Municipal Infrastructure Grant monitoring and rollover management

NCOP Appropriations

20 September 2016
Chairperson: Mr S Mohai (ANC, Free State)
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Meeting Summary

The briefing by the Department of Cooperative Governance (DCoG) covered expenditure performance of the Municipal Infrastructure Grant (MIG) in 2015/16; monitoring of expenditure of rollovers, and mitigation of challenges. Municipalities in North West province had an unspent balance of R238 million in June 2016. The figure for Limopo province was R636 million. The Division of Revenue Act prescribed that unspent conditional grants had to revert to the National Revenue Fund, unless the National Treasury permitted the rolling over of funds into the next financial year. Municipalities reported monthly on approved rollovers. Challenges included an inadequate ability to plan the municipal capital budget over three years, informed by an integrated developmental planning process; lack of capacity to manage and monitor MIG projects; appointment of service providers who could not deliver; late payment of service providers, and the use of MIG funds for operational budget processes.

In discussion, Members had questions and comments about technical support to municipalities; MIG funds used for operational purposes; monitoring by the provinces; the lack of municipal capacity and planning, and term contracts and emerging local contractors.

The briefing by the National Treasury covered duties of the DCoG as Transferring Officer; Treasury monitoring of the MIG; the Fourth Quarter Section 71 report; 2016/17 proposed conversion of MIG allocations; procedures and timelines for applying for rollovers, and 2015/16 MIG rollover requests. The MIG was the third best performing grant with expenditure of R13.8 billion or 93.1% of the adjusted MIG allocation of R14.8 billion. DCoG managed MIG registration and registration of MIG projects. DCoG and the municipalities submitted monthly and quarterly reports to Treasury. Where district municipalities had the capacity to implement infrastructure projects, MIG funds were re-allocated to them to spend on behalf of struggling local municipalities. Conditional grants had to be spent in line with conditions set, and were not to be invested.

In discussion, Members had questions and comments about compliance with the Public Finance Management Act (PFMA); timelines for conversions and re-allocations; non-delivery; multi-year projects; what Treasury did when municipalities had no capacity; managing and monitoring of MIG projects; challenges at Ngaka Modiri Molema municipality; consequence management, and legal responsibility for MIG projects.
 

Meeting report

Introduction by the Chairperson
The Chairperson said MIG monitoring, was highly important. It was a follow-up on the MIG that had been going for five years. There had been an earlier briefing by the National Treasury. Recommendations had improved MIG spending. The MIG played a very important role in municipalities to support basic services like water and sanitation and roads, as productive assets of communities. The MIG contributed to Outcome 9 of the Medium Term Strategic Framework (MTSF). The Department of Planning, Monitoring and Evaluation (DPME) would be invited so as to be part of reflections. The National Treasury was the backbone of the Finance and Appropriations Committees. Treasury was charged with oversight in terms of the Constitution. CoGTA, the Municipal Infrastructure Support Agency (MISA) and the Financial and Fiscal Commission (FFC) had to help to define the role of the NCOP. Meeting with stakeholders could help the Committee to make stronger inputs. Stakeholders had to respond to recommendations to avoid rollovers. He welcome Treasury, Department of Cooperative Governance and Traditional Affairs (COGTA). He noted an apology from the COGTA Minister.

Mr Sigidi Muthotho, DCoG acting Director-General, introduced his team. The briefing would be presented by Mr Timothy Seroka.

MIG performance and rollover management: Department of Cooperative Governance
Mr Timothy Seroka, DCoG Chief Director, gave a briefing on expenditure performance of the Municipal Infrastructure Grant (MIG) in 2015/16; monitoring of expenditure on rollovers, and mitigation of challenges experienced in the MIG programme. Municipalities in North West Province had an unspent balance of R238 million by June 2016. The figure for Limpopo was R636 million by June 2016. Section 22 of the Division of Revenue Act provided for all unspent conditional grants to revert to the National Revenue Fund, unless permission was granted by the National Treasury to roll over the unspent funds into the next financial year. Treasury considered rollover requests in consultation with the Transferring Officer (DCoG) and provincial departments. Municipalities had to report monthly and quarterly on financial and non-financial performance of approved rollover projects.

Challenges included inadequate ability to plan a municipal capital budget to a three year horizon, informed by an integrated development planning process; a lack of capacity to manage and monitor MIG projects; appointing service providers who could not deliver; late payment of service providers, and the use of MIG funds for operational budget pressures. The Municipal Infrastructure Support Agency (MISA) assigned engineers to provide support for evaluation of project designs where required. The DCoG, acting through MISA and in partnership with Treasury, was putting in place a range of framework contracts for municipal goods and services to ease procurement in municipalities.

Discussion
Mr L Gaehler (UDM, Eastern Cape) referred to technical support to municipalities. He asked at what level that would start. The service providers selected did not have required skills. To match the level of the advertisement to Supply Chain Management (SCM) level was the problem. There had to be tactical support for SCM. Most municipalities used service providers. He asked about support for the emerging sector.

Mr F Essack (DA, Mpumalanga) said that the presentation of the previous year was very similar to the current presentation. It was a duplication of a duplication; still it was a good presentation. He referred to the last bullet on slide 22. MIG funds were used for operational budget pressures. It was the crux of the matter. It was an ongoing challenge. The question was how long it was going to prevail. Eskom accounts were funded and there was fruitless and wasteful expenditure. It was at the high level indicators, where things went wrong. It was nothing new. The question was when the handbrakes would be pulled up, and the national department was going to stop being dictated to by provinces and municipalities. He referred to the last bullet on page 3. Municipalities were required to justify their 2015/16 rollovers to National Treasury by 31 August 2016. He asked if that was done across the board. North West province continued to stick out like a sore thumb. He referred to bullet 3 on page 7. The Division of Revenue Act (DoRA) stated that if municipalities failed to repay unapproved or unspent conditional grants, those would be offset against their respective conditional or unconditional grants. He asked how often that happened. Bullet 4 stated that to avoid funds being offset at once, a periodical repayment of unspent funds could be arranged on behalf of municipalities. He asked if that was practical. He referred to the last bullet on page 18. Annual Financial Statements had to be used to verify expenditure on rollovers, to prevent approval of rollover on a rollover. It was linked to slide 20, bullet 4. The Transferring Officer would henceforth require municipalities to report on approved rollover projects, about their monthly/quarterly non-financial and monthly financial performance. He asked what oversight that granted to the Select Committee.

Mr T Motlashuping (ANC, North West) welcomed the presentation. The content was as expected. Part of the responsibilty of provincial government was to monitor and support local government. The provinces had to play a major supporting role in MIG spending, even though money was given from the national government to local government. He asked if the challenge of money from Treasury was being looked into. It was not a political issue. There was movement and improvement. It would not do to always criticise. KZN had performed well. There was movement in North West province despite funds being stopped. There were good reasons for transfer to spending municipalities. SA was a unitary state. It was unacceptable to single out North West. There were nine provinces. If his province (North West) was not doing well, it was no reason to rejoice when Limpopo was not doing well. He was not a member of the provincial legislature.

Mr O Terblanche (DA, Western Cape) thanked the Department for a comprehensive presentation. Challenges that stood out included the lack of capacity in some municipalities throughout the whole process. Capacity had to be built to plan and implement. There was a stop/start approach. A multi-year plan was lacking. There was specialised work like site clearance that needed to be done and for which capacity had to be built. He referred to slide 24. Section 6(b) had to be a last resort, and only in an emergency. Local labour had to be employed. Slide 25 stated that Treasury and MISA were putting in place a range of framework contracts for various municipal goods and services. Term contracts deprived local people from participating in the economy. It had to be a last resort. Tenders had to be done on a small scale to benefit smaller contractors.

Mr C De Beer (ANC, Northern Cape) commented that the Committee had to be mindful of programmes implemented by CoGTA and Treasury to assist municipalities and provinces. He asked about progress made with programmes rolled out there. The Committee had to be able to measure progress. The presentation informed Committee oversight. The Committee might have to call Limpopo and the Northern Cape. KZN could be called to share best practice. He asked that the figures pertaining to the spread of MISA-supported municipalities, on slide 26, be unpacked. He noted that there were 11 municipalities supported in the Northern Cape. It was his province. He asked that municipalities be named.

Mr L Nzimande (ANC; KZN) asked if the R60 million outstanding for a municipality in KZN  was due to lack of capacity, or having bitten off more than it could chew.

The Chairperson commented that underexpenditure robbed communities of valuable assets. There was a tendency in government to use public resources allocated. He noted that the Committee broke with routine and allowed the DCoG to present first. Treasury would present after responses by the DCoG. The presentations had to complement each other, so that areas could be identified that required further attention.

Mr Sigidi Muthotho, DCoG Acting Director General, replied that he would deal with the simple questions. His colleagues could deal with the difficult ones. Of all the grants transferred directly to municipalities, the MIG was among the best performers in terms of expenditure. The quantum of MIG transfers increased every year, since it started in 2004. Mr Gaehler had asked if the DCoG supported SCM processes. There was not a direct programme of support. The DCoG identified certain indicators, when it looked at competencies of practitioners in local government, outside of the parameters of senior management level.

Mr Muthotho said that Mr Essack asked a critical question, namely when rollovers would stop. It was stopped when the MIG was used for operational expenditure. The Annual Financial Statements (AFS) was used to confirm figures of the rollovers on a monthly basis. The Division Of Revenue did not give the Transferring Officer the responsibility of monitoring. High level indicators were referred to assess this. Of the funds that flowed to municipalities, MIG and the Local Government Equitable Share (LGES) were conditional. When an Accounting Officer sat in municipal space, he had to see to it that the MIG dealt with issues of infrastructure. It was very difficult when no delivery was happening. The Accounting Officer would say that there was still R20 million in the MIG kitty, programmes were still running but milestones were not yet delivered. There were still operational expenses on the LGES. Funds were running dry but the LGES would be received within two months. He would use part of the MIG, hoping to get it back when the LGES comes. It was dicey for the national department to think that it could control that. When dealing with rollovers, the only time a rollover could be confirmed was through audited AFS. A municipality would apply to Treasury for a rollover of R120 million, but it would turn out in the AFS it was R150 million. The audited AFS were used to confirm the figure. Rollovers were reported about on a monthly basis. Reports by municipalities on funds that were on rollover went to Treasury through a section 21 report. The national Transferring Officer could monitor that. Every time the municipality spent funds, it had to be known how much was spent on rollovers.

He answered Mr Motlashuping about the role that the province had to play. In the past when the MIG expenditure declined, DCoG looked at the capacity of the MIG unit. But it was also necessary to look at the province when there was a decline. The MIG quantum could also increase. Treasury gave funds to resolve the MIG. Projects were visited to see if they were moving in line with expenditure. CoGTA met with provincial officials and sat with sector managers to analyse reports and environmental impact assessment reports. Provinces had to monitor. The DCoG met with provincial officials in the project management office. There was a lack of political ownership by MECs. The question was if they were able to report at MinMec.

Mr Muthotho answered Mr Terblanche about lack of capacity. The regulations adopted in January 2014 provided for the appointment of senior managers. Treasury still had the competency framework it had before. It had to be ensured that appointees to municipal space had the relevant qualifications. Lack of planning regimes was not the issue. Municipalities had the Integrated Development Plan (IDP) which stretched over five years, and a service budget implementation plan which the mayor approved. The issue was the operational implementation of plans. Municipalities had to provide a three year infrastructure plan, in November. The municipality had to know if it would be able to spend the totality in three years. Mr Terblanche had stated that term contracts deprived local contractors of opportunities. Term contracts were mostly for operations and maintenance. Normal procurement processes were gone through. After three years they were replaced by others. It was critical to know how to bring in medium suppliers as subcontractors. He replied to Mr De Beer that names of municipalities supported would be given. He replied to Mr Nzimande that KZN had overspent on its allocation by R9 million.

Mr Themba Dladla, MISA Acting CEO, answered Mr Gaehler about the level at which support would start, saying it would start at the level of planning. Municipalities would be assisted to develop specifications for projects. Programme managers would come in at the level where support was provided. At the SCM level, technical engineers would give support to develop terms of reference for a project. A part of refocusing in MISA was to look at procurement. Framework contracts were being introduced. Treasury introduced standards for infrastructure procurement. SCM in municipalities would be improved.

Mr Ntandazo Vimba, MISA Head of Technical Support, replied about support programmes with Treasury at Mopani. MISA decided together with the DCoG and Treasury about municipalities that performed badly on the MIG. It was better to support municipalities to spend. MISA engineers could assist to fast-track support. Half of the support had to be approved by Water and Sanitation. Mopani municipality surrendered R150 million. Treasury engaged the Development Bank of Southern Africa (DBSA) to act as implementing agent to assist with spending. Sekhukhune municipality performed poorly in the previous year. It was on the verge of losing R160 million. A team was put together to ensure support. The money was saved and Sekhukhune spent 96% of it at the end of the day. Mr Dladla had indicated support with rollout of standards for infrastructure procurement. There was partnership with Treasury with the focus on capacity. It was found that the MISA technical support team could not make an impact. The current focus was on capacity. MISA made a business proposal to Treasury for the turnaround of the water function in municipalities, to develop capacity to create revenue and maintain infrastructure. Treasury approved the focus on one region. R80 million was made available to pilot the project. In the Eastern Cape, Amathole District Municipality (DM) and Oliver Tambo DM were involved. Water Authorities (WAs) were clustered into regions for total turnaround, so as to leave a lasting legacy. Multi-disciplinary teams dealt with HR, finance and engineering to assist municipalities to develop capacity to plan and implement. MISA had a narrative report, with an annexure that carried a list of all provinces supported.

Mr Timothy Seroka replied that the SCM process unfolded with Treasury separating supply chain processes for infrastructure from SCM processes for goods and services.  Engineers did specifications and evaluations to ensure that the required capacity in terms of service providers was appointed. Municipalites applied directly to Treasury. DCoG measures dealt with crisis management with regard to lack of capacity in municipalities. It was a temporary measure. Capacity had to be built so that when DCoG exited, municipalities could continue by themselves. Capacity in rural areas was a challenge. Given the fact of grading, municipalities could not attract skills. The challenge had to be reviewed at the political level. The question was how to recreate rural municipalities with backlogs that needed support. They were incapable of raising revenue by themselves. The cream of expertise flocked to the metros. Medium term contracts did allow for the appointment of subcontractors. Even high capacity contractors could appoint emerging contractors. It was allowed under the general conditions of contracts. Some emerging contractors could be placed on the database. He referred to the performance of some municipalites in KZN. Such were able to spend on what was planned, but when additional money became available it became an additional budget. On that notion the DCoG considered conversion rather than re-allocation, which put additional pressure on the municipality. It was important that money be spent, but there also had to be a state of readiness to implement. He agreed that some municipalities bit off more than they could chew.

Municipal Infrastructure Grant monitoring: National Treasury
Mr Sello Mashaba, Head: Municipal Grant Monitoring and Analysis, Intergovernmental Relations Branch, National Treasury, spoke on the duties of the DCoG as Transferring Officer; National Treasury monitoring of MIG; the Fourth Quarter Local Government Section 71 report; 2016/17 proposed conversion of MIG allocations; procedure and timelines for applying for rollovers, and 2015/16 MIG rollover requests. The Division of Revenue Act provided for unconditional allocations (the equitable share) and purpose-specific allocations (conditional grants). The DCoG had to manage the MIG registration and registration of MIG projects, and had to account for MIG within the AFS and Annual Report in a manner consistent with the PFMA and Municipal Finance Management Act (MFMA). The DCoG had to report to National Treasury on MIG expenditure and performance. DCoG and municipalities had to submit monthly and quarterly reports to Treasury. MIG was the third best performing grant with expenditure of R13.8 billion, which was 93.1% of the adjusted MIG allocation of R14.8 billion. Where a district municipality had the capacity to implement infrastructure projects on behalf of local municipalities (LMs), MIG funds were re-allocated to DMs to spend on behalf of struggling LMs. Municipalities that lost their 2015/16 MIG funds through re-allocation would be assisted by the same stopping of the re-allocation process if they showed a better spending performance. Municipalities had to submit 2015/16 rollover applications by 31 August 2016. There had to be a progress report on implementation of projects and the amount of funds committed to each project. All conditional grants had to be spent in line with the conditions set for it. It was not to be invested. A municipality had to report separately on the spending of conditional grant funds that were rolled over.

Discussion
The Chairperson thanked Treasury for the correct perspective. There was some information that the Committee secretariat and the Parliamentary Budget Office (PBO) had to follow up. There had to be constant follow-up on specific provinces that underperformed, so that there had to be the conversion of the MIG due to problems. The Select Committee had to diagnose the disease. There were distortions as a consequence of not spending, and devastation in local communities because of the current economic situation. The Committee became impatient when there were areas of overspending. Stakeholders had to be invited to help reorganise. The programme had to grant time for that.

The Chairperson asked if the FFC presentation should follow immediately with their presentation.

Mr Essack proposed that Treasury be engaged as its presentation dealt with the crux of the issue. There was the presentation by CoGTA, and the Committee had to see what came out of the washing machine from Treasury. The FFC could be dealt with quickly.

The Chairperson did not agree that the FFC could be dealt with quickly.

Mr De Beer reminded Members about the FFC briefing to the Committee on its recommendations for the Division of Revenue for 2017/18. Some of what the Committee wanted to address was in that brief. The Committee only had till the end of the year.

The Chairperson said that a creative way had to be found to address that in a public hearing, jointly with the National Assembly Committees. There could be a public hearing after the constituency period.

Mr De Beer said that it was part of the process of the Medium Term Budget Policy Statement (MTBPS) dealing with amendments to the division of revenue. The hearing had to engage with the FFC, the South African Local Government Association (SALGA) and others.

The Chairperson reminded the Committee that the National Assembly was sitting at 14h00, which impacted on the Select Committee proceeding further. Public hearings could be held in the first or second week of October.

Mr Essack commented that National Treasury had given a frank report. The Auditor-General had pronounced that consistency with the Public Finance Management Act (PFMA) was not happening on a broad scale in municipalities. He asked what the action plan had to be. Slide 5 stated that the National Department would administer the implementation of the grant and monitor performance. Slide 6 stated that the DCoG as Transferring Officer had to report the actual expenditure in respect of the MIG schedule 5(b) allocation every month and quarter, both by DCoG and municipalities. He asked if that had been measured, and what percentage of municipalities reported. He referred to the proposed conversion of MIG allocations on slide 15. Someone had to lead the process with a concrete action plan. He asked why communities and business had to continue to suffer from non-delivery. He asked about an action plan and timelines. He referred to slide 19 which stated that by 31 October 2016 all monies for rollovers not approved and unspent funds not requested for rollover had to be paid back to the National Revenue Fund. He asked when a detailed report about that would be available. The following year would be too late. Something had to happen in the current year.

The Chairperson said that the PFMA set a framework for regularity of reporting.

Mr Gaehler asked about multi-year projects. He referred to slide 10. MIG amounts were stopped at Makana and Ikwezi and re-allocated to Sarah Baartman DM in the Eastern Cape. It was stopped in Thabazimbi LM and re-allocated to Waterberg DM. He asked what Treasury did when local municipalities did not have capacity. He asked the DCoG about slide 22 which referred to lack of capacity to manage and monitor MIG projects. The DCoG assisted municipalities with engineers, for example at Kei bridge. It was a good specification that included locals. It was government policy to create work and skills. He asked that stakeholders consider not breaking contracts down for subcontractors. It made them dependent, and they were sometimes underpaid. Government was saying that growth space had to be made for them. Engineers could break it down in their planning to accommodate emerging contractors. Local government could not accommodate Small and Medium Enterprises (SMMEs), which was government policy. Local government lacked skills. He knew of a service provider that had been doing the work for the preceding five years.

Mr Motlashuping acknowledged the presentation. The Chairperson had isolated issues that the Select Committee had to follow up. Some Members who were in the environment understood the frustration. The Ngaka Modiri Molema DM came up year in and year out in the reports. He was from that area and there was only one solution. A culture of consequence management had to be instilled. There was a bloated structure. People sat under trees and did not work. The problem would recurr. Special attention had to be given to that municipality to resolve the problem once and for all.

Mr Nzimande commented that it was a worthwhile presentation. He asked about conversion for Makana and Mopani. Mr Mashaba mentioned that support was in its second year. He asked what the contractual situation was with regard to conversion, and whether it was time bound. He asked how much time Makana needed. There had been Section 139(b) interventions twice. Turnaround plans were submitted and Treasury accepted them. He asked how long it would take to conclude the conversion agreement and implementation. He referred to Fezile Dabi DM and Mafube LM. If the principle was that avoidance of suffering of communities had to be addressed at structural levels of government and institution of projects, the question was who had to assume ultimate legal responsibility. It was stated that there was almost a service level agreement (SLA). But the issue was which contractor was to be appointed. Different parties favoured different contractors. It sounded untenable. People were standing off at the expense of anything. Things sounded unbelievable. There was money but no bodies to work. There could not be delivery because there was no one in supply chain management. Such issues were supposed to be minor problems.

The Chairperson remarked that specific municipalities were plagued by time problems. There were common denominators with regard to how budgets were spent. Infrastructure projects made important interventions and brought valuable assets.

Mr Mashaba replied that a report was needed to answer some of the questions. There had to be a brief on the finalisation of 2015/16 rollovers. There were challenges but good things also had to be talked about. There were good municipalities in North West and Limpopo, which worked hand in glove with DCoG, especially over the preceding two to three years. The AG always raised the matter of the AFS. Consistency with the PFMA had improved. There had been much improvement, as compared to seven years before. Timeous submission of pre-audited finance statements had improved. The submission date was 31 August. North West had a meeting to declare when it submitted on time, as did Northern Cape. The audit reports had improved. The challenge was to ensure better compliance with legislation. Departments had different roles. Treasury could not appoint a CFO or make council to sit and require monthly reports and talk about grants. The DCoG was responsible for oversight and support. Treasury could only give guidance. Treasury worked with the DCoG to ensure successful administration of grant implementation. It provided additional funds to the DCoG to grow their unit. The result of MISA support could be seen at Sekhukhune and Mopani. It was asked if monthly and quarterly reports by the DCoG were real. The percentage of compliance in monthly reports was impressive. Documents were received and submitted. When the Accounting Officer signed off on reports his signature could be pulled out and published on Treasury website. Treasury received all unsigned information electronically. New problems could be identified if they surfaced in all reports received. Both the DCoG and the municipalities had to report to Treasury. There was a system designed to reconcile but it was a huge problem of consolidating MIG as one of 24 grants. There were many problems that could cause disparities. There was a cash basis and an accrual basis to accounting reporting. The technical director in a municipality was responsible for MIG. The CFO gave money for projects. If the technical director delivered, it was performance for him. The job was done. Invoices had to be given to the CFO to clear. If he delayed for more than 30 days it meant that the work was done, but not yet accounted for. There were outstanding creditors that had not been paid for three months.

Mr Mashaba replied about conversions and timelines on slide 15. A start was made in the previous year to address issues. Treasury met with everyone. At Mafume, MIG money was used for other projects but work was done. It was decided not to take money away but to use re-allocation to support Mafume. The money would remain in the same space. Everyone in the provincial legislature agreed that the money taken away from Mafube local municipality should be given to its district municipality. It was agreed that work the local municipality was only progress but not change. The provincial DCoG and Treasuries were consulted. It was decided that the DM was to be the post office which would assist with getting money to contractors. Treasury asked the DM to write a SLA but it had not yet been signed. The district said that it did not want its credibility affected by the contractors appointed. The DCoG had to carry on from where they left off. At year end new MIG money would be allocated to Mafube. The timelines were annual. The funds still belonged to Mafube.

Mr Mashaba replied that as slide 19 indicated, it was decided on 31 October who received a rollover, and who had not spent grants. A submission was prepared to the Minister of Finance to declare that the payment schedule of the equitable share be amended. A submission to the Finance Minister was prepared to ask if the DCoG could pay out the money. As soon as signoffs were received information would be shared with the Committee. It had to be before 1 December. Treasury was pushing for September to conclude rollovers.

He replied to Mr Gaehler that the DCoG would talk to multi-year programmes. Programme management skills had to include the ability to say when what should happen. Money had to follow that function. Municipalities were cautioned not to create the outer year allocation against the current year need. He replied to the question about what happened when a DM did not have capacity. The DoRA stated that the money belonged to them. Conversion could assist in the interim. Services would be taken over from the local municipality for one year, and in the following year it would go back to the LM. The challenge was that municipalities claimed projects as their own and then failed to deliver. Mopani could only spend R250 million of R400 million. It had to declare how much it could not spend. It was R150 million. Analysis indicated that it was maybe not so but MISA supported them both ways, through conversion and re-allocation.

Mr Mashaba noted that Mr Motlashuping had called for a focus on Ngaka Modiri Molema. The Finance MEC for North West, who was also acting for CoGTA, was told that support was needed. The Premier called everyone to the provincial legislature and read the riot act to them. He replied to Mr Nzimande that contract obligations in DoRA was on a yearly basis. In the conversion, the money did not belong to the DM, it went to the local municipality. If they were not ready, money given to them would be lost, but if taken away it was also lost.

Mr Dladla answered Mr Gaehler comment about splitting contracts to maximise the local economy. Infrastructure was the key to local economic development. There was a proposal to split contracts into packages to be implemented by local contractors. Strong programme and contract management was needed for this. Project packages that were to the benefit of the local economy were encouraged by the DCoG.

Mr Vimba added that it was happening in some municipalities. A balance had to be maintained where risk was involved. A programming approach was needed. Contractors had to graduate. There were a number of issues related to planning and SCM (slide 22). There was support through MISA with planning. Support was needed from Committee to have sector departments come on board. The purpose of the grant was to ensure integration in implementation. Grading of municipalities led to an inability to attract skills. MISA had to provide continual support unless grading could be turned around. Conversion to DMs was done through MISA with assistance from the DBSA. Multi-year projects were planned for each phase of the financial year.

The Chairperson concluded that if Members felt that there were areas where responses had to be elaborated on, the secretariat was available to forward questions to Treasury and the DCoG. There were a range of issues to be taken forward by the Select Committee. He asked if SALGA was present. There would be an important engagement with them on the following day. All means had to be employed to shape oversight to ensure that the executive fulfilled its responsibility. The issues would be taken forward to a public hearing after the constituency period. He noted that the last engagement with the FFC had been fruitful.

Committee minutes of 6 September were adopted.

Mr de Beer announced that Members had received the names of nominees to the Land Bank board and it was important to look at the criteria.

The Chairperson adjourned the meeting.

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