Urban Settlements Development Grant: City of Cape Town & Ethekwini; Western Cape & KZN Departments; with Minister & Deputy Minister

Human Settlements, Water and Sanitation

06 March 2018
Chairperson: Ms N Mafu (ANC)
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Meeting Summary

The Western Cape provincial Department of Human Settlements (DHS) reported that there had been major alignment problems between itself and the City of Cape Town, which had affected the implementation of Urban Settlements Development Grant (USDG) projects. The national DHS commented that they had hoped the Western Cape department would have attended a Ministers and Members of Executive Council meeting, as this would have given the both the national and provincial departments an opportunity to form synergies in an attempt to speed up the projects. Thus far, the provincial department had failed to spend 100% of its USDG. The department had applied for a roll-over of funds to the 2018/19 financial year. Expenditure between July 2017 and January 2018 had been R456 924 472, which was only 85% of the total grant tranches received.

 The City of Cape Town was faced with numerous challenges and constraints in servicing informal settlements. These included the unplanned and dense settlements that made it difficult to install services, a lack of community ownership, and a high level of theft and vandalism.

The Committee was not satisfied with the City of Cape Town’s presentation. They were asked to return next week and explain the challenges to their spending patterns, and why the city had not performed well on their USDG projects.

The KwaZulu-Natal provincial DHS and the eThekwini Municipality reported that they also had alignment problems between the USDG and the projects. Other key problems were the late finalisation of key contracts and the land ownership agreements, which had both been delayed. The lack of water supply and delays in the signing of memorandums of association had also halted the implementation of projects. The eThekwini municipality stressed that the major issue at this stage were the delayed business forums. The main interventions that would be implemented were to increase the capacity for awarded contracts, the revision of the construction programme, and the acceleration of social structures through the USDG.

The Committee was concerned about how the municipality was going to cope with the increase in informal settlements, and why the provincial USDG expenditure figures were different from those shown by the national department. There were also concerns over their spending patterns, and whether the municipality could commit to spending 100% of the grant in 2018/19.

Meeting report

The Chairperson welcomed the new Minister of Human Settlements, Ms Nomaindia Mfeketo, and the Deputy Minister, Ms Zoe Kota-Fredericks, to the meeting. She also noted the presence of Mr Bonginkosi Madikizela, Member of the Executive Committee (MEC): Western Cape Department of Human Settlements (DHS), and Mr Mbulelo Tshangana, Director General: national DHS. She said the purpose of the meeting was to provide the Western Cape and KwaZulu-Natal provincial departments an opportunity to present their turnaround strategy for spending their Urban Settlements Development Grant (USDG). The City of Cape Town (CoCT) had not submit its presentations on time, and this made it difficult for the Members to effectively apply their minds.

Minister Mfeketo added that the department would work towards strengthening co-operative governance during the 2018/19 financial year. She had noticed that many of the provincial departments faced the same challenges every year – these being dealing with backlogs in the provision of water and sanitation, and the eradication of informal settlements.

Mr Madikizela said the Western Cape’s expenditure patterns did not paint a good picture. There should be a mechanism in place that would assist provinces to hold each other accountable, and that the USDG was used for its intended purpose. The provincial department was dealing with major alignment issues between itself and the City of Cape Town (CoCT) municipality to ensure that the USDG was used for what it was initially intended. The purpose of today’s presentation was to brief the Committee on the reasons why the USDG spending patterns had not been positive and what the municipality intended doing to improve its spending patterns.

Mr Tshangana said that unfortunately the Cape Town municipality had not been present at the Ministers and Members of Executive Council (MINMEC) meeting, which had taken place last week. The meeting would have assisted both the CoCT municipality and the Department to create synergies to prepare for today’s meeting. The CoCT municipality had failed to spend 100% of its USDG, and as a result had applied for a roll-over of the grant to the 2018/19 financial year, and had lost more than R300 million of the USDG to the fiscus. The CoCT had spent only 25.4% against the total available USDG funds.

CoCT municipality on its USDG performance

Mr Craig Kesson, Executive Director: Chief Resilience Officer: CoCT, said their strategy management framework integrated the strategic planning activities and deliverables across directorates to bring together a holistic, shared strategy, which enabled integrated decision-making. The CoCT had divided Cape Town into five areas; North, East, Central, South and City Wide (Multi Area). Each area had the following appointed USDG projects for 2018, with the funding allocations indicated:

  • North 1 626 376 (R363 066 558);
  • East 693 366 (R779 401 791);
  • Central 654 741 (R582 393 625);
  • South 609 023 (R429 584 034);
  • City Wide 4 053 711 (R606 281 374).

There were 214 445 projects that had not yet been untagged.

The top programmes by value were the desalination of the Cape Town harbour Land Based; Cape Flats Plant Re-use, Athlone Plant Re-use, Zandvliet Plant Re-use, Table Mountain Group Aquifer, Core and local fibre routes and the Meter replacement programme, amongst others. The top programmes had a combined value of R18 billion. The project pipeline included a phase where the projects would be identified, and would go through a planning stage and screening. In the identifying stage, projects would be categorised as a major, medium or small. The planning phase involved mapping out the scope of the project, the support structures, the cost estimate and the preliminary design. Also included in the planning stage was the internal in-year reporting stage, where financial reports had to be submitted weekly and monthly. There was a progressive capital expenditure report, quarterly financial and non-financial reports, annual evaluation reports and circular 88 reporting requirements, which would enhance the quality of non-financial reporting. The city had also established a dashboard view showing live status indicators for screening, overall risks, timeline of the projects, governance and procurement.

Mr Wayne Muller, Chief Financial Officer: CoCT, said the payment of grant tranches between the period July 2017 and October 2017 had been R278 227 129, and the payment between November 2017 and January 2018 had been R258 869 125.17. Actual expenditure as at 28 February 2018 had been R456 924 472, which was only 85% of the total payment. He explained that the CoCT worked on an accrual accounting system, therefore the Auditor-General (AG) required the city to indicate all projects that had been planned for the year, even those for which funds had not been received.

Ms Riana Pretorius, Chief Director: Informal Settlements: CoCT, said informal settlements in general had had no civil works done and therefore no formal roads could be provided. The Upgrading of Informal Settlements Programme (UISP) required developmental plans for the settlement, and roads to be designed and constructed as per approved plans. At the moment, no provision had been made for storm water drainage in the informal settlements, although the CoCT recognised the importance of effective grey water disposal and stormwater run-offs as part of raising informal settlement communities’ standards of living.

The challenges and constraints faced in servicing informal settlements was that unplanned and dense settlements made it difficult to install services, there were frequent sewer blockages, a lack of community ownership, and a high level of theft and vandalism of water and sanitation assets, all of which impacted on service levels.

Discussion

Mr M Bara (DA) said the presentation was not clear, and the municipality had not followed the brief that had been sent to their office.

Ms M Nkadimeng (ANC) said the municipality had not given reasons for the under-spending of their USDG or their challenges, nor had they given an explanation to how they intended overcoming these challenges. The CoCT was currently facing a huge bucket system problem, but they had failed to mention how they intended eradicating the system.

Mr K Sithole (IFP) asked how many informal settlements the city had, and what plans there were to eradicate them.

Mr P Malatsi (DA) asked how the CoCT would reconcile their spending patterns, because they seemed to have an issue with the two accounting systems – the one that was used by the national Department, and the accruals accounting system used by the city. Was the CoCT confident that their accounting system would assist them in reconciling the numbers, and help to produce an outcome reflecting what the USDG was meant to be used for?

Mr M Wolmarans (ANC) also said the presentation had not followed the brief.

Mr C Manana (ANC) said disagreed with the CoCT’s USDG being moved to a well-performing municipality. The transfer of the USDG did not help the people living in Cape Town, who still needed houses, water and sanitation. Instead, the Department had to assist the city to improve their spending patterns, even if it meant asking the better performing municipalities to assist the CoCT.

The Chairperson said the CoCT’s major concern involved their spending patterns, and the related challenges. She asked the CoCT to redo their presentation, which should include the challenges to their spending patterns and why the city had not performed well on their USDG projects. The CoCT had not spent 100% of its USDG since its inception in 2011. She asked them to come back to the Committee on Tuesday, 13 March 2018.

Mr Madikizela agreed with the Members, and added that he disapproved of the CoCT officials arriving late for the meeting.

Mr Kesson replied that the letter they had received from the Portfolio Committee had stated that the meeting would start at 09:30.

The Chairperson said their next presentation should indicate how the CoCT would ensure that 100% of their USDG was spent. The city would be receiving only a R75 million grant in the next financial year; and the Committee wanted to know how this would be spent effectively.

City of eThekwini municipality on its USDG performance

Mr Ravigasen Ranganathan Pillay, MEC: Human Settlements, KwaZulu-Natal (KZN), said the major issue that the provincial department had been dealing with was the alignment issue between the USDG and planned projects.

Ms Thabisile Khuzwayo, Corporate Executive: Treasury, eThekwini Municipality, said the reasons for the under-spending on their USDG for housing -- where only 32.7% had been spent -- was due to the late finalisation of turnkey contracts and the issuing of land ownership agreements (LOAs). There had been poor performance by contractors, which had resulted in the termination of contracts, such as the Cornubia and Inanda Dam projects. Stoppages of projects had taken place in Umlazi and Ntuzuma D section due to communities not allowing the staff to undertake verification of units, and strikes. A lack of water supply had halted construction in the western areas, and there had been delays in the finalisation of memorandum of association (MoA) contracts for work that still had to be done.

Only 36.51% of the USDG for water had been used. The challenges included the delays with the business forums, delays in awarding the pipeline replacement contracts, and implementation delays for the Northern Aqueduct phase 5. The municipality had taken steps to address the challenges related to the Shongweni landfill. The MEC for Finance had written to the City Manager requesting clarification on whether the city supports the landfill or the Shongweni Integrated Development, as both were in conflict with each other. A response had been prepared and was awaiting signatures. Some of the other projects which had been affected by stoppages involved KwaMashu E Cricket, the Inchanga Sportsfield, the Inanda Swimming pool, Mobeni Heights and the Amaoti library.

The more pressing issue at this stage was the business forums that keep being delayed. A number of the projects were dependent on the success of these business forums, and projects were being delayed because of this. The Wyebank BPT to Moriah Reservoir project had been placed on hold because of a shortage of water.

A key intervention for the implementation of projects was an increase of capacity for all awarded contracts. The service providers had agreed to increase capacity and resources from January 2018. Multiple teams would be formed to accelerate work on the ground and revise construction programmes, which would be monitored closely. There would be an aggressive increase in the informal settlement upgrading programme for the provision for sanitation, electrification and incremental services. Social infrastructure, such as refurbishment of halls and recreation centres, would be accelerated through utilisation of the USDG.

Discussion

Mr Malatsi said he was concerned with the municipality’s previous quarterly spending patterns. He was not convinced that the municipality would spend 100% of its USDG.  

Mr Sithole asked how the municipality would ensure that there was not an increase in informal settlements. What assistance was the national Department of Water and Sanitation giving to the province to help them spend their USDG effectively?

Mr Wolmarans said the figures and the improvement of their spending patterns was an indication that both the municipality and the provincial department were working together to increase performance.

The Chairperson said the original presentation from the national Department of Human Settlements had shown that KZN spent only 26% of their USDG. However, the municipality’s presentation indicated that 34% of their USDG had been spent. She asked how the municipality had derived the percentage. She commented that a number of the delays in projects were related to supply chain management (SCM). She asked whether these were new SCM challenges, what had contributed to their worsening the situation, and what external or internal factors were contributing to the challenges.

Mr Krish Kumar, Chief Financial Officer: eThekwini Municipality, replied that some of their projects did not receive 100% of the USDG funding, and they often had to split the funding between two or more projects. The city had hired land invasion units to help the city manage the increase of informal settlements, and they had moved a step forward by purchasing land that would be used to build houses as a measure to eradicate the settlements.

Ms Mfeketo added that there had been action to try and address alignment issues. The Department had allocated USDG funds only to provinces with accredited projects, and had emphasised that provincial departments had to work with the local people when projects were being developed.

Adoption of Minutes

Mr L Khoarai (ANC) moved the adoption of the minutes of 27 February 2018. Mr Wolmarans seconded, and the minutes were adopted.

The meeting was adjourned.

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