Committee Report on Department of Cooperative Governance and Traditional Affairs Budget

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Cooperative Governance and Traditional Affairs

05 May 2015
Chairperson: Mr M Mdakane(ANC)
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Meeting Summary

The Committee considered two proposals by the Democratic Alliance for inclusion in the report. That revenue collected by municipalities on electricity sales should be ring-fenced and used for the repayment of debt to Eskom and for maintenance upgrades to electricity infrastructure in the municipality. The second proposal was that the wording about outstanding consumer debt to a municipality should be worded more strongly and the Department should assist municipal management to improve their financial management. It noted with concern the decrease in the budget  of the National Disaster Management Fund (NDMF) while the NDMF were given increased responsibilities.

The ANC said such laws could not be imposed on municipalities. Many municipalities were getting their income through electricity sales as their tax base was limited and ring-fencing would create problems for municipalities trying to address challenges in other developmental areas. It was not in favour because ring-fencing was a serious policy position that needed a full discussion by the Committee. It said the financial management issue was already covered in the report. All that was necessary was for the Back to Basics strategy to be implemented.

The DA disagreed and said that under the Electricity Act and the Municipal Finance Management Act, Parliament could make such requirements so municipalities did not end up owing millions of rands in debt to Eskom.

The EFF said municipalities did not have the capacity to collect their debt. A Treasury report had showed that municipalities were not capacitated to spend its budget. Corruption in municipalities existed, it was not a perception, and it needed to be cleaned up first.

The DA and the EFF did not adopt the report and reserved their rights. The Committee Report with amendments was adopted.

Meeting report

Mr K Mileham (DA) proposed two additions to the report. On municipal debt to Eskom on electricity sales, he said a recommendation should be included that revenue collected on electricity sales should be ring-fenced and used for the repayment of debt to Eskom and for maintenance upgrades to electricity infrastructure by the municipality.

The second proposal was that the wording on outstanding consumer debt to a municipality should be worded more strongly and the Department should assist municipal management to improve their financial management.

He noted with concern the decrease in the budget for the National Disaster Management Fund, in particular the decrease in funds for disaster relief. This, while the NSMF was given increased responsibilities.

Mr A Masondo (ANC) said  Mr Mileham meant well to call for ring-fencing but it was not practical as it would be illegal as such laws could not be imposed on municipalities and the municipalities had many responsibilities.

On financial management, he said that point was already covered. All that was necessary was for the Back to Basics strategy to be implemented.

Mr P Mapulane (ANC) said the report was based on a presentation of the Department and there had not been discussion by the Committee on the matter of ring-fencing yet. Many municipalities were getting their income through electricity sales as their tax base was limited and ring-fencing would create problems in other areas if municipalities wanted to develop. He was not in favour of ring-fencing being included in the report due to the other challenges municipalities needed to address and because the Committee did not have a point of view on the matter. On financial management he said that point was covered in the Back to Basics strategy.

Mr B Bhanga (DA) said the matter of municipal electricity sales and non repayment to Eskom was a national crisis with municipalities collapsing because the government was soft on municipalities and money was going to programmes not budgeted for. If people paid for electricity they should not suffer because municipalities used electricity revenue for other developmental work. As Parliament, it was the Committee’s responsibility  to guide the Minister and consequently he supported Mr Mileham’s recommendations.

The Chairperson said "better financial management" was covered by point one in the report. The Committee  would monitor municipalities, as part of the Back to Basics campaign,  including the maintenance of electricity infrastructure.

Mr Mileham said point one concerned monitoring while he was advocating getting into municipalities to assist them with their challenges. On electricity sales being ring-fenced, he had tried on many occasions to get the matter onto the Committee’s agenda and one month earlier he had tried to get it on the agenda for discussion prior to the budget vote. He disagreed with Mr Masondo’s comment that there was no legal basis for imposing ring-fencing of electricity sales revenue. Under the Electricity Act and the Municipal Finance Management Act, Parliament could make such requirements so municipalities did not end up owing millions of rands in debt to Eskom.

The Chairperson said the Back to Basics campaign covered all of these areas.

Mr Mapulane said Mr Mileham had made a valid point but the Committee had not discussed this issue. The meeting was not to open new matters. Ring-fencing was a serious policy position that needed full a discussion.

Mr A Matlhoko (EFF) said municipalities did not have the capacity to collect debt. A Treasury report had showed that municipalities were not capacitated to spend its budget. Corruption in municipalities existed, it was not a perception, and it needed to be cleaned up first.

The Chairperson said he thought Members would say there should only be one recommendation, the implementation of Back to Basics, as this covered all proposed amendments.

The Committee could arrange to have a discussion on ring-fencing of electricity sales revenue, finance management and infrastructure maintenance.

Mr Mapulane said 7% of income had to be spent on maintaining infrastructure and he  welcomed the fact that the Minister announced that seven municipalities would be monitored.

Mr Mileham said the DA would not adopt the report and would reserve their rights.

Mr Matlhoko said that the EFF did not support the ANC policy statements and would also not adopt the report.

The report with amendments was adopted.

The meeting was adjourned.
 

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