the municipalities. Mr Mashile asked if SALGA would ensure that municipalities implemented recommendations or necessary actions fully, once the findings of forensic reports were released.

Mr Joseph appealed to National Treasury to monitor provincial and local government Departments of Finance, as this was key to establishing the status of municipalities. The signing of pledges was a positive move, but SALGA and government workers should also sign pledges that they would not use government vehicles and government printing for the elections, to ensure the separation of power. It was cautioned that the budget for staff and the budget for service delivery needed to be carefully considered against each other. National Treasury should offer guidance to establish a proper balance between service delivery funds and funds for staff, as workers were interested in their own financial benefit than what was needed for service delivery. He also commented that because of urbanisation, the budgets allocated to municipalities should be adjusted realistically to accommodate the current demands of service delivery.

Mr Pillay stated that there was a current process to review the Equitable Share and allocations based on the census information. Commenting on budgets, he said that not all municipalities had the same powers and functions and this made it difficult to set a standard or uniform comparison of staffing and service delivery budgets.  In the past, districts were expected to invest 40% to 50% of resources into infrastructure. Since then, the legislation allowed more leeway to municipalities on appropriating the budget, which brought many challenges, although NT was monitoring the provincial and local government treasuries more closely. He said that some interventions took longer than others but if  Parliament could see that drastic changes were needed, then it should act accordingly to ensure the desired outcomes. There had been instances when very quick decisions were made on the establishment of programmes, with support. He said that if the amount of support to municipalities was changed every five years, then not much progress would be seen. He said that in one instance, it had been found on investigation that the municipality contracted someone to do its financial statements, and had refused the help offered by MISA. He added, however, that the establishment of MPACs was to offer objective advice to municipalities and it was expected that once recommendations were made, Council should be tasked with implementing them.

Ms Mpho Nawa, Deputy Chairperson, South African Local Government Association, stated that SALGA offered guidelines, policies and interface with political parties. SALGA had gone to provinces and encouraged provincial offices to focus their attention on problems faced by municipalities, so it was not correct that SALGA acted only to support its members, not looking at the broader picture. There was a sense that municipalities were improving, and the ways in which capacity was being built in municipalities allowed SALGA to fight corruption. SALGA responded to problems, was relevant in addressing challenges and was also willing to help build stronger municipalities after municipal elections.

Ms Majiet commented on the demarcation issue and stated that the Minister was considering the report of the Demarcation Review Task Team, and internal considerations and discussions were taking place. The Minister of Cooperative Governance and the Minister of Higher Education were involved in the establishment of a local government institute, and SALGA, DPSA and the Department of Monitoring and Evaluation all served on the task team, looking at how to achieve greater complementarity and coordination, nuancing with the work of the new institute. CoGTA was looking also at intensifying Councillor training through partnerships with SALGA, LGSETA and developing a more medium to long term programme for the improvement of councillors.

The Chairperson stated that it was expected that CoGTA would do still more to improve coordination and ensure that interventions were not duplicated. There seemed to have been past problems around coordination, capacity or the fact that those tasked with capacity building were not doing their work. There were many stakeholders and interventions in municipalities. The Committee was concerned that the same issues were raised, year after year. He hoped that these submissions would assist Parliamentary committees in ensuring, over the next five years, that achievements would be discussed instead of interventions and failures.

The meeting was adjourned.
 

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