Limpopo’s Municipal Infrastructure Grant expenditure report 2014/15

Meeting report

Briefing on Limpopo Municipal Infrastructure Grant Expenditure

Mr Sello Mashaba, Director, National Treasury, said Limpopo was one of the least urbanized provinces, with the majority of the population living in rural areas. Aggregate municipal expenditure in Limpopo averaged 5.2% of the country’s municipal expenditure, and per capita spending was below the average for municipalities. Despite progress with regard to the provision of basic services to communities, sanitation backlogs had increased in Mopani, Capricorn and Sekhukhune Districts from 2001 to 2011. Backlogs for refuse removal had also increased in four districts between 2001 and 2011, although a decrease had been reported for the Waterberg District. Backlogs for electricity had decreased in all districts.

As at 31 March 2015, 59% of adjusted operational expenditure had been spent, though 33% was on salaries and wages. 31% of the adjusted operational capital expenditure had been spent. There was still over-reliance on national and provincial grants to fund operational expenditure budgets. R755 million in grants had been rolled over, and 82% of debtors and 51% of creditors were outstanding for more than 90 days. R529.7 million of the Municipal Infrastructure Grant (MIG) to Limpopo had been stopped for substantial under-spending, in compliance with S17 of the Division of Revenue Act (DORA), but R224.3 million had been reallocated to fast-spending municipalities within Limpopo. MIG funding had been stopped in Mopani District Municipality, Aganang, Thabazimbi, Lephalale, Modimole, Mogalakwena, Fetakgomo and Sekhukhune municipalities for various reasons.

Mr Gregory Makoko, Acting Head of Department, Limpopo Government Department of Cooperative Governance, Human Settlements and Traditional Affairs (COGHSTA), briefed the Committee on MIG spending in various municipalities, as well as various projects that were in design, construction and completed phases (see presentation). Three interlinked forums -- the municipal infrastructure forum, the district municipal infrastructure forums and the Limpopo inter-governmental forum -- would help to enhance coordination of the financial and built environment requirements in the province. Through these forums, backlogs in service delivery and skills shortages would be addressed through building capacity in specialist skills areas.

Mr Sizwe Ramaremela, South African Local Government Association (SALGA) Councillor, said some of the municipalities mentioned by National Treasury had appointed Chief Financial Officers (CFOs). The main challenge facing municipalities on water involved a lack of capacity in the Department of Water and Sanitation, which sometimes disapproved plans for resolving small technical issues instead of assisting municipalities. Registration of projects was also being delayed by COGHSTA. Municipalities were not being able to retain critical skills because of the new regulations on the appointment of senior managers. Municipalities had to do forward planning. The other challenges for effective political oversight were administrators not giving sufficient information to politicians. Supply chain management (SCM) processes were taking too long. National Treasury was silent on debt owed to municipalities by national departments. Eskom had threatened to switch off the electricity supply to Thabazimbi. Politicians should take part in MIG meetings, while COGHSTA must champion monthly meetings on MIG spending.

Discussion

Mr T Motlashuping (ANC, North West) said the Section 100 government intervention had been important for Limpopo, and reversal of it should have taken into consideration the current challenges. He was not sure whether the two reports presented to the Committee represented a true reflection of the Limpopo situation. Political oversight did not mean politicians participating in the meetings of officials. Millions of rands in grant funds had been stopped, and there had been many service delivery protests in Limpopo. The National Treasury recommendations had been generalised. The challenges that faced the municipalities were unique. The recommendations did not address a recruitment strategy going forward.

Ms E van Lingen (DA, Eastern Cape) said Members always complained that not enough money was allocated to local government, but local government was failing the people by not spending the money. The Municipal Infrastructure Support Agent (MISA) and National Treasury must not come on board, because that was why local government existed. The Members of Executive Committees (MECs) were not performing well in local government. She asked National Treasury why half of the Eastern Cape budget was unfunded -- was it the result of a bloated budget, or poor revenue collection? When should municipalities ask for more money if they wanted to spearhead certain projects? The presentations had been silent on the debtors of municipalities. What action was the province taking to shorten the time to appoint contractors? How much did municipalities owe Eskom, the water boards and the Electronic National Administration Traffic Information System (e-NaTIS). Forward planning must be carried out in municipalities.

Mr C de Beer (ANC Northern Cape) said the meeting had set a roadmap to engage all nine provinces in order to monitor and conduct a diagnostic analysis of what was happening. He asked what time frames had been linked to the corrective action suggested by the province. Each councillor and a municipal manager should have a Division of Revenue book which explained what had to be done in respect of MIG spending and performance. How close were financial officers and municipal managers to getting qualifications, as suggested by the Minister of Cooperative Government and the Treasury? He asked if the national and provincial Treasuries had the personnel to implement recommendations. Which municipalities were participating in municipal finance management programmes? What solution was SALGA proposing to address the municipal challenges?

The Chairperson said there was need to deal with the historical trend in under-spending of the MIG.

Mr Bongani Khumalo, Chairperson, Financial and Fiscal Commission (FFC), said the situation in Limpopo had been deteriorating consistently from 2008 to the present. The objective of rolling out infrastructure services and access to services in the province had decreased. The question was whether the roll out of infrastructure was functional and being rehabilitated, as it needed to be sustained to avoid backlogs. The rural nature of this province needed to be looked at when addressing the challenges it faced. Withdrawing money from municipalities without addressing the challenges that contributed to the withdrawal did not help. He would brief the Committee on the FFC’s analysis of the situation in Limpopo and propose possible solution.

Mr Bob Tooley, MEC, Limpopo Treasury, said that the delegation was not here to talk about debt, even though it was following up on it. The National Treasury had provided technical advisors to assist them. It had a plan to assist with developing skills in municipalities, but there was a challenge in that people did not want to come to work in Limpopo because there were no “shining lights.”

Mr Makoko said the provincial offices of the Department of Water and Sanitation must provide support to municipalities. COGHSTA was also engaging state-owned implementing agencies to asset municipalities in technical specifications. He could provide details of litigation against municipalities if requested. He would make sure that the actions proposed had time frames to identify bottlenecks.

Mr Jan Hattingh, Chief Director, National Treasury, said that the debt numbers would be presented. DORA had a provision that projects had to be approved by October and those who did not comply had to be prosecuted. He would inform his colleagues responsible for capacity building in local government to prepare a presentation for the Committee. Conditions for roll overs were being tightened every year, and circular 75 articulated the steps that had to be followed. Municipalities could fund projects from their own resources, or the sector department could come to National Treasury via the budget process. Other than that, there was no other window once DORA had been allocated. He was working through management letters received from municipalities, some of them as thick as 400 pages. National Treasury was developing a strategy framework, together with the provincial treasury, to address the challenges in municipalities. All the issues raised would be used in preparing presentations for the other provinces.

Mr De Beer said the regulations on withholding money to municipalities must be given to SALGA to circulate to its members.

The Chairperson expressed appreciation for the reports from the National and Provincial Treasuries. It was good to have SALGA in these meetings, to understand where blockages lay. Delays in the completion of projects delayed peoples’ access to services, while the cost escalated and the quality of the result deteriorated.

The meeting was adjourned.