The Portfolio Committee on Cooperative Governance and Traditional Affairs met the management of Dr JS Moroka and Lekwa Local Municipalities, alongside Auditor General SA, Mpumalanga Provincial Treasury, SALGA and National and Mpumalanga COGTA to discuss the state of the two municipalities. Their audit outcomes over the past three years were interrogated as well as their challenges and action plans.
The Chairperson was puzzled that Lekwa Local Municipality failed to mention that it was in the fifth week of a strike by municipal workers. It also owed over R1 billion to Eskom. Its defunct water treatment plant meant pollution of the Vaal River.
Challenges faced by both municipalities included regressed audit outcomes; long-term senior management vacancies; poor internal controls for key business processes such as supply chain and contract management; poor revenue and debt collection and asset management; aging infrastructure and defunct electricity, water and sanitation delivery. The municipalities struggled with political instability.
Questions and comments to the municipalities included consequence management for maladministration; implementation of previous interventions initiatives such as the financial recovery plan; development of a credible funded budget; recovery of unauthorized, irregular, fruitless and wasteful (UIFW) expenditure; and a working Municipal Public Accounts Committee (MPAC). The Committee said that the Lekwa administrative head had to account to the leadership of the Executive Mayor and there had to be working relations and communication between the two as a basic starting point to ensure good governance and service delivery.
The Committee concluded that progress at Dr JS Moroka needed to be noted. Mpumalanga Provincial Government (MPG) had to attend to the dysfunctionality of Lekwa Local Municipality as it is unacceptable that a municipality shuts down for five weeks. The Committee proposed that the Provincial Executive Council take a decision on a section 139(1)(c) intervention.
Chairperson opening remarks
The Chairperson said Dr JS Moroka Local Municipality had recently concluded a six-month intervention from January to July 2020. It had failed to submit its 2018/19 annual financial statements so the audit was outstanding
Presentation by Dr JS Moroka Local Municipality
Mr B Mhlanga, Administrator: Dr JS Moroka Local Municipality said that Mpumalanga Provincial Government (MPG) resolved in January 2020 to institute a Section139(1)(b) intervention in the Municipality. An Administration Team of four experts was sourced from within the provincial government and assumed work on 3 February 2020. A number of challenges were experienced by the team such as being hold at hostage several times by interest groups and barred from entering the main gate. Relief came through a High Court Interim Order which stopped the former Municipal Manager from entering the municipal premises on 30 March 2020. The team started fully operating at the beginning of April. The municipality has 64 000 households.
Mr Mhlanga reported on preparations for the upcoming audit as both the 2018/19 and 2019/20 audits are incomplete and in 2017/18 it had received an adverse audit. The state of finances and revenue collection were given for March-June 2020 and in June the revenue collection rate was 47%. Most paying customers are government and commercial users. Households do not pay. It suggested various methods to increase revenue collection including the use of debt collectors. He also gave a breakdown of unauthorized, irregular, fruitless and wasteful expenditure, saying in 2017/18 the municipality did not do well and needed to do consequence management. In 2018/19, the irregular expenditure had increased and the balance went up to R717 million, whereas the fruitless and wasteful expenditure balance remained at R5 million. The position of the Municipal Manager was vacant and the Chief Financial Officer was undergoing a disciplinary hearing. The Executive Manager for Administration and Corporate Services was also vacant.
There was a risk committee in place but it was non functional due the vacuum created by the lack of senior management but the risk register was compiled and everything was available. The audit committee contract has lapsed and the municipality has place an advertisement. During the previous financial year, the audit committee could not be functional due to political instability which resulted in poor submission of annual financial statements to the Auditor General. The Municipal Public Accounts Committee (MPAC) has also not been functional due to political instability. There are no records for its sittings and there were poor working relations with the previous accounting officer. However, MPAC has been allocated office space and given the necessary support to render its services.
While there is progress in the municipality there is an urgent need for the functioning of Section 79 committees. Council meetings are sitting regularly at the moment. Filling critical vacancies especially senior management needs to be expedited. More resources are required for the preparation of the audit process for the last two financial years. The municipality has established the Improvement Audit Steering committee comprised of senior management and it sits every week. Vigorous efforts need to made on consequence management to deal with irregular, unauthorized and fruitless expenditure.
Auditor-General SA briefing on Dr JS Moroka Local Municipality
Ms Bomkazi Bhobho, AGSA Business Executive, said that Dr JS Moroka Municipality submitted its 2018/19 financial statements to AGSA on time on 31 August 2019. However, due to conflict that erupted in the municipality the effectiveness of the audit was impacted. After having tried alternatives like working from a hotel, they realized it was not safe for them. After the appointment of the administrator this year, the AG tried to go back to complete the audit but the environment had not stabilized. They aimed to complete the audit in October 2020. She present a three-year analysis of audit outcomes so that the Committee could understand how the municipality ended up where it was.
The municipality achieved a qualified audit opinion in 2016/17 and regressed to adverse in 2017/18 and results were outstanding for 2018/19. The deterioration meant that something fundamentally wrong was happening in the municipality and there was a need explore exactly what it was. One of the problems had to do with the deteriorating state of the preventative controls in supply chain and contract management, the payment system, employee and payroll system, the asset, liabilities and revenue management. The control environment that was supposed to ensure the effectiveness of the preventative controls was also not effective, which spoke to instability in critical positions as well as an ineffective governance structure.
Another problem was that while management submitted financial statements on time, they could not produce reports and schedules that tied up to the figures in the submitted financial statements. This was because basic financial discipline did not happen during the year and this could be linked to the vacant positions in the municipality. The municipality then employed consultants to fill the void, but they also could not improve the audit outcomes of the municipality due to the lack of preventative controls.
The figures for 2018/19 unauthorized, irregular and fruitless expenditure were not yet audited but the municipality submitted the figures for transparency. Due to the adverse audit opinion, AGSA struggled to assess financial viability as it was unable to calculate some of the ratios for revenue collection and payment of creditors. The Auditor General's extended mandate on material irregularity came into operation last year and the municipality was one of four municipalities selected but due to the disruption they had to pause and they aimed for resumption of the audit hopefully in October.
SALGA on Dr JS Moroka Local Municipality
Mr Muzi Chirwa, SALGA Mpumalanga Province Chairperson, said that SALGA intervened and supported Dr JS Moroka Local Municipality at a political level and conducted training workshops to support by building capacity of councillors to be able to monitor the work and activities of the municipal manager, as well as with consequence management. SALGA had engagements with the CFOs in the province through provincial forums. In June 2017 there was an engagement where the municipality was represented by finance officials and in the engagements, areas of concern were identified about the municipality, such as the poor quality of annual financial statements, as well as the use of section 32 in procurement and supply chain, and the expenditure management on cut offs and accruals. Other areas of concern included asset management completeness and existence as well as incorrect prior year figures, which affect audit outcomes of the forthcoming year. SALGA looked intensely at the audit outcomes of 2015/16, 2016/17 and 2017/18 reports which they used as a tool to ensure a change in the municipality’s audit outcomes. The financial performance of 2018/19 measured against their IDP indicated challenges. SALGA looked at the performance and spending of conditional grants and advised pre-planning especially on the supply chain processes. SALGA examined the human resource organogram in the municipality and assisted in developing a human resource development strategy. In terms of vacancies, it was difficult for the municipality to be able to function in most critical areas, especially in the finance and corporate level. On governance support, the challenges in the municipality stemmed from the external environment because people would impede service providers and stop the progress of projects, which affected governance.
Due to lockdown, SALGA only met with the MEC on 4 June 2020 and thereafter met the political officer bearer troika of the municipality. SALGA noted these challenges and ensuing progress:
- Audit outcomes not received due to the process being abandoned by AG as information was not available due to staff shortage;
- Budget & Treasury office collapsed and could not perform any functions;
- Key personnel were suspended under Budget and Treasury Office;
- Municipality operating on Acting capacity management;
- The municipality is not owing Eskom and Rand Water;
- Revenue collection was 37% in Jan, 35% in Feb and 40% in March 2020;
- Low Municipal Infrastructure Grant (MIG) expenditure rate
- The four Section 56 employees who were dismissed won their CCMA case and they were re-instated, however two opted not to return to the municipality;
- The budget and IDP was adopted before the deadline of 30 June 2020;
- Revenue collection rate for services is slightly improving.
Provincial Treasury on Dr JS Moroka Local Municipality
Mpumalanga MEC for Finance and Economic Development, Mr Petrus Ngomane, said that his presentation would be short as the main challenges were covered in the previous presentations. The main focus of the Provincial Treasury was ensuring the functionality of the Risk Committee as well as the Audit Committee, MPAC and Disciplinary Board. The most important issue for Provincial Treasury was that the municipality needed to control their financial environment through standard operating procedures for revenue management, expenditure management, supply chain management and contract management. The municipality needed to work on budget improvements because most of the time they did not concentrate on having a funded budget. Provincial Treasury was convinced that all the identified challenges were dealt with. MSCOA was fully compliant as Provincial Treasury officials were there to monitor the situation. Provincial Treasury worked with the Auditor General to ensure the audit was completed but they failed because of the challenges faced by the municipality. They would continue working with the AG in October to ensure that they find joy. There was a good working relationship with the AG, SALGA and COGTA about the municipality and the presentation by COGTA would help in identifying more areas of improvement.
COGTA on Dr JS Moroka Local Municipality
Mr Sam Ngobeni, Capacity Building Manager: Municipal Infrastructure Support Agent (MISA) said COGTA would focus on the intervention and share its perspective on the governance and administrative issues in the municipality. The municipality was put under administration on 17 January 2020 due to failure to execute its executive obligations and the governance and financial management lapses which led to glaring service delivery challenges. The intervention ended on 17 July 2020. The team of four experts put together the turnaround strategy which was approved by the MEC.
He highlight the achievements of the intervention as well as the outstanding issues that needed attention. In terms of governance at the end of July 2020, the political environment had fairly stabilized as council meetings were held regularly. The process of resuscitating governance structures was undertaken and there were some improvements in stability which were achieved as a result of provincial COGTA having taken steps to remove the former municipal manager (MM) which was done through an Interim Order of the Court and the MEC, who intervened to address the standoff between the administrator and the political management team. The disciplinary cases that affected those senior managers were resolved, and the administrator attested to that. The IDP and budget processes for 2020/21 were done and approved. The province considered proceeding with support in term of section 154 of the Constitution, and National COGTA supported the capacity support initiatives that the province would undertake.
There were some challenges that still needed to be undertaken such as harmonization of the relationship between the municipality and the community, especially because of the community protests. There was a need to appoint a new audit committee. The municipality needed support in implementing and monitoring the implementation of the Service Delivery and Budget Implementation Plan (SDBIP) and reviewing the implementation of policies as well as adoption and implementation of performance management. Municipal administration had instability and uncertainties due to the vacant critical positions of MM,CFO and Director of Corporate Services. It also faced capacity constraints in the financial management unit, supply chain and technical services department; hence the need to build capacity in those areas. COGTA had observed that the municipality had weak institutional capacity and the control environment needed to be improved.
The improvements in financial management were the municipality managed to change the signatories for the primary bank account of the municipality which brought some stability and functionality in the municipality. This contributed towards simplifying payment of salaries, third parties as well as creditors on time and addressing backlogs on outstanding invoices. There were improvements in paying creditors within 30 days and the administrator, managed to improve the internal control environment compared to what they had found there. Other achievements were improved document management system in the finance unit and rolling out policies and standard operating procedures, and ensuring that committees sit regularly. There was development and implementation of supply chain management as well as the financial delegation.
Other challenges included ensuring that the 2018/19 financial statements were compiled, filling critical positions in finance and building capacity in the supply chain unit. Financial management as well as oversight capacity needed improvement. There was a need to improve implementation of the procurement plan, assets register, verification of assets, as well as timeous reporting to the treasurer.
In terms of service delivery, the municipality around January 2020 was sitting at 0% for expenditure on MIG but working through MISA, by the end of June 2020, expenditure had improved to around 83%. There were significant improvements for project implementation in the current financial year. Provincial COGTA and MISA continued working together on the preparation of technical reports for water and sanitation as well as solid waste projects, including appraisal of MIG projects for implementation in the 2021 financial year and an acceleration plan for improved expenditure on MIG projects.
Provincial COGTA mentored the technical department officials including those in the PMU of the municipality, assisting them to register with statutory bodies. The municipality had challenges with the reduced capacity of water from Mthombo Dam, which affected water supply, reducing it from about 60MLa day to 230ML a day. The municipality resorted to water carting and development of water sources to augment capacity, as well as a refurbishment of 6 boreholes. R40 billion was set aside in the 2021 budget to construct a bulk line with capacity to supply 6ML a day from Mthombo emergency pipeline to Weltervreden Water Treatment Plant. Items still needing to be addressed included project identification, especially on water projects to address shortages, as well as the development of the Infrastructure Capital Investment Programme for the next five years, development of sector plans, 100% expenditure on MIG projects and water demand and conservation management.
In terms of COVID-19 interventions, the municipality received a Disaster Relief Grant of R417 000, which was used for fumigation, procurement of hand sanitizers, thermometers, duct tapes and disinfection sprays. R68 million on MIG funds were reprioritized and repurposed towards water and sanitation projects to curb the spread of COVID-19, including 12 borehole projects and three water and sanitation projects. The municipality received 82 water tanks, with 64 coming from DWS, 18 from Nkangala District, as well as 8 water bowsers from DWS. The municipality received and distributed 3 100 food parcels to all its 31 wards, received 277 sanitizers from DWS, as well as 3000 hygiene packs that were delivered through MISA/Tirisano collaboration. 15,000 sanitizers, 25 litres each were distributed equitably to the 31 wards.
Mr Sam Ngubane, HOD: COGTA Mpumalanga, said the outstanding financial management matters included verification of the section 71 publications, quality of the annual financial statements submitted to the AG, filling of critical positions and building in-house capacity to ensure that the budget and treasury office of the municipality functions properly, development of the revenue collection strategy, implementation of the procurement plan, establishment of the Policy Revenue Review Committee, the asset registers and verification thereof, meeting of report deadlines to Treasury, as well as vetting of all officials working in the budget and the treasury office. He reclarified and summarized some of items presented by Mr Ngobeni.
Discussion on Dr JS Moroka Local Municipality
Mr K Ceza (EFF) observed that not much had been done to change the situation in Dr JS Moroka Local Municipality and said the people of the municipality did not remember the COVID-19 food parcels that were delivered. All that they knew was that the Premier had visited the municipality and distributed the food parcels from ward 1 to ward 14. There was no portfolio evidence in the form of an invoice to show where, how and to whom, and by which service provider the parcels were distributed. He wanted to know the consequence management steps undertaken by the municipality on the maladministration and spending discrepancies and whether the Special Investigating Unit (SIU) was involved in the investigation of the irregularities in spending. Residents from wards 23 to 31 were struggling with access to clean drinking water, which was the case even before the national lockdown and even with the recent provision of the water tankers they were still struggling. What were the urgent measures taken by the municipality to assist the people with this? In one of the wards in the municipality there was a family that had been living in a temporary tent given them in 2018 because their house was damaged. The tent had become a symbol of humiliation for the children of that family as it affected them very much and they were bullied by others. When would the family be assisted with a proper house?
Mr Ceza said that during oversight by national COGTA in February 2020, the administrator and COGTA promised the public that a section 106 forensic investigation report would be released, but that did not happen. He asked when the report would be released. He asked the administrator to explain the R810 000 paid to SS Masondo Attorneys for a case that was withdrawn from court and why the payment was made for a service that was not rendered. He asked for an explanation of the amount paid to Mashaba Inc Attorneys on 2 March.
Mr Ceza said at the municipality he saw that the Fresh Produce Market under construction since 2009 had not been completed even though it was always allocated a budget every year and he noted that the structure was vandalized. A criminal case was opened for Geo Map construction and the Finance Department for paying R10 million instead of R1 million and asked about the state of the project, who the implicated parties were, as well as the consequence management taken on that unnecessary expenditure. He asked why the suspended CFO who was said to have invested in VBS Bank had been receiving a salary since 2018.
Ms D Direko (ANC) asked about the causes of the instability in the audit committee and if they were political or administrative instabilities. She asked if the administrator was able to deal with the political challenges in the municipality and if there were external forces that assisted in ensuring that MPAC could function properly. The AG said that the municipality struggled to produce the relevant documents for expenditure and asked if this was resolved and if there was a system in place to ensure that documents would be submitted for the next financial year audit. The AG said that some officials had to delegate their duties to consultants and asked for the status quo of that situation and if the officials were still part of the municipality. If that was the case, she asked if there was action taken against them. It was highly disappointing that the officials received salaries monthly when they were not performing their duties. On the pending cases against senior managers and staff, she asked for the latest information on those cases and how this affected day-to-day running of the municipality. She asked if the service delivery challenges were resolved that resulted in protests by residents.
Ms A Khanyile (DA) asked the administrator to provide clarity on how the COVID-19 procurement and the distribution of PPE during level 5 of the lockdown. She asked if it was the community members or the employees of the municipality who were responsible for the service delivery protests that led to the instability and inability to finalise the 2018/19 audit report. She asked about the grievances of the protesters and what the municipality did to address those grievances. When did the administrator think the situation in the municipality would go back to normal? She shared sentiments with Mr Ceza on the distribution of food parcels. She asked if SALGA revisited and evaluated if its support, advice and guidance actually yielded fruitful results and the changes they made in cases where municipalities do not have positive results.
The Chairperson read questions on behalf of Mr G Mpumza (ANC) who was struggling with connection due to load shedding. He asked about the financial recovery plan of Treasury to change the financial situation in the municipality and the measures in place to recover funds lost due to unauthorized, fruitless and irregular expenditure. Mr Mpumza asked for the timeline in place for the recruitment of a Municipal Manager and CFO. On the conflict that resulted in a standoff between the municipal administration and the troika about their roles in the municipality, he asked from which side did the misunderstanding stem and how the conflict was resolved. [Further questions unclear due to poor connectivity].
Ms G Opperman (DA) asked why the contracted services actuals were standing at 22% as that was very high, considering that the average was always at 2% to 5%.She asked who was dealing with the audit findings in the municipality as the CFO delegated his duties to consultants who left the position. She asked if the CFO was still receiving a salary considering he has been on suspension for two years and asked when the case is going to be finalised.
The Chairperson asked why the Acting CFO did not take responsibility for the financial statements but instead delegated this responsibility to consultants. She asked the COGTA MEC to explain the moral regeneration workshop suggested to boost the morale of employees of Dr JS Local Municipality [unclear].
Mr Mhlanga said that it was a fact that the municipality was facing a drought season and as a result, they had spoken with the Department of Water Affairs to release water three times a week from the Dam so that that the communities could have access to water and that alleviated the water challenge in some parts of the municipality. There was a refurbishment of more than 10 boreholes in the rural areas of the municipality, as well as a provision of water through the water tankers in the municipality and DWS contracted water tankers that distributed water, but that contract had since expired and the municipality had taken over. The municipality received 3 water tankers from the district to assist on provision of water and was in the process of purchasing additional water tankers. the court order was addressed because the order did not stipulate that the municipality could not pay its Attorneys, but there was a misunderstanding on the part of the complainants which were some community members, but the report was submitted to the MEC and the matter was settled. The Fresh Produce Market and Geo-Map matter was in court and the municipality was awaiting its finalisation, and upon its finalisation, the community would be informed of the outcome. The municipality had opened a case against Geo-Map to recover the money. When there was instability in the municipality, that affected the functioning of the Audit Committee in seating meetings for planning oversights and there was no support coming from management which as a result, they pulled out. The Audit Committee could not function because of the instability and the council meetings were not seating, which affected the operations of the MPAC as they did not have the support staff. All the support staff was brought back, and they were provided an office to start operating.
The term of office for the Audit Committee expired and, in the meantime, the administration would do month to month until the appointment of a new Audit Committee was finalised. The municipality had appointed a new acting CFO in charge of the finance department to improve it, an Improvement Steering Committee in administration monitored the work done by the consultants to ensure quality and timely annual financial statements (AFS), including asset register and asset management. The senior management cases at the CCMA were since finalised and two executive managers went back to work and the other senior manager resolved to take a settlement, hence the position of Senior Manager Corporate Services was vacant, and the municipality was in the process of advertising. For the middle managers who were suspended, administration dealt with those disciplinary hearings and the managers returned to work to stabilize the municipality at the finance department. The CFO case was in the process of being concluded and they were dealing with mitigation measures and the administration was expecting a report in less than two weeks.
Most PPE procurement were done through 30 000 quotations and on some, the municipality participated with the district on contracts and followed the SCM regulations when doing the procurement and all documents were recorded for any Member who wants to see. There was distribution of sanitisers as there were services that did not shut down during lockdown and some employees were at work and at some point, needy communities and families were identified. On the protests, a memorandum was handed over to the municipality by the protesters and the municipality responded to that memorandum. The matter was addressed and the province is attending to the section 106 forensic investigation report matter.
Mr Mhlanga said for irregular, unauthorized and fruitless expenditure, the administration was making sure that MPAC is performing its mandate and a disciplinary board was appointed by the municipality to attend to these issues and investigate the irregularities. He expressed hope that with time consequence management would be implemented. On the former Municipal Manager matter, there is an interim court order and the next High Court date is 6 October to finalise the matter. The matter was postponed by the court as it was not urgent, so the court kept on postponing. The former MM himself filed a Labour Court application, challenging his dismissal, so the matter will be dealt with in due time. After the court order of 30 March 2020, the former Municipal Manager stopped going to the office and the administration team was allowed to enter the municipal premises, so there were no further challenges with that. On the misunderstanding between administration and Troika, COGTA intervened. It was about clarity of roles and responsibilities and was resolved within 30 minutes when the MEC alongside the Acting HOD convened a meeting. The asset register was in the process of being reviewed and updated in preparation for the upcoming audit. The municipality is only using consultants on infrastructure projects and in terms of the percentage of the extent, perhaps one would need to sit down and calculate but the municipality has not reached 22%. On moral regeneration, Mr Mhlanga replied that it was upon his assessment as administration leader when there was a division amongst the employees, where National alongside Provincial COGTA took the responsibility that there might have been a need for a workshop to boost the morale of employees since there was serious political instability in the municipality.
Mr Ceza said that Mr Mhlanga did not respond about the suspended CFO who invested in VBS Bank and if he was still receiving a salary. He asked for more clarification on the distribution of food parcels and asked for evidence of the delivery of those food parcels. He asked the need for extension of the six-month intervention as it expired on 17June.
The Chairperson said that the MEC will respond and asked that the questions centre on audit outcomes and service delivery.
Provincial Treasury response
MEC Ngomane replied that MPG would ensure the financial viability of the municipality by first focusing emphasis on the review and development of a credible funded budget. In support of that particular budget, Provincial Treasury would need to assist with the reestablishment of the revenue value chain. On the revenue management strategy and action plan, which was developed and given to the municipality, Provincial Treasury would ensure it is actioned and that would be a priority. It would support the review control environment over expenditure management and supply chain management. Provincial Treasury would assist the municipality with the review of SOPs and with the establishment of a Cash Management Committee to oversee all financial liabilities initiatives. If all these were to be done working hand in hand with COGTA and the municipality, the financial viability of the municipality would be inevitable.
Mr Mandla Msibi, MEC: COGTA, Mpumalanga, replied that Mr Ceza’s observation that not much happened in the municipality throughout the intervention was correct. On Section 106, COGTA made an undertaking that they would to present the following week in a special Executive Council meeting specifically on the section that created some noise in the municipality. The issue of section 139 would be closed because towards the close of the intervention COGTA could not get hold of the administrator and only learned later that the administrator was not well probably due to COVID-19. The CFO matter is now in the hands of court, which makes it very difficult for the municipality to conclude on that as it is a court matter. COGTA requested its legal team to engage the court to fast track the process. Until the court has made a verdict, the municipality will not be able to conclude the process. There was a lot of in-fighting in the municipality resulting in suspensions and officials taking each other to court. That in-fighting spilled over to the community, which affected the service delivery as there was no focus on service delivery but rather on court matters. MEC Msibi agreed with Ms Khanyile that municipalities keep on deteriorating and stated that the challenge in the municipality is consequence management by council. It will continue to be that way until local government reforms are done by allowing the MEC to deal with challenges directly. There is currently no legislation that allows the MEC to intervene directly in municipalities without going through a long process.
Mr Chirwa replied that when SALGA initiates its support projects and programs for municipalities they provide advice and then after that they do their own assessments and check if there are improvements. Where they are not registering improvement, they coordinate with stakeholders such as COGTA and Provincial Treasury to address those specific challenges. With Dr JS Moroka Municipality, the circumstances had not been normal to begin with for some of SALGA’s interventions to kick start, but the intervention and working together with Provincial Treasury and COGTA has yielded some positive results. However, all that is dependent on the political and administrative leadership of the municipality.
Executive Mayor response
Mr Thulare Madileng, Executive Mayor: Dr JS Moroka Municipality, asked for the details of the family that had been living in a temporary tent for two years to intervene and find a way to help the family. Mr Ceza later provided him with the details of the family and said he was surprised that the Mayor did not know about the situation. The Executive Mayor assured him that the situation would be taken care of.
Follow up questions
Mr Ceza said that he was satisfied with the responses given but he still did not hear a breakdown of the food parcel deliveries for wards 14 to 31 in the municipality.
Ms Direko asked for details of the employee cases because the administrator indicated that the municipality lost those cases at CCMA. Some employees took settlements, and some returned to work. This is important because when the municipality pays a settlement, it loses more money, which is unacceptable.
Ms Khanyile repeated her question on who was responsible for the service delivery protests that led to the instability and inability to finalise the 2018/19 audit - was it the community or the municipal employees. She asked about the grievances of the protesters and what the municipality did to address those grievances. Some municipalities ignore the protestors and it affects the community members. She asked for a list of the areas where the water tanks were distributed as there had been a number of complaints from municipalities that they are sitting in the premises of the municipality and not distributed.
MEC COGTA response
MEC Msibi replied that there was infighting within the management of the municipality, which spilled over to the community and since the intervention, the protests stopped. The only protest that came later was the argument that section 106 forensic investigation report had not been presented although the section 139 had expired. The section 106 forensic investigation report will be presented at the special cabinet on 9 September. As for section 139, they were waiting for the close-out report which was currently with the province.
Mr Mhlanga replied that he did not have the list at the moment, but the water tanks were at the majority of the municipal wards. For the physical location they would have to prepare a report separately and send it to the Committee. They were spread among the three magisterial districts within Dr JS Moroka, particularly in the rural areas. For their actual physical location, a report would follow after this meeting. The CFO matter is being concluded and is undergoing mediation and may be concluded within the next few weeks.
State of Lekwa Local Municipality
Mr Linda Dhlamini, Executive Mayor: Lekwa Municipality, asked the Municipal Manager to present.
Ms Gugu Mhlongo-Ntshangase, Municipal Manager: Lekwa Municipality, noted the unqualified audit report in 2016/17, a qualified report in 2017/18 and a disclaimer in 2018/19.
- Key findings for 2016/17 was a growing concern about viability where liabilities were more than assets and the municipality was identified as distressed. It was required to put together a financial recovery plan. There was material loss, especially in electricity and water trading due to challenges such as illegal connections.
- In 2017/18, there were findings on cash and cash equivalents; bank reconciliations were inexplicable; property plant and equipment, which had a serious impact on the financial statements. There was inadequate asset verification and assets management and inadequate record and contract management.
- In 2018/19, there were findings on payables, where the creditor age analysis did not agree with the AFS. There were cash and cash equivalents problems due to bank reconciliation variances plus the property plant and equipment challenges continued. R9 million of movable assets could not be verified. R82 million of infrastructure network assets had not been transferred from work-in-progress to the assets register. There was a finding on receivables where the debtor’s age analysis could not be reconciled to the AFS as well as impairment of receivables were understated, plus poor contract management. On unauthorized, irregular, fruitless and wasteful expenditure, the municipality failed to establish a disciplinary board which meant that there would be inadequate capacity to investigate this. It failed to pay invoices within the 30 days threshold and struggled with debt collection, which limited revenue.
Feedback was given on the audit action plan where of the 66 findings in total, 18 were still in progress, 33 were addressed and 15 were not resolved. The municipality was able to identify the prior period areas and to do reconciliation on the payables. On Cash and Cash equivalents, it opened new bank accounts that resulted in the parallel processing of transactions. This resulted in proper reconciliation of the bank accounts, as well as prior period errors being identified and processed to correct opening balances. Property plant and equipment were still in the process of finalisation and the asset registers were with consultants that are assisting the municipality with the identification and verification of the movable assets. On the receivables, it ensured that debtors reconciliations were performed monthly to ensure that there was backlog and the prior period errors identified were corrected. On commitments, the municipality ensured that they register contracts on a monthly basis. It investigated the irregular expenditure maintained a register and submitted a report to the audit committee, and MPAC finalised this and tabled to council. On expenditure management, the municipality prioritized all its invoices to be paid within 30 days, except for big invoices that could not be paid immediately due to cash flow constraints, where payment arrangements were made with service providers. On debt collection, the municipality appointed a debt collector to assist in collecting debts more than 90 days old. Expenditure management was improved as invoices were processed via a cash book before payments were made. On irregular, unauthorized and wasteful expenditure, the municipality centralized SCM processes to BTO/CFO to avoid reoccurrence. On the limitation of scope, the municipality had an updated register with all tenders awarded until June 2020. In summary, the 19 findings on financial statements and misstatements, 17 were resolved. Non-compliance with laws and regulations, the total number of findings was 27 and18 were resolved. Internal Controls had 10 findings and 7 were resolved; Service delivery had 9 findings and none were resolved. The Annual Report finding was resolved.
For COVID-19 expenditure, the municipality received R1.36 million, and spent R325 527 to date. Revenue collection rate in March was at 81% but the revenue collection fluctuated in the following months due to COVID-19. April collection was 36% and increased to 56% in May and then decreased to 46% in June.
The municipality undertook consequence management in the finance department due to irregularities caused by some officials which affected the finances of the institution. Some of those officials were suspended and are facing disciplinary processes. On institutional capacity, the CFO position was vacant and had been for a few years; it had made efforts to recruit without any success. The position of Director of Technical Services, as well as Director of Corporate Services were vacant, and efforts were made to fill the positions with no success. It had the oversight structures of an Internal Audit Committee and a Risk Committee. On Operation Clean Audit, the municipality had a committee that sat weekly to ensure the audit action plan was dealt with and the previous audit findings were addressed in preparation for the next year's AFS submission for audit. National Treasury seconded an official to assist, and the district seconded a financial expert, as well as COGTA. MPAC provides quarterly reports to Council for investigation as well as to the district and provincial forums. MPAC has been effective even though there were administrative support gaps due to vacanices.
Auditor General South Africa (AGSA) on Lekwa Local Municipality
Ms Bomkazi Bhobho, AGSA Business Executive, said that Mpumalanga province audit outcomes regressed in 2018/19, and Lekwa was one of six municipalities that regressed. The 2018/19 disclaimer audit report means that the municipality was unable to provide sufficient and appropriate evidence to support the figures in the financial statements. That happens when the preventative controls in supply chain, contract management, payment system, employee payroll system, assets, liabilities and revenue management are not in place and effective to prevent misstatements from happening. The major concern in the control environment was the high vacancy rate. The overall vacancy rate was 52%, where 67% was senior management and 33% finance department with the CFO position already vacant for over 15 months. This means even if there is an Internal Audit Committee, it would not be able to implement recommendations, which affects the value chain. Importantly, the municipality was not effectively doing reconciliations of its bank accounts throughout the year to ensure that the balances in their accounting system matched with the balances in the bank accounts so they were unable to explain and support the differences to the auditors. This was concerning as this is where the municipality keeps, maintains and protects its funds.
Property, plant and equipment, including infrastructure, was a concern as Lekwa did not implement controls to effectively manage its assets so some in the asset register could not be located during audits. This pointed to a lack of internal controls through the year and credibility of the asset register was questionable. AGSA noted that when the infrastructure networks were fully constructed, they were not transferred to the asset register. On receivables, one of the challenges facing most municipalities, including Lekwa, was the ability to collect the bills. If municipalities do not have proper controls to ensure the debtors balance is kept up to date and reconciled, that reduces the chances of collection. On irregular expenditure, AGSA could not confirm for 2018/19 if the amount presented was a true reflection as Lekwa did not provide the information during the audit. Due to the number of vacancies, it was inevitable Lekwa had to heavily rely on consultants, but there were no improvements in the audit outcomes – due to lack of preventative controls. Lekwa was one of the five municipalities put under intervention from 2017/18. Looking at the audit outcomes, the intervention is yet to produce tangible results. AGSA has suggested to the Provincial COGTA that perhaps there is something that needs to be changed in the intervention initiative to ensure that there is progress.
SALGA on Lekwa Local Municipality
Mr Chirwa, Mpumalanga Chairperson: SALGA, explained the ways in which it provided support such as mSCOA training workshop for councillors. The key audit concerns were dealt with at the CFO Provincial Forum where Lekwa was represented by finance officials. SALGA supported the implementation of its Financial Recovery Plan. SALGA could not obtain if the Financial Recovery Plan was effective because in February 2020, there was very serious political instability, where a group of councillors removed the Mayor and the Speaker from office, but that situation was later corrected in June. The municipality had three months where there was no political leadership and the recovery plan could not be effectively implemented.
On the large Eskom debt, SALGA partnered with Provincial Treasury, COGTA and Eskom to engage Lekwa as it was not even honouring its current account. A positive outcome was they were able to insist Provincial Treasury request government departments pay their debt owed to municipalities. Lekwa was encouraged to ringfence that electricity revenue to service the monthly current account in full and send proof of payment to Eskom. A major challenge that caused problems in that area was the intermittent power outages used while the municipality remains in debt. Lekwa is without electricity for hours or even a day or two.
Mr Chirwa said SALGA was excited when on 28 August the High Court granted an interim interdict, applied for by community stakeholders, prohibiting Eskom from continuing to limit electricity supply to Lekwa to the Notified Maximum Demand (NMD) level.
SALGA explained how it provided Lekwa human resources management support (performance management, human resources management strategy development, chairing of disciplinary hearings, training) and infrastructure support services such as the Integrated National Electrification Programme (INEP) workshop on implementation of the electrification programme. It also spoke about its councillor induction programmes; economic development and planning support and records management seminar. Its Spatial Land Use Management Act workshop resulted in Lekwa planning the development of Standerton Mall but it is awaiting infrastructure so the mall can be built. SALGA played an important role in ensuring that the district municipality in that area would be able to deal with the mall plans on time.
On governance support, one of the main areas of concern was political instability affecting all councillors in Lekwa, which resulted in them not focusing on their key governance responsibilities. The workshop was poorly attended even though it was meant to assist councillors and had to be cancelled. SALGA assisted it on the implementation of council resolutions and completion of the agenda as there were a lot of issues affecting the agenda, including the inactivity of the Troika. SALGA had a provincial executive committee (PEC) engagement that took into account the administrative and political challenges.
COGTA on Lekwa Local Municipality
Mr Sam Ngubane, HOD: COGTA Mpumalanga, said Lekwa is one of the municipalities experiencing challenges and instability, especially in the political sphere. The instability continues as since August there has been a municipal strike. National COGTA engaged with the Provincial COGTA HOD on this and was advised that the issues were dealt with at PEC level and further guidance would be provided. The municipality had been battling with litigation and provincial and national COGTA have been assisting with that. National COGTA was concerned about the vacant senior management positions and failed to understand why Lekwa struggled to fill the positions.
Mr Ngubane said that to improve revenue collection, the municipality needs to have political will, which somehow is still inadequate in implementing credit control policies. The municipality has continuous sewer spillages, aging infrastructure, vandalism and theft, lack of human resources. MISA interventions were outlined in detail.
Mr Mpho Mogale, COGTA Executive Manager, said that COGTA feels that there is a drastic need to do something about the municipality because people out there are suffering. They receive calls on a daily basis where people complain that there is no electricity, water supply problems and about the discipline among the staff members. Something needs to be done and the province needs to intervene because it has been closed for five weeks and the people need services.
In response to the Chairperson asked about the status of the municipality, Mr Mogale said that it was not operational and was closed.
The Chairperson said that the Municipal Manager did not reflect that in her presentation. She did not know if it was intentional for her to withhold that information from the Portfolio Committee.
Provincial Treasury on Lekwa Local Municipality
Mpumalanga MEC, Mr Petrus Ngomane, said that Provincial Treasury is equally responsible as COGTA for the functioning of the Lekwa municipality. It was one of the municipalities approved in October 2019 to be assisted through a financial recovery plan, which was presented towards the end November 2019. If the financial recovery plan is not institutionalized due to all the distractions, it would be very difficult see the results of the financial recovery plan. Through the information in the meeting and through Lekwa’s presentation, Provincial Treasury wanted to believe that the situation would improve.
The Provincial Treasury wanted to see Lekwa municipality ensuring that its Troika, Mayoral Committee and all departments that need to know about the financial recovery plan are informed. If it does not follow the financial recovery plan in place, it is not going to improve. The focus should not only be on the political disruption and instability, as the pandemic had also disrupted progress. A resident advisor had been placed in Lekwa to assist with the improvement of financial management for a period of two years and because of the disruptions, he was unsure if his assistance was welcome. Assurance providers need to be strengthened through training and a disciplinary board needs to be established. Support on the development of a credible funded budget is a priority for Provincial Treasury. It will continue assisting and if the municipality could follow what is in the financial recovery plan, the non-credible budget will be a thing of the past.
On improvement of the control environment, mSCOA compliance support will continue as budget funding was developed and given to Lekwa, and Provincial Treasury will ensure that it is implemented in the way it was intended. Provincial Treasury will review the audit action plan to ensure that the root causes are identified and addressed. The municipality must institutionalize the financial recovery plan and report within the stipulated timelines. The CFO post needs to be filled as a matter of urgency and overreliance on consultants must be addressed. MEC Ngomane said that if all these points were institutionalized, an improvement would definitely surface.
Provincial COGTA on Lekwa Local Municipality
MEC Mandla Msibi said that he was disappointed because he had thought that when the Lekwa Executive Mayor was given an opportunity to speak, he would have given a true reflection of the status of the municipality, considering that it had been closed for five weeks. When they visited Lekwa last year it was engulfed by challenges, which was the reason that the Fifth Administration MEC for COGTA, MEC Mashile appointed a forensic investigation. There were a number of allegations and when the Sixth Administration came in, they found that the section 106 report was ready for tabling. Provincial COGTA found difficulty in convening the Troika, as they only met the Speaker and the previous Chief Whip before she was removed, which made it difficult to present the section 106 report emanating from the Fifth Administration.
MEC Msibi thought this would have been reported on by the Executive Mayor and Municipal Manager because it would have been prudent for them to tell the truth, as they were elected by the people to render services to them. The section 106 report was eventually presented only in June this year due to the infighting within municipality management. Provincial COGTA was assigned by the AG to inform them to fill all the vacant posts. The Executive Mayor and the MM failed to inform the Portfolio Committee that the CFO and other senior management had left the municipality because of the infighting. In February, a council was convened and it removed both the Executive Mayor and the Speaker from office in a vote of no confidence. For a period of about three months the municipality had no executive authority, which is required by the Municipal Finance Management Act to ensure that budgets are spent in the right way. Provincial COGTA had to intervene for them to elect the Executive Mayor and Speaker.
Immediately after the Executive Mayor and Speaker were elected, Provincial COGTA was convinced that the situation would be better, but it worsened because the Executive Mayor and the Municipal Manager do not see eye-to-eye. Provincial COGTA was taken to court by Civic Voice after leading the meeting to elect the Executive Mayor and Speaker of Council as Civic Voice said that was unlawful. The municipality did not fight this, which meant that they agreed that the initiative by the provincial government was wrong. He asked the Executive Mayor why they did not fight the case and the Mayor told MEC Msibi that the Municipal Manager does not listen to him. COGTA won the case and the Judge said that it was the responsibility of the MEC in section 154 of the Constitution to ensure municipalities are able to work effectively and efficiently. Provincial COGTA had tried its level best to change the situation in the municipality with no success. MEC Msibi emphasised that as things stand, the municipality is not workable and should be dissolved.
The Chairperson asked why MEC Msibi had not submitted a notice to dissolve the municipality because it was his responsibility as Provincial Executive. She requested that the Executive Mayor speak about what was happening in the municipality.
Executive Mayor of Lekwa Local Municipality
Mr Linda Dhlamini, Executive Mayor: Lekwa Municipality, said that it was not their intention to mislead the Portfolio Committee, as they thought there was an expected presentation framework they had to follow. He admitted that there had been political instability in the municipality since 2018, particularly at council level that was caused by some councillors of the governing party who were working with the opposition. It is true that towards the end of November 2019, Provincial Treasury tabled the financial recovery plan to Council, and it was approved, and the first month of execution was January. From 10 February they were unable to act until 5 June. When council was reconstituted on 5 June, the pressing issue was to approve the budget and it was approved on 29 June with the help of COGTA, the District and Provincial Treasury, and efforts were made for the budget to help the municipality. Subsequently, the municipality had a meeting with Eskom as COGTA indicated that the municipality had to deal with the Eskom debt. The municipality participated in the meeting and there was a commitment to finding a way towards debt repayment and ensuring that the current account would be paid monthly. Agreements were made, and the municipality paid the R45 million shortfall to Eskom in July. The Financial Recovery Plan (FRP) was tabled to council at a 31 July sitting. Among the points made in the meeting was limitation on usage of consultants. He admitted that there was a period of four months that council was not receiving quarterly reports on the FRP.
Mr Dhlamini stated that when the council was taken to court by Civic Voice, they were briefed by the Municipal Manager who said they might need a council resolution on the matter before they could defend. Lekwa Municipality is a 30-member Council, where the ANC has 20 councillors, the DA has 5, Civic Voice has 3, and the EFF has 2, so the balance of power in the council from time to time causes uncertainty. When Executive Mayor and Speaker were re-elected, they were tasked to try to reposition the institution to remove the constraints. On 3 August a memorandum containing 22 demands directed to the Executive Mayor was received by the municipality. On 4 August a discussion was convened by an NGO and the Troika to find a way of managing the memorandum and the same week they were able to communicate to workers. Part of the demands included a salary increment of 6.25%; PPE issues; Auditor General report. On 8 August, the municipality communicated with the administration to prepare a document to brief council about the labour unrest in the municipality. The reply was that management felt that it might be premature to brief council, as they were pursuing legal advice on the matter.
Mr Dhlamini said that processing the section 106 report polluted the institution because there were people who supported the report and those who did not. He admitted that the municipality is at rock-bottom. They are mindful of the current problem and would not bury their heads in the sand to say all is well. The municipality will welcome any intervention to assist the communities in the municipality. One of the major problems has been that when a point is being raised between the Executive Mayor and the Municipal Manager and one is of a different view, it has given an idea that they are not seeing eye-to-eye.
The Chairperson said that the Executive Mayor was supposed to lead the municipality and that he should not just list the problems of the municipality, as it is his own responsibility to lead. She expected the Executive Mayor to at least give an indication of the steps they would take to fix the problems in the municipality, as the people are suffering. She allowed the Executive Mayor to wrap up his comments.
Mr Dhlamini spoke to the strike in the municipality saying they had engagements with regional and provincial leaders and isolated immediate issues from the long-term issues. The main focus point for the municipality was to end the strike, as it had gone on for too long. On repositioning the status of the municipality, they accepted all the interventions raised and are monitoring those on a monthly basis, but their preoccupation is the stabilisation of the labour unrest in the municipality.
Discussion on Lekwa Local Municipality
Ms Khanyile said that the situation in Lekwa is depressing and the matters raised by the Executive Mayor were not new. Going forward, it would be very important for the municipality to do background checks before employing any municipal manager because there are many allegations on online platforms about the municipality’s current one. She commended the provincial authorities for sticking to their word when they said they would provide a section 106 report and expressed shock that the municipal manager said that the municipality was unable to produce data from the smart meters and that is one of the reasons why they are unable to collect revenue. This was because when community members report their smart meters as faulty, the municipal employees then connect the smart meters illegally, meaning that the community members do not buy electricity. Some community members were currently sitting with a document that needed to be signed by the municipal manager to have electricity supplied directly to them by Eskom, but the municipal manager had refused to sign the document. She asked the municipal manager to make a commitment to the Portfolio Committee that she would sign the document and make the necessary arrangements. Another concern was that leaders in the municipality do not answer their phones which makes the work of community leaders difficult as they are unable to provide feedback to community members on certain matters. She asked for the plan to fill the vacant positions. Since only R300 000 of the R1 million COVID-19 relief fund was used, they must redirect the rest of those funds to address the water challenge in Ward 8. The water tanks distributed about three weeks ago are gathering dust because the municipality said they did not have a driver to deliver water. She asked for the plan to address such issues. It is important the leadership of the municipality learn to put their differences aside because people are suffering.
Ms Khanyile said the information from the municipal manager about consequence management was misleading, as the officials named in her report were in the traffic department which was a completely different matter. She asked if any form of consequence management was done in the municipality and if the municipal manager was aware of her duties in the municipality. She found it highly unacceptable that the CFO position had been vacant since 2017 and asked the MM to explain this. She appreciated that the leaders of the municipality acknowledged the problems and asked them to provide an action plan on how they would solve those problems with timelines attached. She asked why the matter of the fire engines has not been resolved and why the fire department does not exist. SALGA and COGTA’s meeting with Eskom came too late because it happened when COVID-19 cases were declining in the country. She asked why it did not happen sooner, as the hospitals had to use a generator which is unsustainable during the peak of infections. She asked for a detailed outcome of that meeting. The Standerton Mall was confirmed in 2016 but the construction never happened. She asked if the mall construction was still going to happen. Some of the funds that would be used to build a stadium should be redirected to building infrastructure for the areas that do not have infrastructure. The construction of a stadium is never completed because people vandalize the stadium. She asked the Executive Mayor to provide an action plan of how they are going to stop the strike in the municipality.
Ms Direko said that when the political and administrative heads in the municipality are "having issues", one must know that the municipality is in deep trouble, especially when there is an element of denial from the parties involved. She asked if there were alternative measures the municipality pursued to improve revenue collection. If that was the case, she asked for the measures taken, and if that was not the case, she asked the reasons. She asked if there was a noticeable improvement in revenue collection after the service provider was employed and the commission of the service provider. What date was the report on UIFW expenditure sent to MPAC and how far along is the matter? She asked the reasons for the municipality opening a second bank account and how long the MM has been her position. Is the municipality able to make its monthly payments on the Eskom bill?
Ms Direko asked for its progress in assessing other service delivery matters including water and sanitation, refuse removal and infrastructure matters. Had it managed to finalise its asset register? She asked for details on this. Did it adopt a credible funded budget? She asked if the municipality was paying the workers who were on strike. She requested details of their demands and the plan to meet those demands. She asked if the municipality understood the impact of the strike on the business sector and the community in general.
Mr Ceza said that the fact that the municipality withheld information from the Portfolio Committee about the animosity between the Executive Mayor and the MM did not inspire confidence. People in Lekwa do not have drinking water which signifies the gravity of the situation. He asked about the systems put in place by the province to assist the municipality to prevent such a crisis. It seemed that most times the municipality and government departments were reactive rather than proactive in such cases. Considering the water problems, had COVID-19 infections escalated in the municipality? He asked if it had now been paying Eskom and if so from where the funds came. He asked for the amount of money spent on private security for municipal officials, and the investigations about the municipal manager’s BMW. Were the municipal workers paid for overtime and what did they do to meet their demands?
Mr Mpumza asked why the Executive Mayor is still in his position when he could not render services for almost five weeks to residents. He asked the municipal manager if she had the required skills in the technical department, considering the municipality did not have an asset register and it has aging infrastructure. He asked why the situation in Lekwa continues to prevail. It is impossible for MEC Ngomane to ignite hope. One despairs, especially because even with the help of SALGA, COGTA and Provincial Treasury, the municipality still got a disclaimer audit report. He asked why the maladministration was tolerated contrary to the objective of building a capable and ethical local municipality. He asked when the Provincial Executive would invoke Section 139(1)(c), considering that section 139(1)(b) had failed in the municipality.
Ms Opperman asked when the CFO post would be filled and why there had been a struggle to fill that post for an entire year. When last did the municipality have a progress report on the recommendations of section106 forensic report. She asked for the location of the water tanks received from the district and why water had not been delivered. She asked for the status of the water treatment plant polluting the Vaal River, as the contract for fixing this expired in June 2020. She asked about the functionality of the pump stations as the Lekwa municipality had received a court order to stop the sewage spills from entering the Vaal River. What were the infrastructure upgrade plans for the dysfunctional water treatment plant. Lastly, she asked the reasons the municipal manager refused to sign the transfer documents of their properties.
Ms H Mkhaliphi (EFF) said that the municipality did not deserve to be called as such because it does not exist. The problems of the municipality have been the same for a number of years, and people were not getting service delivery. She asked what actions had been taken by National COGTA in dealing with Lekwa Municipality. The Portfolio Committee would be failing the people of Lekwa if they believed what MEC Ngomane said about there being hope for the municipality. There needed to be a proposal on the next step to be taken.
Mr I Groenewald (FF+) asked if there was a performance contract with the MM, and if a performance assessment was done and where the report is.
The Chairperson said she had expected that the Mayor and Municipal Manager would share the progress made since their last interaction with the Portfolio Committee in 2019. She asked the MM to mention any part of the municipality that has actually progressed since their last interaction. She asked why the Municipal Manager did not take accountability for the results of financial statements. It was clear that there was no consequence management since no disciplinary board had been appointed. She stated that the audit action plan was meaningless. She asked for a response to the Committee questions.
Lekwa Local Municipality (LLM) response
Ms Ntshangase replied that in the Civic Voice court case, there were six respondents: COGTA MEC, COGTA HOD, Lekwa Municipality, Executive Mayor in his personal capacity, Speaker in her personal capacity, and Municipal Manager in her personal capacity. The lawyers, when consulted, advised that in the court application by the applicant, it was clear that should any of respondents quoted in their personal capacity used municipal finances to defend the matter, they would be solely liable if they lost the case. The MM advised the Executive Mayor that since they were conflicted in the matter because they were cited in their personal capacity, it would be advisable to seek a council resolution to defend the matter.
Ms Ntshangase explained that on 3 August workers downed tools, and one of the major demands was the 6.25% annual salary increment. It was unfortunate that on the eve of the municipality preparing salaries, National Treasury had issued a letter to municipalities indicating that they should not implement the 6.25% as a result of the current fiscal challenges. The municipality did not implement the increment but, as the Executive Mayor indicated, there were several engagements that eventually led to an instruction that we should pay the 6.25%. The 6.25% was paid and the municipality had expected workers would return to work as one of the major cries from the workers was the 6.25%. Unfortunately that did not happen. The municipality then wrote an ultimatum requesting workers to go back to work, which did not happen. During the strike, there was a lot of public violence, malicious damage to public property and disruptions.
In the main collective agreement, workers had a platform where they engaged in the Local Labour Forum (LLF). From the start of lockdown, a circular from COGTA together with SALGA directed that meetings be done virtually, and this was communicated to the LLF. The municipality arranged a Zoom platform for members to be able to interact and there were about four meetings called without success because the LLF had different excuses such as data challenges. The data was provided to workers for them to be able to engage but they then insisted on a physical meeting. The Executive Mayor was right to say there was an interaction between the political leadership of the institution and the workers. The processes in line with the main collective agreement approved and signed by both parties were not complied with. The municipality went to court to ask for court to interdict workers from striking and return to the platform in terms of the collective agreements so that there would be an engagement on matters. However, in the papers filed in court, they indicated that they had returned to work on 17 August, following the 6.25% increment and engagement with municipal leadership, which was not true. The matter was then dismissed as not an urgent matter because SAMWU indicated they had returned to work. To date, SAMWU had not returned. It is unfortunate that the workers have become engulfed in the political challenges existing within the municipality. There has been an attempt by management to sit with labour, but labour refused to sit with management. What was concerning was that when labour was requested to sit with management, they would refuse but they were comfortable when sitting with the political leadership.
On the water meters, there were several interventions as far back as 2015 on meters and breaching. However, all of those projects did not succeed, including the smart meter project, as they ended up with different challenges – one of them is in the section 106 report. Currently the municipality have been trying to procure meters and has procured 3 000 meters to assist households where meters were breached for a number of reasons. It is one of the municipality’s projects they want to continue with as part of the Financial Recovery Plan in improving especially with electricity. On the question about farmers who applied to move out of the municipality electricity supply to be supplied by Eskom directly, their letter was acknowledged through the municipality’s legal department. As a municipal manager she was not able to sign the letter because Lekwa municipality is an electricity distributer and to allow customers to move out of their service would make the municipality lose revenue. For her to do that, she would need a council. An acknowledgement letter explaining this was sent to the farmers.
On section 56 senior manager positions, the CFO left in 2017 October and there were attempts to fill the position. LLM was successful in the first instance and an appointment letter was issued but the candidate later declined and said Lekwa municipality has many challenges with political instability and that he would not be able to work in LLM. The person was pursued at different levels by leadership but the person refused and the person now works for the district. The same thing happened to technical services. The person later refused to accept the appointment and cited the working conditions and the political environment as reasons. The second time around a candidate accepted the position but only stayed for five months and stated that the conditions were not convenient for him and he resigned. LLM is awaiting approval from council to continue since section 56 managers positions are a prerogative of the council for the processes that need to unfold.
On water challenges due to aging infrastructure, Lekwa is an urban town and does have infrastructure and with water. It engaged MISA to assist and they did an infrastructure assessment with DWS. It was clear that the water treatment plant capacity was far less than the demand required. Most of the water pumps are old and need maintenance. One of the council resolutions was the prioritisation of water, electricity and sewer systems and most of the allocations were prioritized towards water and sanitation but it has not been enough. Through the intervention of national COGTA, LLM had an engagement with one of the local companies where a pledge was made to assist. LLM engaged its stakeholders such as Sasol on their SME project to assist in water and sewer. This was approved and would be addressed through their SME funding.
On consequence management, the reference was to officials within the finance department, specifically Mrs Jean Jacobs who was Revenue Manager, where fraud and corruption allegations were levelled against her, as well as Mr Harris and two other officials in Finance and Revenue Collection.
On infrastructure maintenance and asset care, through MISA and Provincial COGTA a thorough assessment was done of the water, road, electricity and sewer infrastructure. As a result of the severity of the challenges faced by LLM, it was one of those identified for DBSA funding that LLM did not have to pay for. A business plan was done, and an application sent to DBSA and verified by COGTA for an asset care program. However, it was still waiting for council to approve the application because DBSA replied that they would not accept the application without a council resolution.
On COVID-19 funding, LLM was given R1.63 million to spend on PPE and the rest. LLM spent just above R300 000. This was a fund that required strict monitoring and for LLM to channel the funds to something else, they would have to get authority from council to do so. With the payments of service providers, LLM had been battling to pay on time until they established the Cash Management Committee to prioritize service providers. LLM had service providers whose accounts were overdue to almost 120 days and even beyond but it was able to reduce this to 30 days. Those major service providers it is still struggling to pay – as the amount owing is too much and it had to request a payment plan – are SARS, Eskom, DWS and the Licensing Department. It was able to pay medical aid, bonds and so on.
Since the last interaction with the Committee, LLM procured a fire engine using the RT57 contract from National Treasury but unfortunately there were delays in delivering the fire engine. As a result of the delay, the service provider gave LLM an interim fire engine to use until the fire engine is delivered at the end of September. It has progress reports and on-site inspection of the building of the fire engine.
On the PPE concerns raised in the workers' memorandum and protest, LLM gave PPE to the workers and they have photos and attendance registers of receipt of the PPE. There are about 10% of workers who have not received PPE. LLM came from not having tools of trade as it had entered into a contract that cost them millions for vehicle rental. Thus, it had to start from scratch in 2018 procuring vans, trucks and equipment. It could not procure everything due to budget constraints, but most were procured. It is now left with the electricity department where they need to start from scratch in procuring cherry pickers and equipment. Procurement is done on a yearly basis, as the budget allows.
On the electricity challenges, LLM had an inconsistent supply of electricity which started when Eskom took a decision to not allow municipalities to exceed their notified maximum demand (NMD). LLM had a very close engagement with Eskom, assisted by MISA to do an assessment on LLM infrastructure, but because of the challenges in the infrastructure and the LLM electricity debt of R1 billion, Eskom decided that those indebted to Eskom needed to bring their accounts up to date before Eskom considers increasing their energy supply. Depending on weather conditions, LLM needs up to 80 MVA. With the intervention from COGTA, there were engagements between LLM and Eskom to see how the matter could be addressed and a commitment was made that LLM would address its R92 million current account shortfall from January to date and R45 million was paid in July to try and bring this up to date. LLM committed to look at its equitable share and increase the payment rate on the current account.
On debt collection, LLM looked at smart meters and a Vodacom intervention brought in through the Province, where they would install smart meters. Unfortunately the smart meters were rejected by the public to a certain extent, and LLM had to go back to the normal smart meters. The second intervention was looking at the debtor’s book which stood at about R1 billion to identify the main electricity consumers and the top 200 customers from both business and households were identified. LLM focused on those customers to ensure they paid, and their queries were addressed. One of the biggest challenges was billing, as bills had challenges of inconsistency and inaccuracy. LLM was waiting for the district intervention to assist with data cleansing as that exercise would assist it in addressing debt collection. A service provider was looking at LLM’s outstanding debt from 90 days upwards. On UIF, LLM utilized the same service provider assisting with the AFS and other financial reports to investigate the UIF from 2012 to date. The UIF report was completed in December 2019 and served before the audit committee which would forward it to MPAC for processing.
On its second bank account, LLM changes its bank account every five years but when the bank account is changed, it is not an automatic exercise that happens within a month. A period of six months was allowed for the change to happen. Unfortunately, the Auditor General found that when the bank reconciliation statement was prepared, the two banks accounts needed to be reconciled with each other and with the cash book.
Ms Ntshangase was appointed on 11 August 2017 after the previous municipal manager had completed the third year in the position. On LLM’s ability to pay the Eskom debt, it has been paying the debt but was not fully servicing the current account. The monthly current account is on average R35 million. LLM has an existing court order issued in 2017, where the court ruled that four of LLM’s big customers would pay directly to Eskom instead of paying to LLM. The court order ruled that LLM would commit 12% per equitable share to Eskom. This monthly LLM payment does go to Eskom but there is a shortfall in terms of the current account.
On the fixed asset register, LLM acknowledges that there is a challenge and it has been monitoring the service provider very closely. As indicated there was a National Treasury secondment to assist LLM with financial matters. Another person seconded by the district assisted the finance department together with the seconded Acting CFO from COGTA.
LLM has a standing committee that sits weekly monitoring very closely the asset register completeness and verification to remedy the audit finding that assets that had been completed were not transferred to the asset register. LLM was grateful for the Treasury extension for the final submission of its AFS. LLM was at 70% verification and compliance with the 2017/18 standard. In past financial years LLM adopted unfunded budgets but Provincial Treasury has been working very closely with LLM to ensure the budget was funded. In 2018/019, the Treasury directive was that all municipalities that had unfunded budgets would not receive their equitable share. Corrections were done by LLM working closely with Treasury to ensure its budget was realistic and funded. This year LLM managed to submit a funded budget and Treasury verified it as funded. On third party payments such as medical aid, pension fund, maintenance insurance policies, it had a backlog in past years, but since 2018/19 and 2019/20, LLM has been paying third parties.
The Chairperson said that Ms Ntshangase responded as if Lekwa was a functional municipality and asked her to confirm if that is what she was implying.
Ms Mkhaliphi agreed with the Chairperson that the MM responded as if everything was going well.
Executive Mayor response
Mr Dhlamini said that LLM had experienced interventions as matters were not going well especially due to the audit findings on financial management and unstable internal controls, as well as overreliance on consultants. The R23 road was raised with SANRAL to resolve this. The challenges raised by the Portfolio Committee are indeed true, and Lekwa needs support. The governance and financial management challenges affect service delivery to the people.
The challenges in LLM were already there when National COGTA introduced the Integrated Municipal Support Plan in 2018 followed by the Financial Recovery Plan in November 2019. The instability was centered around the infighting by councillors.
On Standerton Mall, LLM noted that the district was dealing with processes for building the mall. The 31 July council meeting discussed the mall as Standerton residents bought their goods in Secunda and there needed to be a way of ensuring that they spend locally in Standerton. The advice was the development of a mall and developers approached LLM. Since then LLM has been seized with providing bulk infrastructure for the construction of the mall. The mall would be seen as a mitigation especially for COVID-19 challenges such as unemployment. At the beginning of Sixth Term LLM identified five priorities: water, sanitation, electricity, roads and refuse and LLM spending had been moving in that direction. What helped LLM in the midst of all the challenges were the Social Labour Plans from local mines as they assisted with some of the infrastructure challenges. The supply of water services challenges indicate the capacity of the contractors that were given opportunities but some were not equal to the task. LLM will have to work on this challenge going forward. The leadership will engage with SAMWU to try and solve the problems and restore stability.
The Chairperson asked the MPAC Chairperson for the number of reports MPAC had considered and the recommendations made.
Ms Juliet Khumalo, LLM MPAC Chairperson, said that LLM needs to improve on implementation of council resolutions. MPAC did a lot of work but the council resolutions were not implemented. This made it look as if MPAC was not performing its duties. MPAC advised council to appoint a disciplinary board in 2018 but that did not happen until the decision was reaffirmed in the section 106 report. MPAC does not have the necessary resources and human capital to assist it. Ms Khumalo said that the Executive Mayor and municipal manager need to go over and check all the council resolutions.
Ms Khumalo noted that she had been appointed after the Local Government Elections.
The Chairperson asked if the MPAC Chairperson had seen the 2016/17 audit outcome if MPAC addressed the UIFW expenditure. She asked for the number of recommendations implemented since 2016/17.
Ms Khumalo replied that MPAC reported to council quarterly on the matters referred to them by council. The non-implementation of resolutions was a hiccup that made the committee dysfunctional.
The Chairperson said that it is MPAC’s responsibility to take the audit report and look at the UIFW expenditure, it was part of the training provided by SALGA and Provincial and National COGTA. LLM would not have been facing challenges if MPAC had exercised its responsibility.
Ms Khumalo said she was not ready with the reports as she did not anticipate they were needed in the meeting.
The Chairperson pleaded that the MPAC Chairperson provide the reports by 8 September.
Ms Gugu Langa, SALGA Provincial Director of Operations, replied that SALGA did conduct records management training with LLM but unfortunately it relied on the willingness of LLM to implement that training. She said that with Eskom, what was agreed upon in the meeting was that municipalities would have to pay their current accounts. There was a Political Task-team that was established, led by the Deputy President of the country, which in the meeting encouraged municipalities to try and keep up with their current accounts and their arrear accounts.
Mr Ngubane said that COGTA took note that much needed to be done to intervene in LLM. All matter of concern to COGTA had been addressed in the meeting.
Mr Mogale said that drastic action needed to be taken in Lekwa. COGTA is aware of the challenges as it has witnessed them through working with the LLM. COCTA expects action to be taken to restore normalcy because the Lekwa community had suffered enough. They deserve service delivery and must be given those services by the LLM leadership.
Provincial Treasury response
MEC Ngomane said that Provincial Treasury heard the comments and concerns from the members of the Portfolio Committee and understood the challenges of Lekwa and listened to all the advices that came from the members. they are at liberty of the Portfolio committee to be advised if there were other ways to deal with the challenges of Lekwa and hope as from the following day something would happen in LLM.
MEC COGTA response
MEC Msibi said that the immediate task of the Executive Mayor is to address service delivery. The immediate task of the Municipal Manager as accounting officer is to account first to the leadership of the Executive Mayor. It does not need to be a task for there to be communication between the Municipal Manager and the Executive Mayor. They need to have working relations and ethical standards of good governance to be able to deliver services to the people. They need to ensure that there are no sewer spillages into the Vaal River and ensure the potholes are fixed with immediate effect. The two should collect as much quick wins as they can to restore stability in LLM and the dignity of their leadership.
Mr Ceza commented that all the observations of the COGTA MEC and Portfolio Committee needed to be taken into serious consideration on what needs to be done in LLM. They need to implement sustainable solutions for the problems to guard against providing temporary solutions for long-term problems.
COGTA MEC summing up
MEC Msibi noted the two COGTA interventions in Dr JS Moroka Local Municipality – section 106 and section 139(1)(b) interventions. The section 106 report was presented and with the section 139, they had received the close-out report and on 9 September there would be a special Cabinet to conclude the intervention. Immediately after the Cabinet meeting, a Council meeting would be convened by 11 September with Dr JS Moroka Local Municipality to present both the section 106 and section 139 reports. COGTA would then assist Dr JS Moroka municipality with section 154 of the Constitution, section 155, schedule 6 and section 106 of the Municipal Systems Act.
On Lekwa Local Municipality, COGTA would await advice from the Portfolio Committee, as COGTA had intervened in all the ways it could. COGTA had received a report the previous day that On Govan Mbeki Local Municipality (GMLM) had convened a special meeting to suspend its municipal manager. GMLM had not submitted its AFS although it had used consultants instead of in-house staff to do that work. COGTA was finalising a report to Cabinet for a section 139(1)(b) intervention in GMLM as internal controls had collapsed nor could it pay its debt to Eskom, as it channels collected revenue to other services.
Provincial Treasury MEC summing up
MEC Ngomane said that he was satisfied with the summary given by MEC Msibi. They had spoken before they had to present on what their next step was on the struggling municipalities. He was going to attend all the meetings that MEC Msibi had mentioned, as it was his responsibility as he is deployed from finance.
Chairperson summary of state of municipalities
The Chairperson said that the progress at Dr JS Moroka needed to be noted and it would be discussed within the committee programme. Provincial representatives needed to note and send a message to the Mpumalanga Premier that since the intervention, there was no improvements in Lekwa Local Municipality, as their audit outcomes have shown a deterioration in the past few years. It is unacceptable that a municipality shuts down for five weeks. Provincial leadership needed to go back to its Provincial Executive Council and take a decision on a section 139(1)(c) intervention. Lekwa needed to go and make changes and come back to the Portfolio Committee with a report. The next municipality to be investigated by the Committee is the Govan Mbeki Municipality as it is as dysfunctional as Lekwa. The Chairperson thanked all the municipal stakeholders and allowed them to exit the meeting.
Municipal Systems Amendment Bill [B2-2019]
The Chairperson said that the Local Government: Municipal Systems Amendment Bill [B2-2019] would not be finalised today as there was not enough time. She asked the Committee to decide on a date when they would meet and finalise the Bill.
The Chairperson said that there would be an oversight visit to Mpumalanga from 14 to 18 September to Dr JS Moroka, Govan Mbeki and Thaba Chweu local municipalities. The National Council of Provinces (NCOP) would visit those municipalities. Members could take part in the oversight, but it should not interfere with their own work as the Portfolio Committee.
The Chairperson thanked Committee members for the work they had done together and the mutual respect they had shown one another even though they represent different political parties, citing their passion and understanding of their duties as servants of the public. She would continue to call out officials who do not perform their duties even if they come from the same political party as her.
There was now a two-week recess before the final term. From 6 to 16 October the Portfolio Committee would deal with the BRRRs and Annual Reports of departments and entities. On 20 October the Committee will have a progress report on the VBS saga and COGTA would provide consolidated progress on all the forensic investigations. Looking at the state of Dr JS Moroka, Lekwa and other municipalities that the Committee had met, there must be corruption in those municipalities and COGTA needs to provide an updated presentation because the provinces have not been giving reports to National COGTA. From 21 October the Portfolio Committee would have meetings with all the amalgamated municipalities in the country. They identified and listed all the municipalities they would require reports from.
The Chairperson said the Committee Content Advisor would revise the edited Committee Programme and she would sign it and the Ministry would be provided with a copy.
The meeting was adjourned.
- Delegation list
- COGTA on Lekwa Local Municipality
- Provincial Treasury on Dr JS Moroka
- Dr JS Moroka presentation
- Dr JS Moroka LM: Provincial Close-Out Report
- Mpumalanga Provincial Treasury on Lekwa
- Auditor SA on Lekwa Local Municipality
- Mpumalanga COGTA: Lekwa Intervention
- SALGA support to the Municipalities
- COGTA presentation on Dr JS Moroka LM
- Lekwa Local Municipality presentation
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