MIG use for sport and recreation infrastructure: inputs by Treasury, COGTA, SALGA and SRSA

Meeting report

Mr Muthotho Sigidi, Acting Director General: Department of Cooperative Governance (Cogta), said that the Municipal Infrastructure Grant (MIG) was structured in a way to include sports and activities happening in municipalities. These were issues that had been discussed at the last meeting Cogta had had with the Committee, and they were glad that the South African Local Government Association (SALGA), the Department of Sport and Recreation South Africa (SRSA) and National Treasury (NT) were in attendance, to present on issues relevant to the MIG.

Cogta Presentation

Mr Timothy Seroka, Chief Director: MIG, Cogta, said that the presentation was focused on two areas: the MIG financial performance on sports and recreation facilities by municipalities in the 2015-16 financial year; and collaboration plans with SRSA for the utilisation of the ring-fenced R300 million for sports infrastructure, systems and processes in place. The programme was the largest in the country. It was meant to provide access to the poor and unlock economic growth in municipalities while alleviating poverty.

The MIG had been initiated in 2004/05 through the merger of the Consolidated Municipal Infrastructure Programme (CMIP), the Local Economic Development Fund (LEDF), Water Service Capital Grant (WSCG), Community Based Public Works Programme (CBPWP), the Building for Sports and Recreation Programme (BSRP), and the Urban Transport Fund (UTF).

The objectives were to balance social and economic goals, the decentralization of spending authority within national standards, a focus on the infrastructure required for a basic level service, ensuring sustainability of infrastructure by reinforcing local, provincial and national developmental objectives, providing equity in the allocation and use of funds, the efficient use of funds, and predictability and transparency.

The MIG formula had a ‘B’ component, which was the amount allocated for basic residential infrastructure, and comprised 75% of the total MIG allocation. This component was further divided into water and sanitation (72%), roads and storm water drainage (23%), and refuse removal and street lighting (5%).

The ‘P’ component was the amount allocated for public municipal facilities, and comprised 15% of the total MIG allocation. It was further subdivided into public municipal facilities, including community facilities such as community centres and sports facilities, social services, emergency services, parks and open spaces, and public transport; with sport and recreation receiving 5% of the MIG allocation.

The ‘E’ component was the amount allocated for other institutions and micro-enterprises, and comprised 5% of the total MIG allocation.

The ‘N’ component was the amount allocated for 27 priority district municipalities and comprised 5% of the total MIG allocation.

The ‘M’ component was an allocation to allow for performance-related adjustments to the total MIG allocation, but it had not been used to date. It was at 0% on the basis that it was not applied directly and was not included in the formula per se.

There was an issue with sector participation, and over the years it was prevalent that departments were not participating as they should, for various reasons. It might have been because of an unwillingness to support the MIG programme -- an inability to support it due to resource constraints – or also due to a lack of support by relevant sector Ministers and MECs.

The MIG had now been centralized, and was not working in silos any more. The following were key milestones in confirming the commitment by stakeholders to support the MIG programme:

• Written responses from stakeholders providing their comments and commitment to support the MIG programme;
• Various bilateral engagements with Cogta provinces and sectors in the following two months;
• Sector participation in current planning sessions and project interface as a building block to Integrated Development Plan (IDP) processes;
• Confirming the commitment at the next inter-Ministerial task team for service delivery and local government MinMec;
• Designated session at the MIG quarterly review workshop, to discuss and agree on the 2017/18 MIG framework with sector and provincial stakeholders.

Cogta was of the view that SRSA had the following responsibilities in terms of the MIG framework: setting norms and standards applicable to the sports sector; supporting municipalities on municipal sports and recreation; and ensuring that municipalities registered their sport and recreation facilities’ projects.

Since the inception of the MIG in the 2004/2005 financial year, there had been increases in expenditure each year. In the 2014/15 and 2015/16 financial year, there had been a significant increase of 3%, which indicated the number of projects that the MIG was supporting. Investments were categorised in terms of the type of MIG work being done.

Low spending of the MIG grant on sports and recreation was as a result of sport infrastructure not being prioritised in most municipalities, given the competing demands for water and sanitation in relation to limited resources. This grant had been performing poorly on sports due to the weak links with sports bodies in municipal planning; limited capacity and funding to properly operate and maintain facilities; poor coordination between spheres of government; and limited support by the sports sector to support planning and implementation at the municipal level.

There had been collaboration between Cogta and SRSA on the implementation of the MIG through quarterly review workshops, SRSA workshops with municipalities, and MIG quarterly workshops. The resolutions from the workshops were that issues raised by the Director Geneeral (DG) of SRSA and the provincial Cogta’s would be discussed at provincial sessions arranged by SRSA and their provincial bodies; SRSA would resend norms and standards and classification lists to provinces for comments; SRSA was to send out revised project lists to Cogta for distribution; and SRSA had to share the 2017/18 financial year project lists with all stakeholders to facilitate the registration of the projects. The existing collaboration between Cogta and SRSA at the provincial level needed to be improved.

Some of the challenges identified were poor understanding of the conditional grant’s framework amongst stakeholders; the slow pace of execution of projects; SRSA not communicating regularly with stakeholders; no clear standard of a basic level of sports facilities, especially for the poor; no clarity of roles of SRSA and provincial departments; poor consultation between SRSA, provinces and municipalities regarding special sports projects; lack of unit costs for sport facilities; limited access by the poor; and no multi-year planning by SRSA.

Low spending on sports and recreation could be improved through sector guidance on priorities; identification of backlogs; strengthening their participation; and also improving coordination and integration.

The way forward was for departments to improve on provincial engagements, so that programmes were identical between the different provinces; to improve and strengthen the roles of SRSA and its provincial counterparts in the project value chain; and for SRSA and their provincial counterparts to enhance capacity.

Discussion

The Chairperson said that Cogta was not leading and monitoring their department and were presenting on their challenges, and not on the improvements from their last meeting with the Committee. Cogta was supposed to have monitoring systems and not coming back to the Committee to present on challenges.

Mr M Malatsi (DA) said that based on the presentation, there had been no meaningful progress in addressing the challenges that had been presented the last time. He was worried that the presentation was silent on addressing how Cogta would be getting municipalities to stop under-spending. What was Cogta doing to get municipalities to acknowledge that sport was also a priority?

What had happened to the initiatives that were agreed to at the last meeting with Cogta?

Mr P Moteka (EFF) said that it was disheartening to be told that sport was not a priority for some municipalities, and that some in Mpumalanga and the Northern Cape had spent nothing on sports facilities in 2014/15. How many culprits had been punished for not using the MIG on sport, because that was the kind of accountability the Committee needed to be told about. Since sport was not a priority, what was Cogta doing to change that reality? It seemed, from the presentation, that municipalities had a choice to use the 15% allocation for sport or not. He asked that if municipalities were not using it, who was in charge that the Committee could hold accountable.

Ms D Manana (ANC) said that the Committee just come from oversight visits, and it would be easy for SALGA to place the blame on Cogta, and also for Cogta to blame SALGA, but it was the responsibility of Cogta to monitor cooperation. The Committee wanted to see the entire 15% allocation of the MIG going to sports, and not being diverted to providing water and sanitation, as outlined in the presentation. What steps had been taken against those municipalities that had not spent the MIG on sport?

Mr S Ralegoma (ANC) said that it was disappointing to be fighting something that was not there. If Cogta could implement the ‘P’ component, then poor municipalities would not be compliant because more pressing needs would definitely be prioritized.

The Chairperson said that the Committee wanted the 15% of the MIG given duly to the sports departments. She did not know what the role of Cogta was, because they did not monitor MIG usage.

Mr Moteka said that on their Free State oversight visit, they had encountered hostility when questions were raised with municipal managers.

Mr Alec Moemi, Director General: SRSA, said that SRSA was a small department, and they would not be complaining about the 15% allocation of the MIG for sports if it was being used correctly. However, only 4% of the municipalities were using it. The poor and rural municipalities in the ‘P’ component received the smallest amount of the MIG, and due to capacity, they could not do much besides building courts, for instance. The bigger municipalities received a lot more money, and they were the ones not being compliant.

He said it was nonsensical that a small department of fewer than 250 people should be expected to also monitor facilities. They had notified Cogta and SALGA that they required assistance with the monitoring of facilities, while SRSA’s role was to provide funding. He had had a meeting with the Director General (DG) of Cogta, since he had the authority to enforce MIG, and if municipalities were not participating, then SRSA would much rather deal directly with municipalities implementing the MIG allocation for sports. He agreed with Mr Moteka that the problem was that there was no consequence management for municipalities not utilising the MIG for sports.

Cogta’s response

Mr Sigidi said that some of the issues that had been raised by Committee Members could be dealt with by Cogta and others could not.

The issue of prioritising had to take into consideration the planning of municipalities in their Integrated Development Plan (IDP). Smaller municipalities were expected to act according to the norms and standards set by SRSA, but they did not have the capacity to prioritise sport in most cases. Cogta did not have the engineering capabilities to monitor municipalities, which was why they had outlined the role of every stakeholder in the Division of Revenue Act (DoRA). In the last financial year, Cogta was looking at reallocating finances to those municipalities that had the capacity to do more if they were to receive more funds.

Mr Sigidi said that with regard to the issue of the municipal manage that was hostile to the Committee, they were definitely out of line and disciplining was up to the municipality and not Cogta.

Mr Seroka asked the Chairperson if he was protected, as DG, when Moemi was responding to the presentation when he had said it was “nonsensical” that a small department should be expected to also monitor facilities.

The Chairperson said that Mr Seroka was protected, but he had needed to say this while Mr Moemi was still on the floor.

Mr Moemi said that he apologised to Mr Seroka if he felt offended when he had used the word “nonsensical,” because he had meant it in a way that the presentation did not make sense, and not that it was nonsense per se.

Mr Moteka said the MIG was not working for the sporting community if municipalities were allowed to choose how they spent the money. This needed to be looked at again so that it was implemented correctly.

Mr Ralegoma said that from his understanding of the presentation, sport was receiving 5% of the 15% allocation for sports.

National Treasury presentation

Ms Malijeng Ngqaleni, Deputy Director General (DDG): Intergovernmental Relations, National Treasury, said that most stakeholders -- including the Portfolio Committee on Sport and Recreation -- were unhappy with the implementation of the rule that the ‘P’ component (15%) of the MIG was ring-fenced for sport infrastructure. The ring-fencing of the ‘P’ component had been introduced in 2012 following a recommendation by the Standing Committee on Appropriations. In many areas, the full ‘P’ component was not spent on sport infrastructure, and despite this, hundreds of sport infrastructure projects were funded by the MIG. SRSA felt that it did not have a sufficient role in the selection of projects to be funded. National Treasury, Cogta and SRSA had presented to the Committee on 27 October 2015 and committed to making changes to the MIG to resolve the issues that had been identified.

The R300 million for the MIG was not particular in respect of the formula, and departments could use those funds in terms of the projects agreed for use. Municipalities were instructed to use procurement contracts set up by SRSA.

The MIG was equal to C + B + P + E + N. ‘C’ was the constant in the equation, to ensure a minimum allocation for small municipalities. The constant was 8% of the formula – an allocation of R5 million to each municipality. ‘B’ was for basic residential infrastructure. ‘P’ was for public municipal service infrastructure. ‘E’ was the allocation for social institutions and micro-enterprises, and ‘N’ was the allocation for the 27 priority districts identified by the government. The allocation for each municipality was based on this formula, but funds did not have to be spent according to the proportions of the formula. This allowed municipalities to respond to local priorities and accommodate large once-off projects in a single sector.

Following consultation between SRSA, Cogta and National Treasury, it was agreed that an amount of R300 million would be ring fenced within the MIG for sport infrastructure projects identified by SRSA, and also that a third of the ‘P’ component would still be ring-fenced for municipalities to use for sport infrastructure projects identified by their own IDPs. The advantages of this approach were that it gave SRSA many benefits of having a separate grant for sport infrastructure, such as having a strong role in project selection, projects selected would fit within the national SRSA strategy, and national SRSA would set procurement requirements. At the same time, it drew on the advantages of being within the MIG, such as using the existing capacity in national and provincial Cogtas to transfer funds and monitor expenditure, existing reporting systems could be used, and municipalities could make use of the project management units which were funded by the MIG to assist with managing implementation.

The new system was enforced through the DoRA, which was tabled by the Minister of Finance in February 2016. The framework included the conditions that the sport infrastructure allocation was ring-fenced, and sport infrastructure was part of the ‘P’ component.

To assist SRSA to fulfil its role of monitoring and supporting municipalities to implement these projects, the following amounts had been added to SRSA’s budget over the 2016 MTEF:

• R6 million in 2016/17;
• R8 million in 2017/18;
• R10 million in 2018/19.

SRSA had also received advice and support regarding issues from the office of the Chief Procurement Officer and the Municipal Infrastructure Support Grant Agent.

Discussion

Mr Ralegoma said that the issue they were discussing with National Treasury was with regard to the consequences for municipalities not following guidelines. What were the consequences for municipalities that disregarded the MIG, particularly the ‘P’ component?

Mr L Ntshayisa (AIC) asked if it was correct for municipalities to use 15% of the MIG for anything other than sports.

Ms Manana asked if it was possible for National Treasury to take money from the MIG that was not been utilised by municipalities, to be sent to the national Department of Sport and Recreation.

Mr Moteka said that National Treasury should have the power to enforce how money was being used, since they were the office issuing the funds.

Response

Ms Ngqaleni said that there were consequences with regard to the grants, but they needed to be triggered by departments alerting National Treasury of municipalities who were not spending or being compliant.

Mr Steven Kenyon, Director: Budget Process, National Treasury said that transfer times depended on the payment schedules of funds, which were different for each municipality.

Mr Favourite Khanye, Specialist: Community Development, SALGA, said he was not sure if a distinction was made between how Treasury would deal with the non-compliance of officials compared to those who were compliant.

Mr Moteka said that SRSA had been performing for the past three years according to the Auditor General’s (AG) report, but the department that National Treasury had allocated to monitor implementation of the MIG had been one of the poorest performers, according to the AG. How could an under-performing department be expected to lead?

Mr Moemi said that SRSA and National Treasury were on the same page on what needed to be done, and he welcomed the presentation. If municipalities were using MIG for the correct purpose, SRSA would not be raising any complaints, so something needed to be done to address the problem.

Mr M Moatshe, Senior Manager, Cogta said that page 10 of the National Treasury’s presentation spoke about the roles and responsibility of stakeholders, and the framework was not clear. That was why Cogta could not take responsibility for matters where they did not have the required capacity.

Mr Ralegoma said that it was now clear that officials transferring funds to municipalities were responsible for consequence management.

The Chairperson said that she was very serious about SRSA because it was one department that was receiving little from the National Treasury, so they therefore needed to ensure that all monies were being used for their allocated purpose.

SRSA presentation

Mr Moemi said that SRSA had previously presented to the Committee on the programmes that were currently under way. As far as the National Treasury and MIG presentations were concerned, SRSA was on the same page and there was nothing more to add. It would be presenting on the progress with MIG and the programmes in the New Year.

SALGA presentation

Ms Pinky Moloi, SALGA Councillor, said that SALGA had entered into a Memorandum of Understanding (MoU) with the SA Sports Confederation and Olympic Committee (SASCOC) in terms of their working together on issues that had been raised, so that there was no duplication of work.

SALGA was a representative body of organised local government as per the constitution, and their role was to give support to member municipalities, profile them, lobby for them, and act as a knowledge hub for municipalities.

There was a need for the development of a more consultative, comprehensive and sustainable approach involving all four institutions -- SRSA, Cogta, National Treasury, and SALGA -- for a better roll-out of the MIG in municipalities. The Integrated Developmental Plan (IDP) and the MIG needed to be properly aligned, and the four institutions needed to agree to certain norms and standards of how the 30 projects found expression within the IDP, and also to show how funds were used. There was a need for clear selection criteria of municipalities receiving MIG funds.

The issue of municipal officials not acting in line needed to be addressed. In most cases, disagreements could have been as a result of miscommunication on either side.

Discussion

Ms Manana asked what the time frame for the implementation of projects was.

Mr Moemi said that there was already a selection of criteria for municipalities, and this had been tabled to Cogta, National Treasury and the provinces. Municipalities needed to be in line in order to qualify for the MIG. Maintenance of facilities needed to be provided by municipalities, and if they were not able to do so, then they did not comply with MIG regulations

The Chairperson said that irrespective of the IDPs, small communities were still using around 2% of MIG funds. There needed to be improvements and systems that could show that more facilities were being built. Sometimes the Committee could sound harsh and query why things were not happening, but this was necessary in order to see changes.

The meeting was adjourned.