Western Cape Municipal Infrastructure Grant (MIG) performance

NCOP Appropriations

10 May 2016
Chairperson: Mr S Mohai (ANC, Free State)
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Meeting Summary

The Committee was taken through the performance record of Municipal Infrastructure Grant (MIG) expenditure by the Western Cape provincial government for the preceding five years. Situational analysis for the second quarter indicated that 6 municipalities were above 50%; 11 were between 40 and 50%, 4 were between 30 and 40%, and 3 were below 30%. Three municipalities invoked section 19 of the Division of Revenue Act (DoRA) for not spending 50% of the total allocation. Situational analysis for the third quarter indicated that 8 municipalities were above 62.5%; 4 were between 55 and 62.5%, and 12 were below 55%. Overall, 74% of planned expenditure was achieved. It noted 19 542 poor households benefited from water services. Figures for non-financial performance were provided for the districts of Cape Winelands; West Coast; Overberg; Eden, and Central Karoo.

In discussion, there was a call for information on projects completed. Positive spending had to translate into targets and policy objectives. There was interest in capacity challenges at Hessequa. Members had questions and comments about the availability of engineers for municipalities; skills transfer; experience for newly trained engineers and architects; training for small contractors and artisans, and job creation. On oversight later in the year, the Committee would look at collaboration on technical skills between provinces and municipalities, and coordination with government. Budgets had to be translated into policy objectives.

Meeting report

Introduction by Chairperson
The Chairperson noted that the President and Deputy President, and Ministers led by the Minister of Finance had good interactions with business and organised labour the day before at the business-government task team report-back on improving economic growth. The country could be congratulated on successful overseas road shows. The team led by the Minister engaged with civil society, labour and business. Economic growth was currently on the right track. There was emphasis on efficiency of spending that the Minister noted. Bold moves were being made towards fiscal consolidation. National Treasury was addressing important areas of concern about macro-economic and fiscal policies. Government was committed to translating fiscal policies into concrete guidelines. Positive sentiments were expressed during the IMF mission to South Africa to conduct the 2016 Article 4 consultation discussions. It was found that government was making progress with addressing infrastructure bottlenecks, especially in the electricity cycle, and in strengthening public procurement. Important issues at the heart of the economic situation were raised when the President interacted with various stakeholders. Stats SA third quarter report highlighted that unemployment was high. Growth and development in the economy had to be focused on. The MIG grant supported municipalities with the provision of basic services like water and sanitation, roads and recreational services. Cooperative Governance and Traditional Affairs (CoGTA) administered the grant, but in collaboration with other stakeholders. Information gained by the Committee could be used later on oversight visits. Information supplied in the current meeting could be used for Western Cape oversight later in the year. The focus of the day would be to assess financial and non-financial performance. The research office had circulated a report that could serve as reference. He noted apologies from the Western Cape MECs for Finance and Local Government.

Western Cape Municipal Infrastructure Grant (MIG) performance: 2nd and 3rd Quarter 2015/16
Ms Eda Barnard, acting Chief Director: Municipal Monitoring and Support, and Mr Marius Brand, Director: MIG, from the Western Cape Department of Local Government presented. The Committee was taken through a performance record of the preceding five years. MIG processes and procedures were outlined. A cumulative expenditure graph for 2015/16 was supplied. A situational analysis of the second quarter indicated that 6 municipalities were above 50%, 11 were between 40 and 50%, 4 were between 30 and 40%, and 3 were below 30%. Three municipalities invoked section 19 of the DoRA, for not managing to spend 50% of the total allocation. Third quarter analysis indicated that 8 municipalities were above 62.5%, 4 were between 55% and 62.5%, and 12 were below 55%. Overall, 74% of planned expenditure was achieved. With regard to non-financial performance, 19 451 poor households had benefited from water services in the current financial year. Figures for sanitation were 24 929 poor households that benefited, and for solid waste, 38 804. Figures for non-financial performance were provided for the districts of Cape Winelands; West Coast; Overberg; Eden, and Central Karoo. The visual impact of MIG expenditure was indicated through a number of images.

Discussion
The Chairperson noted that it had been a combined presentation by two departments. Performance over the previous five years had been positive. There had to be an indication of projects completed, and how positive spending translated into a set of targets and policy objectives. There had to be information on jobs created, people trained and the establishment of a sustainable skills base.

Mr Brand replied that investment in construction projects provided short and medium term job opportunities to immediate beneficiaries. Investment in infrastructure also increased access to services. There was 90 to 98% access to water and sanitation, roads and electricity. It unlocked housing opportunities. Whilst there was movement with bulk infrastructure, hundreds of houses became available. Training was part of construction programmes. There were new programmes for small contractor development and skills upgrading, and small business finance training, as well as in business skills. There were structured targets.

Mr L Nzimande (ANC, KZN) referred to non-financial performance. He asked if the figures referred to the third and fourth quarters, or the five year period. He asked if overall households or individuals were being referred to. He asked if the figures referred to the number of people within a household or to structures. He asked if zero figures with regard to cemeteries and others was because there was no planning, or because it was not needed.

Mr O Terblanche (DA, Western Cape) commended an excellent presentation. He asked how different projects in wards were identified. People were complaining that certain wards were being neglected. He asked how budgets were allocated on a ward basis.

Mr F Essack (DA, Mpumalanga) remarked that the Western Cape always had a good story to tell. He was impressed by the numbers and figures, and looking forward to meeting with the other provinces. He asked if every municipality had a full-time engineer. He referred to the Responsible, Accountable, Consulted and Informed (RACI) tool, and asked who the role players were.

Mr Essack referred to the slide on non-financial performance for water and sanitation, electricity, sport, solid waste, emergency services. He asked how the zero figure for cemeteries, parks and open spaces and others was arrived at. The 74% of planned expenditure was good, but situational analysis for the third quarter showed that Hessequa seemed to be the problem child. There were said to be capacity challenges. Positions in the short-listing process stood at only 48.8%. He asked what was going on there.

Mr L Gaehler (UDM, Eastern Cape) referred to the statement that small and medium enterprises could create employment. He asked what the policy was, regarding that. South Africa was lagging with its high rate of unemployment and lack of skills transfer. He asked government to be open about such issues. There were a lot of young people with academic training who could not find work. Employers would say to them that they needed experience. He asked if young architects and engineers were being taken into projects to assist. He asked about future plans for skills transfer to youth and women.

Mr C De Beer (ANC, Northern Cape) referred to capacity challenges in some municipalities. He asked if such were part of the Municipal Infrastructure Support Agency (MISA) programme, and if so, what was being done. He referred to the Winelands district municipality that received a R4.8 million allocation in 2013/14 and the municipality failed to report on expenditure. He asked if the 2013/14 allocation was spent or not, or returned to the National Revenue Fund.

Ms Barnard responded that the MIG Unit was not aware of that allocation process. It would be necessary to go back to the municipality to get details.

Mr O Terblanche (DA, Western Cape) referred to training given to programme participants. He asked if the type of training given could enable people to operate as independent small contractors, or as proper artisans. He referred to the housing contractor brought in where a contractor was not appointed. He asked how appointment had proceeded. It could be a dangerous venture.

Mr T Motlashuping (ANC, North West) remarked that money had been spent well over the preceding five years. He asked if provision was made for historically disadvantaged companies to benefit. He asked if jobs were being created in the province.

Mr De Beer noted that page 280 of the Division of Revenue Bill was a highly important page with reference to bulk water allocation from Treasury.

The Chairperson commented that when the Minister of Finance introduced the Budget he also emphasised efficiency. Infrastructure projects had to be managed in a downsized economy. He asked how multi-year projects were planned. He asked if positive spending trends were a result of planning.

Ms Barnard responded that the non-financial performance breakdown referred both to the preceding years and the future, to make trends visible. She answered Mr Nzimande that “households” did not refer to individuals. It was done according to the Act. Every municipality did not have an engineer. It was a challenge across the country. People wanted to work in Cape Town or George, but not in the Karoo or the West Coast. It was a struggle to find capable people to work there, especially with technical skills. In the Western Cape there were mutual support projects were services were shared. Two or three municipalities would appoint a planner, as was done in the Central Karoo. It made access to scarce skills possible, where there had been none before. It was working well in the West Coast, the Karoo and the Overberg. MISA was helping with engineers, who worked from the MIG offices. In Prins Albert and Laingsburg there was a good working relationship with the MISA team in the Western Cape. Engineers could be moved around to help out in other areas. The Back To Basics support programme focused on supplying engineers to vulnerable areas. Municipalities struggled to attract engineers. Payment regulations were a challenge. Engineers were already in the hinterland, and what to pay them became a second conversation. Plans were made for capacity, which were reflected in spending.

Ms Barnard continued that she had met with the municipal manager at Hessequa, to deal with the challenges. Mr Brand and a colleague, with CoGTA, would also meet with the municipality on the following day. The technical manager had resigned. There were vacancies in senior management, and no MIG manager, which compounded the situation. There was also no manager between the manager and the MIG manager. There was a struggle to appoint somebody. Attempts were made to appoint consulting engineers, who drove projects in small municipalities, but there was a dispute about the appointment. There was support through an intervention by CoGTA, and a municipal manager was appointed, and there were interviews to appoint a technical manager. The downward spiral was halted and the municipality was back on track. She hoped that the deadline would be met.

Ms Barnard responded with regard to skills transfer, that the Western Cape made sure that those who followed would be provided with a lead. There was an aggressive bursary policy in cooperation with the Treasury. 50% was given for governance related studies, especially financial governance. Youth had to be attracted to work in places like Laingsburg and Prince Albert. Opportunities had to be provided, but it also had to be ensured that the student would work in Laingsburg. Hard work was done to get youth to work in rural areas. There was a structured process. There was a successful programme run by the Department of Transport, for engineers, planners and architects in the rural areas, which had been running for some years.

Mr Brand responded that the zero figures for cemeteries and emergency services did not imply that nothing was spent on MIG. Municipalities prioritised MIG spending in terms of budget backlogs. There might be funding from the capital programme, emergency programmes, or the national disaster team. Lately there had been more movement in terms of streets. It provided for small contractor development. There was skills transfer for bricklayers, pavers and the like. The aim was for labourers to graduate from being a labourer to being a small labour contractor, who could supply to big companies. However such graduates were as yet not ready to operate as independent contractors. There was a programme in the central Karoo for skills upgrading. Job creation through the Expanded Public Works Programme (EPWP) would be recorded, on a monthly and quarterly basis.

Mr Brand explained that the RACI role players depended on the problem faced. It varied from technical director to manager. It could be the CFO budget office if it was a supply chain problem. In the public sector it was the MIG unit. The means for deployment to a municipality could be identified. Assistance was asked from MISA engineers. The sector departments were involved in the monitoring of their targets, especially water and sanitation. MIG SMME policy did not include programmes like SANRAL offered. Each municipality had a local economic development policy. Small contractor development featured under that. The supply chain management policies of municipalities were used. When local contractors were not used, it had a higher weight.

Mr Brand replied on the question about skills transfer that engineers were appointed through bursary schemes like that of Human Settlements, which had been operative for a number of years in the housing programme. Skills transfer through construction was mostly through artisan training. It provided skills like plumbing and paving. Economic Affairs ran a big programme at Saldanha to produce artisans for municipalities and industry. The Western Cape government offered structured programmes for local economic development.

Mr Brand replied to the question about the implementing agent, where a tender was included under the housing contractor. The bulk infrastructure was part and parcel of the initial tender. Some municipalities only went for the housing part of it, but a municipality could fall back on tender values submitted for construction linked to the housing project.

Mr Brand noted that multi-year projects were encouraged. There was detailed planning of implementation programmes with municipalities. In a stop and go situation, the contractor had to be paid for site establishment. Some municipalities planned to start late because they wanted a multi-year project.

Mr Brand explained the Integrated Development Plan (IDP) had to be looked at to see why certain wards were not getting attention. It was all part of the public participation process of the municipalities. Road and storm water projects were ideal for typical ward based projects. All wards benefited. It had to be ensured that all projects ended up in the capital budget and in the MIG programme. The IDP process was followed. It had to be ensured that public participation took place.

The Chairperson concluded that the Committee would identify MIG projects for site visits. The secretariat could work with the Western Cape Department. The Committee wanted to see collaboration on technical skills, and productive assets to communities. Availability of water to communities was a pressure point. It would be asked how the community used women and economically active people. Collaboration between province and municipality, and coordination with government would be examined. It was crucial that budgets translated into policy objectives. The Committee wanted to study figures and talk to people on site. A message had to be sent to principals to work with the MIG team. Participation on site visits would be appreciated.

The Chairperson adjourned the meeting.

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