South African Local Government Association (SALGA) on its Annual Performance Plan 2016

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Cooperative Governance and Traditional Affairs

08 March 2016
Chairperson: Mr R Mdakane (ANC)
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Meeting Summary

The South African Local Government Association (SALGA) presented its Annual Performance Plan (APP) for the final year of the current administration. SALGA looked at its evolution since its inception in November 1996. Local government had come a long way since 2000 moving from a highly fragmented racially based system to an integrated democratic system with wall to wall municipalities. The route to reforming municipalities had been a huge task and it had to face the twin challenges of service delivery and transformation. There had been an improvement in overall audit outcomes since 2007. For 2014/15, the audit outcomes showed an overall improvement except in Limpopo and approximately 46% of municipalities had moved out of the red zone. Areas of concern in audits were supply chain management practice, the financial health of municipalities and increased unauthorised expenditure.

Key problem areas for municipalities were the revenue collection ability arising from problem ICT governance systems and controls, weak record keeping and a lack of regular and accurate reporting. The current challenges informing the APP were growing consumer indebtedness and inability to pay for services, the ballooning outstanding debt of government, general economic decline and fiscal constraints. Municipalities still faced the residual challenges of insufficient institutional capacity, the low rate of revenue collection and slow service delivery.

The APP would be informed by a ten point plan to build positive community experiences; prioritising municipalities that received disclaimers for more than three years; enhancing revenue collection; targeting the appointment of senior managers in municipalities; targeting basic and technical services and infrastructure; the implementing of forensic reports; having a metropolitan programme; strengthening the role of district municipalities; and developing spatial and regional integration.

SALGA also spoke to its readiness to guide and manage the transition of municipalities which would be restructured following municipal demarcation changes. SALGA had developed guidelines for governance stability and had developed ‘Day 1’ guidelines and a councillor induction programme. SALGA was on the change management committees set up by all provincial governments which had municipalities affected by major municipal restructuring. SALGA then spoke to apex priorities of legislative and policy review; sound financial management and the fiscal framework for local government; building municipal capability with SALGA as a centre of excellence, knowledge and intelligence.

Members said the presentation spoke about capacitating municipalities. Were there maintenance plans in place for capital expenditure infrastructure? Members said debt owed to municipalities by departments and citizens was not being paid because of problems with municipal billing systems. Was SALGA assisting municipalities to deliver accurate billing?

Members noted the number of municipalities would be reduced from 278 to 257. How was this factored into SALGA’s revenue model? The previous year COGTA had said that the current year would be the last year that SALGA would receive funding from the Department, yet members noticed that R90m in funding would still be received from COGTA. They did not see any expenditure controls or plans to deal with this future loss in funding Members said 49% of SALGA expenditure went to administrative costs. Most of SALGA’s funds should be used in support of municipalities, rather than on administration. Could this be explained? Members wanted clarity on how the municipalities were being assisted regarding Eskom cut-offs.

Members said it was not about what the municipalities believed would reduce community protests, rather it was about what communities believed would reduce protests. They noted SALGA had organised to have a national assembly one month before the municipal elections, surely it should be postponed until after the elections. Members were tired of hearing about the municipal barometer, they wanted to see it.

Members asked what support SALGA was giving municipalities struggling with the impact of drought. What was SALGA’s plans for the continuous learning of councillors over their full term of office? Members asked if there was a way SALGA could address the fact that while municipalities had fixed rates, Eskom charged municipalities a higher tariff for electricity consumed during peak periods. Members said the allocation to local government had decreased slightly which would affect local government services. How far were discussions to sort out the debt owed to municipalities? Members asked what steps SALGA was taking to recover monies from those that could pay, especially from villages adjacent to towns. Members said SALGA should be bold enough to make its own suggestions on how to tackle the drought. Members said municipal managers needed to improve their performance in delivery of services such as rubbish removal. 

Meeting report

South African Local Government Association (SALGA) on its Annual Performance Plan 2016
SALGA Chairperson, Councillor Thabo Manyoni, noted SALGA was presenting its APP for the final year of the current administration. SALGA’s main focus was to ensure there was confidence in local government and governance by building capacity and to manage the transition period.

Mr Xolile George, SALGA CEO, said that SALGA would reach its 20th year milestone on 22 November 2016. It was established in November 1996 after which a White Paper had charged SALGA to play a key role and find innovative ways to be developmental. Local government had come a long way since 2000 moving from a highly fragmented racially based system to an integrated democratic system with wall to wall municipalities. The route to reforming municipalities had been a huge task and it had to face the twin challenges of service delivery and transformation. Substantial progress had been made in developing communities by ensuring service delivery to the poorest of the poor. At the same time local government institutions and their resilience had to be developed.

There had been an improvement in overall audit outcomes for the period 2007 to 2013 and the trends for audit outcomes in 2014/15 showed improvements in all categories of opinions and reduction in disclaimers, adverse findings and audits not finalised and an improvement in consequence management. Audit areas of concern were supply chain management practise, the financial health of municipalities and increased unauthorised expenditure. Key problem areas were the revenue collection ability of municipalities arising from problem ICT governance systems and controls, weak record keeping and a lack of regular and accurate reporting. For 2014/15, the audit outcomes showed an overall improvement except in Limpopo and approximately 46% of municipalities had moved out of the red zone.

He said the current challenges informing the APP were growing consumer indebtedness and inability to pay for services, the ballooning outstanding debt of government, general economic decline and fiscal constraints. He then spoke to municipalities and community protests and the residual challenges of insufficient institutional capacity, the low rate of revenue collection and slow service delivery.

 The APP would be informed by a ten point plan to build positive community experiences; prioritising municipalities that received disclaimers for more than three years; enhancing revenue collection; targeting the appointment of senior managers in municipalities; targeting basic and technical services and infrastructure; the implementing of forensic reports; having a metropolitan programme; strengthening the role of district municipalities; and developing spatial and regional integration.

The SALGA framework for the transition had been adopted by the NEC in November 2015 and SALGA would be guiding and managing and giving support to municipalities undergoing transition and being restructured. It had developed guidelines for governance stability. All provincial governments which had municipalities involved in major restructuring had set up change management committees and SALGA was on these committees. SALGA had developed ‘Day 1’ guidelines and a councillor induction programme.

Key milestones would be the municipal managers forum in April, the National Members Assembly in May, the local government elections, the provincial conference in September-October and the national conference in November 2016. Key projects and strategic priorities were the rollout of the municipal audit support programme (MASP), the roll out of the Centre for Leadership and Governance programmes, to lobby for a review of legislation to strengthen local government's role in integrated planning, economic development and spatial planning, the launch of SALGA knowledge/innovation products and services, the implementation of sustainable urban development and guiding and managing the transition.

He then spoke to SALGA’s apex priorities of legislative and policy review; sound financial management and the fiscal framework for local government; building municipal capability with SALGA as a centre of excellence, knowledge and intelligence.

Discussion
Ms J Maluleke (ANC) said the presentation spoke about capacitating municipalities, but she was concerned whether maintenance plans for capital expenditure infrastructure were in place. What was SALGA doing about that? She said debt owed to municipalities by departments and citizens was not being paid because of problems with municipal billing systems. Was SALGA assisting municipalities to deliver accurate billing?

Mr K Mileham (DA) said the number of municipalities would be reduced from 278 to 257. How was this factored into SALGA’s revenue model? The previous year COGTA had said that the current year would be the last year that SALGA would receive funding from the Department, yet he noticed that R90m funding would be received from COGTA. At the same time, he did not see any expenditure controls or plans to deal with not receiving the R90m in future. He said 49% of the expenditure went to administrative costs. Most of SALGA’s funds should be used in support of municipalities, rather than on administration. Could this be explained? He wanted clarity on how the municipalities were being assisted regarding Eskom cut-offs.

Referring to slide 33, Mr Mileham said it was not about what the municipalities believed would reduce community protests, rather it was about what communities believed would reduce protests. He noted SALGA had organised to have a national assembly one month before the municipal elections, surely it should be postponed until after the elections. He said he was tired of hearing about the municipal barometer, he wanted to see it.

On maintenance plans for infrastructure investment, Mr George replied that it was an area of concern that major capital expenditure had not been supported with a maintenance budget. Treasury and COGTA had issued clear guidelines that nine to ten per cent of capital investment should be allocated for maintenance. There had to be a maintenance budget and it would be more a question of monitoring that the 10% maintenance allocation was being used as it was supposed to be used.

On municipal debt, Mr George said it was a major challenge because of its growth from R11b in 2000 to R117b currently and was a growing issue especially the structure of repayment. SALGA was asking for more engagement to settle the matter especially the compounded portion of R5b owed by national government. A possible creative solution was that SALGA get government to invest in a reliable billing system which would assist in revenue generation for municipalities . SALGA had commissioned a study to look at competent billing systems which could then be used as a benchmark to assess municipal systems and to assist with municipal integration.

On the Department grant to SALGA, it had been agreed that the grant would be phased out in 2016, but through engagements the grant had been reinstated. For the past eight years SALGA had been requesting a funding model to undertake and perform key governance responsibilities assigned to SALGA. To date it had not received that funding, it had only received the existing grant which continued to cripple the organisation.

On municipalities that would be phased out, he said that according to the levy formula, SALGA would look at the receiving municipalities because amalgamation might or might not retain it at the same threshold for payment of the levy. Sometimes this would not automatically mean a reduction of the levy for SALGA as a municipality might jump into a higher category.

On the cut-off of electricity, he said SALGA had since the previous year made clear proposals that measured steps be taken as some municipalities were unviable. Withholding the Local Government Equitable Share (LGES) would plunge them into ruin. Municipalities should not enter agreements for compliance sake because there were underlying structural issues that were not sorted out. SALGA had met with NERSA and raised these issues. SALGA had been working on the issue but it needed further impetus.

On the community's view, he said the citizens' views as well as the municipality's views had been canvassed to find out what the main drivers of the protests were.

On the national conference, he said that SALGA was bound to hold it because it was a constitutional requirement, but SALGA was also using it as an opportunity to present its transition plans.

On the municipal barometer, he said that it had started and SALGA was looking at pilot municipalities in Mpumalanga and Mbombela. It had launched a portal on its website which would be rolled out

Mr Nceba Mqoqi, CFO, said the revenue funding model was formula based. There had been changes to a number of municipalities so there would be additional members above the billable amount in terms of membership fees.

On the grant, he said the 2010 National Members Assembly had adopted a funding model. The re-instatement of the grant would put SALGA where it was. SALGA had been doing cost-cutting such as in printing and travel costs and had moved away from using external support.

Mr E Mthethwa (ANC) asked what support SALGA was giving municipalities struggling with the impact of drought. What was SALGA’s plans for the continuous learning of councilors over their full term of office?

Mr P Mapulane (ANC) asked if there was a way SALGA could address the fact that while municipalities had fixed rates, Eskom charged municipalities a higher tariff for electricity consumed during peak periods. He said the allocation to local government had decreased slightly which would affect local government services. How far were discussions to sort out the debt owed to municipalities?

Mr C Motsepe (DA) asked what steps SALGA was taking to recover monies from those that could pay, especially from people in villages adjacent to towns.

Mr A Masondo (ANC) said SALGA should be bold enough to make its own suggestions on how to tackle the drought issue. He said the area requiring attention was in improving the performance of municipal managers in delivery of services like rubbish removal.

Mr Mileham said that the use of monies owed to improve municipal billing systems would be a dangerous door to open. Other clients of the municipalities would also ring fence their payments towards the improvement of some or other service of the municipality.

Mr George replied that municipalities were sitting with non-credible billing systems. If the monies were paid to municipalities, the municipalities would still have structural problems with the existing billing systems. Municipalities were spending a lot of time contesting bills and the Auditor-General had also raised concerns over the billing problems.

Mr Manyoni said that the maintenance plans would be raised at MinMec meetings. The maintenance issue had also been raised in the State of Nation Address (SONA) and at the budget meetings.

SALGA had released a report in the past week covering all municipalities about the drought and related water issues. It would look into water consumption which would need a behavioural change.

On Eskom, he said that nothing had happened despite SALGA meeting with Eskom to raise some issues. There needed to be a differentiated approach to municipalities. A worrying factor was that the amount allocated to local government had declined.

He said SALGA had a plan to go to the community to campaign for the recovery of monies from those that could afford to pay.

Mr Rio Nolutshungu, SALGA’s Institutional Development Executive, said SALGA had plans to train councillors over their term of office. It started with councillor induction and councillors could gain credits for accreditation and there were executive programmes and leadership skills programmes. The programmes were aimed at building the capacity of the current members and develop a pipeline of skilled councillors.

Mr Manyoni said the main focus of SALGA was to ensure a smooth transition to allow for continuity of service delivery.

The meeting was adjourned

 

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