Dr Ruth Segomotsi Mompati District Municipality: state of municipalities

Meeting report

The Chairperson welcomed all attendees to the meeting and requested that all speakers switch on their videos.

Mr I Groenewald (FF+) mentioned that he had been informed that the Council of the Mamusa Local Municipality (MLM) had threatened that if the Mayor tabled a legal opinion to the Council, he would be removed through a vote of no confidence. He asked whether the municipality could confirm the allegation.

He then asked when the MLM Council had last sat for an ordinary meeting.

The Mayor of the MLM, Dr Gotsilekgosi Batsi, said that he only received a dispute letter on 24 November 2020, not a legal opinion. Council did not sit to discuss a grievance raised by one of the Councillors. The only matter discussed in Council was a notice of motion from the North West High Court.

The Chairperson asked what the notice of motion entailed.

Mayor Batsi replied that the notice of motion referred to the appointment of the Municipal Manager (MM). It also referred to an allegation that the MM appointed the Chief Financial Officer (CFO) who at the time did not hold a grade 12 qualification. The Council resolved that it would seek legal advice on the motion. In addition, it would defend against the motion.

The Chairperson asked whether the Municipality had received the legal opinion on 24 November.

Mayor Batsi said he had not; the Municipality had only received a letter from a Councillor, which was sent to the Speaker.

The Chairperson informed him that the Committee had verified the existence of the legal opinion. 

Mayor Batsi denied the existence of the legal opinion.

The Chairperson requested that the Committee Secretary upload the legal opinion document on the screen. She then asked the Mayor whether he had seen it before.

Mayor Batsi said it was the first time that he had seen the legal opinion.

The Chairperson asked how he had not seen the legal opinion previously, as it was addressed to him. Also, had the Council not decided to obtain a legal opinion on the issue?

The Committee had been informed that the Council instructed an attorney to issue a legal opinion on its behalf. She asked whether the attorney was employed by the Council. 

Mayor Batsi confirmed that he was.

The Chairperson mentioned that the North West MEC for Cooperative Governance, Human Settlements and Traditional Affairs, Mr Mmoloki Cwaile, provided a conditional concurrence on 15 of February on the MM’s appointment. She asked why the MEC had provided conditional concurrence on the appointment. This would not have been lawful, if the Mayor’s claim that he had not received the legal opinion was true. 

Mr Groenewald reminded the Committee that in the earlier meeting, the Mayor had referred to the legal opinion, therefore indicating that he was aware of it. He told the Mayor that he should not lie to the Committee.

MEC Cwaile confirmed that his Department had provided conditional concurrence. He said it was informed by the submission made at the time, which included the resolution by the Council on the full compliance and the successful processing of the appointment of the MM. This also included the competency test, which the MM had passed. In its submission, the department indicated that the appointment could only be made on the condition that within 14 days, it received all the necessary documents. The legal opinion was not included in the submitted documents. When it didn’t receive the documents, it then made direct inquiries at the North West University, which the MM claimed he had attended. To date, the department had not received a response from the MM, the university or from the Municipality. During an interaction with the Mayor, he had expressed his discomfort with the appointment process, and requested that the department review the appointment of the MM.

There was an agreement in place between the Department and the Mayor that the department would request the nullification of the MM’s appointment through the courts. However, the Council had not cooperated with the Department in this regard. 

The Chairperson mentioned that in the earlier meeting, the Mayor had indicated that he had knowledge of the document. Now at this meeting, he said otherwise. She asked when the Municipality had submitted the appointment documents to the MEC for concurrence.

The Head of the Department, Mr Phihadu Motoko, said it usually took the Department a week to conduct an assessment of documents received and to then advise the MEC. He suspected that this process was completed at the beginning of December.

The Chairperson asked if the legal opinion was part of the documents they received from the municipality.

Mr Motoko indicated that it was not. The documents only included the qualifications of the candidate, a copy of the adverts for the post and a report on his qualifications and his experience.

The Chairperson asked when in November Municipality submitted the documents.

She asked whether the municipality had developed a post-audit action plan, as it had received disclaimers of audit opinion for the past three financial years.

Mayor Batsi said that it had developed one.

The Chairperson asked what the details of the plan were. She said the political leadership of the municipality had failed to exercise oversight of its audit outcomes. She asked why the Municipal Public Accounts Committee (MPAC) was dysfunctional.

Mr K Ceza (EFF) requested that the Mayor respond to the questions posed by Members in the earlier meeting.

Mr M Montwedi (EFF) said that the Mayor was not cooperating with the Committee, as the questions had been put to him in the earlier sitting. He requested that the Committee move on to the next item on the agenda.

The Chairperson said that the Committee had allowed the Mayor time to consider the questions and to respond during this meeting. In its report, the Auditor-General of South Africa (AGSA) had indicated that there was no political oversight in the municipality. She requested that the Dr Ruth Segomotsi Mompati District Municipality (DRSMDM) comment on the issues raised by Members.

The Executive Mayor of the DRSMDM, Ms Kgalalelo Sereko, said the MPAC commissioned an investigation into the District’s investment in VBS Bank. It tabled a report to the Council. The report recommended to the Council that it should apply consequence management to those responsible. The matter was then taken to a disciplinary board. It then tabled a report to the Council which recommended that the Council should suspend the MM, which it then did. He then challenged the suspension in court, claiming that it was unlawful. He subsequently lost the matter. However, whilst the disciplinary proceedings against him were ongoing, Council unlawfully reinstated the MM. The MM then suspended all officials who were witnesses in the case, including the legal manager. The District remained committed to bringing finality to the VBS matter and ensuring that all the money lost was returned. Presently, it was receiving legal advice on how best to tackle the matter.

The district had not taken a resolution to write off the lost VBS money; it had only arranged to pay back the lost money to the National Treasury.

The Chairperson referred her to the findings of the Auditor-General (AG) that the District had taken a decision to write off the money. 

Mayor Sereko said that she did not recall the Council resolving to write off the money.

The Chairperson asked what the Council had resolved.

Ms Sereko replied that the matter was still pending.

The Chairperson mentioned that the AG was on record as stating that R100 million meant for Municipal Infrastructure Grant (MIG) projects was lost. An additional R29 million for the Regional Bulk Infrastructure Grant was also lost. The AG had indicated that all the projects were not completed.

Mayor Sereko said the projects were affected by the R150 million invested in VBS.

EFF councillors had levelled allegations of financial misconduct against the MM. On February 19, 2021, the Council resolved to issue a notice to suspend the MM, and he had since been suspended.

Referring to a point raised about excessive use of consultants, she said that the municipality had used a service provider to assist with the preparations of its Annual Financial Statements.  However, to ease its reliance on external service providers, the municipality had appointed the CFO.

In the AG’s report, it was mentioned that there had been regression in the municipal audit outcomes, relating mainly to water and sanitation transactions. This affected how assets were accounted for, as the district had to account for all assets in its book. The AG had also found many errors in the evaluation of assets.

Service-level agreements for water provision had also not been properly implemented. The district had not been accounting for all of its financial transactions.

The MLM had not signed off on the service level agreement, therefore the AG could not ascertain the basis for accounting for water transactions.

Supply Chain Management (SCM) compliance had also contributed negatively to the audit opinion, as all awards were found to be inconsistent with regulations, resulting in irregular expenditure.

It was true that the VBS investment had affected the provision of services in the District. The District had scheduled a meeting with the Executive Committee. Many communities had been affected by the non-completion of several projects.

The Chairperson said that the District was confident that the municipality did not write off the money, yet the AG’s report indicated otherwise. She asked if she still maintained that the money was not written-off.

Mayor Sereko said she would have to go and look at the records to confirm whether the resolution had been taken. The Chairperson asked if she was indicating that the AG’s findings were wrong. Mayor Sereko said that she wasn’t, but she had to first verify. The Chairperson mentioned that this information could be found in the AG’s 2017/18 report.

Mayor Sereko mentioned that before she became the Mayor, she had been a member of the MPAC and was not aware that this resolution had been taken. The Council had treated the VBS matter as an exceptional case.

The Chairperson asked what this meant. Mayor Sereko replied that the Council had resolved not to write-off the amount, as it felt the money could be recovered. The Chairperson asked why they had treated it as a special case for three years. Mayor Sereko said it was a complicated matter and the Council had to follow due process before it came to a conclusion. The Chairperson expressed her concern that the matter would not be finalised.

Mr Charles Malema, CFO, DRSMDM, confirmed that they did not write off the amount. The findings by the AG referred to the fact that the amount was not showing as cash or investments in the balance sheet. As the municipality could not recover the R150 million, the officials decided to take the matter to Council for impairment. The matter was with the MPAC for further investigation.

The DRSMDM had repaid most of the lost amount back to the National Treasury. The last tranche should be paid at the end of March. The municipality had managed to internally fund the projects that were negatively affected. Many of the projects had recommenced.

Mr Montwedi said that this information confirmed that the AG was correct. It also showed that the municipality had failed to report on its progress on the matter. The money that was allocated for projects had still not been retrieved by the municipality.

The Chairperson mentioned that Members should not doubt the integrity of the AGSA, as it was a Chapter 9 institution.

MEC Cwaile mentioned that he was in possession of a report which said that in July 2017, a R60 million MIG was allocated to the Municipality. The report further stated that in March 2018, the Municipality invested R150 million of allocated money - R100 million from the Regional Bulk Infrastructure Grant, R29 million from the MIG and R21 million from the  Building Fund - into VBS. During the time when the MM was suspended, there were internal investigations in June 2018, which were tabled to the Council. The findings were that the municipality’s banking and investment policy was not consistent with the Municipal Finance Management Act (MFMA); and that the policy was not consistent with investment regulations. The MPAC found that this amounted to financial misconduct. According to the policy of the Municipality, officials should have consulted with the Mayor before making investments, yet he was not consulted. The council resolved to review its banking and investment policy so that it was consistent with the MFMA and municipal investment regulations. The Council also considered the preliminary report from the risk management unit, which mentioned that the Council should implement a Ministerial Directive to the fullest.

The Department had a report of the investigation conducted by an attorney into the VBS matter. The report indicated that a direct claim had been made to the liquidators of VBS. The Department expected that the money should be refunded. The investigator was not able to go further in his investigation as the MM was not cooperative. 

Another report on consequence management mentioned that on 4 September 2019, the Executive Mayor of the DRSDM received copies of a notice of motion and founding affidavit from Mr Jerry Anthony, which had been filed in the North West High Court. The report suggested that the MM and his administration could had misled the AG and altered the claim made with the liquidators. It was possible that the MM and his administrative team could have manipulated the financial information on the matter. This report detailed the extent of the MM’s dishonesty.

The Department had sent the municipality a letter telling it that it intended to invoke Section 106 of the Municipal Systems Act, based on the fact that the AG could have been misled by the administration. He said that the report would be made available to the Committee on the coming Friday, as there had been contradictory information provided in the two reports.

Mr A Motswana (ANC, NW Legislature) said the Committee could not allow the Municipality’s officials to contest the view of the AG without allowing the institution the opportunity to respond. 

The Committee should note that the report compiled by the DRSMDM’s MPAC would not be submitted, due to the MPAC’s dysfunctionality. It was not able to exercise the necessary oversight. The municipality, in line with the MFMA, should have opened a case with the police, instead of only instituting an investigation.

The MM in question was a former CFO of the Dr Kenneth Kaunda District Municipality. He had a history of manipulating information, to the extent that ordinary council members were not able to understand the information.

He felt that the Municipality was trying to cover up its wrongful actions by indicating that it had paid Treasury its debt. It was an attempt to mislead the Committee.

The Chairperson agreed that the Municipality had misled the Committee. She reminded the officials that they were under oath.

Mr Ceza said the findings of the AG should be a guide for the Executive Mayor to improve governance in the Municipality. He discouraged her from disputing the findings. He asked that the DRSMDM inform the Committee why the Executive Mayor should remain in her position if she could not answer relevant questions.

The Chairperson said that many of the local people in the area had had to suffer for the poor decisions made by the Municipality. Officials from both Municipalities had wasted the Committee’s time.

She asked whether the DRSMDM could provide the Municipality with the assistance that it required.

What had happened to the money provided for Covid relief? How far was the district in re-prioritising funds? The Committee felt that there was lawlessness in the District Municipality and a complete lack of disregard for the systems of the country. The Committee would have to reconvene with both the MLM and the DRSMDM, to ensure that it obtained the answers it required.

The MEC for the NW Provincial Treasury, Ms Motlalepula Rosho, indicated that the Department had had difficulties engaging with municipalities in the province. Recently it had concluded a mid-term assessment of all of the municipalities, and it had found that all was not well. It found that there were serious challenges with the Budget and Treasury Offices (BTOs) in the municipalities. The department had tried to assist the municipalities and would continue doing so. 

The Chairperson requested that the Committee move to the next item on the agenda, which was the briefing by the Naledi Local Municipality (NLM). She requested that the officials focus their briefing on the AG’s findings.

Opening Remarks by the Mayor of the NLM

The Mayor of NLM, Mr Mpolokeng Mahase, apologised for submitting the Municipality’s report late to the Committee.

He said the Municipality obtained a qualified audit in the 2016/17 financial year. In the following two years it received disclaimers of audit opinion. In 2017 the municipality appointed an MM, but the officials did not cooperate well with the MM. The MM was found to be involved in financial misconduct and was suspended by the Municipality. He then challenged the suspension in court, and the Municipality spent a considerable amount of its budget on the legal fees. To prevent further expenditure on legal fees, the municipality reached a settlement agreement with the MM.

The Municipality was pleased that it was able to appoint three directors in 2019. A new CEO had been appointed recently and should assume his duties soon. He was highly qualified and managed to pass his competency test with distinction.

The Provincial Treasury had assisted the municipality with appointing service providers to assist with its financial management. Financially, the Municipality was in a poor position.

He requested that the MM provide more detail.

The MM of NLM, Mr Modisenyane Segapo, said the municipality had identified ways to deal with unauthorised, irregular, fruitless and wasteful (UIFW) expenditure. One way was to recruit senior managers, and another was to commission a register of third party payments, The MPAC would sit to interrogate the Accounting Officer’s report on 18 March. The Council would sit to reflect on the report provided by MPAC on 21 March. The MPAC would then have sittings from March to June; and another report would be submitted to the Council in July 2021.

The NLM was a revenue-based municipality, and it was currently looking to set up a local economic agency, which would aid with industrialising the area.

The Municipality had been provided with the support from the Provincial Treasury and Department of Cooperative Governance, Human Settlements and Traditional Affairs. It had interacted with them on several occasions to ensure that they sorted out their governance issues.

The Municipality had noted that its reservoirs were in poor condition.

It had looked to revisiting all of its partnerships to better improve its financial situation.

The Chairperson opened the floor for discussion.

Discussion

Ms M Tlou (ANC) asked how much revenue the municipality collected monthly.

If the reservoirs were not in good condition, it meant that the community was drinking unhealthy water. She asked what the municipality would do to ensure that the reservoirs were cleaned every three months and that there was clean drinking water for the residents.

The Chairperson asked when the Municipality envisioned publishing its 2018/19 audit and annual reports, as they were still outstanding. Had the Municipality held anyone liable for the failure to produce these reports? She was concerned that the senior management did not have the required qualifications for their posts, as they could not produce basic reports.

Mr J Dliso (ANC, North West legislature) mentioned that the Provincial Public Accounts Committee would be meeting with the municipality to establish when the outstanding reports would be published.  He asked why they had not submitted the reports.

No services were being provided to the residents in the Municipality and the MPAC was dysfunctional.

Mr Groenewald asked when the municipality had last held an ordinary council meeting. It appeared to be common for municipalities in the North West to not have ordinary council sittings. According to the law, the Council should sit once every quarter.

Ms P Xaba-Ntshaba (ANC) asked why the Municipality had received a disclaimer of audit opinion, following the unqualified audits in prior years.

She asked why the vacancy rate was high in the municipality, particularly when there was high unemployment in the area. Instead of hiring permanent staff, they had hired consultants, who had not transferred their skills to them. When would the municipality fill the vacancies?

Mr Motswana asked if the municipality could confirm if the Acting MM was employed following a Section 139 intervention, and whether he was deployed as the Local Economic Development (LED) specialist.

He also asked for the municipality to confirm the allegations that the MM did not have the required experience for the position of MM. If he did have experience, where had he gained this experience and how many years’ experience did he have?

Mr Montwedi said that the Council had had a meeting with the Premier and voluntarily requested that it be dissolved, as a result of political infighting. He asked whether the Municipality had been stabilised, or did it still have instability?

He asked how the Municipality would ensure that it accounted for the UIFW expenditure and that those who are responsible were held to account and money retrieved.

The municipality was known to have a highly bloated administration. Was this still the case.?

It was well known that the municipality did not have good relations with labour. There had been a ruling by the Commission for Conciliation, Mediation and Arbitration (CCMA) for the municipality to reinstate 100 employees. Had they done so? What would the total number of employees be after the reinstatement?

There had been a collapse of service delivery in the municipality, and there had been no effort from the Municipality to deal with it. He asked what the municipality was doing to improve service delivery in the area.

Residents in the rural areas and townships did not have a consistent supply of water, yet residents who resided in town did. He asked why the municipality had served the interests of the white residents and not the black residents. Was the water engineering unit controlled by white individuals? The municipality had failed its black residents.

Mr Groenewald mentioned that all communities must be served.

Mr Montwedi clarified that he did not state that one community should not be served over the other; what he meant was that black residents should receive the same services.

Responses

Mayor Mahase confirmed that the Council had requested the Premier to intervene, in a bid to resolve political infighting. The Speaker, the Chief Whip and the Mayor had been assaulted by what he termed gangsters.

Since 2016, the municipality has had an unfunded mandate. The municipality had not been able to repair its reservoirs as it had not received its water and equitable share funds from the district.

The Council would sit on the coming Thursday to refer the annual and audit reports back, as they were not credible in their current format.

A Director for Corporate Services had been appointed. He had an honours degree. The Municipality had also appointed a Director for Community Safety, who was also qualified. Both appointees passed an independent competency test conducted by the national Department of Cooperative Governance and Traditional Affairs. The Provincial Standing Committee on Public Accounts (SCOPA) would be provided with the proof of experience and qualifications of the appointees. 

Mr Clifton Groep, NLM Council Speaker, mentioned that Council had scheduled a sitting for the 19 November 2020. The ordinary Council sitting for the first quarter would take place at the end of the March.

The Acting MM of the NLM indicated that he was a qualified mechanical engineer and held a Master of Business Administration (MBA) degree. It was his intention to reduce the Municipality’s reliance on service providers. The Municipality is currently working with experts to centralise expertise within the Municipality, which would cut costs.

The Municipality had received material from the Department of Public Works to repair its reservoirs. The provision of bulk water services was in the hands of the District.

Mr Montwedi asked whether he had experience in local government.

The Acting MM mentioned that he had experience in advising the North West Provincial Government, through the Department of Trade and Industry on advanced manufacturing, amongst other things. 

Mr Montwedi mentioned that his experience did not make him a suitable candidate for the position of MM. For him to qualify for the position, he would have had to be a senior manager for at least eight years. He said the MECs present should be held accountable for allowing him to obtain the position.

The Chairperson asked if he had CBMD qualification as this is a requirement for all senior managers in municipalities. The Acting MM indicated that he would complete it in June.

The Chairperson said that the position of MM was highly technical, thus he must have specific skills for the job. It has been a trend for administrative experts – sent by the provincial government during Section 139 interventions – to be absorbed by the municipality, or in other cases the experts had refused to leave their positions.

MEC Cwaile mentioned that the Department had announced in the Legislature that it would engage the NLM to establish why it had appointed a person who did not meet the requirements for the position of MM. He requested that the Committee provide the department five to seven days to address the matter. The current MM’s experience was secondary, not primary experience. The Department also noted that whoever presided over the Municipality must have security clearance, which the current MM did not have. The Department was trying to ensure that all appointed individuals had security clearance.

Presently, the District Municipality owed the Sedibeng Water Board R400 million. The District had decided to replace the security at Sedibeng with its own, and this had occurred in other areas. On the coming Friday, the Department would make a submission for processing of the challenges faced by Naledi. The submission would also include a plan to support and turn around the Municipality.

Much of the political infighting in the Municipality was based on accusations of corruption against opposing factions. The Department wanted to strengthen the systems in the Municipality, to ensure that they were able to embrace changes in personnel.

The Chairperson requested that at some point the Department should provide a report on the state of municipalities in the province to the Committee.

MEC Rosho mentioned that the department had been supporting the Municipality in compiling its AFS (AFS) for two years. It had made an assessment of the strength of the BTOs in the municipalities, and it had found that the NLM had serious governance and other administrative challenges which had been there for five years.

Much of the support provided by the Department to the Municipality was in financial management. The Department and the Municipality had agreed to have a hand-holding process when compiling financial statements, as there had been resistance in some municipalities such assistance. 

The Chairperson requested that Kagisano-Molopo Local Municipality (KMLM) brief the Committee.

Opening remarks by the Mayor of KMLM

The Mayor of the KMLM, Ms Ontlametse Mochware, apologised for being late in handing the documents to the Committee.

Mr Rowen Ferris, CFO, KMLM, said that in the 2016/17 financial year, the Municipality received a qualified audit opinion, in 2017/18 it received a disclaimer and in 2018/19 it improved to a qualified opinion with six audit paragraphs. These paragraphs focused on accumulated surplus, irregular expenditure, property plant and equipment, investment property and trade payables.

The Municipality had adopted an action plan and applied remedial action to all the issues identified by the AG. Although it received its audit opinion at the end of January, it adopted its action plan at the end of February. Despite the Covid-19 Lockdown, the Municipality had managed to achieve 95 percent of targets for developing controls. This would ensure that the issues cited by the AG did not occur in the future.

The Municipality had received a grant of R286 000 for Covid-19 relief in May 2020 and spent that budget by 30 June 2020. It also allocated R4.7 million of its own funding towards Covid-19 relief. Up to December, the municipality had spent R2.2 million on Personal Protective Equipment (PPE) and sanitisers.

In the prior year, the municipality collected 37 percent of its revenue. As of December it was sitting at 38 percent. This low collection was due to the impact of Covid-19 on state debtors’ ability to pay their property rates and taxes. Negotiations between the municipality and the state debtors were ongoing and it had been agreed that the first payment would be made by next week. The municipality was also engaging farmers on the settlement of debt, as many of them only paid their property rates and taxes once they had sold their farms.

The Municipality managed to spend all of its grant allocation by June 2020, hence there was no rollover requested.

Sixty percent of the midterm grant allocation had been spent by December 2020 and the Municipality believed it would spend the full allocation by 30 June 2021.

The MPAC was currently investigating the UIFW incurred. Management had also completed its investigations into the registers.

All senior manager vacancies had been filled.

The Municipality prepared its audit plans through the District’s Internal Audit Committee (IAC). The IAC advised the MM and the Municipality’s Audit Committee on the execution of the audit plan. He confirmed that the IAC was fully functional. Audits were conducted on a quarterly basis. The Municipality ensured that it submitted its reports on time.

The Chairperson opened the floor for discussion.

Discussion

The Chairperson asked what the names were of the service providers who in the 2018/19 financial year received awards from the municipality in contravention of the supply chain regulations and the MFMA. The 2017/18 audit report made reference to similar contraventions. Why had the municipality not taken steps to stop the abuse of SCM processes? Had the Municipality held anyone liable for the wasteful expenditure incurred in the 2018/19 financial year? If not, why not? What was the progress of the investigations of two municipal officers implicated in fraud or improper conduct in relation to SCM?

Mr Montwedi said that there was a collapse of service delivery in the Municipality. The Economic Freedom Fighters (EFF) in Council had written to the Mayor alerting her that the Municipality had illegally continued to pay an individual councillor even after a court had instructed it to remove him. He asked the Mayor whether she had seen the court order confirming his removal.

This was the MM’s first appointment in local government. He asked if he had managed to obtain a CPMD qualification. The AG had noted that the Municipality continued to employ individuals in the MM position without them having the requisite qualifications or experience.

Mr G Mpumza (ANC) asked if the Municipality’s asset register was compliant. If so, did the Municipality appreciate the role of asset management. Were all the senior officials competent and did they have the requisite qualifications for their positions?

Mr Motswana reminded the KMLM that a committee of the North West Cooperative Governance Department had conducted oversight of the Municipality in November 2020, and it had raised the issue of the Council continuing to remunerate the councillor. Should the Municipality continue with its behaviour, the Legislature would have to obtain an order that they be held accountable as a result of their actions. He asked whether the Municipality had attended to the matter.

During the same sitting, the committee had also raised the issue of continued rental of mobile offices by the Municipality, instead of occupying adjacent halls at a multipurpose centre in Ganyesa. The mobile offices were not procured with competitive bidding, and this amounted to irregular expenditure. The municipality had a habit of ignoring the views of Chapter 9 institutions and law enforcement agencies.

The MPAC had compiled a report which indicated that there were ghost services that were being driven from the office of the Mayor. The MPAC had subsequently opened cases against the Municipality, but the officials were not cooperating with law enforcement.

An amount of R2.8 million had been spent on the decontamination of halls, and one company’s services were continually sourced by the municipality. This company had received R1.8 million from the Municipality for its services. He asked why the Municipality had spent money on decontaminating halls during Lockdown Level 5, when it knew that no one would use them. This money could have been used to provide water services to the communities. 

In one of its engagements with the Hawks police unit, the Department's committee had been informed of difficulty in cooperating with the MM. As the leader of the Municipality, the Mayor should be held accountable for the MM’s behaviour. He requested that the Mayor provide the Committee with a commitment that it would meet with the Hawks, as the MM had been acting unlawfully.

Prior to his appointment, the MM had been employed as an acting magistrate in Taung; he had never worked in local government. The North West Legislature would have to open cases against the Mayor if she did not hold the MM to account.

The Chairperson asked why the Speaker was not present in the meeting.

Responses

Mayor Mochware said that all of the senior managers had CPMD qualifications. The Director of Infrastructure was currently studying for it and the MM already had the qualification before he was appointed to the job.

The Municipality was aware of the court case against it the previous year.

The Council had resolved to purchase mobile offices, and she had to abide by its resolution.

Mr K Mataboge (ANC, NW) mentioned that the Mayor had not answered questions posed to her by the Members.

The Chairperson agreed with Mr Mataboge. She requested that she respond to all the questions.

Mayor Mochware mentioned that she had found it difficult to express herself in English.

The Chairperson confirmed that there were no interpretation services available. She asked for the Members to advise on the way forward.

Mr Mpumza suggested that given that the Mayor had difficulty expressing herself, the Committee should agree to arrange another sitting with the municipality – and the MM should attend as well. 

Mr B Hadebe (ANC) agreed with Mr Mpumza’s proposal.

Mr Matoboge mentioned that the Mayor had expressed herself in English earlier in the meeting and it was only after the Committee had posed difficult questions that she mentioned that she could not communicate in English.

The Committee should note that the MM had treated it with contempt by not availing himself. He agreed that they should defer the meeting with the Municipality.

The Chairperson aired her frustration that the Mayor had not respected the decorum of the Committee.

Mr Montwedi said that the conduct of the Municipality was frustrating, and he was concerned that the officials showed the same contempt for its residents.

He agreed that they should organise another meeting with the officials.

In the absence of an appeal against the court order, the Municipality must abide by the court order and remove the councillor.

Mr Motswana also agreed that the meeting with the Municipality should be deferred, even without the presence of the MM.

The NW Legislature had raised the same issues with the municipality last year in November. There should be an intervention by the MEC on the issue of retaining the councillor, as public funds were involved.

The Chairperson asked how the Department had allowed for the lawlessness to occur on its watch. The Committee requested that the department commit to resolving the matter urgently.

MEC Cwaile said the Department had written a letter to the Speaker of the Municipality asking why she had failed to implement the court order. It had since referred the matter to the legal division and the advice received was clear: the matter must be taken to court. As such, the Department has notified the MM, through its legal team, that they had no option but to refer the matter to court, in order to remove the councillor and to swear in the new councillor. Due to competing priorities, the Department could not prioritise the matter, but they assured the Committee that they would do so.

He agreed that the matter should be deferred to the next sitting, and the Department would also report progress on the matter. In this case, it was the Speaker who had failed to discharge his or her duties.

The Chairperson asked why the Council had not been held responsible.

MEC Cwaile said that based on the legal advice, the matter only referred to the Speaker and Municipal Electoral Officer. The Department might have to request that the remuneration payments made to the councillor should be recovered; not only from the councillor, but from all the officials who played a role.

The Chairperson said that this matter referred mainly to the MM, who had failed to conduct his financial duties. Also, the Council had failed to fulfil its oversight role.

MEC Cwaile said that in the last interaction with the Municipality, the Department advised that there was no need for the Municipality to advertise tenders for gravesites and catering.

The Chairperson said that the Committee would entrust the Provincial Department with the responsibility for intervening in the issues faced by the Municipality, as there  was no functioning municipality.

MEC Cwaile said that the Department was in full agreement with the sentiments of the Committee and would conduct its duties.

MEC Rosho mentioned that the Department found it difficult to work with the MM, as he did what he pleased. Instead of looking at issues through the MFMA, he looked at them through a legal lens and this had compromised the system.

The Chairperson appreciated the input from both provincial departments.

She asked that the officials of Lekwa-Teemane Local Municipality (LTLM) brief the Committee.

Opening remarks by the Mayor of LTLM

The Mayor of Lekwa-Teemane, Ms Lydia Duiker, mentioned that the revenue collection from 20 March 2020 till December 2020 stood at R158 825 million.

Unauthorised expenditure amounted to R113 759 million in 2019 and R286 million in 2020. The opening balance of UIFW in 2019 stood at R38 507 million. It was R44 418 million in 2020. Irregular expenditure amounted to R88 million in 2019 and R98 million in 2020. The key contributors to UIFW expenditure were: inadequate implementation of the approved SCM policy; the interest charged by Eskom and the Department of Water and Sanitation (DoWS) on outstanding debt; continuous over-expenditure on monthly bulk purchases of water and electricity; non-cost reflective tariffs; incurrence of supply chain deviations which did not meet required conditions; continuous extension of lapsed contracts; the lack of contract capacity and investigations by the MPAC on UIFW; a lack of consequence management; prolonged vacancies in senior management positions; and the abuse of deviations for procurement that was not urgent.

Total Covid-19 expenditure amounted to R666 117.

The Chairperson opened the floor for discussion.

Discussion

Mr Mpumza commented that the report illustrated the bad state of governance in the Municipality. He asked why the councillors displayed a lack of leadership and oversight. What measures had the Mayor taken to address the governance issues?

Mr Ceza asked whether the Municipality had been able to submit its 2019/20 annual financial statements. If not, why had it not done so?

He asked whether the municipality had been able to provide consistent delivery of water to the residents. If not, why not? 

In some of the informal settlements, residents have complained about the lack of electricity. He asked what action had been taken to restore electricity in those settlements. In addition, what recovery plan did the Municipality have and did it mention how it would eradicate informal settlements? 

The Chairperson mentioned that the AG identified non-compliance when conducting environmental inspections. Many of the landfill and water waste management sites were in poor condition. She requested that in the next sitting with the Municipality, the officials should inform the Committee of the steps they had taken to institute consequence management. 

She asked whether the Municipality envisaged collecting property rates and taxes efficiently if it had not prioritised the appointment of a municipal evaluator.

Mr Montwedi said there had been stagnation in the audit outcomes for the Municipality. He asked whether the Municipality was worried that there had been a disclaimer of opinion for the past four years.

To what extent was the municipal budget funded and what were their key income drivers that would ensure that the budget was fully funded?

What difficulties had the municipality had in ensuring that the MPAC was able to discharge its duties?

Why had the Municipality borrowed money from a service provider? What type of arrangement was in place for the loan to take place and what were the conditions attached? This should have been a transparent process.

Which officials in senior management did not have the appropriate competencies?

He asked what the assets of the municipality were.

What were the financial implications of the municipality not adequately recording the books allocated to traffic officers? 

It was reported that the former Mayor had sold municipally-owned land to himself. He asked what consequence management had been taken against him.

Mr Motswana mentioned that the North West Province’s SCOPA had had several meetings with the Municipality in the previous year and found that the Municipality had ignored the allegations that the Mayor had sold land to himself. To date, they had not received a report on the findings of the Municipality. There were several allegations that councillors had sold land to themselves and the claims had not been investigated by the Municipality. The absence of investigations, it would say that the Municipality was complicit.

He asked how far the municipality was in filling vacancies. The municipality was, yet there were key positions in the finance sector that had not been filled.

Responses

Mayor Duiker mentioned that the Council elected an ad hoc committee to investigate how the former Mayor and the then MM were able to conduct the land transaction.

During her tenure as the MPAC Chair, the Committee had not been dysfunctional. It was able to sit on several occasions. Although there was a shortage of staff, it had been able to appoint a researcher.

Mr Mokgopane Thokoane CFO, LTLM, said part of the municipality’s audit action plan was to first focus on the more manageable issues highlighted by the AG.

Of the Municipality’s budget, 74 percent came from collected revenue. The Municipality relied on property rates and taxes. For two consecutive years the municipality had adopted an unfunded budget. It had creditors amounting to R290 million, mainly for bulk water. There was a dispute on whether the municipality was a water service authority or a water service provider. 

The Chairperson asked who the water service authority was.

Mr Thokoane said that the District was and they were the water service provider.

The Chairperson asked what the dispute was about and whether the Municipality complied with the service-level agreement.

Mr Thokoane said a summons had been issued against the Municipality over an amount of R290 million owed to the Department of Water and Sanitation.

The Chairperson asked whether the water service provider did supply bulk water. Mr Thokoane said that was where the dispute was.

The Chairperson asked whether they had exhausted the Inter-governmental Relations mechanisms.

Mr Thokoane said that they had not.

The Chairperson asked if they could provide a separate report on the dispute by Thursday that week.

Mr Mataboge mentioned that the CFO should take responsibility for the issues faced by the Municipality.

The Chairperson agreed with Mr Mataboge.

Mr Thokoane mentioned that the loan made to the Municipality had been identified as an obligation to the Municipality and should be payable.

The Municipality had had to unbundle the asset register in the previous year. It had to process R15 million worth of assets and so far it had not received material findings for immovable properties in the 2019/20 audit.

The Municipality did have an issue with filing the books for traffic fines, and it was thus decided that the transactions would be impaired.

The Municipality applied to the MEC for Cooperative Governance for the extension of approval for the appointment of a property evaluator. It had since submitted the project charter, which showed how it would implement the process of appointing the property evaluator.

It was true that in previous years the Municipality did not investigate the UIFW. It had now created a reduction strategy, which had been taken to the Council. This strategy looks to reduce UIFW in the future.

Mr Mpho Pilane, Acting MM, referred to the question on filling of vacancies. He said that the position of MM had been advertised and it was closed for applications on 19 February 2021. The position of Director: Technical Services closed on 15 February 2021, and the positions of SCM manager and Manager for Expenditure would be finalised later this month.

Maintenance of the landfill sites had been a challenge, and this had been raised with the District.

UIFW that had been registered had been submitted to the MPAC for investigation. The MPAC had been resourced with additional capacity.

Mayor Duiker mentioned that the MM was suspended in February 2020, due to his misleading of the Council on the procurement of CG Cell technologies. In a Council sitting, he said that the Municipality had signed a performance agreement with CG Cell, whilst the AG had found that the Municipality had received a loan from the company. He was dismissed in June 2020 and was not receiving a salary.

Mr Motswana requested that a report on the landfill sites be made.

The Chairperson reminded the Members that the District would have to appear before the Committee once more to address all of the outstanding issues.

MEC Rosho said that there had been political infighting in the Council and the issue of the MM had been central to the differences.

The BTO in the Municipality was very weak. It had been agreed that financial experts would assist the Municipality with its financial management. Going forward, the Department would provide assistance to the Municipality.

The Chairperson said that prior to the follow up meeting, all relevant reports should be submitted to the Committee.

He invited officials of the Greater Taung Local Municipality (GTLM) to address the Committee.

Opening remarks by the Mayor of the GTLM

The Mayor of the GTLM, Mr Nyoko Matlhabane, apologised for submitting the documents late to the Committee.

All senior manager positions in the Municipality had been filled, except the position of Internal Audit Manager. The position had been advertised and the selection had been made. Other positions had been readvertised. No suitable candidate was found for managing the Municipality’s fleet. Presently, the Municipality was looking to fill the vacancy. 

Transfers and subsidies in 2015/16 amounted to R208 million and in the 2018/19 financial year, they  amounted to R238 million. Property rates in the 2015/16 financial year amounted to R17 million and in the 2018/19 financial year they amounted to R29 million. Interest and investments in the 2015/16 financial year amounted to R10 million and R17 million in the 2018/19 financial year. As a rural municipality, it had to rely on grant funding.

General expenditure amounted to R51 million in the 2015/16 financial year and R126 million in the 2018/19 financial year. Employee and council salaries amounted to R89 million in the 2015/16 financial year and R102 million in the 2018/19 financial year. This expenditure comprised 36 percent of the total budget.

From July 2020 to January 2021, the municipality collected R371 000 from refuse removal. From July 2020 to January 2021, the municipality collected R15 million from rates. It was only able to collect R225 000 in July for water. This small collection was attributed to the fact that it was not a water service authority. The municipality had signed a service-level agreement with the District and had not been paid anything from it.

The Chairperson asked why it had signed a service-level agreement if it was not a water service provider.

Mayor Matlhabane said that they had to because communities were not receiving water.

The Chairperson asked whether the AG had picked up the issue that the municipality had not been paid over the agreement.

Mayor Matlhabane said had picked up on the issue. 

The municipality was allocated R276 000 for Covid-19 relief and it also allocated R530 000. Total expenditure amounted to R806 000.

The audit opinion for the past four years had been qualified. Management continuously developed effective internal control systems to address findings identified. These systems were developed in line with the relevant legislation and laws. Each department was involved in the implementation of the action plan and they worked together. Management met monthly to monitor and update the progress made in the implementation of the audit plan. The action plan is reviewed on a monthly basis and progress was reported to the audit committee. Funding was audited by the audit committee who deferred to management.

The Chairperson opened the floor for discussion.

Discussion

Ms D Direko (ANC) asked what the monthly salary bill and collection rate of the municipality were. The Committee had found that in other municipalities the salary bill was higher than the collection, and this affected service delivery.

Mr Montwedi said the AG had flagged the municipality’s inability to bill its residents properly. Some communities had asked to purchase electricity directly from Eskom, as the rates were too high. Previously, the municipality had agreed to write off debts of indigents, yet it was still collecting debt. When the residents purchased electricity for R100, they only got electricity worth R20. He asked whether the residents had the right to buy electricity from Eskom and how soon the billing issue could be resolved.

Had the quality of AFS improved after the appointment of the CFO? In addition, were they conducted internally?

What role had the municipality played in ensuring local economic development (LED) initiatives were implemented? Had it placed focus on improving Taung as an agricultural hub?

How far was the municipality in developing a new policy on immovable property?

When would the litigation cases be closed?

Mr Motswana mentioned that when SCOPA engaged the municipality in November, they noted that councillors and officials were conducting business with the municipality. He asked whether there had been progress in retrieving money back from the councillors and what consequence management had been implemented. 

A report by the Public Protector (PP) indicated that employees of the municipality who were whistle-blowers had been dismissed. He asked why this had occurred.

It was alleged that the former MM serviced his vehicle with the Council’s money. Furthermore, the Council found that R6 million had been transferred to a family member pof his He asked whether the Council had tried to recover the money.

The Council had not been able to submit its AFS due to issues with its financial system. He asked what the process was so far on this issue.

Taung had received favourable audit opinions over the past four years. He asked what financial system it had been using when it received favourable audit opinions. Why had its audit opinions regressed recently?

Responses

Mr Katlego Gabana, Acting MM, GTLM, said that the Municipality spent R10m million a month on salaries and collected R5.2 million. Thirty-six percent of the budget was dedicated to salaries. The Municipality had never used service delivery money to pay for salaries. The budget had always been funded and had positive surpluses. .

The municipality had changed its strategy two financial years ago and done away with the use of consultants. Now it compiled its statements internally, whilst the reviewal was done externally.

The municipality has been able to negotiate and settle many of its litigations. Currently, it had fewer than ten litigation cases.

The AG had found that some of the councillors had not declared that they were part of corporate deals with companies registered with the municipality. There were instances where families benefited.

The Chairperson mentioned that councillors' family members were prohibited from benefiting from the State.

Mr Gabana agreed and said that a warning was given to those where there was non-disclosure. Councillors must now disclose, on an annual basis, if they were conducting business with the state.

Mr Mataboge said that the municipality had not mentioned what consequence management steps had been taken.

The Chairperson requested that the municipality answer the question.

Mr Gabana replied that the municipality had identified all officials who had been implicated in these matters and hearings had been conducted, with all of them receiving warnings.

The municipality had been approached by the Public Protector in 2018, on a matter relating to a former employee, who claimed that he had been unfairly dismissed. The remedial action stated that the Municipality should consider reinstating the former employee. Subsequently, the municipality took the matter on review, as it would have to settle a substantial amount if he was reinstated.

Forensic investigations illustrated that a tender for the provision of T-shirts, amounting to R78 000 was provided to someone known to the previous MM. The Municipality decided to pursue the money, until it was informed by the forensic investigator that there were no assets to attach, and thus the matter was closed. The amount was not R6 million as mentioned by a Member.

During the compilation of its 2018/19 financial statements, the Municipality’s system crashed. Sebata Municipal Solutions was the financial system provider at the time. Once the Municipality had to migrate to the Municipal Standard Chart of Accounts, (MSCOA), it found that Sebata was not compliant with MSCOA and in an attempt to convert its system, it crashed. Thus, the Municipality was not able to produce its financial statements. It was only able to submit them in January 2020, as it had to recapture the data from the previous provider. The Municipality hoped that by the end of the financial year, it would have been audited for the 2020/21 financial year. It had since had support from both the Provincial and National Treasury and had explained their dilemma.

Sebata also struggled with Standards of Generally Recognised Accounting Practice (GRAP) compliance, and the municipality had to outsource consultants.

Mr Mataboge asked if there was capacity to handle the financial management within the municipality. He asked for an estimate of how much they had paid consultants to help prepare the statements.

Mr Gabana said that the municipality was on the right track, as it had established a team that would compile the statements internally.

The municipality found it difficult to attract the required skills for the technical jobs, as it was rural.

The Chairperson said that other municipalities were able to do so, with their limited resources.

Mr Gabana mentioned that both the CFO and the AFS Manager had a degree in finance. All of the staff were compliant with requirements.

Mr Mphiwa Chuene, CFO GTLM, said that in the past year, the municipality paid R1.3 million towards the compilation of its financial statements and in the previous year it spent R1.1 million. The Municipality had appointed a contractor for three years, at a total cost of R3.5 million, to assist with its AFS submissions.

Mr Mataboge asked whether the amount paid to the contractor was more than what would have been paid towards the relevant staff.

The Chairperson asked whether the municipality had paid more than it would to fully employed staff.

Mr Motswana said that JBFE Consulting had assisted most municipalities with their asset registers, yet none of them were able to produce their AFS.

The Chairperson mentioned that there had been no transfer of skills by JBFE to the Municipality.

Mr Chuene said that when JBFE was contracted by the Provincial Treasury, 17 municipalities received an unqualified audit opinion.

The Chairperson asked why the municipalities had regressed.

Mr Chuene said that they had not regressed in terms of GRAP 17.

The Chairperson asked that the Provincial Legislature should conduct an audit on the issues.

Mr Motswana asked why the CFO had responded positively with regard to the service provider.

Mr Mataboge asked whether there was capacity in the financial office of the municipality and how much had been paid to consultants.

The Chairperson requested that the municipality answer the questions asked by Members.

Mr Chuene clarified that he was not defending the work done by the consultants.

The Chairperson said that there is an issue of over utilisation of consultants by municipalities, instead of building capacity and providing employment.

Mayor Matlhabane mentioned that many of the black farmers in the area had had to rely on white farmers within the neighbouring areas for support. As a result, the municipality had decided to establish an agency that would provide support to these farmers. The municipality had engaged the Premier’s office on the creation of the agency.

The Chairperson said the municipality had the capacity to mobilise the businesses in the surrounding area, to help stimulate LED.

MEC Rosho confirmed that the biggest challenge with the Municipality iwas its financial system. This has been a challenge ever since it migrated from Sebata to Moonsoft. This migration was finalised on the eve of the audit processes, thus the system collapsed. The Municipality had shown political will to engage with the department on matters.

The Chairperson referred back to officials of MLM and mentioned that they and the Mayor had been dishonest towards the Committee when they were questioned on their awareness of the legal opinion. She cautioned the officials against further lying to the Committee, otherwise they would initiate a commission into their conduct or would pursue a criminal charge. She expressed hope that in the following meeting the officials would be honest. 

She also cautioned officials about not adequately preparing for meetings.

Mr Groenewald gave a timeline of the events. He said that MM was appointed on15 November 2020. On 19 November, the Municipality received a letter from attorneys. It then received a legal opinion on 25 November, which was followed by a Whips meeting. Following this meeting, the MEC gave concurrence on the appointment of the MM, which occurred on 15 December. On 15 February, the municipality received an interim order and on t18 February the Council had a sitting, where it chose to support a vote to pay the MM’s legal cost when the matter went to court. Essentially the Council voted to pay the cost for the MM’s legal suit against the Municipality. The Mayor misled the Committee and the MEC, when seeking concurrence for the MM.

Mr Mataboge mentioned that the Municipality had previously failed to appear before the Department of Cooperative Governance committee. It then wrote a letter, indicating that Mr Motswana should not be a part of the next planned meeting. He was pleased that the Portfolio Committee had intervened in this matter.

The Municipality contained several corrupt officials who did not cooperate with Chapter 9 institutions and other organs of the State.

Closing remarks by the Chairperson

The Chairperson indicated that the meeting with the MLM would be rescheduled and the Committee expected that the officials would provide honest responses to questions asked. The Committee would also seek legal opinion on the dishonesty of the Mayor.

She requested that the District provide an overview of its municipalities.

All Members were disappointed by the conduct of the officials of several of the municipalities. The Committee would continue its work without fear or favour.

The meeting was adjourned.