OR Tambo District Municipality progress on water and sanitation projects: follow-up on oversight visit

NCOP Appropriations

16 September 2020
Chairperson: Ms D Mahlangu (ANC, Mpumalanga)
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Meeting Summary

Video: Select Committee on Appropriations, (National Council of Provinces) 16 Sep 2020

The Select Committee on Appropriations met via a virtual platform with the O R Tambo District Municipality, National Treasury, the Municipal Infrastructure Support Agent, the Eastern Cape Department of Water and Sanitation, and the Amatola Water Board. The meeting was called to discuss feedback from the oversight visit that had been conducted by the former Select Committee on Appropriations in the O R Tambo District Municipality in 2018.

The O R Tambo District Municipality explained that the oversight visit had come after the National Treasury had withheld R90 million of the Municipal Infrastructure Grant. The officials outlined the factors that had led to that decision: poor performance and monitoring and evaluation mechanisms, the appointment of contractors using incorrect protocol and delaying completion of projects. Other reasons were that the municipality did not report on its projects and expenditure to Treasury. After the oversight visit, National Treasury, the Municipal Infrastructure Support Agent, the Eastern Cape Department of Water and Sanitation, and the Select Committee made recommendations to overcome some of the issues that had been raised. In terms of governance, the municipality claimed that most of the strategies it had adopted were relatively new at the time of the visit and had not yielded results. Five of the ten projects that were underway during the oversight visit had since been completed.

The Municipal Infrastructure Support Agent acknowledged that there was still work to be done in the Municipality but it identified many improvements, especially in the areas of project planning and monitoring. The Eastern Cape Department of Water and Sanitation attested to that, confirming that, since the oversight visit, the Department had been working hand-in-glove with the Municipality to assist with the implementation and monitoring of projects. The major handicap was that the money allocated to it was not consistent with the projects that it needed to undertake.

National Treasury explained that it had withheld R90 million identified for infrastructure because of the Municipality’s lack of expenditure of the Municipal Infrastructure Grant; it was not consistent in its reports on expenditure to Treasury, and the projects were not registered. Funds that were allocated in a particular year had to be spent in that specific year. Treasury was ready to resume its financial assistance to the Municipality and was considering paying the outstanding R90 million as the withholding of funds had been a temporary procedure to protect the fiscus in a particular year. When the municipality demonstrated that it was ready, the funds would be despatched to it.

However, the financial health of the Municipality was very fragile because it had adopted a budget with a surplus of R40 million and had a very low rate for the collection of revenue: 61% for the 2018/19 financial year. That placed the municipality at high risk as Treasury projected that it would struggle to meet its financial obligations in the future and that compromised the district’s financial viability for funding. The institutional dynamic of the district was fragile because the municipality was under the administrative leadership of the Acting City Manager as the Municipal Manager had been suspended on 17 June 2020, the wage bill was excessively high and excessive use was made of consultants. However, there had been a reduction in the level of Unaccounted for Water from R3.2 billion in the 2017/2018 financial year to R1.4 billion in the 2018/2019 financial year.

Members asked if the municipality had any plans to deal with the outdated reticulation in old infrastructure that was causing immense water loss. They requested clarity on the roles and functions of the district municipality. Had the land conflict between the municipality and the community in the Libode Waste Water project been resolved amicably? Why women were not hired in that specific project? Had any penalties had been imposed on contractors who failed to execute projects due to claims of financial constraints? How did the municipality appoint contractors knowing that they did not have adequate resources for the projects to be conducted by the contractor?

One Member requested the names of the contractors that seemed to be recurring in many of the municipality’s projects. How many were local contractors? Had the Municipality experienced people from labour forums who arrived at the work site and demanded 30% of the value of the contract?

Members asked why the Portfolio Committee from the Legislature in the Eastern Cape was not represented in the Committee meeting, nor the relevant Member of the Executive Council in the Eastern Cape.

Meeting report

Opening remarks

The Chairperson welcomed all invited stakeholders and encouraged them to participate as the meeting’s agenda was of great importance. She extended her regards to members of the public and thanked them for taking an interest and for attending the meeting. The purpose of the meeting was to follow up on the report concerning all water and sanitation projects in the O R Tambo District Municipality (ORTDM).

Between 30 July and 3 August 2018, the then Select Committee on Appropriations had conducted an oversight visit to the OR Tambo Municipality as it had requested intervention from the National Council of Provinces (NCOP) after the National Treasury had withheld R90 million of the Municipal Infrastructure Grant (MIG) on the grounds of improper reporting, non-registration of projects and slow take up. The National Treasury and the then Committee resolved to conduct an oversight visit from 30 July to 3 August 2018 to assess whether the MIG was used in accordance with its purpose.

The Chairperson said that since 2019, the Select Committee of Appropriations (SCA) had viewed the O R Tambo District as one of its priorities for their oversight week but due to the COVID-19 pandemic that had not been possible. The core of the current meeting was to follow up on the findings of the previous committee and to close this matter. She emphasised that as the SCA appropriated and allocated money granted to various departments, sectors, and municipalities, it was crucial to determine whether value for money was attained. The meeting intended to evaluate if there had been any progress in that regard.

Before turning to the agenda, she asked the Committee Secretary to update Members on any outstanding issues.

The Committee Secretary welcomed everyone to the meeting. He said he was assisting Members and stakeholders to log into the virtual meeting platform. He extended an apology from Mr Y Carrim (ANC, KZN) for not attending the meeting and on behalf of the relevant Ministers who could not attend because of ongoing Cabinet meetings.

The Chairperson acknowledged the apologies and asked Committee Members for comments on her introduction.

Mr D Ryder (DA, Gauteng) acknowledged the apologies and expressed appreciation for the Committee Secretary’s efforts to assist those who were struggling to join the meeting. His main concern was the absence of the Executive Mayor. He was greatly disappointed and asked what was more important that morning than attending a Committee Meeting that dealt with the Executive Mayor’s municipality. He demanded an explanation.

The Committee Secretary interjected and confirmed that the Executive Mayor was present and that she was among the individuals who were struggling to log into the system.

The Chairperson confirmed this and stated that she had received a report earlier that morning explaining that the Executive Mayor was driving to where her team was. Notwithstanding the report, she encouraged the Executive Mayor to lead by example. Members were waiting for her and it was expected that she would have logged in earlier. She welcomed her once again and asked her, and her team, to present a report on the progress in water and sanitation in the ORTDM.

ORTDM Presentation

Ms Thokozile Sokhanyile, Executive Mayor, ORTDM, greeted everyone in the meeting from the invited stakeholders to the members of the public. She apologised for her late-coming and explained that she had struggled to log into the virtual meeting platform. Due to these technical issues, she had resorted to using her secretary’s device. She introduced her team and handed over to Mr B Matomela, Director in the Office of the Municipal Manager, ORTDM, to proceed with the presentation.

Mr Matomela began by greeting everyone in the meeting. He briefly reflected on the oversight visit that had been conducted by the Committee in 2018 and acknowledged that the municipality had received a report and recommendations on how to deal with its challenges. The presentation outlined ORTDM’s responses to the SCA’s inquiries and recommendations. The response was in two parts: firstly, a discussion on matters of governance, and secondly, an overview of progress in water and sanitation projects.

Beginning with matters of governance, Mr Matomela said that the 2018 report found that while the ORTDM displayed an impressive spending pattern, its system of monitoring and evaluation was unsatisfactory. In response to that concern, he explained that the municipal monitoring and evaluation mechanisms had been relatively new at the time. To rectify its shortcomings, ORTDM had engaged with National Treasury, Department of Cooperative Governance and Traditional Affairs (COGTA), and the Department of Water and Sanitation (DWS) to monitor grants.

The report described the concerns of the Auditor-General (AG) about performance assessments being conducted only at Director level. As with the first issue, Mr Matomela said institutional performance management at the ORTDM had been relatively new. He claimed that since that time, the municipality had adopted a Performance Management System (PMS) to monitor performance at top management and that that would extend to the middle and lower management levels once the system matured. However, in the meantime, the municipality had developed accountability plans for middle management.

The appointment of Amatola Water Board without following correct procurement processes was another pressing issue in the report. The ORTDM had taken it upon itself to investigate the legalities of the issue and had found that the appointment of the Water Board was not regular. The contract with the Amatola Water Board was regularised according to Section 110 of the Municipal Finance Management Act (MFMA).

The report recommended that ORTDM strengthen its communication strategies to ensure that decisions in the Council structures were communicated to everyone. In response, the municipality had devised a communication strategy that enabled the head of communications to participate in council. That ensured the communication of the Council decision to all parties and communities at large.

Mr Matomela added that the report found that the ORTDM had accumulated R680 million in outstanding debt and accruals. He said that was primarily caused by poor communication with property owners in the municipality. They vacated and leased their properties without notifying the municipality. The consequence was a massive accumulation of debt. Old infrastructure caused underground water leakages which added to the ORTDM’s expenditure. As a result, the municipality had embarked on data cleansing to identify old and damaged infrastructure as well as indigent property. With regards to accruals, Mr Motomela said those remained a problem because of the payment to infrastructure project contractors.     

The report also raised concerns about the pricing of the Libode Waste Water Treatment Works Phase 1A which was very low and posed a risk of price escalations. The Committee had found that to be an indication of poor project planning. In explaining the municipality’s pricing, Mr Matomela stated that all bids were evaluated according to the Preferential Procurement Policy Framework Act (PPPFA). He claimed that at the time of award, the price was seen to be adequate. However, he acknowledged the possibilities of price escalation due to multi-year projects in the municipality. It had a negative bearing on its project budget and the municipality was looking into alternative strategies to deal with this issue.

Also on the Libode Waste Water Treatment Works, the report observed that the project did not have local sub-contractors. That was against the 30 percent Regulation for MIG projects, which demanded the transfer of skills and supervision when there was lack of capacity in the municipality. Mr Matomela explained that the requirements to appoint sub-contractors was mostly for projects with a biding price that was in excess of R30 million. However, the municipality was mindful of that requirement, especially during the supply chain processes of evaluating tender documentation and that it always adhered to it.

Other concerns raised by the report included the poor supply chain project management which was the reason why the ORTDM appointed contractors that did not have the capacity to deliver. The Committee observed that the municipality used the same consultants and contractors for various problems and that numerous projects were delayed because contractors experienced cash flow challenges related to the ORTDM’s delays in awarding contracts long after the tender proposals had been submitted. For the first issue, Mr Matomela said that contractors were awarded contracts after they had been evaluated as per the functionality criteria. That was done by assessing supporting documents that determined whether bidders had the capacity to deliver. For the second issue, he claimed that the Municipality had appointed a panel of consultants for a specified period to render a specified project management and consultancy service. Finally, for the last enquiry on the issues of governance, he said since the last oversight visit, management ensured that the turn-around time for the awarding of bids was reduced to the acceptable period by arranging regular committee meetings per council calendar.

In the second part of his presentation, Mr Matomela outlined the municipality’s ten projects. Of these, five projects had been completed: the Mangxamfu Water Supply 2015 to 2019; the Tsolo Waste Water Treatment Works B 2016 to 2017; the Lebode Waste Water Treatment Works 2018 to 2020; the Nyandeni Ward 4 Sanitation project 2018, and the Upper Mhlahlane Augmentation Scheme 2013 to 2019. The remaining projects were in various stages of completion. These were the Tsolo Waste Water Treatment Works A which was 97.86% complete in 2020, having started in 2016. The other projects were the KSD PI Construction Projects one and two which had started in 2017 and 2018 respectively and were both scheduled for completion in 2020. The first project was 94% complete whilst the second one was 96% complete. The remaining two projects still in progress were the Misty Mount Rising Main project and the Coffee Bay Regional Water Supply Scheme. Those faced a few contractual and administrative setbacks which had led to the rescheduling of their dates of completion.

Mr Matomela detailed the ORTDM’s expenditure on the projects as well as which contractors were involved. He explained the various challenges that were faced in completing them. For instance, delays in the Misty Mount Rising Main project were a result of the absence of water for the contractor to test the pipeline whilst delays at Coffee Bay Regional Water Supply Scheme were a result of slow progress by the contractor. He said 66% of the contracted time had lapsed with only 33% of the work completed. As a result, the contract with the body responsible for the project had been terminated.

Mr Matomela concluded with his appreciation of the recommendations that had been made by the Select Committee and assured Committee Members that ORTDM was committed to completing its projects and providing the best service to its community.

The Chairperson acknowledged the ORTDM presentation and attested to some of the issues that it raised. Before opening the meeting for discussions, she asked if the Executive Mayor or anyone from the municipality had any comments on the presentation.

The Executive Mayor said the presentation was accurate and that her team was ready to respond to questions.

The Chairperson asked if any of the stakeholders present in the meeting wished to add anything to the presentation. There was no response to her call, and she asked the Committee Secretary to check if relevant stakeholders were present.

The Committee Secretary confirmed that the stakeholders were present, and that members from MISA had a few things to share with the Committee. He recommended that the Chairperson allow MISA to speak as its report was going to enrich the conversation on the Committee meeting’s agenda.

The Chairperson granted MISA five minutes to give an executive summary of its report.

Feedback Presentation on the implementation of the Regional Management Support Contract (RMSC) Programme in ORTDM by MISA

Mr Ntandazo Vimba, Chief Executive Officer, MISA, confirmed that his team had circulated a report on their work concerning the legacy report that was being discussed in the meeting. He outlined the functions of MISA and emphasised that it was concerned with the total turnaround of the municipality and not just matters of water and sanitation. He claimed that through the RMSC, MISA had done extensive work in the ORTDM.

Mr Lubabalo Luyaba, Engineer at MISA, took over the presentation. The RMSC under MISA at ORTDM commenced on 16 August 2017 and that it was planned to end on 30 September 2020. MISA identified challenges in infrastructure planning, infrastructure delivery, infrastructure operations and maintenance, financial health, technical capacity, and transversal functionality. Water and sanitation services were not optimally conducted, water access levels were low in some areas, revenue collection was not at a desired level, and information management was poor and needed immediate improvements.

In light of that, Mr Luyaba said MISA had identified support activities along six streams to deal with these problems: water and sanitation, facilities management (FM), human settlements (HS), human resources (HR), the office of the Municipal Manager (MM), and Budget and Treasury Office (BTO). The programme was designed to have Key Performance Indicators (KPIs) that would be used to objectively measure and quantify the impact of the programme and the improvement of the municipality: a percentage increase in municipal revenue from water and sanitation (W&S) services; improvement in the reliability of W&S services; Green Drop and Blue Drop Assessment results, and improvement in the Municipal Strategic Self-Assessment (MuSSA) scores.

Unfortunately, MISA did not get the results that it had anticipated. He argued that was due to systemic challenges prevalent at the ORTDM, among those being the scarcity of funds to execute the projects. Apart from that, he said substantial progress was made in the municipality, and that a lot of skills and knowledge were transferred to the ORTD officials. He concluded by recommending the Select Committee, together with other stakeholders, continue supporting the ORTDM because change took time. Although MISA had only served two and half years in the ORTDM, he projected that it needed five to six years of sustained support to realise its targets and to get to the root of the systemic challenges alluded to earlier.


Mr D Ryder (DA, Gauteng) thanked the ORTDM and MISA for the presentations. However, he said for a matter that big, the time allocated for the meeting was not enough. He expressed disappointment in some of the responses that were given by the ORTDM, particularly in respect of matters concerning governance. Considering that it had been two years since the oversight visit, he had expected a more assertive response. Claiming that the municipality’s monitoring mechanisms were relatively new was not convincing.

He requested clarity on the roles and functions of the district municipality. The model that was presented by Mr Matomela was different from what he was familiar with in Gauteng which underscored the fact that one size did not fit all in municipality models. He then asked what roles the district municipality played on behalf of the local municipality, especially in the allocation of electricity, water reticulation and treatment. He also enquired as to the percentage of non-renewable water at the ORTDM. The ORTDM presentation referred to internal reticulation projects. Were the projects for new or replacement reticulation? Did the municipality have any plans to deal with outdated reticulation in old infrastructure that was causing immense water loss? He asked Mr Matomela to provide further explanation about some of the challenges that the municipality faced when using MIG funds to replace old infrastructure.

Mr Ryder also expressed concerns on the issue around value for money. In situations like those, corruption was often the first thing that came to mind. Whether it was corruption on the side of the municipality or the contractor, he would not to comment. He suggested that Treasury had to comment on the presentation because the discussion seemed one-sided. As the approvers of the MIG, Treasury needed to indicate the extent to which it was comfortable with proceedings at the ORTDM, especially with regards to value for money.

Mr Ryder requested the names of the contractors that seemed to be recurring in many of the municipality’s projects. He asked whether the contractors were in the meeting. He further expressed concerns on the length of most projects at the ORTDM. Projects spanning six years were not ideal and that was among the root causes of the municipality’s financial problems. He suggested that contractors had to participate in the meeting to shed light on why projects were delayed. It was unacceptable for contractors to claim that they had run out of funds before the project was completed. That suggested fraud in the tendering system. How many were local contractors?

Finally, he asked whether the ORTDM had experienced people from labour forums who arrived at the work site and demanded 30% of the value of the contract.

Having outlined his concerns, Mr Ryder praised MISA and said it was a brilliant initiative. He wanted to know more about their works and achievements. In addition, he applauded Mr Matomela for an excellent presentation. He said his presentation was telling of the incredible grasp he had on his field. He asked to engage the Committee Secretary on a few proposals that he had on long- and short-term strategies to deal with water issues.

Mr M Moletsane (EFF, Free State) greeted everyone and thanked the presenters. He noted that on the AG’s Report said nothing about zero tolerance on non-compliance. He referred to the land conflict that the municipality had had with the community in the Libode Waste Water project. Since the ORTDM claimed that it was a people-centred entity, had the issue been resolved amicably? He also asked why women were not hired in that specific project.

The Chairperson agreed with Mr Moletsane that the question on the absence of women was a pertinent one. She requested an explanation as to why they had been excluded. How had the ORTDM’s projects impacted communities in its local municipalities? On other issues, she agreed with Mr Ryder’s suggestion that the Treasury had to engage in the discussion. She encouraged its representatives to prepare to answer questions. She asked the Committee Secretary if the Portfolio Committee of Finance, the Member of the Executive Council for Finance (MECF) and the Eastern Cape Treasury Department were present.

The Committee Secretary replied that it was difficult to tell because none of them had contacted him directly. However, there were representatives from National Treasury that were interested in commenting on the subject matter.

Before giving National Treasury the floor, the Chairperson noted that the Portfolio Committee from the Legislature in the Eastern Cape was not represented. The MEC was the same MEC for COGTA in the Eastern Cape. After weeks of discussing the issue with the Portfolio Committee, she expected an understanding of the severity of the situation. In light of the financial crisis that had befallen the ORTDM, she asked where the oversight body was? Oversight bodies did not support the municipality and they failed to execute their roles effectively. She was greatly disappointed by their absence and demanded an explanation for why they did not attend the meeting.

The Chairperson posed additional questions on the issue of escalating costs and requested more clarity. Had the municipality learnt any lessons from its experiences and had it any long-term plans to tackle some of the problems that were highlighted in the presentations? She agreed with Mr Moletsane’s point on consequence management and stated that there was a growing concern of rent-seeking among officials in government organisations. She lamented that they relentlessly abused state financial grants because they knew politicians were going to take the blame on their behalf.

Amidst the ORTDM crisis, the Chairperson said the communities anticipated delays in the municipality’s projects and they were aware of the misconduct of officials. The Executive Mayor was lucky to be in the Eastern Cape because her municipality was in proximity with the Nelson Mandela University which had a strong academic background on infrastructural development. She urged her to engage the University on matters discussed in the meeting.

The Chairperson asked if any penalties had been imposed on contractors who failed to execute projects due to claims of financial constraints. How did the municipality appoint contractors knowing that they did not have adequate resources for the project to be conducted by the contractor? Often the government was accused of sabotaging contractors by not paying them on time. Whilst there was some truth in this, she claimed government officials sometimes deliberately withheld the money in a ploy to force contractors to pay them. Such rent-seeking behaviour festered in government institutions because consequence management structures were absent.

The Chairperson asked if the unrest between the municipality and the Xilinxa community had been resolved. Gone were the days when a municipality gave the people what it thought was sufficient. In these times, it was important to engage the people. She pleaded with the municipal officials to close the gap between the community and the municipality because the ultimate purpose of the latter was to serve the former. Although she did not have much detail on how the unrest between the two parties had started, it was very likely that the municipality had done something without the community’s consent. On this matter, she reminded Committee Members and stakeholders that the people of South Africa were patient but their patience should never be taken for granted. All they want was to be engaged and their needs acknowledged.

The Chairperson asked the municipality what the Reconstruction Development Programme standards were on water and sanitation and whether the withholding of the R90 million by the Treasury was still an issue for the municipality. She requested the Treasury Department to comment on the matter because the Committee had to be informed why the municipality was being denied the grant. What roles did invited stakeholders play in dealing with the crisis after the previous oversight visit? Had ORTDM built any relations with those stakeholders? Of the projects that were underway in 2018 during the oversight visit, how many had been completed? If not, she demanded an explanation for the delays. Delaying projects had immense cost implications on the ORTDM’s budget and expenditure.

She asked the Committee Secretary how many of the invited stakeholders wanted to comment on the matter.

The Committee Secretary said that after the Treasury Department, the DWS and Amatola Water Board were present and recommended that the Chairperson granted them the opportunity to speak.

The Chairperson acknowledged their presence and mentioned that it had always been her wish for them to participate in the discussion.

Input by National Treasury

Mr Sello Mashaba, Director at the National Treasury Responsible for Conditional Grants and Monitoring, greeted everyone and expressed his appreciation for being invited to the meeting.

The Chairperson interjected and reprimanded him for his dress code. She said it did not represent the National Treasury.

Mr Mashaba expressed his sincere apologies to the Chairperson and Members of the Committee. He proceeded to describe his role at the National Treasury which included the granting and withholding of funds to municipalities in all provinces. He introduced his team that had been involved with the subject matter from the beginning. Together with his team, he had prepared for a presentation and a document from National Treasury was being circulated in the meeting. Due to limited time, he did not go through the presentation but commented on Mr Matomela’s meeting and responded to questions directed to the National Treasury.

Concerning the decision that had led to the withholding of the R90 million, Mr Mashaba stated that between 2016 and 2017, the ORTDM showed slow performance in terms of the expenditure of the MIG. It had an expenditure of R609 million which was reduced by R90 million to R519 million. This was because the municipality was not consistent in its reports on expenditure to Treasury, the projects that reported expenditure were not registered and the slow up-take in implementation. According to the provisions of the Department of Revenue Act (DRA), funds that were allocated in a particular year had to be spent in that specific year. The problem with the ORTDM was that projects that were not in the implementation plan for 2016 and in 2017 were reflected against the performance report. Consequently, the Treasury could not recognise those expenditures.

Mr Mashaba also explained that according to the DRA, municipalities had to go out on tender eight months prior to the financial year to allow them to implement their projects at the start of the financial year. Unfortunately, the ORTDM had delayed in procuring funds and its projects were stagnant. As a result, the Treasury decided to halt its funding. This meant that the ORTDM could not spend on projects even if they wished to because its projects were not awarded, and their progress not reported.

In response to the question on the role of the Treasury in the matter, Mr Mashaba said the Department worked hand-in-glove with the Department of Water and Sanitation (DWS) and Department of Cooperative Governance and Traditional Affairs (COGTA). He claimed the relations between the ORTDM and the National Treasury had improved tremendously as was evidenced by his communication with Mr Matomela and the municipality’s Chief Financial Officer on a weekly basis to discuss the financial issues and how the Department could support the Municipality.

Concerning whether the Treasury was happy with the current proceedings at the municipality, Mr Mashaba replied that that since the withholding of the R90 million, there had been 100% reporting on projects for the 2017 and 2018 financial year. It was only the 2019 and 2020 financial year that had reported less than 100% of the municipality’s expenditure. The Treasury had already received a roll-over request from the municipality and was assisting it in that regard. The changes suggested that the municipality had re-evaluated its project planning system because previously there had been problems in project management, project scheduling and project readiness. The outcome was that the ORTDM would present projects that were not ready for implementation and then commit money allocated under the provisions of the DRA which was limited to a single year.

In terms of value for money, Mr Mashaba replied that in 2016, the municipality had performed poorly in that regard and there were projects that were yet to be commissioned. It was impossible to talk about value for money in projects that took three to four year to be commissioned. In fact, that only resulted in escalations. However, with regards to the subsequent years, he assured the Committee and other stakeholders that National Treasury was comfortable with the municipality’s spending. He concluded that perhaps Treasury’s “unpopular” stance to withhold the R90 million was had borne fruit. Treasury was ready to resume its financial assistance to the ORTDM and was considering paying the outstanding R90 million. The withholding of funds was a temporary procedure that protected the fiscus in a particular year. When the municipality demonstrated that it was ready, the funds would be despatched to it.

National Treasury Budget Analyst for the Eastern Cape

Ms Matjatji Mashoeshoe, Budget Analyst, Eastern Cape at National Treasury, explained that she provided budget analysis and financial reporting support to the district municipalities in the Eastern Cape. She said the financial health of the ORTDM was very fragile because it had adopted a budget with a surplus of R40 million. She said the Treasury Department was concerned about the municipality’s low collection rate which was 61% for the 2018 and 2019 financial year. That placed the municipality at high risk as it was projected that it would struggle to meet its financial obligations in the future and compromised the district’s financial viability for funding.

According to the AG’s report, Ms Mashoeshoe said the ORTDM’s financial governance was in distress. She referred to the Audit Action Plan that was developed by the AG to address the municipality’s delay in adopting recommendations by the AG but it also did not yield positive results. She noted that there was a reduction in the level of Unaccounted for Water (UFW) from the irregular expenditure which was reported to be R1.4 billion in the 2018/2019 financial year from R3.2 billion in the 2017/2018 financial year.

She stated that the institutional dynamic of the district was fragile because the administration of the municipality was under the administrative leadership of the Acting City Manager. The Municipal Manager (MM) had been suspended on 17 June 2020. She commented on the high wage bill in the municipality and the excessive use of consultants. These were not ideal for the financial health of the municipality. Regarding the mandate of the “Ntinga entity”, she claimed that there was duplication of duties between the entity and the district municipality. She said the district struggled to implement reform and that in terms of service delivery there had been a decline in the targets that were met in the 2018/2019 financial year compared with previous years. She also said water loss was a huge concern because it was unaccounted for and was made worse by the fact that the district municipality did not have a long-term strategy to deal with it.

Ms Mashoeshoe said the Treasury Department had made recommendations to the municipality. It had advised the ORTDM to implement a moratorium on recruitment to reduce the strain caused by the existing high wages bill and excessive use of consultants. She said although the municipality had implemented its revenue collection strategy, “The Billing of Peri-Urban Areas”, very little progress has been recorded. That also applied to the work done by the debt collector which had yielded very little in the way of results. Given those challenges, Treasury advised the municipality to devise strategies to collect revenue during the COVID-19 pandemic. The district already had a very low collection rate, and this had the potential to drop further during the pandemic.

The Eastern Cape Department of Water and Sanitation (DWS) and the Amatola Water Board

Ms Portia Makhanya, Provincial Head for the DWS, Eastern Cape, introduced the Amatola Water Board team that was with her. On behalf of the DWS, she said the intention in participating in the meeting was to respond to issues that had been raised in the meeting, not to provide specific input. Although the role of DWS was not explained extensively in the presentation, she said that it was in the value chain. Apart from providing infrastructural support, it monitored the municipality’s grants.


She mentioned that the ORTDM was in a rural area which had a very rocky geological structure which contributed to its challenges. Despite those challenges she said DWS dealt with municipalities according to their needs by taking stock of their challenges, quantifying their backlogs and finding strategies that operated within the funding that was allocated. She also mentioned that DWS was part of the ORTDM’s District Development Model (DDM) and they were heavily involved in that programme.

In light of the municipality’s challenges, Ms Makhanya lamented that soon people and animals were going to compete for water due to the municipality’s backlogs and irregular funding trends. To overcome the constraints of operating along the per year allocation of funds, she suggested that the municipality could engage relevant departments at the Nelson Mandela University for sustainable delivery models for its projects.

She said that the Presidential Intervention Project in the ORTDM faced negative publicity in the media and that DWS was engaged with both the provincial and the National Treasury to address the issue. In monitoring grants, she said DWS operated under Schedule Five. Here funds were advanced to the municipality that had appointed Amatola Water Board to implement on its behalf. She said there were quarterly evaluations and site visits on the municipality’s projects. Reports were derived from those expeditions and sent to the Treasury as specified by DRA. She confirmed that the ORTDM was complying with those provisions.

Ms Makhanya shared Mr Mashaba’s observations on the municipality’s poor performance and stated it was the reason why DWS also withheld funding to the municipality. She said the main issues affecting performance were the procurement of resources, delay in projects, and the misalignment of costs and feasibility of projects. On delays of projects, she explained that the money that the municipality received did not correspond with its projects which forced it to work on a stringent budget, thereby compromising the targets that were set for project completions. On the last point, she explained that the ORTDM’s projects lasted for several years and that accumulated costs. She said that one would not expect a project from 2012 to operate under the same budget in 2020. She also recommended that funding departments closely monitor their grants to improve project implementation.

She mentioned that there was a lot of non-compliance in terms of pollution. At one time 20 out of 23 pump stations in the Umtata River were not working. That was resolved by the Presidential Intervention project.

The Chairperson thanked Ms Makhanya for her detailed response and asked officials from the ORTDM to respond to the issues that were raised in the discussion.

Further responses


The Executive Mayor responded to the Chairperson’s enquiry on the conflict between the Libode Community and the municipality. She said there had been unrest about a land claim, but it had been settled. A much deeper conflict was with the Community Property Association (CPA). The Association claimed that the land on which the municipality was conducting its projects belonged to them. It demanded that the municipality build a hall for them. After some time, this issue had been resolved, and the projects resumed. However, even after reaching a consensus with CPA, the Association demanded that all people working on the municipality’s project in that area had to come from Moyeni. The municipality had continued to engage them until the matter had been completely resolved.

In response to Ms Mashoeshoe’s question, Mr Matomela said the municipality did not have a single consulting panel. It so happened that the Select Committee visited the King Sabata Dalindyebo Presidential Intervention (KSDPI) area where GIBB Consulting was the main consultant. He assured the Committee that there were more consultants. On the question about Variation Orders (VOs), he explained that the ORTDM was committed to limiting them in its projects. However, although they had been successful in that regard, VOs were inevitable in certain projects. The Mangxamfu project was a good example as the presentation clearly illustrated how the scope of the project had changed.

Mr Matomela acknowledged Mr Moletsane’s observation on the absence of women in one of the projects. He assured him and the Committee that measures would be taken to avoid such disparities in the future. He confirmed that the municipality included penalties in the contracts it signed with consultancies. Those were drafted in line with the guidelines of the Construction Industry Development Board (CIDB). However, he acknowledged that there were unavoidable instances where projects had to be extended, so the use of the contractual clauses instrument in the contract was conditional.

Mr Matomela responded to the question on the municipality’s public participation. He said that it was one of the ORTDM’s fundamental principles as evidenced by the existence of a committee of facilitators, the Institutional and Social Development Committee, that was charged with engaging the public. However, he mentioned that despite those efforts, political issues that overlapped into the social sphere strained relations between the municipality and the public. He referred to the case of Xilinxa where people who were protesting for electricity had vandalised the municipality’s project site. He said it was unfortunate that the municipality’s projects suffered because the community wished to put pressure on government leaders through vandalism.

He confirmed that the municipality’s projects were conducted according to the RDP standards. He said there were certain committees within the Implementation of Intergovernmental Relations (IGR) that evaluated every project in the municipality to ensure that they complied to the RDP standards. In addition to implementation of projects, Mr Matomela said the municipality had devised new mechanisms of planning. Before implementing a project, the municipality planned to ensure that the land where the project was located did not belong to any entities. That would help to limit VOs on projects.

Mr Matomela reiterated Mr Mashaba’s and Ms Makhanya’s points on IGR. He claimed that the municipality had good relations with various governmental entities like COGTA, the DWS and Treasury and the ORTDM consulted those departments on every project it conducted. He said the municipality had a structured Project Management Unit (PMU) to ensure that projects were implemented with great precision.

Finally, he responded to questions on incomplete projects and explained that if the Committee looked closely, they would notice that there were no costs associated with the delays on the projects because the municipality had that in control. Other issues on the ground, as discussed above, were main causes for the delays and the municipality was working earnestly to resolve them. In reply to Mr Ryder’s question on the existence of people who appeared on construction sites and claimed 30% of the value of the project contract, he stated that it was a national issue and a serious setback in the implementation of projects. However, despite the challenges, he assured the Committee and other stakeholders that the municipality was committed to engaging the relevant entities to resolve those issues.

The Chairperson thanked Mr Matomela for his responses.

The Executive Mayor indicated that the ORTDM Chief Financial Officer wished to comment on the matter.

ORTDM Financial Response

Mr M Moleko, Chief Financial Officer, ORTDM, greeted the Committee and invited guests. In response to the questions on unaccounted water loss, he explained that in the last financial year, 2018/2019, the municipality generated 15.8 million units but billed 10.8 million units. He said the remaining balance was unaccounted for. As part of the solution, he said the municipality planned to place bulk meters in all areas to achieve accurate measurements.

Mr Moleko noted that the ORTDM had received an extension from the AG to submit their financial statements by the end of October 2020. This gave them time to resolve issues that the AG had raised in the 2018/2019 financial year before the 2020 audit. In conclusion, he attested to what other speakers said on the status of the ORTDM. He said the municipality had frank and sound relations with relevant government bodies and that they were working together towards finding solutions for its problems.

The Chairperson thanked them for their responses. She suggested that MISA respond to some of the questions that had been posed to them.


Mr Vimba responded to Mr Ryder’s enquiry on MISA and said although he was not going to dwell much on the operations of MISA in that meeting, he was happy to do so if invited to present to the Select Committee in the future.

In response to the question of water losses, he referred the Committee to a document circulated by MISA which outlined the ORTDM the water balance report for the 2018/2019 financial year. It detailed the non-revenue waters, technical losses as well as commercial losses. He explained that according to this report, the ORTDM had 68% non-revenue water. Of this percentage, 35% was loss due to leakages and the rest were commercial losses.

Further discussion

The Chairperson thanked the ORTDM and MISA for the responses. She agreed with Ms Makhanya’s point that operating in a rural environment like ORTDM was difficult but emphasised that it was important to persevere through such limitations.

She requested the AG to comment on the status of the municipality and the outcomes of the latest financial statements. She asked if the municipality was improving, stagnating, or regressing. She asked if there was a plan to mitigate the issues that were raised by the Auditor-General.

The Chairperson followed up with Ms Matjatji on the suspension of the municipality’s MM. She asked how long the municipality would be operating without the services of an MM and whether the matter had been resolved.

She opened the platform to other Committee Members.

Further discussion

Mr Ryder said he was not comfortable with the outcome of the meeting because there were no representatives from the Committee that had conducted the oversight in 2018 and that was made worse by the less than detailed presentation by Treasury and the fact that the AG had not said anything.

He was concerned about the systemic problems that were highlighted in the meeting and suspected that they were on a bigger scale than presented by the speakers. He was not convinced by the response to the power dynamics between the district and local municipalities. Having said that, he argued that the biggest systemic problem in the municipality was contractors who did not deliver on time and that could be resolved by reviewing the terms of the contracts.

Mr Ryder said that the ORTDM was not alone in this problem. Many municipalities had similar problems with the same contractors that were responsible for projects in the ORTDM. He recommended that municipalities and other government entities check the track records of those companies. That would shed light on the “serial offenders” and contractors who did not complete projects on time. He pointed out that MISA had a bird’s eye view having worked with various municipalities in the country. It would be ideal for them to take the lead in such a venture.

The Chairperson responded to Mr Ryder’s observation. On the contrary, she believed the meeting had been fruitful. She acknowledged the limitations that Mr Ryder had raised but pointed out that progress was being made by getting feedback from the ORTDM and relevant stakeholders.

She invited Members of the Committee to share their views once more.

Mr Moletsane replied that he was satisfied.

Ms M Mamaregane (ANC, Limpopo) said she had no comments.

The Chairperson asked if Mr Du Toit was present.

Mr S Du Toit (FF+, North West) responded that his concerns had been covered.

The Chairperson asked if Mr Z Mkiva (ANC, Eastern Cape) and Mr E Njandu (ANC, Western Cape) wanted to comment.

The Committee Secretary said they had exited the meeting, potentially due to technical problems with the virtual meeting application.

The Chairperson requested more comments.

Mr Ryder suggested that in the future, when conducting oversight visits, the Select Committee could compare projects carried out successfully in specific municipalities with those that were being conducted poorly. That would help to identify what was working and what was not.

The Chairperson agreed with his observation but noted that the meeting focused on the ORTDM. Moving forward, his idea was worth considering. She asked if the DWS had any comments on the issues that were raised.

The Department did not respond, but the Committee Secretary announced that there were a few hands up.

The Chairperson permitted them to comment.

Further responses

The Department of Cooperative Governance and Traditional Affairs

Ms V Mabitsi, Senior Manager, COGTA, greeted everyone and explained that she was responsible for the MIG in the Eastern Cape. She mentioned that the visit of the Committee in 2018 was a result of the stopping of the funds for ORTDM by Treasury. Since then, she confirmed that COGTA had seen a great improvement of the municipality’s compliance in accordance with the MIG.

In response to Mr Ryder’s question on the criteria of MIG funding, she said MIG was not limited to new projects but extended to existing projects and the refurbishing of old infrastructure.

She reiterated that since 2018, the IGR had improved tremendously in the district. She said the provincial COGTA, Treasury, and MISA were working closely with the ORTDM to guide project implementation and monitoring.

She mentioned that MISA had appointed a full-time engineer in the municipality because planning had always been a challenge for the ORTDM. Therefore, a readily available engineer brought significant improvements in that regard. She praised MISA for that and said the delays in projects were a result of challenges with packaging, planning, preparation, and sequencing. All the issues had been resolved by the package MISA offered to the municipality.

Ms Mabitsi pointed out that since 2018, COGTA, together with the previously mentioned stakeholders, had devised a process of verification to mitigate the problem of delayed projects. She said that every invoice that the municipality received was verified to ascertain whether the targets of the potential contractor were practical, financially viable and feasible.

Finally, Ms Mabitsi suggested that the municipality had to adopt a focused approach to its projects. The funding allocated to the municipality was very small, yet it had big projects. Instead of spreading the limited funding across all the projects, she suggested the ORTDM focus on a few projects at a time then move on to the others and so complete projects on time.

National Treasury

Ms Mashoeshoe stated that the ORTDM MM had been suspended on 17 June 2020 in response to the Chairperson’s question. However, Treasury was not informed of the duration of the suspension. Clarity could only be obtained from the district itself.

The Chairperson thanked her response and requested the AG to make comments but the AG was not represented in the meeting.

The Chairperson then requested the ORTDM Acting MM to make his comments.


Mr F Mphako, Acting MM, ORTDM, greeted everyone in the meeting.

The Chairperson interjected in isiXhosa suggested that he should switch on his camera. She was strict on activating cameras in the meetings as the meetings would be played again elsewhere. As a result, it was important to ensure that the Committee Members and participants were visible in live footage.

Mr Mphako responded to the Chairperson’s enquiry on progress in the municipality, saying that there had been no improvements in the past three years. He said that although the municipality had not regressed, it remained in the qualified column in the audit report. Irregular expenditure was the main reason for that position. To overcome that, the municipality was implementing a Management Action Plan.

He pointed out that most findings in the AG’s report evolved around the constitution of bid committees. The bid adjudication committees were not constituted properly. The municipality did not have a supply chain management practitioner and the number of Senior Managers was not in accordance with regulations. He said the municipality had resolved those issues by reconstituting bid committees according to recommendations and regulations. He said the municipality, under the guidance of Treasury, was in the process of implementing its Management Audit Plan. The measures were anticipated to propel the district municipality to the unqualified column in the audit report.

The Chairperson thanked Mr Mphako for his comments. She asked the Executive Mayor if Mr Mphako realised the power that was on his shoulders. She said he had been requested to switch on his video, but had continued with it off. She asked if it was a form of defiance, especially after she had explained why she was asking Members and participants to switch on their cameras.

Closing remarks

The Chairperson thanked everyone who had taken time to participate in or witness the meeting. She acknowledged the stakeholders that were present.

She made her last comment on the limitations of operating in a rural environment like the ORTDM and assured the officials from the municipality that she related to their struggles. She acknowledged that the Eastern Cape had been negatively represented in the media and that the municipality was accused of things that were not in their control. Considering this, she encouraged them to continue working for the good of their communities.

She emphasised that everyone should take care of themselves amidst the ongoing pandemic. She said Members of the Select Committee had to remain to deal with the minutes.

The Committee Secretary interjected and said given that the meeting had exceeded its time allocation, he was not sure if it was still being recorded. He said there was no one from IT who could assist them with an extended recording.

The Chairperson replied that she could see the recording icon which indicated that the meeting was still being recorded. She suggested doing two of the four sets of minutes.

Committee Minutes

Mr Du Toit said if the Committee was going to adopt the two sets of minutes, the Committee had to remember that the minutes on drought relief had a pending amendment.

The Chairperson suggested he communicated those amendments through the Secretariat.

The minutes of 30 July 2020 and 26 August 2020 were adopted with no amendments or objections.

Closing remarks

The Chairperson thanked the Committee Members for their time and dedication.

Meeting adjourned.

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