S139 interventions in Limpopo Province; Follow-up meeting with Polokwane Local Municipalities

Meeting report

Opening Remarks of the Chairperson

The Chairperson indicated that the meeting would be focused on the post audit report on the Mogalakwena Local Municipality (MLM) and intervention there. The meeting was overdue. Prior to the 2016 local government elections, the Limpopo Provincial Executive Committee (PEC) had invoked Section 139 of the Constitution to intervene in the following municipalities: Thabazimbi Local Municipality (TLM), MLM, Modimolle/Mookgophong Local Municipality (MMLM) and the Fetakgomo/Greater Tubatse Local Municipality (FGTLM).  

MMLM had obtained a disclaimed audit opinion for a third consecutive year. The municipality’s 2019-2020 Covid-19 special adjustment budget had been tabled and adopted for the 2021 financial year. This budget was unfunded. In addition, its debt to Eskom, as at the end of June 2020, amounted to R500 million, without any repayment arrangements being in place. The municipality was among the top ten contributors, nationally, to fruitless, irregular and wasteful expenditure because of Eskom interest penalties amounting to over R50 million.

The Committee was concerned by the wasteful expenditure incurred by the municipality. This raised flags on the effectiveness of the intervention in the municipality – which had since been terminated – as it was expected that, post-intervention, the situation would have stabilised. 

The Committee had visited Fetakgomo/Greater Tubatse Local Municipality the previous year, as part of its oversight visits. Among the observations made by the Committee were the simmering tensions between the labour force and the municipality, and the municipality’s poor handling of the situation. Much of the tension emerged from the pay differences among employees on the same salary grade, as a result of the amalgamation of the two municipalities. The Committee was concerned by the impact of the amalgamation on the functionality of the newly merged municipality.

Both Modimolle/Mookgophong Local Municipality and Fetakgomo/Greater Tubatse Local Municipality were new formations resulting from the 2016 demarcation process. The Committee was certain that the Section 139 interventions resulted from the challenges caused by the amalgamations. A meeting had been scheduled between the Committee, the Department of Cooperative Governance and Traditional Affairs (COGTA), National Treasury and the South African Local Government Association (SALGA) on the amalgamation of municipalities. The meeting would take place on 13 November. She extended an invitation to the Limpopo Province’s MEC responsible for Cooperative Governance, Human Settlements and Traditional Affairs (DCGHSTA) to attend the meeting to share the experiences of the province.

Part of the reason why the Committee had decided to conduct an oversight visit at Thabazimbi Local Municipality was because it had obtained consecutive audit disclaimers. This was mostly due to the late submission of its annual financial statements and the fact that it had been operating on an unfunded budget since 2016. There was also serious litigation, amounting to hundreds of millions of Rands, which the Committee was concerned could become a breeding ground for fictitious and fraudulent claims. Members wanted to be informed on whether the intervention there had assisted in resolving these problems.

Earlier in the day, the Committee had had a follow-up meeting with officials from the Polokwane Local Municipality, as resolved at a meeting on 1 September 2020. During the course of the meeting, the underlying challenges experienced by the municipality had been discussed.

Discussion

The Chairperson opened the floor for discussion on the Mogalakwena Local Municipality.

Mr H Hoosen (DA) said that while he had noted progress in the municipality, the situation there was still concerning. The fact that it had been put under administration illustrated that there had been an attempt to regain control over the municipality and to return it to normality. Since the Committee’s last visit, there had been several questionable incidents which did not inspire confidence that the officials were improving the situation.

The report indicated that R62 million was spent on Covid-19 related expenditure. However, he was concerned that the report did not provide further details on this expenditure. While he understood that the municipality needed to procure water tankers to provide water to the various communities during the Lockdown, he did not understand why it had spent R58 million contracting seven companies. It was indicated on the slide that showed Covid-19 expenditure, that the municipality relied on a database of existing contractors. The bulk of expenditure was on the procurement of water tankers, which relied on deviations and quotations, and he found this to be suspicious. With the municipality’s drought and water shortages, he was surprised that it did not have a set of contractors it could rely on consistently. He asked whether there was an existing database of service providers for water tankers. If the answer was yes, why had they not used those contractors, instead of the seven listed companies? In addition, he asked if the officials could provide a written submission on the money spent on Personal Protective Equipment (PPE).

Mr Hoosen referred to a controversy about the qualifications of the former Deputy Manager of Corporate Services at the municipality, Mr Jabu Mashamaite. He asked whether the matter had been investigated. If it had been, what was the outcome? When the municipality appeared before the committee previously, concern was raised about the pending investigation. There were allegations that there had been an attempt to withdraw the disciplinary proceedings, which the new Middle Manager refused to do. As a consequence, she was then placed on leave for three months. A report on the matter showed that the disciplinary procedure had been finalised and Mr Mashamaite had since returned to work. Given the circumstances, he was interested in what had occurred during the hearing. He asked whether the disciplinary charge had been withdrawn. Had the municipality implemented the remedial actions recommended by the Public Protector?  

It had been reported that the municipality was short on funding, more specifically funds required for the provision of water. During the lockdown, many of the schools did not receive a proper supply of water. The explanation from the municipality was that it did not have sufficient funding and that the Department of Water and Sanitation had to cover the costs. If the municipality was short on funds, how was it able to afford spending R200 000 to hire a Mercedes Benz for the Mayor – as per a media report. With the shortage of funds, such an act should not be seen as appropriate by the leadership of the municipality. He asked why the Mayor had rented the vehicle. In addition, what was the full amount spent and how long was it rented for? He also asked whether the DCGHSTA was aware of this allegation. He suggested that the municipality should look to recover the money if the expenditure had gone above the upper limits for the Mayor's spending on vehicles. 

He touched on a recent court ruling by the High Court on a security tender in the municipality. It was a civil matter between two security companies which were providing services to the municipality. In the court papers, it was indicated that the owner of one company had defrauded the municipality and had inflated invoices by 40 percent. One of the findings by the High Court was that the owner of the company had lied to the court. In a previous sitting, Mr Mashamaite had confirmed that he had links with the owner of the same company. He asked whether the DCGHSTA was aware of the matter. If so, had it taken any action? If the department was not aware, could it provide an undertaking that it would get to the bottom of the matter? It was of concern that an official in the municipality had links with the businessman. 

45 % of the municipality’s wage bill was spent on financial departments, which was quite high. He asked if the department had looked into this matter. He was concerned about the municipality’s 2018/2019 audit outcomes, where it was indicated that R54 million had been spent on consultants’ fees.

He asked for an update on whether the Mokopani Sports Complex had been completed. The municipality had spent R25 million on it, yet it had not been completed.

Ms M Tlou (ANC) asked what remedial actions were taken to improve the municipality’s ability to report timeously, as required by the regulations.

She directed her next question to SALGA. She asked what it had done to deal with the high absenteeism and lack of discipline of some officials in the municipality – and the lack of consequence management in this regarde. 

Mr G Mpumza (ANC) said that in the previous meeting with the DGHSTA, he had raised his concern about their belated section 139 intervention in the municipality. He pointed out that the monitoring and support provided by the MECs responsible for the Treasury and the DCGHSTA were enhanced by the provisions in the law, in particular, the section 71 and 46 reports. He asked whether the two departments had monitoring and support capabilities in assessing the section 71 and 46 reports, to ensure that they were in a position to intervene in municipalities before the situation regressed.

In the report compiled by the MEC, through the Director-General (DG), there was an indication that the intervention focused on the areas of sound labour relations and sound financial management. However, in the report compiled by the Municipal Infrastructure Support Agent (MISA), it was indicated that the municipality had slow supply chain processes. He asked whether the challenges raised by MISA related to pre-intervention or post-intervention periods. If they related to the latter, why had the supply chain processes still not improved?

The DG had indicated that the labour relations were improving. Was his assessment correct?  

It had been mentioned that the DCGHSTA forensic reports were tabled to the Municipal Council on 25 August. How many were outstanding? In addition, what costs did the municipality incur in commissioning the forensic investigations?

In its report, the MISA mentioned that drought and water security posed a serious challenge to the municipality. With this information, the municipality had prioritised only one water project as part of its interventions. He asked the municipality to explain why it had failed to prioritise procuring water services.

The same report also mentioned that the appointment of Mr Mashamaite to a higher position was irregular. He asked what steps had been taken to recoup the money spent on Mr Mashamaite’s higher salary.

The municipality reported that in the current financial year, it incurred R613 million irregular expenditure. He asked the municipality to explain how much of that amount had been written off. Further, what consequence management had the Municipal Public Accounts Committee (MPAC) recommended to the Council, for it to recoup the money? 

Ms P Xaba-Ntshaba (ANC) mentioned that several land claims had been lodged with the government, through the municipality. She asked how many claims had been finalised. In addition, what was the impact of land claims on spatial development in the municipality? Had there been land invasions in the municipality since the outbreak of Covid-19? Could the municipality inform the Committee about how much land they had set aside for both residential and industrial purposes? She indicated that in 2016, the municipality had gazetted a land use scheme.

The Chairperson asked how much of the R613 million irregular expenditure had the Council condoned. Furthermore, how much of the R2.3 billion in irregular expenditure incurred in the previous financial year did the Council condone?

A technical services employee in the municipality had been on suspension since 2018, for the theft of diesel. After two years, a sanction was still outstanding. She asked why the municipality had not finalised a case that was unsophisticated. In addition, she asked how many other employees were still under suspension without receiving a sanction. 

According to the municipality, the Public Protector’s report had been implemented. She asked if it was correct that Mr Mashamaite had reverted to his original position. To gain an understanding of the gap in salary between the two positions he had occupied, she asked what the title of his previous position had been. In her report, the Public Protector found that his employment in his previous position was irregular, as he did not have the required qualifications. She was concerned that only the MEC’s report contained details on this matter and not the municipality’s report.

She asked Councillor Rassie Maepa to make his remarks.

Cllr Maepa indicated that he was a member of the Executive Committee (Exco) of the municipality. He added that several of the issues he would raise had been raised in previous Exco meetings. On the first issue, he said that the administrator appointed to manage municipal matters had not assisted the municipality and had in fact sowed more confusion. For instance, in July both Exco and the Council began preparations for the final Integrated Development Plan (IDP) document. In the draft document, the municipality recorded 619 employees on its final organogram. However, the final IDP indicated that there were 919 employees on the organogram. No explanation was provided by the leadership as to why this had occurred without following due process. The matter had been raised with the head of the intervention team, and he had yet to respond.

Referring to the water project that was secured through the Covid-19 emergency procurement, he said that he had written a letter to the municipality, asking how they had spent R62 million on one project. This amount should have funded enough projects to provide water security in the municipality. He accused officials of inflating the prices of the procurement. He alleged that one of the companies was paid R2.7 million per month for its services. He asked that the leadership investigate the matter. He raised his concern that the leadership did not want to be held accountable.

He explained that the mandate of the administrator was to promote sound financial management. As the head of the intervention team, he should have a say in the procurement of such services. He assumed that the administrator must have been involved in signing off of the project and added that this action had led to many councillors questioning the administrator’s purpose in the municipality.

He indicated that the matter of Mr Mashamaite was still under review, as per the court order. The administrator had played political games in the matter, as Mr Mashamaite’s disciplinary proceedings were concluded in two weeks, allegedly, while the proceedings for other employees had not been finalised.

The Council and its committees were still meeting beyond the scheduled calendar of the municipality, which was approved by Council in July. On 29 October, the Council met to submit its final financial recovery plan and its budget recovery plan. This matter did not pass through the Portfolio Committee for Finance - instead it went straight to the Council. Due process had not been followed. He alleged that the administrator had not intervened.

He also alleged that there had been open interference by the MEC for the DCGHSTA and that in certain cases, he had even attended Council meetings.

He asked whether there were requisite skills present in the municipality’s Project Management Unit (PMU).

Absenteeism of members of the PMU had been a challenge. He asked if the matter had been elevated to the MM and what her response and that of the administrator had been.

He pleaded with the Mayor to invite fellow councillors to the discussions she had with the MEC for the DCGHSTA. He also asked that in future, the DCGHSTA verify its information before it released a report, as it had inaccurately mentioned that the situation in the municipality had improved.  

He was confused as to why the DCGHSTA had sought legal opinion on the exoneration of the MM It seemed that there had been a contestation of power between the administrator and the MM. He alleged that the administrator wanted to be above the Council.

All other details on his complaints would be provided in writing to the Committee.

Mr B Hadebe (ANC) said that in the earlier meeting, the Deputy Director-General (DDG) made it seem as if the affairs of the municipality were in order. As the financial recovery plan had been adopted – as per the report – he asked for a synopsis on the objectives of the plan and when it anticipated that the inputs would make a change. 

The Committee had learnt over the years to be more proactive in continually assessing the progress of interventions. This had strengthened their oversight capabilities.

Referring to the remedial action recommended against Mr Mashamaite, he asked whether all the recommended remedial actions by the Public Protector had been implemented.

He asked how long it would take for the municipality to have a fully funded budget.

Responses

The Executive Mayor of the Mogalakwena Local Municipality, Ms Andrina Matsemela, clarified that the Council had accepted the terms of the intervention set by the  Provincial Executive Committee (PEC)., The officials had seen significant progress since the administrator began his work in the municipality, and all the achievements could be found in the two separate reports. She expressed her confusion on why some councillors had not accepted the work done by the administrator, when Council as a whole had accepted the terms of reference.

The municipality had seen progress in its ability to institute consequence management, ever since the administrator and his team had been there.

She denied the allegations that both the MEC and the administrator were conniving with other councillors.

She said that she would write a detailed report on the Council's view on the administrator’s work in the municipality.

The Speaker of Mogalakwena Local Municipality, Mr Samuel Mathebula, said that the Council was comfortable with the process of the interventions made by the provincial government. The administrator had worked in line with the terms of reference.

Several councillors had struggled to partake in ward committee meetings because they did not have an understanding of how to use their devices. However, the Council is continually assisting them to get up to speed.

One of the examples of the municipality’s progress since the intervention was that the Council had been better able to adopt itineraries for its meetings.

He clarified that Mr Mashamaite had reverted to the position of Building Caretaker – he previously served as the Deputy Manager for Corporate Services.

The municipality had implemented almost all remedial action recommended by the Public Protector and the judicial review. It had gone even further and instructed the Municipal Manager (MM) to implement section 32 and section 137 of the Municipal Finance Management Act (MFMA). This would ensure that all officials who had formed part of Mr Mashamaite’s irregular promotion would be punished. 

The Head of the Intervention Task Team, Mr France Boishelo, said that the team welcomed the constructive criticism received during the course of the meeting. The intervention team relied on the capacity of senior managers and officials to conduct their work efficiently.

Since the arrival of the intervention team, there had been improvement in the municipality’s financial management. For instance, the Council was no longer paying suppliers who did not perform their tasks. Both the MISA and internal auditing had assisted in improving its management ability.

He went on to explain why the municipality had spent R62 million on one water carting project. He mentioned that when the municipality received invoices for the project, it was required that the Council sign off that the trucks had indeed delivered the goods. It then had to assess whether the signatures and the kilometres indicated on the invoices were reasonable. The municipality had issued another tender for water carting and would ensure that the rates agreed with the service providers would be reasonable. Currently the rate was R27 per km, which was too high. There were 176 villages in the municipality and most of them were far apart. On average the service provider had five trucks and due to the distance, the municipality had been charged an exorbitant amount. He had recently requested internal auditors to audit all of the Covid-19 invoices, to ascertain whether the amounts paid were reasonable.

Referring to why he had requested a legal opinion on the matter involving the MM, he first mentioned that the terms of reference indicated that he must sign off on all reports that were tabled in Council. This was to ensure that they complied with the legal prescripts. The report that had led to the suspension of the MM had not been processed properly. He had been part of the team that raised the allegations mentioned in the report. As a result, he was meant to be interviewed, but this did not occur. In his initial allegation report, he mentioned people who had interfered in the supply chain process; however, they were also not interviewed. The report was submitted without the portfolio of evidence (POE). As the report had not been processed properly, he sought a legal opinion to ascertain whether the procedure had been fair.

Several key performance indicators needed to be finalised, such as job evaluation and the organogram. Extensive consultation between several stakeholders was required to finalise the organogram. This was done to prevent the labour union from rejecting it. He was pleased that there had been progress in both indicators. The municipality had to now ensure that it finalised the placement policy, as the right people needed to be placed in the correct positions, so that they could be optimally used. This would ensure that there was continuity and stability in the municipality.

The Council had approved the financial rescue plan. This plan had two phases: rescue and stabilisation.

The Council had recently received a report from the task team, indicating that it had reviewed the Annual Financial Statements (AFS) and provided recommendations that would improve on the errors found. However, not all the advice was taken by the Council. The intervention team was concerned about this and believed that in the future there would still be errors in the AFS. The intervention team did not believe that 12 months was enough time to ensure the stabilisation of the municipality.

Section 139 was invoked because there had been project stoppages and non-payment of contractors. However, the team believed that a service delivery War Room should form part of the terms of reference, to fast track the delivery of services to the public.

The Chairperson indicated that the question on irregular expenditure had not been answered.

Mr Boishelo said the question would be answered by the Chief Financial Officer (CFO) or the finance officials in the task team.

The Chairperson asked why the municipality had incurred R631 million in irregular expenditure. What actions had been implemented to address the matter? He said he had asked the head of the intervention specifically, as he would have had to sign off on the documents.

Mr Boishelo said the Municipal Public Accounts Committee (MPAC) was supposed to have submitted the reports to the Council the previous week. However, he was ill at the time and could not verify whether the documents had been submitted.

The Municipal Manager (MM), Ms Beverly Gunqisa, said the Council had looked into the report prepared by the MPAC and it was agreed that the Audit Committee would look at all unauthorised expenditure from the 2014 to 2017 financial years. It had decided that the money would be written off. Council had decided to write off all unauthorised expenditure for the 2017/2018 financial year. All unauthorised expenditure in 2018/19 had not been written off, as the MPAC did not have access to several of the required documents. Many of the documents had been requested by the law enforcement agencies. 

The Head of Department (HOD) of the Limpopo DCGHSTA, Ms Ngaka Dumalisile, referred to the question on the Mokopane complex. She said that the official involved had been suspended and his car had been confiscated by the police investigative unit, the Hawks. The department had received information that he had since left the municipality. It would follow up with the municipality on whether it had started the processes to recoup the money.

Referring to the point made that the presentations made by the MISA and the department had contrasting information, she said that MISA’s intervention occurred before the provincial government’s section 139 intervention. The department had already picked up that the supply chain management (SCM) process was slow and that was why it had formed part of the key performance areas for the administrator. 

Five forensic investigations had been conducted over a number of years. When the department looked to table them before the Council, it was aware that the recommendations in the reports had been tabled to previous administrators. The department could not locate the records and the Council’s resolutions and as a result, the reports had to be re-tabled, except for the one report that was conducted by the KPMG auditing firm. The department would follow up on what had happened.

Mr Mashamaite had been suspended for two weeks before the intervention and his suspension had resulted in conflict between the MM and the Council. Some of the recommendations in the Public Protector’s report had since been adopted and implemented by Council. One of the recommendations was to reverse his appointment as Deputy Manager of Corporate Services. The other was to recover the salary that he was paid during his tenure. The process of recovering the money was initiated by the former MM. 

On the confusion the administrator was said to have caused during the finalisation of the organogram, she said that this had not been brought to the attention of the department however it would follow up with the complaint made by Cllr Maepa. The department would also attend to the requested investigation into payments made in the water carting project.

Referring to the legal opinion sought by the administrator, she explained that the administrator wrote to the Mayor about his discomfort with the process to remove the MM. He then wrote to the MEC, to whom he reported directly, raising the same issues. Subsequently, the Mayor then also wrote to the MEC, requesting him to intervene in the matter and saying that she was also dissatisfied with the process. The MEC decided to seek legal opinion, to determine whether the processes were proper. Once the opinion was received, the matter would first be presented to Exco and the Political Management Team (PMT) and then to Council.  

Before the DCGHSTA discussed the allegations levelled against the MM with the municipality, it provided it with a progress report on the intervention at that point. She emphasised that all matters related to the intervention should be submitted properly to the relevant structures.

Dr Modjadji Malahlela said the HOD and the head of the intervention team had responded to all the questions.

The Chairperson said certain questions had not been answered.

Ms Gunqisa confirmed the version provided by the HOD on the implementation of the Public Protector’s report. Mr Mashamaite had taken the report to court for judicial review and this had been granted by the court. The Council had recently decided that tit should set aside its resolution on the matter until the review was finalised. As a result, he had been brought back to his previous position and was earning his full salary. 

She mentioned that several land claims had been made by residents in the municipality and many of them dated back to 1998. Not all of the claims had been finalised. There had been land invasions during the Lockdown. However, the illegally erected infrastructure had been cleared. The municipality did have land available. It had approximately 10 000 square metres available for commercial use and 6 000 square metres available for residential purposes.

The DDG for Sustainable Resource Management in the Provincial Treasury, Mr Mothlanke Phukuntsi, touched on the reliance on section 71 and 41 reports. He said that the department drew the reports from the National Treasury’s database. The department always tried to engage with municipalities after analysing reports, as required by the municipal Standard Chart of Accounts (mSCOA). It had also provided municipalities with training conducted by the system vendors, to ensure that the reports were credible and accurate. In addition, on a monthly basis, the department issued assessment reports on the submissions made by municipalities, to ensure improvements in the future.

The FRP outlined ways to financially rescue the municipality and to bring financial stability to it. The FRP had been drafted together with the municipality, COGTA and the National Treasury. A 6-12 months turnaround period was added. Fortunately, the municipality did not have accounts with Eskom or water boards. This made it easier to schedule creditors as it tried to improve on its revenue collection. The funding plan adopted the previous week by the Council was also in line with the FRP. The Provincial Treasury wanted to improve how it captured information on m-SCOA during this process as well.

The MEC for the Limpopo Provincial Treasury, Mr Seaparo Sekoati, said that there should be appreciation for the progress registered in the municipality. The purpose of the intervention was to set up systems that would allow it to run efficiently. Prior to the intervention, all the systems had collapsed. The provincial government had identified certain areas for intervention, to ensure that the municipality would become sustainable. More tangible progress would only be seen once all the systems were set up and the officials were able to undertake their tasks.

Issues of budgeting, reporting, revenue management, m-SCOA support and slow SCM were all challenges that the municipality faced. These were a result of non-compliance with regulations, which led to significant unwanted expenditure. The intervention team had tried to ensure that the municipality followed the SCM processes. He admitted that the intervention did have its limitations as many of the documents required were not available to the Council. This slowed progress in the municipality. However, the provincial government was confident that the work done would ensure that the municipality would eventually be sustainable and that it would have capacity. 

Mr Basikopo Makamu, Limpopo MEC: Cooperative Governance, Human Settlements and Traditional Affairs, mentioned that there was an implementation plan which had been canvassed with the stakeholders in the municipality. It focused on what areas needed to be worked on. However, due to the Covid-19 regulations, the plans had to be scaled back. Some of the plans had not yet been completed.

He mentioned that it was the first time that he had heard about the allegation that the owners of a security company, whose services were procured by the municipality, were related to officials of the municipality. The department would follow up on the matter. It would also follow up on the procurement of trucks to provide services for water carting.  

The Council was the highest decision-making structure in the municipality. He indicated that he had gone to the Council several times to track the progress of the intervention. He cautioned against casting aspersions that he had gone on a witch hunt.

Consequence management must be applied objectively and diligently, to ensure accountability. This had been done. The report presented by the DDG was compiled by COGTA and he had signed the document personally. The report would be taken to Council, to ensure that the findings and recommendations of the provincial government were agreed upon.

The department had also noted improvements. This year was the first time the Council had adopted a report tabled by the MPAC. It was also the first time it had allowed the audit committee to make a presentation. The provincial team had engaged with several stakeholders to ensure that there was an improvement in service delivery. A lot of work had been put in by the provincial government to stabilise the municipality. Beneficiaries of wrongdoing would always try to prevent the task team from setting up the processes to correct the issues present.

Responding to the question on why the municipality had one water project, he said that more water projects were required.

Questions

Mr Hoosen said that he appreciated the response received from the Provincial Treasury. He mentioned that he had sent the information on the security contract to the department, via the Committee Secretary.

He indicated that he did not get a response on his questions regarding the Mayor’s hiring of a Mercedes Benz.

A report had been released which indicated that there were councillors who were doing business with the municipality, yet no action had been taken against them. He asked what the status of the report was and how many councillors were conducting business with the municipality. Had any action been taken against them?

Mr Hadebe clarified that his question was on the adopted financial plan and not the FRP. He wanted greater detail on whether there were certain milestone projections the plan had hoped to achieve. For instance, it might indicate that in the first three months, the municipality must ensure that certain systems were put in place to detect irregular expenditure. Setting milestone projections and timelines would assist with measuring their success.

The current budget was an unfunded one, which was in contravention of the Municipal Financial Management Act (MFMA). He asked the officials to confirm that they had mentioned that it would take a year to implement the funding plan. If that were the case, did that mean that the budget would be fully funded in the next financial year?

It had been mentioned earlier that a standing invitation to administrators to attend finance committee meetings was not being implemented. He asked why there had not been an invitation to the administrator to sit in the committee.

He applauded the intervention team and the municipality for the work they had done so far. He asked that they continue working with each other.

Mr Mpumza mentioned that his question on how much was spent on commissioning the forensic investigations had not been answered. 

He asked if the tumultuous labour relations had since stabilised and whether positions had been filled.

There had been a lack of supporting documentation and forward planning, which had slowed spending of the Municipal Infrastructure Grant (MIG). He asked for assurance that the municipality was addressing those gaps as part of improving the situation and stabilising the municipality.

The Chairperson asked whether the leadership of the municipality were paying their rates and taxes – and if their accounts were up to date.

Responses

Speaker Mathebula confirmed that the Mayor had indeed rented a vehicle after she had been involved in an accident. The MM would clarify how much was spent on the vehicle.

No Councillor owed the municipality rates and taxes. The municipality monitored its councillors and ensured that their accounts were up to date. It recognised that if its councillors’ accounts were not settled, it would be difficult to encourage the residents to settle theirs.

The Chairperson asked if he made the claims with authority.

Speaker Mathebula said he did.

The Chairperson asked what the municipality’s debt collection policy for public representatives was. She asked if the Speaker could print the bills of each councillor and email the information to the Committee. She also asked what action should be expected from the municipality if his claims were incorrect. 

Speaker Mathebula confirmed that no councillor owed the municipality.

The Chairperson asked if he had seen a report which confirmed the authenticity of his claims.

Speaker Mathebula said that the last time he checked; no councillor owed the municipality money.

The Chairperson asked that he send their bills by 10am the following morning.

Ms Gunqisa mentioned that she was not employed as the MM during the period when the municipality procured the services of the security company. However, she would look into the matter to understand why the irregularity had occurred.

She confirmed that subsequent to the Mayor’s motor vehicle accident, the municipality had to hire a vehicle for her. In the past financial year, the municipality had been subjected to several protests, which prevented Council sittings from occurring. This had slowed the process of purchasing another vehicle for the Mayor. Council had sped up the process of the insurance paying out. It was now looking at purchasing the Mayor another vehicle. She indicated that R256 000 was spent on hiring the vehicle. It was unfortunate that the money had to be spent on hiring the vehicle.

According to the findings presented in the report of the Auditor-General’s (AG), no councillor was found to be doing business with the municipality. Only a relative of an official had done so, and this was picked up by the AG. 

The municipality would send the FRP document to the Committee. This document indicated how financial sustainability would be brought to the municipality. Much work had been put into drafting the plan, with the DCGHSTA and Provincial Treasury providing assistance. The plan covered all facets of financial management and credit control. It also indicated how revenue would be raised and how it would benefit the communities. It also touched on service delivery, and methods to collect revenue and provide services.

The forensic reports had been presented to the Council. The municipality would provide the Committee with a report on the amounts that had been spent thus far on commissioning the reports.

On the filling of positions, she said that the intervention team had assisted with implementing a long-standing order from the Labour Court about contract workers who had worked in the municipality.  There had been negotiations between it and the unions, and all those workers had been absorbed into the structures of the municipality. 

It was not correct that the municipality only had one water project. In fact, the municipality had several water projects. One was a water reticulation project, which was two-phased and would supply 38 villages with water. Another was an industrial wellfield, which would provide reticulation in the town and the peri-urban areas surrounding the town. There was also a Municipal Infrastructure Grant (MIG) project, to supply nine villages with water and this was almost complete. There were other projects, all of which were meant to improve water distribution in the municipality’s villages. At the moment, the municipality did not have sufficient funding to penetrate all 138 villages. It hoped that the national project started by the COGTA in 2010 to provide all villages in the country with water would be revived once more. 

The Chairperson reminded the municipality that the question on the employee who was suspended after being found to have stolen diesel had not been answered. 

Ms Gunqisa said that the municipality was looking at why certain suspensions had not been finalised when they should have already concluded. With this case, the delay was due to the fact that a number of hearings were postponed over time. This meant that the officials were not doing their work properly. However, the case was nearly finalised, and they are awaiting the pronouncement.

The Chairperson asked when it would be finalised.

Ms Gunqisa said that the matter would be concluded before the end of the financial year.

The Chairperson reminded her that the end of the financial year was 30 June 2021.

Ms Gunqisa clarified that she meant the end of the third quarter of the current financial year.

The Chairperson said that the Committee had previously raised an issue that many appointments were irregular, as the individuals were not found on the final organograms.

She said that, in an earlier meeting with the Tzaneen Municipality, the municipality had been able to account for incomplete projects. She asked that the MLM provide written information on how long projects had been incomplete and what their current status was.  

Ms Gunqisa said that the municipality would share that in writing.

The Chairperson asked that the MEC’s provide their closing remarks on the MLM matter.

Ms Dumalisile mentioned that the department would ensure that the FRP would be provided to the Committee.

One of the contributing factors to the instability in the municipality was the non-functionality of the local labour forum. After the intervention, the forum was resuscitated and now that there was a platform for engagement, the labour issues had settled. The municipality was working on its overtime policy, to correct the wrongs that happened previously and to close the gap on the additional staff members that had been employed. The workers who were supposed to be absorbed had been absorbed. Workers who had not been were working on a temporary basis and were seeking a legal opinion.

She asked that all the information requested by the Committee be submitted at a later date as it was a lot of information that would have to be compiled.

Mr Boishelo confirmed that the labour relations had since stabilised. There was currently an issue with the pump operators and the municipality needed to address their plight. Council had approved their request to be reimbursed. He believed that doing so would assist in further improving labour relations.

In terms of the arbitration award, the workers who had been absorbed had to be paid retrospectively from July 2020. Currently, the municipality was assessing the costs to make sure that it was able to pay them. The workers wanted certainty on when they would be paid.

He explained that FRP was three-phased, but he had mentioned only two of the phases in the meeting. The first phase focused on the financial rescue. In this phase, they identified key areas: A funded budget, cost containment, cash flow management, collection rates, expenditure, credit management and the ring fencing of conditional grants.

The second phase focused on stabilisation, which included identifying systems and key policies that would assist the municipality to function optimally.

All of the time frames were also included in the plan. The intervention team must be present to monitor the implementation of the plan.

The MEC for the Provincial Treasury, Mr Sekoati, mentioned that the intervention team had looked at SCM to strengthen procurement processes in the municipality. It had previously lacked transparency, and there were issues of asset management and poor auditing. Consequence management also had to be enforced in the municipality. Once all these were covered, the municipality should be on a good footing. In the past, MLM was one of the better municipalities in the province. 

The Chairperson asked that, at the end of the meeting, he respond to the challenges faced by the three other municipalities under consideration by the committee.

She also reminded him to speak on Polokwane City’s liquidity problems, as a presentation in the morning had not answered the problems.

MEC Makamu said that the MLM had shown much improvement. The intervention was required as the situation was dire. With the cooperation between all stakeholders, the situation would be stabilised. He thanked the Committee for its guidance and assistance.

The provincial government was supporting the three other municipalities in terms of Section 154 of the Constitution. There was a level of political instability in the Thabazimbi Local Municipality (TLM) as a result of the coalition government which required that all matters be negotiated before being tabled before Council. The municipality also had a lack of resources, which had hurt its financial stability, but improvement could be seen through its spending of its MIG funding. Its audit opinion had moved from disclaimer to qualified, illustrating the improvement.

In the Modimolle/Mookgophong Local Municipality (MMLM), the department had observed much progress. However financial sustainability remained a challenge. Currently, the municipality owed Eskom more than R600 million, but the department was pleased that it had since entered into a payment arrangement and had paid nearly R100 million in this financial year to Eskom. He admitted that the amalgamation of the two municipalities had caused serious problems for both. They needed to appoint a Municipal Manager, but could not because of the current litigation.

The Fetakgomo/Greater Tubatse Local Municipality (FGLTM) was also being supported in terms of Section 154. Both the Chief financial Officer and Municipal Manager positions had been filled, with the Corporate Services Director being the only vacancy.

FGTLM was one of the municipalities that had invested money in the VBS bank, and this had shaken its finances. However, it had adopted its FRP. The placement of workers had also been a challenge. The amalgamation created disparities within positions. The department had requested the municipality to update them on the lease agreement for the offices they were using. The department would continue to assist the municipality to deal with this matter amicably.

All prepared reports would be forwarded to the Committee.

Discussion

The Chairperson, referring to the intervention in TLM, said the PEC had recommended the DCGHSTA request National Treasury to undertake a forensic investigation of all the municipality’s activities in order to unearth the financial irregularities. However, it was on record that it could not conclude the investigation due to the lack of records. She asked what alternative ways the PEC had considered to finalise the forensic investigation.  

It was clear that the PEC’s decision to revoke Section 139 in TLM had not assisted it. She asked if the provincial government had compiled a close-out report. If the main challenge was the ineffectiveness of appointing one administrator instead of a team to support the lead administrator, then why had the PEC decided to revoke the intervention instead of appointing the requisite team of administrators?

On MMLM, she asked what the progress was regarding the implementation of the forensic recommendation tabled to the Exco of the municipality. What were the factors behind the Council’s and the trade unions’ resistance against the finalisation of the transactional measures of the merger between the two municipalities? She wanted to understand the key areas of this agreement.

Part of the terms of reference for the intervention was to stabilise the financial circumstances of the municipality. The intervention team was tasked with ensuring that MMLM honoured its payments to Eskom. However, the AG report showed that the Eskom debt had ballooned after the termination of intervention and no payment agreement had been made as of June 2020. Three financial experts had been deployed in the municipality. Was this an indication that they did not transfer the scheme? How was the province dealing with this?

She asked four additional questions. First, what stage was the MMLM at in appointing a Municipal Manager?

Second, what were the circumstances that led to the suspension of the Municipal Manager in TLM in June 2020?

Third, what progress had been made with the finalisation of the development of ward operational plans in both MMLM and FGLTM?

Fourth, what was the nature of the unresolved challenges with the mining house that led to the non-establishment of ward committees in the 5 wards in FGLTM and the 11 wards in TLM?

Responses

MEC Makamu said that a presentation would have assisted the Committee. For instance, in the close-out report for TLM, the lessons learned from the provincial government during the process could be found. It also included what recommendations could be implemented.

Dr Modjadji indicated that the Municipal Manager had resigned after his suspension.

The department had been working with both TLM and FGLTM, but it had struggled to have the wards established in the two areas.

A forensic report had been tabled before the MMLM Council and had since been adopted. The implementation of the report was underway. Disciplinary processes for certain officials identified in the report had begun.

The matter concerning the suspension of the Municipal Manager in TLM had been handed over to the law enforcement agencies.

Honouring payments was an item in the terms of reference. There was an agreement in place between MMLM and Eskom. She agreed that when the intervention team was present, the municipality did make an effort to service its debt to Eskom. Most of the money used to service the debt came from a grant provided by the provincial government; hence the lights had not been switched off in the municipality.

Explaining why the intervention in TLM was abrupt, she said that a Constitutional Court judgement had rendered the Municipal Systems Act as both unconstitutional and invalid. In light of this, the municipality wrote a letter to the provincial government, indicating that since the Act had been rendered unconstitutional, the provincial government could not second managers to act in senior positions in the municipality. Subsequently, the municipality identified and recommended officials in its staff complement who would act in those positions, while the recruitment process was being finalised. The provincial government had to ensure a transition where it could conclude some of the work of the team, to prevent members of the intervention team remaining in full-time positions in the municipality. This had caused several problems.

On MMLM’s debt to Eskom, she mentioned that after the intervention team concluded its work, the municipality reneged on its agreement with Eskom and as a result, the agreement lapsed. Interest had now been added to the payments to the entity. Since then, there had been a delay in payments because of disagreements between the two parties. Both the DCGHSTA and Provincial Treasury had facilitated a discussion between the two and they had recently reached an agreement on a payment plan. The matter had been presented to Council the previous week and it had decided to return the contract to the finance committee to consider the item. Once that process was complete, the agreement would be finalised. The department did not want the municipality to enter into an agreement that it could not honour.

MMLM was in a poor financial state and one of the reasons for this was that it had used its conditional grants for other purposes and as a result, the National Treasury withheld some of their equitable share budget allocation. 

On the appointment of a Municipal Manager in MMLM, she said that it had been delayed as one of the candidates – who was an official of the municipality – interdicted the process. The resulting court order indicated that the municipality must restart the process, which it had not yet done. The Council had established a small committee to look into the matter. In TLM, the Chief Financial Officer had been acting as the Municipal Manager for a long period.

The department was concerned that TLM had recently been struggling to honour its payment plan with Eskom. Previously it had been able to honour its agreement. The department was trying to ensure that it met its payments.

Ms Dumalisile, referring to MLM, said that several of the employees in the Mookgophong municipality attempted to resist the merger with Modimolle. Each labour forum in the two former municipalities also resisted their amalgamation. These issues had since been resolved, with there now being one local labour forum and one municipality. The municipality’s placement issues had been finalised and there were only four disputed cases on the placement of officials affected by the amalgamation.

On MMLM’s debt to Eskom, she said that the municipality had struggled financially because it had fixed tariffs throughout the year, which had affected their collections. They had tried to engage their regulator but have not been given a hearing by the regulator. The municipality has also requested the Provincial Treasury and the DCGHSTA to assist it with this problem. It has also approached the National Treasury and indicated that their equitable share allocation was not enough and as a result, it could not service its debt to Eskom. The Treasury had requested that the municipality look at their organogram, as their wage bill was bigger than what they could afford. The DCGHTSA had engaged the Municipal Manager the previous day on the matter and was waiting on updates.

Salary disparities were the only issue remaining in the amalgamation of FGLTM. There were irregular promotions in the municipality and the department then had to engage the services of the human resources expert deployed there. The officials were given two options on how to address their irregular appointments. The first was to reverse the appointments and recover the money. The second was to reverse the promotions but not recover the money. These options had been presented to the Council, which indicated that it would seek a legal opinion on how it should implement its decision. Council had yet to receive the legal opinion, but once they had, the department would monitor the developments. 

They did have close out reports for all three municipalities.

The Chairperson said the administrators had adequately responded to the questions. These are ongoing matters, and the Committee would continue to engage with the three municipalities.

MEC Makamu mentioned that the responses provided by the department indicated the collective effort made in making sure that the municipalities were assisted.

The chairperson of SALGA in Limpopo, Cllr Pule Shayi, said that he appreciated the input and engagement of all present in the meeting. He hoped that more support would be provided to all three municipalities going forward.

MEC Sekoati appreciated the opportunity to interact with the Members of the Committee. He thanked all officials who had been involved in the process of assisting all three municipalities. Municipalities were pivotal in transforming the lives of the citizens of the country and they needed to be held accountable for the decisions they made.

The Chairperson thanked all officials for the engagement.

The meeting was adjourned.