Department of Cooperative Governance on impact of SoNA on local government (focusing on progress report per province on Back to Basic programme)

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Cooperative Governance and Traditional Affairs

16 February 2016
Chairperson: Mr M Mdakane (ANC)
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Meeting Summary

The Department of Cooperative Governance and Traditional Affairs (CoGTA) briefed the Committee on the implications of the recent State of the Nation Address (SONA) for the Department. A brief summary of the main points of the address were given. It was noted that the country is affected by global constraints in growth and declining investment in developing economies and domestic factors such as electricity constraints and instability in industrial relations. The President indicated that the current situation requires an effective turnaround plan. The State of the Nation Address also gave attention to issues such as governance and management of State Owned Enterprises, empowerment of small, medium and micro enterprises, promotion of domestic tourism, economic transformation and black empowerment improving competitiveness, and financial skills developments. Despite the efforts and initiatives implemented by Government, there were many challenges still. They were in priority areas and included service delivery and backlog challenges, in  housing, water and sanitation, challenges of ageing infrastructure, poor maintenance, cost for refurbishment and replacement of infrastructure, poor communication and accountability relationships with communities; problems with the political administrative interface, corruption and fraud; and poor financial management evidenced by negative audit opinions.

The presenters noted that the 2016 Division of Revenue Bill would take account of the new municipal demarcations, which would then be in effect for the majority of the 2016/17 municipal financial year. All formulae and other allocation methodologies would be updated, and a full accounting of the impact of demarcation changes would be taken. The municipal demarcation transition grant allocation is being increased, but the number of municipalities is being reduced from 278 to 257. There is a 15% reduction in wards, with a final figure of 4 392. Developmental local government will form the backbone for the continuing reconstruction and development of South Africa.

The Back to Basics (B2B) programme is to be implemented by all spheres of government, and being a Presidential priority it is not allocated only to CoGTA but is a collective responsibility, with everyone to prioritise and focus on campaigns, programmes and projects that have high visibility, broader mobilisation, and will impact positively on delivery and messaging of core B2B objectives. Other priorities included tackling corruption, dealing with dysfunctional and at risk municipalities and trying to prevent any from regressing. Multi-department teams would have to address dysfunctionality. Several challenges still remained, including priority areas for service delivery, backlogs, ageing infrastructure, poor communication, and accountability, with political and administrative interface, corruption and fraud and poor financial management still causing problems. Some municipalities still faced systemic challenges outside their control like a low revenue base and inability to attract qualified expertise. Some section 139 interventions were not sustainable and because of poor citizen engagement, weak budgeting, and huge amounts still owed to municipalities. Some of the initiatives taken after analysis were listed, generally aimed at making municipal infrastructure and procurement more efficient and effective by national framework contracts.

A Ten Point Plan was adopted, to be incorporated into Annual Performance Plans of municipalities, and provincial departments were helping to translate this into actionable plans in the integrated development plans.
Members wanted some concrete information on how to address dysfunctional municipalities and asked how the organograms were to be brought in line and standardised approaches followed. A Member suggested that the Committee needed to cut wasteful expenditure and have a concrete approach for oversight in the provinces. The point was made that many of the issues in the recent SONA were not new, including comments on unlocking potential of SMMEs and cooperatives and adhering to 30 days payment of creditors, and the question was when this would be achieved. The President had not discussed the forensic audit The Committee had requested the Minister of Cooperative Governance for a comprehensive report on all municipalities and despite this having being promised initially for last February it was still outstanding. Members said that the responsibilities of Community Development Workers were still not clear, asked if the prioritization was likely to be used to put some municipalities under administration, suggested that good examples should be taken from the strong municipalities and asked if CoGTA was investigating allegations that some municipalities were buying audit reports. Members felt that a single approach to Back to Basics would not work, given the widely varying experiences of municipalities and appropriate solutions were needed. Members questioned the percentages on the urban:rural residency statistics. 
 

Meeting report

State of the Nation Address (SONA) 2016: Implications for the Department of Cooperative Governance and Traditional Affairs (CoGTA)
Mr Themba Fosi, Deputy Director General, Department of Cooperative Governance and Traditional Affairs, commented on the implications of the 2016 State of the Nation Address (SONA) from the perspective of his Department. This SONA had focused heavily on the economic prospects and turnaround plan. The President reiterated the importance of the National Development Plan (NDP) and radical economic transformation agenda in fostering a resilient and fast growing economy. The country is affected by global constraints in growth and declining investment in developing economies and domestic factors such as electricity constraints and instability in industrial relations. The President emphasised that an effective turnaround plan is required.

The President commented on cost containment measures the country has made, and undertaking to spend public funds wisely and to cut wasteful expenditure, but without compromising on the core business of government and the provision of services to our people. Excessive and wasteful expenditure has been reduced, but there is still more to be done to cut wastage and the Minister of Finance will announce more measures. The Minister invited the Premiers of all nine Provinces as well as mayors to join in eliminating wasteful expenditure within Government.

The President had reported progress on the Nine Point Plan announced in 2015, particularly on:
- Revitalisation of of the agriculture and agro-processing value-chain;
- Advancing beneficiation, adding value to the country's mineral wealth
- More effective implementation of a higher Industrial Policy Action Plan
- Unlocking the potential of Small Medium Micro-sized Enterprises (SMMEs), cooperatives, township and rural enterprise
- Resolving the energy challenge
- Stabilising the labour market
- Scaling-up private-sector investment
- Growing the Ocean Economy
- Cross Cutting Areas to Reform, Boost and Diversify the Economy, in the areas of Science, Technology and Innovation, Water and Sanitation, Transport infrastructure, Broadband rollout; State Owned Enterprises (SOEs)

Apart from commenting on the economic prospects, the SONA also gave attention to issues such as:
- Governance and management of SOEs
- Empowerment of SMMEs
- Promotion of domestic tourism
- Economic transformation and black empowerment
- Improving competitiveness and financial skills development
- Consideration of the cost of maintenance of two capitals
- Drought
- Water infrastructure
- National minimum wage and labour relations
- Operation Phakisa
- Broadband roll-out
- Education funding
- Supply of antiretrovirals
- Improving police management
- International relations and peace and security in Africa

He said the President urged all citizens who are over the age of 18 to register to vote for the upcoming elections. On the implementation of the Back to Basics (B2B) in the second phase of implementation, national government will engage in more active monitoring and accountability measures. This includes unannounced municipal visits, spot checks of supply chain management processes, the implementation of recommendations of forensic reports, site visits to Municipal Infrastructure Grant (MIG) funded projects, and increased interventions to assist struggling municipalities. A 10-point plan of B2B priority actions has been developed to guide this next step. The plan includes the promotion of community engagement, which is absolutely critical to enable communities to provide feedback on their experience of local government.

Current and future CoGTA activities supporting the SoNA: Local government elections DoRA
Mr Fosi said that allocations in the 2016 Division of Revenue Bill (DoRB) tabled in February 2016 were published that would take account of the new municipal demarcations. The new demarcations will be in effect for the majority of the 2016/17 municipal financial year. All formulae and other allocation methodologies will be updated, and a full accounting of the impact of demarcation changes would be taken.

The municipal demarcation transition grant allocation is being increased to subsidise the additional administrative costs in respect of the re-demarcation. He said that, following the municipal demarcation process, the number of municipalities has been reduced, from 278 to 257. In relation to ward delimitation, there is a 15% reduction in wards, with a final figure of 4 392. Developmental local government remains the visionary foundation for the continuing reconstruction and development of South Africa.

He noted that the B2B Programme must be implemented by all spheres and all departments of government. Since it has been named as a Presidential priority this programme does not belong only to a specific unit in a department, nor only to CoGTA, but it is a collective responsibility for which everyone is responsible and accountable. Everyone must continue and accelerate the hands-on approach and prioritise and focus on campaigns, programmes and projects that have high visibility, broader mobilization, will impact positively on delivery and messaging of core B2B objectives in the pre and post-election period. Other priorities will include tackling corruption, tackling "dysfunctional" municipalities, moving "at risk" municipalities to "doing well" and preventing any municipalities from regressing. The special focus on dysfunctional municipalities means that it will be necessary to mobilise multi-departmental teams to tackle dysfunctional municipalities (with national and provincial resources) as well as improving support and interventions. Any deficiencies in the support programmes themselves were also to be addressed.

Dr Kevin Naidoo, Executive Manager: CoGTA, commented on the financial issues of municipalities and told Members that the CoGTA was still looking into various issues around the amalgamation of municipalities. The demarcations finalised by the Municipal Demarcation Board (MDB) not only included financial matters, but also issues relating to legal and policy issues, and rationalisation around bylaws in those areas, infrastructure projects and human resource considerations. There will need to be a single organogram for the newly established municipalities after elections.

The transition process was being managed by various change transition committees. At the municipal level, there are local municipalities coming together, managed then at the district level, which in turn will feed into the provincial Technical Change Management Committee, which comes to the National Department to report progress. In relation to the finances, there is a streamlined and dedicated process. On 7 December 2015, National Treasury (NT) released a comprehensive circular dealing with these change processes, and specifically the finances, and there would be another circular issued in March to deal with questions that Members had raised.

In relation to staffing, the Minister issued regulations on 17 January 2014, dealing with conditions of service for senior managers in local government. One of those provisions said that one year after the regulations had come into effect, municipalities must review the organogram. The CoGTA was hoping that this would address the problems municipalities had formerly had with their staffing and organograms. 

Mr Fosi concluded that CoGTA was well aware that despite the efforts and initiatives implemented by Government, there are remaining challenges. These challenges are priority areas and include service delivery and backlog challenges in housing, water and sanitation, challenges of ageing infrastructure, poor maintenance, cost for refurbishment and replacement of infrastructure. There remained some poor communication and accountability relationships with communities. There were problems with the political administrative interface, corruption and fraud, and poor financial management as evidenced by negative audit opinions.

Back to Basic Implementation: Progress Report
Mr Fosi gave a progress report on the Back to Basics (B2B) implementation. He noted that there was uneven performance across municipalities, with problems of weak capacity also in some provincial CoGTA portfolios. Some municipalities continue to experience perennial systemic challenges that are beyond their control, such as questions around viability, a low or non-existent revenue base, inability to attract qualified expertise, tariff setting and non-revenue losses on services (water and electricity).

Section 139 interventions were not always yielding the desired result, due to lack of sustainability and the inability to resolve perennial systemic challenges. Citizen engagement was generally weak, in those municipalities that were still categorised as dysfunctional or at risk, in terms of their reporting back to communities, complaints management systems and functionality of the ward committees. They showed inability to plan, procure, and project-manage infrastructure delivery, resulting in poor infrastructure grant spending, fraud and corruption. Poor budgeting for maintenance, refurbishment and replacement of aging infrastructure resulted in poor quality and breakdown of services. Although there was some progress made in addressing government debt, municipalities are still owed huge amounts by governments, business and households.

Mr Fosi then commented on service and infrastructure, the state of municipal technical capacity and capability, in terms of Technical Units organograms, alignment of structure with core function, existing capacity and vacancies (see attached presentation for full detail). CoGTA had done an analysis of the municipal absorption capacity and capability to manage infrastructure grants, in particular looking to whether all critical posts are filled with appropriate expertise and critical functions. There was a need to increase access to quality, reliable and sustainable basic levels of service in 27 prioritised districts, through diagnostic analysis, then leading to support and intervention to address key challenges. CoGTA was intending to put in place regional support contractors to assist municipalities to improve infrastructure delivery and operations, and to mobilise more funding for rehabilitation, refurbishment and replacement of ageing infrastructure, from government grants and loan funding. It was intending to make municipal infrastructure procurement more efficient and effective, by putting in place a national framework contract.

A Ten-Point Plan had been adopted and approved by the Local Government MinMEC, and the provincial CoGTA departments were currently incorporating this Plan into their Annual Performance Plans. The provincial CoGTAs, working with municipalities, were translating the Ten Point Plan  into actionable plans that are aligned to municipal plans. The national sector departments will work with CoGTA to implement integrated plans that respond to priority municipal challenges. The Ten-Point Plan reflects the Government Outcome 9 and Medium Term Strategic Framework (MTSF) priorities. Clear targets, indicators and funding streams are to be finalized in the Department's Annual Performance Plans. Institutional coordination mechanisms are in place to ensure coherent implementation of the programme.

Discussion
Mr E Mthethwa (ANC) wanted more information on how dysfunctional municipalities were to be addressed. He asked if there was any plan in relation to how to streamline the organogram, for the new municipal leaders. Perhaps the CoGTA needed to propose the new organogram, based on the new structures, and start working on a new National Plan that will guide everyone on the Back to Basics. He feared that if this was not done, everyone would start to implement the organogram in their own way.

Mr B Bhanga (DA) said that the Committee should look into the issue of cutting wasteful expenditure by taking legal advice on how the Committee should conduct oversight over provinces. Many of the issues raised by the President were not new – including the call to unlock the potential of SMMEs and cooperatives, and adhering to 30-day payments to promote their good functioning. Despite the repetition of the principles, the question is to what extent this had been achieved by the municipalities. The President had not raised the forensic audit, but the Committee had, and it had also requested the Minister of Cooperative Governance for a comprehensive report on all municipalities. The Minister had initially promised this report in February 2015. He then requested an extension to June and then in June, requested another extension to October 2015.  The Committee has still never received the the report, and now the Department was saying it was still looking into the issue. He wanted to know when the Committee would receive this comprehensive report. He also asked if the new Minister was likely to bring in a new vision for the Back to Basics.

The Chairperson said Back to Basics was now a government programme. This was a political question which the officials could not answer.

Mr Bhanga said he would put that question directly to the Minister in the following week.

Mr Bhanga was concerned about the Community Development Workers (CDW) mentioned in the presentation, for in the Eastern Cape the Department is not able to define their responsibilities clearly. He asked if a uniform approach was to be taken to ensure that they are put in the structure of CoGTA, and for the Committee to track what they are doing. For much of the time the CDWs are used for political purposes.

Mr Bhanga asked what was meant by CoGTA saying that it was going to prioritise some municipalities, and whether this meant they would be put under administration. Finally, he wanted to know what the plan was to deal with ageing infrastructure in Mthatha.

Mr M Matlhoko (EFF) said that despite 15 years of developmental local government, there was no proper report on what had actually been achieved. South Africa is still “stuck” on capacity building and employment of qualified skilled people, and he wanted to know when a final report would be produced. Politicians would tend to protect each other and do not want officials to account. There needs to be an administration that could say it has managed to integrate Integrated Development Planning (IDP) into the district municipalities. He said that fresh blood was needed to get things moving.

The Chairperson said that Mr Matlhoko could not suggest that the Committee was doing nothing.

Mr C Matsepe (DA) said when the Minister launched the B2B idea in Johannesburg, he was cornered by the Southern African Institute of Government Auditors (SAIGA). He had said municipal managers were complaining that he was conniving with SAIGA, but he was in fact worried about audit reports being “bought” by municipalities. He asked what CoGTA was doing to investigate and get to the bottom of the issues, and address those allegations.

Mr N Masondo (ANC) appreciated the presentation. He asked if Municipal Infrastructure Support Agent (MISA) had capacity and whether it enjoyed the confidence and trust of the various government departments and related institutions of government and what experiences had been learned from this Agency. He felt, in relation to B2B, that a single approach would not work because municipalities faced different challenges daily – for instance informal settlements were prevalent in Tshwane and in Ekurhuleni, and therefore there was a need to find out which metros were able to find appropriate solutions for these kinds of difficulties. He wondered what CoGTA could do to ensure viability, in the longer term, of some of the smaller dysfunctional municipalities including those with no tax base.

Mr M Mapulane (ANC) asked for clarification on the statistics the Department presented, that 59% of the population of the country lives in Metropolitan Municipalities (Metros), asking if this was quoted by StatisticsSA.

Mr Fosi firstly commented on the point about unlocking the potential of SMMEs and cooperatives, and said that there were economic issues, particularly around the 30 days payment rule. In the context of financial management the CoGTA will continue to assist municipalities and play an oversight role in ensuring that municipalities and provinces do pay their creditors on time.

Mr Bhanga noted that Cape Town seemed to be capable of doing what the other municipalities are not able to do, and suggested it could be used as a valuable case study for other areas.

Mr Masondo said there are best practices from all over the country, from which municipalities could learn and it was not right to suggest only Cape Town.

Mr Bhanga retorted that he had cited this as an example in view of his preference for Cape Town and suggested that it was up to the officials to respond, not other Members.

Mr Fosi said there are quite a number of municipalities that are doing well, and Cape Town was one amongst them. This was a question of using best internal processes especially around financial management.

Mr Bhanga asked Mr Fosi to specify which other municipalities were doing well.

Mr Fosi responded that the forensic report had analysed about 100 cases and the CoGTA could make this available. He could not comment on the question about the Minister. In relation to the questions on B2B, this was a government wide programme, and Premiers report to the Provincial Coordinating Committee on work they are doing on B2B. Members of the Executive Councils (MECs) report at the local Government MinMEC on what they are doing on the B2B. Municipalities are also expected to implement an Action Plan on taking forward the B2B.

He said that the issue of CDWs needs to be resolved between CoGTA and the Department of Public Service and Administration (DPSA) because currently the function does not lie within CoGTA, although the provincial CoGTAs were paying CDWs in line with allocations to municipalities. There is a framework to deal with it.

In relation to the audit disclaimers, Mr Fosi said that there are many matters raised by the Auditor-General (AG), some actually beyond the control of municipalities. The nature of the issues that have been raised by the AG needs to be understood, and the political and administrative leadership must be held accountable for taking forward and addressing these issues.

He noted that there was already a plan and process in place on the B2B as part of the induction. The Department of Water and Sanitation has a dedicated programme and there have been a number of youth employed under this programme. The Department will have to look at the allegations of municipalities buying audit reports.

Answering the questions on MISA, he said that this Agency did currently have a number of engineers and artisans. The statistics quoted came from a study that was done by the Council for Scientific and Industrial Research (CSIR) in 2013 which covered both cities and large Towns.

The Chairperson said that the country was urbanising very fast.

Mr Mapulane said the statistics should be reconciled because the former Minister quoted a statistic that was from StatsSA, which, at that time, was already 60% of the population living in cities, metros and big towns.

The Chairperson said that the CoGTA would have to work on this. In Gauteng, it was said that there were 1 000 people per day flooding into the towns. It is very clear that drought is going to have a negative impact because people are already moving away from places that are affected by drought to urban areas. It is projected that by 2030 Gauteng will have about 15.5 million people

Mr Fosi said this is an issue that has to be dealt with as a country, and the rapid urbanisation is affecting many cities and larger towns. Therefore, it is vital to balance the development of both urban and rural areas, and the kind of interventions that are to be provided in rural areas must recognise this fact, so that investments are not made into areas from which people are moving: for instance schools are now emptying with more people moving to the towns.

The Chairperson pointed out that the flip side to this was that other schools were now being flooded with pupils and the Committee must find a way to deal with this challenge.

Mr Bhanga understood that CoGTA wanted to prioritise some municipalities, but in some, the direct actions of politicians and decisions of councils had continued to contribute to financial mismanagement, without consequences being imposed. He asked to what extent CoGTA implemented what was in the Municipal Structures Act, to discipline councillors.

Mr Fosi said that the B2B pillars are defined by legislation on government issues. The Department can continue to work with provinces in monitoring and ensuring that provinces are a first point of call if there are any irregularities in councils. This is an ongoing exercise. Part of the B2B process will also be to assess the Department’s own capacity to manage the process.

Mr Fosi noted that CoGTA was not able to directly answer some questions, such as appointments, for the MEC was responsible for that. Overall, however, CoGTA continues to recognise the importance of the efforts, and where the Department needs to intervene it will do so.

The meeting was adjourned.

 

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