Lejweleputsa District Municipality: state of municipalities; with Minister

Meeting report

Opening remarks: Chairperson

The Chairperson opened the virtual meeting, welcoming all the Members and the delegations from all the Municipalities, as well as the Minister of Cooperative Governance and Traditional Affairs, Dr Nkosazana Dlamini-Zuma, who was also in attendance. The Chairperson indicated that the Minister had asked to be excused early from the meeting, as she had another meeting to attend and the Chairperson agreed to excuse her.

The Chairperson said that the Committee called the meeting because in the 2018/19 financial year, the Free State province had the highest number of municipalities that failed to submit financial statements on time. Masilonyana Local Municipality is one of the worst culprits, as it is now 18 months past the deadline for submission of 2018/19 financial year statements for auditing and yet the Municipality’s submission is still outstanding. This means that the municipality has not yet accounted for the manner in which it used the 2018/19 taxpayer’s money. The Committee’s concern on this issue is the delegation of duty and the gross disregard for the prescripts of the Municipal Finance Management Act (MFMA). There is also no demonstration of evidence that the Municipality received effective financial management support from the district, and the district need to comment on this. The Department of Cooperative Governance (DCOG) in the province must also assist the Committee to understand why Masilonyana remains severely challenged despite having recently emerged from a Constitutional intervention in terms of section 139 (1) b.  

The other issue that is of concern for the Committee is that none of the municipalities in the district submitted the financial statements that were prepared in accordance with the requirements of the MFMA. This is because of the entrenched culture of poor accountability in the provinces as a whole. None of the municipalities in the Free State achieved a clean audit in 2018/19. This is the inevitable outcome of dysfunctional Internal Audit Units and Audit Committees that are failing to achieve their primary purpose of providing oversight over the financial reporting processes, including Internal Controls and Compliance with Legislations. The AG’s report states that the Internal Audit Unit of Nala has not produced any reports for the past five years, but there has been a homebody who has been a receiving money and the Salary Cost Bill amounted to R800 000 a year. The MM of Nala will have to address this matter during the discussion with the Committee Members. The Audit Committee of Nala Local Municipality has not met for the past three years. The Chairperson said that she does not understand why the Committee has not been disbanded because it is merely just a structure for malicious compliance. As a result of this dysfunctional Audit Committee, the municipality’s 2018/19 annual report did not contain the Audit Committee's report. This also explains why the municipality’s audit reports regressed from qualified opinion to disclaimer.

In Tokologo and Masilonyana Local Municipalities, the report from the Department of Cooperative Governance (DCOG) states that there is no risk management despite the existence of the Audit Committees. Another cause for concern is the loss of revenue, particularly in Mathjabeng and Masilonyana Local Municipalities, which is likely to lead to the withholding of payments by ratepayers. Management and leadership that entertain that potential loss of revenue do not have the best interests of the municipality at heart. When looking at the colossal debts of over R7 billion owed to Eskom and City Water, Mathjabeng should be striving to use every opportunity to maximise revenue collection.

Lejweleputsa remains a beacon of hope in the district given its relatively favourable audit outcomes over the past two financial years. The district has an Audit Committee and an Internal Audit that has provided some level of assurance, as well as irregular expenditure that is reduced significantly from R14.2 million in 2017/18 to R583 000 in 2018/19. The District also has a good risk management and proper records. This is leadership by example, and the local municipalities would do well to emulate it. However, the issue that is of key interest to the Committee is why the District has failed to translate its good financial management practices to its local municipalities as it is expected to do so by the law in terms of section 154 of the Constitution.

Presentation by the Office of the Auditor-General South Africa

Mr Luthando Mbandazayo, Acting Business Executive; Free State Auditor-General Office of South Africa, said that Masilonyana Local Municipality last submitted their financial statements on the 2016/17 financial year, where the municipality received a disclaimer audit opinion. The report that was submitted had the same issues that are prevalent in the municipality and it is impossible to know whether the municipality is improving or not; Mathjabeng Local Municipality received a qualified audit opinion for the financial year 2018/19, with seven qualification paragraphs; Nala Local Municipality received a disclaimed audit opinion for the 2018/19 financial year, with 10 qualification paragraphs; Tokologo Local Municipality also received a disclaimed audit opinion in 2018/19, with 14 qualification paragraphs; Lejweleputsa District received an unqualified audit opinion, while Tswelopele received a qualified audit opinion with two qualification paragraphs in 2018/19.

The qualifications paragraphs received by the municipalities included service charges, trade payables, property rates, contracted services, receivables from exchange transactions, employee related costs, payments received in advance from consumer receivables, investment property, property, plant and equipment, commitments, irregular expenditure, government grants and subsidies, etc. Masilonyana Local Municipality was not included in the qualification paragraphs, as they have not submitted their financial statements.

In terms performance information in the District, the AGSA found that the achievements that were reported were not consistent with the planned and reported targets. There were many areas of limitations, especially due to some calculations of the achievements indicated by the municipalities not being clearly defined.

On non-compliance, the Office noted that the most common findings were in terms of annual financial statements that were submitted with material misstatements, financial statements that were submitted late, and annual financial management systems that were not adopted. There were also no ethical controls for revenue.

On expenditure management, Mr Mbandazayo noted that the most common areas included the non-payment of creditors within 30 days, as well as payments that were made without the approval of the municipal Manager or the CFO. Reasonable steps were not taken to prevent unauthorised, irregular, fruitless and wasteful expenditure (UIFW).  

Mr Mbandazayo explained the status of internal controls in each of the municipalities in the District in detail. He said that all the municipalities in the district are in a bad state of financial health, with Lejweleputsa District being the exception. An intervention is required for the rest of the municipalities, as they continue to incur losses, and their assets exceeding their liabilities, etc. The entire district also incurred a total of R1.7 billion in UIFW expenditures.

Presentation by Free State South African Local Government Association (SALGA)

Mr Zolile Mangcotywa, Free State SALGA, said that the main mandate of SALGA is to provide support and advocacy to municipalities. SALGA also supports municipalities in terms of providing training of the Municipal Public Accounts Committees (MPACs) for them to be able to provide proper oversight. SALGA’s working groups on the ground ensure that it provides support and training to municipalities in terms of how to run finances. This is because maladministration of finances is a big issue in terms of the AG’s report. At the political level and council level, the heads of municipalities have to be strong in order to provide the necessary oversight to the municipalities in order for them to run their finances properly, which will allow them to be able to provide the necessary service delivery to the communities.

Mr Mangcotywa handed over to Mr Zanoxolo Futwa to present on the state of the municipalities and the support provided by SALGA. 

Mr Zanoxolo Futwa, Provincial Executive Officer, SALGA, said that Lejweleputsa is a rural District largely characterised by two active sectors of the economy, mining and agriculture and the district has made national contributions in terms of these two sectors. However, these are the two sectors that, over the last decade, have been showing a significant decline in terms of their contribution to the province as well as to the country and had shed a lot of jobs. COVID-19 has not made it easy in the District, as it has been heavily affected. While there are five municipalities in the District, almost 2/3 of the District resides in one area, which is Matjhabeng. He said that the presentation would speak mostly on the challenges faced by the Mathjabeng local municipality.

Mr Futwa said that at the beginning of the term, there are certain elements that were built in the system that SALGA wanted to strengthen, as there was a beginning of consolidation around governance issues with improved audit outcomes. SALGA worked hand-in-hand with COGTA and Provincial Treasury to try and improve the areas of concern raised by the AG. However, COVID-19 had a significant impact and in part has slowed down the pace of some of the gains that were started at the beginning of the term. Lejweleputsa has been affected the most, as it is the host of the largest proportion of people who move across the provinces into the mining sector.

Some of the general challenges faced by the District and mostly evident in Matjhabeng include High levels of debt to ESKOM and the Sedibeng Waterboard, aging infrastructure, high levels of water and electricity losses, high levels of unemployment as well as a high level of recorded UIFW expenditures impacting negatively on the District’s ability to achieve clean audits.

He said that as a result of the history of the challenges faced by the district, there have been reflections of the AG audits in the last two cycles of terms by SALGA. The reflections indicate that there has been a shift in the response to protecting and improving assurances in the municipal institutions. While SALGA has worked hard to ensure that all municipalities in the region and across the Province have Audit Committees and MPACs and are continuously engaged in creating capacity building, there are varying levels of functionality and varying levels of capacity to translate that into governance stabilisation and improvement.

On the support provided by SALGA to the Lejweleputsa District Municipality and its local municipalities, Mr Futwa noted that SALGA provided three forms of support. First, they provided Oversight and Assurance Support where they assisted with capacity building in MPAC, Audit Committees and Public Participation processes. Secondly, they provided support in terms of capacity building where they provided training in terms of MPAC, PMS (Performance Management System) and Audit Committees, as well as SPLUMA (Spatial Planning and Land Use Management Act). They also provided capacity building support in terms of mediation, collective bargaining and representation in legislative reform. Lastly, they provided knowledge sharing, profiling and Hands-on support in terms of Bulk Tariff Setting, Debt Management, PMS and SPLUMA.

Presentation by Provincial COGTA & Provincial Treasury

Mr Mokete Duma, Head of Department, Free State Department of Cooperative Governance and Traditional Affairs (Free State COGTA), presented on the assurance providers from the District Municipality from 2016/17 to the 2018/19 financial years at different levels, noting an improvement between the years. He noted that the main concern is Masilonyana Local Municipality, as they have failed to submit their financial statements. The arrangements have been concluded with the AG for the municipality to submit all the outstanding financial statements. The main issue with the delay in submitting the financial statements was the compilation of the Assets Register because of the dispute that the Department had with the service provider, which has been resolved.

Mr Duma provided an overview of the Creditor’s position, indicating an increase on outstanding creditors from R8 billion to almost R10 billion as of 31 January 2021. Various stakeholders, including government, also owe the municipalities. The combined value, of what is owed to the municipalities, amounts to R6.5 billion, which is money that could be used to advance service delivery in the municipalities. The municipalities are also struggling with high salary bill expenditure. Provincial COGTA and Treasury have encouraged the municipalities to reduce the salary bill by ensuring that when people exit the system, the municipalities do not have to advertise those vacancies. The staff members that are redundant in the municipalities should be re-skilled to go and do the work of those who have left the system.

The provincial Department of DCOG assisted Tokologo Local Municipality with payments of salaries amounting to R2 million, as well as Nala Municipality and Matjhabeng with their Eskom legal costs amounting to R1.5 million, respectively.

Some of the generic finance management challenges in the municipalities include a slow response in addressing audit findings, poor planning towards annual financial statements, non-compliance with SCM regulations, overuse of service providers and consultants, among others. The problem with service providers is that they do not transfer skills, as that would affect their revenue. Most of the municipalities do comply with the mSCOA, except for Masilonyana. A large number of municipalities are not budgeting, transacting and reporting directly in or from their core financial systems. Instead, they prepare their budgets and reports on excel spreadsheets and then import the excel spreadsheets into the system. Often this manipulation of data leads to unauthorised, irregular, fruitful and wasteful (UIFW) expenditure and fraud and corruption.

Mr Duma provided an overview of all the challenges related to non-compliance in the district municipalities, including the Municipal Property Rates Act, filling of vacant posts, free basic services, functionality of ward committees, public participation, complaints management system, Integrated Development Planning, inclusion of vulnerable groups, Local Economic Development, etc.

Presentation by DCOG

Mr Themba Fosi, DCOG, focused on the issues relating to the District Development Model (DDM) and some of the challenges remaining in the district municipality and its local municipalities. The champions appointed for the DDM in the District include Minister Lindiwe Zulu as the National Champion and MEC Mamiki Qabathe as the District Political Champion. The District municipality is relatively politically stable but faces challenges such as the limited revenue streams due to the municipalities being mostly rural and highly dependent on agricultural activities. Some of the issues impacting the DDM implementation in the District municipality include Infrastructure engineering, spatial planning, environmental issues and economic positioning.

Mr Fosi explained the type of support provided by DCOG to each of the local municipalities in within Lejweleputsa District municipality in detail.

In concluding the presentation, he stated that the Lejweleputswa District and its local municipalities are fairly stable with a wealth of opportunities for economic growth and thus good potential for the DDM to thrive. The district has enough natural resources and potential to salvage what is lost through harnessing efforts. Mines can be rehabilitated, new mining opportunities explored and illegal mining dealt with from the root of the problem. Agricultural activities can be enhanced towards commercialisation, agri-tourism and optimising value chains. However, there is also a dire need to effectively manage finances across the board and to fill the critical posts that are vacant within the municipalities.

Discussion

Masilonyana Local Municipality

Ms P Xaba-Ntshaba (ANC) posed her first questions to the Matjhabeng Local Municipality. She wanted to know about the consequence management that has been implemented in the municipality with regards to payments made from the municipality’s bank account without approval from the Municipal Manager (MM) or the CFO. She wanted to know what the Accounting Officer envisages responding to the material irregularity identified in respect of interest owed to Eskom and the quality issues at the Nyakallong Storm Water System.

Ms Xaba-Ntshaba also wanted to know the progress in respect to the section 106 investigation initiated against the municipality on 20 February 2020. Three months is the expected duration of such investigation, and it is now more than a year since its initiation. She asked about the challenges experienced by MISA (Municipal Infrastructure Support Agent) in providing full time assessment to the municipality to enable it to spend its MIG (Municipal Infrastructure Grant) effectively. The expenditure rate of 27%, six months away from the end of the financial year, is not acceptable. She wanted to know the plan to rehabilitate the municipality’s non-functional Wastewater Treatment Plant. She also asked about the strategy implemented by the municipality to combat illegal mining activities that interfere with the functionality of the treatment plant.

About Tokologo Local Municipality, she asked the municipality to confirm whether it had spent the 2018/19 allocation of the Municipality Infrastructure Grant, Regional Bulk Infrastructure Grant, the Water Services Infrastructure Grant and Integrated National Electrification Program Grant for the intended purposes. She wanted to know if the COGTA MEC in the province had reasons to believe that there is serious malfeasance in the municipality, especially following the financial misconduct allegation uncovered by the Auditor-General (AG) against the officials of the municipality.

Ms Xaba-Ntshaba also wanted to know what had been done by the Provincial Treasury in respect of these allegations. She asked if there is any investigation that has been conducted by National and Provincial COGTA, as well as SALGA and Provincial Treasury on the unceremonious relationship between the Technical Director and Municipal Manager that has contributed to MIG expenditure being at 0% as of December 2020.

Ms E Spies (DA) posed her first questions to the Tswelopele Local Municipality. She said she was overwhelmed at the amount of support that has been given to the municipalities and added that the Tswelopele Municipality, eight years ago, had very positive reserves and is now standing at almost billions of Rands of debt to their creditors. She indicated that there was a payment plan created for Eskom two years ago when they threatened to cut the electricity supply to the municipality. She wanted to know if the payment plan has been implemented and what its impact is. She also asked if a revenue enhancement plan has been implemented in the municipality and whether it has had an impact in the revenues generated. There is also a huge incorrect classification of property that was sold to residents, but they have never received title deeds for these, which means there is no revenue that is generated from those. These are issues that if they could be sorted out, they would actually bolster the revenue for the municipality. Ms Spies also wanted to know if the committees such as MPAC and Audit Committees are functioning in the municipality.

About Masilonyana Local Municipality, she noted that the CFO resigned from the municipality 27 months ago, in November 2018. The Council never received an exit report from that CFO and since then, there has been no proper Accounting Officer. The MM has also been off sick since November 2020. Council meetings are not taking place according to schedule, with the effect that quarterly reports and monthly reports are not in compliance. The council has appointed another committee, but they have never seen any reports from such a committee. Ms Spies said that the situation in Masilonyana is totally unacceptable and there needs to be some consequence management in that regard.

Ms H Mkhaliphi (EFF) asked for clarity from Nala Local Municipality about a letter written by the MEC on 20 September 2019. She added that the letter raises some serious concerns for transparency under its recommendations; she also asked for the representatives of Nala local municipality to clarify the contents of the letter. She asked what Provincial COGTA, Treasury and SALGA had been doing over the past few years knowing that the last time Masilonyana Municipality submitted its financial statements was in 2016/17. She wanted to know what these municipalities that do not have functioning MPACs and Audit Committees are going to say to the public about where the funds of the municipalities have been used since they are not providing service delivery to the people. She wanted an explanation from Masilonyana on how the municipality expects to have the right financial statements when they do not have a CFO.

She wanted clarity from Matjhabeng Municipality regarding their debt to Eskom of about R4 billion and the 139 farms that were allegedly given to Eskom in an attempt to settle their debt. She asked for an explanation of how this would exonerate them from their debt. She asked Lejweleputsa to explain how it was that under procurement and contract management some builders, who did not meet the criteria, were just awarded quotations. She asked the municipalities to explain the reasons for their subdued and disinterested responsiveness to assistance from the AG to improve on struggling areas. She wanted to know the national and provincial DCOG’s role in the municipalities.

Ms Mkhaliphi also wanted to know the actual role of the DDM Champions that were mentioned in the presentations. She asked Matjhabeng municipality to explain the R9.9 billion debt and their recovery plan from the debt. She asked Mr Duma if the solution that requires the reskilling of workers in terms the salary bill for is the only solution that they have for reducing the salary bill in the municipalities. She did not think this could be the only solution to the problem and added that this would not help, especially if the specific vacancy requires an expert. This would create more problems for service delivery.

Ms M Tlou (ANC) stated that Masilonyana Local Municipality continues to undermine the constitutional mandate of the AG by having not submitted their financial statements since 2016/17 financial year. She wanted to know the investigation outcome of this issue, as it contributes further to the UIFW expenditure in the municipality. She wanted to know if there has been an identification of strategies from the AG’s side to assist the municipality with their debts, especially to Eskom, as it is among the top five municipalities in the province with the highest debt. She asked about the strategies available in the municipality of addressing the issue of unskilled labour and whether there is an initiative adopted to employ skilled people who would also be able to balance the municipality’s financial books correctly.

Ms Tlou also wanted to know when the CFO vacancy is going to be filled in the municipality. She emphasised the importance of the employment of skilled personnel in the municipality in order to improve bookkeeping as well as service delivery, and added that the critical positions need proper screening of individuals before they are employed. She wanted to know the reasons why Matjhabeng Local Municipality had failed to pay their debtors within 30 days.

Mr K Ceza (EFF) said that his main concerns had to do with the AG pointing out that municipalities struggle with basic financial management, unwillingness to comply with legislation and general disregard for internal control accountability. The community of Matjhabeng Local Municipality protested for, amongst other things, the appointment of Mr Mosala and the illegal appointment of some service providers. He asked the Mayor of Matjhabeng to shed light to the Committee on why the community were up in arms against Mr Mosala and asked about the origins of relationship between the Mayor and Mr Mosala. He also asked about the illegal appointments of service providers, as in Matjhabeng there is also a member of the Mayoral Committee, who was arrested for allegedly being in possession of unlicensed ammunition. He wanted to know the disciplinary actions that were taken to reprimand this MMC if the disciplinary committees are functional in the municipality.

Mr Ceza was also concerned about the issue of aging infrastructure in Matjhabeng Municipality, such as roads that are full of potholes and water infrastructure that is more than 60 years old. He wanted to know if there are plans in place to fix the roads and provide new water infrastructure as well as the timeframes for the completion of repairing/renewing the infrastructure.

The overreliance of municipalities on consultants is indeed a real concern. Mr Ceza wanted to know the remedial actions that have been taken by Matjhabeng Municipality to reduce the extent to which it relies on consultants. He enquired about the usefulness of the consultants in the municipality, especially because the Internal Audit team does not have the required skills to perform the audits on its own. He wanted to know if there is still any value for money in using consultants as the money could be redirected for other purposes. He asked the Mayor of Matjhabeng about his plans to fix the sewer pump station, as the municipality only has one Sewer pump station that is working out of 11 and the timeframes to have it fixed. He wanted to know the Mayor’s plan of action against the officials implicated in investigations that includes the Directors. What will happen to commuters who use the bridge in Virginia, as it is not drivable and puts people at risk, particularly when it comes to rainy seasons?

He also asked for the root cause of maladministration in the municipality and expressed that he was concerned about the usurpation of political power in the municipality. He asked about the actions that will be taken to ensure that MPACs are strengthened to exercise their oversight duties. He also asked about the preventative measures that were taken in the municipalities against UIFW expenditure as well as the number of officials or senior management staff in the municipalities, who were found to have been involved in non-compliance with procurement processes and the consequence management taken against them.

Mr Ceza asked about the actions taken by provincial COGTA in assuring the attraction of necessary skills in municipalities to ensure the improvement of service delivery. He reckoned that the root cause of the provincial intervention in Masilonyana is the fact that the municipality is unable to manage their limited resources and its inability to collect at least up to 50% of its budget. He wanted to know the impact that was made by the intervention in the municipality. Were there any improvements and is anything to be learnt by other municipalities from the improvements?

Mr G Mpumza (ANC) wanted to know when Masilonyana Local Municipality would submit their annual financial statements, as they are required by the law to do so in time. He asked how the municipality intends to address the issue of creditors.

Ms D Direko (ANC) posed her first questions to Matjhabeng local municipality. She wanted to know the challenge behind their struggle of maintaining their infrastructure and if there are any plans to resolve this matter. She asked how the municipality plans to resolve the challenge of monthly and daily control as indicated by the Auditor-General. Lastly, she asked how it was possible that the municipality of Matjhabeng failed to comply with the waste landfill site regulations and what the municipality is doing in order to resolve the issue.

She stated that in terms of Lejweleputsa and Nala Local Municipalities, the AG indicated that there is ineffective leadership, which is a cause of concern. She wanted to know how SALGA and Provincial COGTA are assisting the two municipalities. The audit outcomes of Nala Local Municipality have regressed over the past three financial years and the AG also expressed concern on the submission of financial statement by the municipality. Ms Direko wanted to know how the municipality is dealing with this matter, if the municipality has a posed audit plan and whether they are implementing it. She added that the HOD of provincial COGTA raised a concern about the Department of Local Economic Development and IDP serving as a dumping site for employees who do not possess the skills required for the specific departments. She wanted to know if there is a plan in place to resolve the issue, as unskilled people continue to be employed in these departments, increasing incompetence.

With regards to Tswelopele Local Municipality, she wanted to know the basis in which the Council wrote off unauthorised and irregular expenditure as irrecoverable when there was no investigation that was undertaken to determine whether the money could be recovered or not. She also wanted to know if Tokologo Local Municipality has a financial recovery plan, considering that it has been declared bankrupt.

Mr B Hadebe (ANC) posed his first questions to Masilonyana Local Municipality while focused on the presentation by National COGTA. He noted that the COGTA presentation stated that section 139 (1)(B) was revoked while the municipality was still struggling across all its basics pillars. Secondly, the municipality was unable to implement its financial recovery plan. Mr Hadebe wanted to know the terms of reference for the intervention and the reasons in the first place to invoke the intervention if the intervention would be revoked while the municipality is still struggling. He asked what the reliance was on when deciding to revoke the intervention, as COGTA mentioned that they have not received a formal closing report from the municipality, further indicating its struggle. He asked how the province assessed whether or not its intervention was a positive or not if they still do not have a closing report from the municipality to date. National COGTA further states that the MPAC is not efficient in terms of UIFW expenditure as evident by the ever-increasing level of irregular expenditure. He wanted to know what led to the withdrawal of the interventions in Masilonyana. COGTA also said there is a need to review the organogram of Masilonyana in an effort to make it fit for purpose. What this suggests is that the organogram of the municipality is not fit for purpose and that there is a bloated structure with some positions being redundant. He asked about what has been done in the municipality to ensure that the municipality’s organogram is fit for purpose.

With regards to Tokologo Local Municipality, he wanted to know where the resistance to provide support to MISA is coming from. He asked who is resisting support and who is refusing to be supported. Mr Hadebe also wanted to know the contributing factors that cause conditional grants not to be spent by the municipalities in the District, as it is money made available by national government for these municipalities to spend on specific and direct issues. He also asked about the main contributing factors to the low revenue collection and about the plans in place to ensure that the situation is turned around.

He wanted to know the cause of the strife between the MM and the Director of Technical Services in the municipality, which is causing MIG projects to not move forward. He asked if DCOG has intervened in this situation and how they intervened to make sure that people are not negatively affected.

Mr Hadebe said that it was also reported in the presentations that the municipalities’ liabilities are more than their assets. He wanted clarity on whether this refers to current liabilities and current assets only or if it is about total liabilities and total assets. In the case that this refers to total liabilities and total assets, it would mean that the municipalities are trading recklessly.

Ms C Visser (DA, North West) stated that the concern with these municipalities is that there is regression in the quality of political and administrative leadership, causing the appointment of officials that are not fit for purpose and it subsequently leads to the collapse of governance. She said that bettering and equipping political leaders could overcome this so that they are responsible and accountable enough to appoint people in essential positions to deliver the services and to integrate with the IDP and the budget. She said that the AG and SALGA must feel helpless because they provide year after year clear-cut analysis regarding the financial management and the institutional functioning of these municipalities. The municipalities literally have a checklist, which they can work on to improve. But service delivery clearly is not a priority, and neither is good governance. There are no controls, no checks and balances, no accountability, no questions asked, no consequence management and no paper trails of documents that they need to store.  She wanted to know how it is possible that some municipalities are governing within the laws and the reason why some municipalities are allowed to govern in ignorance of all legislation and compliance. Municipalities are a government closest to the people and should create an environment where people will feel proud to live in. They must provide infrastructure and local economic development and provide opportunities for people to get employment in the areas where they are close to their families.

Ms Visser said that what is needed is for provincial COGTA and Treasury to do forensic audits in all of the municipalities to be exposed to the committees of Parliament. The provincial administrations need to also send their regular reports of these municipalities to parliamentary committees because they sit far away from them, and this leads to lack of accountability of the money that is lost. No one accounts for where it goes and how people suffer from not receiving basic services like water, sanitation and electricity.

The Chairperson posed her questions to Masilonyana Local municipality. She said that the municipality fails to submit its financial statements and audit reports and yet still continues to accept money from national government. She wanted to understand why the municipality is in the situation that it is in and if there is a political will to get the situation rectified. In all fairness, it cannot be that after 18 months, the municipality has not submitted its financial statements. She wanted to get an understanding from the municipality on how things got to where they are. She wanted to know if the leaders of the municipality actually have the best interests of the people at heart.

She noted that the last audited financial statement that was submitted by the municipality was a disclaimed audit opinion. She wanted to know if the current situation is because the municipality does not want to address the issues that were raised on the disclaimed audit opinion. She asked about the actual work being done by the consultants in the municipality because the situation in the municipality keeps on worsening. Why do the consultants continue to get paid if they do not perform their duties?

Responses by Masilonyana Local Municipality

Mr Moeketsi Moshodi, Mayor of Masilonyana Local Municipality, said that when the municipality was before the Standing Committee on Public Accounts (SCOPA), they made a commitment that the high vacancy rate in the municipality is going to be filled. The municipality has filled the position of Social and Community Service and Technical Manager. The position of the Corporate Service Manager is vacant because the manager resigned and went for greener pastures. The position of the CFO remains vacant, and the municipality has re-advertised those two positions. It is alleged that the Council is not sitting because the Municipal Manager is ill. That is not true because at the end of February the Council was sitting and dealing with the adjustment budget as well as the submission of the annual reports, which were also submitted to Treasury. The Council also dealt with the issue of the MM being ill; the MM has recovered and will be reporting back for duty next week Monday. The municipality has submitted its AFS for 2016/17 and the AFS for 2018/19 will be submitted by next week.   

Mayor Moshodi said that he is glad that COGTA managed to sort out its dispute with the service provider that was appointed by administration. He added that the annual financial statements would be submitted in due course. There is a dilemma of standardised PMS, but SALGA is assisting with the issue and the municipality is also expecting COGTA to assist in this regard.

Mr Hadebe said that the manner in which the responses from the Mayor of Masilonyana were forthcoming was frustrating him. It is as if the questions from the Committee were not clear or adequate enough. The Mayor says that the financial statements will be submitted but that was not the question asked. The question was why they were not submitted in the first place. Mr Hadebe wanted to know what led to the AFS to not be submitted and what has been done in the municipality to hold those who were meant to submit the AFS accountable.

The Chairperson agreed with Mr Hadebe and added that the Mayor was not assisting the Committee. She said that she let him continue with the thought that he would eventually come with the specific answer to the questions. She then asked the Mayor to respond directly to the questions.

Mayor Moshodi said that the municipality was under section 139 and a service provider was appointed by COGTA.

The Chairperson said that section 139 (1)(B) does not usurp the powers of the Mayor and added that he still had to perform his functions and responsibilities, as it does not exonerate him from accounting.

Mayor Moshodi said that there was a dispute between COGTA and the service providers that were assisting the municipality with the compilation of annual financial statements. The issue has been resolved and by 15 March 2021, the outstanding AFS will be submitted. The AG identified that one of the issues that the municipality is not implementing was bulk infrastructure. The municipality has installed meters across Masilonyana households so that the services that the community is using can be metered and the people can pay for the services. The municipality has embarked on a process of verifying and registering new indigent people who are not working in the municipality. The organogram of the municipality is a prototype and national COGTA is assisting the municipality to create an organogram that will be accepted. The organogram was approved in November 2020. The salary bill of the municipality is still within the 35% threshold. That is why the municipality has advertised positions that also deal with the compliance in the finance Department. The municipality has also advertised for a company that will assist with refuse removal.

The Chairperson said that she does not believe that the dispute between COGTA and the service provider lasted for four years. She then asked the Head of Department of COGTA to clarify the matter.

Mr Duma (HOD) said that the Mayor was correct and added that when COGTA intervened in the municipality. They were informed by a number of factors on why they had to intervene in the municipality. Among those factors, was the issue of financial statements for the 2017/18 financial year that were not submitted to the AG and the intervention only came in 2019. The other factor was that the salaries were not being paid and the third parties were not being paid. There were also issues in relation to money that was wrongly paid to an account, which was supposed to be an Eskom account. And when the municipality got its equitable share in December 2018, it was found that the money was actually spent without all the supporting documents. This was even before the appointment of the Mayor because at the time the Mayor was not available when COGTA intervened. The Municipality also did not have Senior Management that was appointed, as the MM and CFO had resigned. After the intervention by COGTA, there were a number of things that that they did to try and bring stability in the administration – like the appointment of the MM and other Senior Managers. Because the financial statements for 2017/18 were not submitted, COGTA then appointed a service provider to assist because according to the AG’s report, it was clear that the GRAP 17 issues, the asset register and the infrastructure assessment register were a problem to the municipality. It is important that the Committee remembers that a municipality can only have the complete submission of a financial statement if it also includes the asset register or information on the assets. The reason why the AFS were not submitted in the subsequent year 2018/19 financial year, when COGTA had already intervened, is because there was a dispute with the service provider in relation to a subcontractor on GRAP 17. The engineers do GRAP 17, so the service provider was working with an engineer, but they had a dispute to the level that the engineer withheld the information on the assets. COGTA intervened in that dispute and paid the engineer directly because it was related to the payment of some of the invoices. That is when the asset register was finally released to the municipality. That is why the municipality said that they will submit the financial statements, as they have already confirmed to the AG that they will submit the financial statements from 2017/18 and 2018/19 financial years. The issue of water is also being attended. The installation of the meter has also come in handy to try and increase the revenue collection of the municipality because people will then be able to pay when they consume.

Follow-up discussion

Ms Spies said that the Mayor needed to understand that the purpose of the meeting was to try and find solutions to the problems that they have in the municipality. It does not help that the Mayor tries to mislead the Committee. A part of intervention and oversight processes includes speaking the truth and reach out to explain the situation. The Mayor needs to understand that the Committee wants to help because the municipalities would not have been called to the Committee meeting if there were not any problems.

Ms Mkhaliphi said that SALGA needed to also explain why the problems in the municipality persisted for four years while they are there claiming to be providing support.

Mr Hadebe said that it has been four years and the municipality only submitted financial statements once, which means the municipality is definitely misleading the Committee. He reminded the Mayor that even though the sittings are done virtually, they are still in Parliament. The Mayor should not be economical with the truth and mislead Parliament. He said that he still wanted to know why the municipality did not submit its financial statements and what they have done with those responsible for submitting. This municipality has not had an opportunity to submit and review annual statements tabled before Council and for the public to comment for four years. That on its own is another violation of the local government legislation.

Mr Ceza wanted the details of the dispute between the service provider and COGTA. He added that the municipality might need another intervention because of the late financial statements.

The Chairperson said that she understands that the problem must be historical and added that if indeed it is historical as the HOD of COGTA had said, then there is no need for the Mayor to defend them. She asked him to provide details of the situation he found when he first stepped in as Mayor of Masilonyana.

Ms Xaba-Ntshaba said that the Committee is here to assist the municipalities to find the solutions to problems. He asked the mayor to remember that when two bulls are fighting, it is the grass that suffers. He asked the mayor to assist the Committee so that it can assist the municipality.

Responses

Mayor of Masilonyana

Mayor Moshodi said that he was trying his best to assist the Committee by explaining that there was a dispute between the service providers appointed by COGTA. The financial recovery plan for the municipality is being implemented. In terms of debt collection, there is a Revenue Enhancement Committee that is actually dealing with the issue of non-payment of services. Regarding the valuation roll, there is a Dispute Resolution Committee that deals with disputes and other issues. The municipality has been attending to all the issues relating to property rates. There are measures in place to resolve issues within the municipality.

Free State COGTA

Mr Duma said that in the 2015/16 financial year, the municipality had an unqualified audit report. The 2016/17 financial statements were not submitted and the reasons were unknown; this compelled COGTA to intervene to come up with a turn-around strategy of ensuring that the financial statements are submitted. That is when COGTA appointed a service provider for the composition of the financial statements because at the time, the municipality did not have a CFO. The other service provider that COGTA appointed was for the compilation of the assets register, which also included the GRAP 17 asset register. The service provider on the asset register subcontracted an engineer to actually assist with the compilation of the asset register in terms of GRAP 17. The subcontracted service provider complained that certain invoices were not paid and then withheld information relating to GRAP 17. If the financial statements were to be submitted without GRAP 17 information, it would have led to a disclaimer audit opinion. The decision was to sort out the dispute first so that all the outstanding financial statements could be submitted and an audit action plan, which indicated what financial statement, will be submitted. The 2017/18 has already been submitted and the 2018/19 is going to be submitted to the AG by next week. Part of what COGTA has done in collaboration with SALGA is to ensure that the municipality fast tracks the issues relating to the submission of their financial statements.

National DCOG

Mr Fosi said that the Champions, as part of the rollout of the DDM, were appointed by the President during the beginning of the pandemic; one of their oversight responsibilities was to oversee the COVID-19 response plans as they are implemented by national Departments, the province and more particularly by the district municipalities. Their duties were to also look at how the champions can assist unblock any sort of blockages that might be there in the intergovernmental coordination between the three spheres.

The Chairperson wanted to know when the Champions were deployed.

Mr Fosi said that he was unsure of the date and would return with the answer for that, but he was sure that they were appointed in 2020. He added that not all the Champions have interacted with their districts, as there are still a few districts that have not been touched in terms of the visits by the Champions.

The Chairperson wanted to know if there is a mechanism to hold the Champions accountable and asked about the impact that they have had so far in municipalities, as she had not heard a single success story thus far.

Mr Fosi said that they are still in the initial stages of the rollout of this process, so not all of the Champions will be actively involved in their municipalities. But in addition to the terms of reference, there is a reporting template that is provided so that for every visit that is done there is a report back of the activities and emerging issues that require either national or support from other spheres. He added that there are success stories that could be provided to the Committee where the active champions have actually assisted in district municipalities. The critical issue is the role of the Champions in the intergovernmental alignment around integrated planning, budgeting and implementation. The Champions will be critical in ensuring that national departments that have contributions to make in municipalities come on board with clear commitments of their budgets and programmes. This is because there have always been complaints about the absence of national sector departments in the IDP processes. SALGA will continue to interact with the Presidency to look at options of strengthening the whole coordination of the work of the Champions as part of the rollout.

MISA

Ms Mapatane Kgomo, Deputy Director-General: Infrastructure Delivery Management, MISA, said that the capacity deployed to the Free State as a whole is very limited, as they only have four engineers that are assigned, and they have to service the entire province. MISA is not in a position to fully give the necessary support to Lejweleputsa but with the little resources that they have they do a quite a bit, especially in supporting municipalities with MIG programmes. She said that they help the municipalities to prioritise projects for MIG registration, with developing their business plans and procurement support. Starting from the next municipal financial year, municipalities will be able to utilise a portion of the MIG to improve their asset management practices. So the issue of the dilapidated water treatment plants that have been neglected for quite some time, because municipalities did not have enough funds to attend to those issues, will be addressed to a large extent. She said that there are two national political champions that have done visits to two district municipalities, Thabo Mofutsanyana and Mangaung. Thabo Mofutsanyana’s political champion is Deputy Minister [Agriculture, Land Reform and Rural Development] Sdumo Dlamini, and he did visit the district in 2020 around September and engaged to the district and local municipalities on service delivery related issues and they have put together a report that would then guide the development. She said that she does not have much detail on the visit that was undertaken by a Deputy Minister [Human Settlements, Water and Sanitation] Mahlobo in Mangaung, but she just wanted to confirm that there has been work done by the political champions in terms of the DDM.

Mr Simon Rapulane, MISA, said that it is true that their capacity is very limited. He added that the challenges that they have are in terms of supply chain that is hampering need spending. He said that they only come in when appointments have been made for service providers so that they can perform project management and invoice verification.

SALGA

Mr Mangcotywa said that SALGA has a constitutional mandate to lobby, advocate and represent its members. He added that they also do capacity building for councillours and officials, as well as offer support and advice to its members and in part, share knowledge and information. SALGA serves as a knowledge hub but unfortunately there are limitations in terms of the legislative framework. SALGA cannot hire and fire Municipal Managers, officials or even counsellors in terms of the law.

Mr Mangcotywa said that the support that they provide to municipalities is confined to the mandate that they have in terms of the constitution. When Masilonyana municipality was under section 139 (1)(B), SALGA worked with the administrator to make sure that the municipality is being brought back to normality. He added that SALGA was present in the municipality working with the administrator and COGTA, which is also why the intervention was revoked in the municipality because things were starting to change. The only slack in Masilonyana was when their CFO and the Manager of Corporate Services were no longer part of the municipality, which led to the problems then becoming bigger. SALGA also provided support to Masilonyana on the performance management system and was able to impact training regarding matters that were raised by the AG. SALGA was also able to lobby for funding to help the municipality to galvanise resources so that it could be able to meet its obligation of service delivery. The municipality was cash-strapped and there were no resources because they were under collecting. SALGA also helped the municipality to interact with the Chamber of Mines because of water challenges in the area for them to work together to make sure that the provision of water for communities balanced with the provision of water at the mines. SALGA also assisted in the municipality during service delivery protests at some of the communities to ease the unrest that was going on. At the level of Intergovernmental Relations Policy (IGR), SALGA does raise issues that they had to experience when they interact with COGTA and other stakeholders.

Ms Mkhaliphi said that she did not get a clear picture of the dispute between service providers and how it lasted four full years. She also added that the matter of service delivery pertaining refuse removal also needs clarification as well as the matter regarding the appointment of a CFO.

Mayor Moshodi said that the issue of refuse removal is true, as the waste has not been collected because the trucks are old. He said that they have advertised for a company to take over the refuse removal, as well as for the position of the CFO.

Mr Nkosinjani Speelman, Mayor of Matjhabeng Local Municipality, said that with regards to the issue of the waste treatment plant, the municipality has written letters to the Ministers and the President, which is why a team has been established to take them to various areas on those waste treatment plants. The municipality is also applying a new technology of security because those plants have been vandalised. With regards to illegal mining in the area, the municipality has been engaging the Department of Mineral Resources and Energy (DMRE) to legalise the illegal mines in a way that will benefit the people. In terms of the UIFW expenditure consequence management, Mayor Speelman said that in 2017 the MM was fired by the Council and then in 2019, council was about to fire another MM, who unfortunately passed away whilst in the process of investigation in 2020. There is consequence management in the municipality, particularly with regards to fruitless wasteful expenditure negligence.

On the issue of the farms that were sold to Eskom, he said that the HOD misrepresented the municipality and added that any expropriation of land is the powers of the Council and not of anybody, so it was wrong to say that there was no decision taken by the council on the issue of Eskom on the farms. He said that the MPAC of Matjhabeng is working very nicely.

He confirmed that it is true that the municipality is not paying its debts on time and indicated that the municipality is struggling with cash flow. He added that the national government also owes the municipality and are also not complying with the 30-day deadline.

With the regards to the question of his relationship with Mr Mosala, Mayor Speelman said that he has no relationship with Mr Mosala and added that he knows him as just a comrade. He said that it would be wrong for anybody to come and dictate who must be employed or not employed in the municipality. Everyone who is employed in the municipality has gone through the necessary steps of interviews and is chosen as a result of their qualifications and competence for the particular position.

He said that he would not comment on the issue of the MMC, who was with ammunition, as the police are still handling the matter. It is difficult to say the actions that the municipality will take, as the municipality is still waiting to see how the police will handle the matter.

Concerning the problem of potholes in certain areas in Matjhabeng, he said that they have resealed about 72 kilometres of roads in Matjhabeng and there is only one that is yet to be resealed. Regarding the matter of the sewer plant, he said that it is one of the issues that he will address in the office of the President; as for many issues he had written letters to the President and to the Minister. They said that the municipality must establish a committee but also wanted assurance from the municipality that if they fix the plant, the municipality must guarantee that they will make sure that the plants are not going to be vandalised again. The Committee has been established and meets every fortnight.

The matter the Virginia Bridge is being dealt with by the municipality, alongside Minister of Transport, Mr Fikile Mbalula, and the mining sector. Although the people of Matjhabeng use the bridge, it is also the responsibility of the mines. The municipality has written letters to Minister of Transport and the Minister of Energy and Mineral Resources in order for them to work together with the municipality and solve the problem. Mayor Speelman said that they met with the Ministers on 14 February 2021 and were going to have a follow up meeting.

Mr Ceza asked Mayor Speelman to speak on the motion of no confidence that was tabled against him. He also questioned the consistency of the Council in the matter of the MM who was fired.

Mayor Speelman said that in order to fire the MM, the Mayor must provide evidence to Council. One cannot do a deviation without consulting the Council. In terms of the motion of no confidence against him, he said that he thinks it has to do with political differences within the municipality because the members of the ANC raised it, then by the EFF, but it never materialised.

Mr Ceza asked if Mayor Speelman rejected a proposal by the CFO to establish a Financial Disciplinary Committee to deal with officials and Council members implicated in UIFW expenditure on 04 December 2020 when MPAC brought their report on UIFW expenditure in the municipality.

Mayor Speelman said that it is the first time he has heard of that and added that he does not have the powers to do such a thing. With regards to aging infrastructure, Mayor Speelman said that the matter has also been referred to the office of the President. The office of the President said they must identify the key areas that need urgent attention and also perform an age analysis. He said that the municipality is having a challenge with their landfill site, as they are full. The municipality will do a land feasibility study in all areas. The other challenge is that Matjhabeng does not own its land and the land that they actually own has mine dumps.

Provincial COGTA

Mr Duma said that he did not say that the municipality sold land to Eskom. He clarified that the municipality had a debt of R371 million owed to Eskom and Eskom wanted the municipality to pay it back. Because the municipality was not going to be able to make its financial obligation, COGTA reminded Eskom of the dispute that is currently in Court in relation to the services that they need to be paying at the municipality, which they have not paid. Eskom wanted a guarantee that the municipality would pay their debt, as a result, the municipality together with the attorneys representing the municipality agreed that a collateral security would be issued with the lands. The lands have not been sold but are kept by Eskom as collateral security until the municipality is able to pay off its R371 million debt. Mr Duma said that COGTA is looking for ways to make the municipalities liquid and the only way to do so in the current state of the country is to dispose of some of their current assets in line with section 14 of the MFMA.

The Chairperson announced the meeting would reconvene at 19:00.

The meeting was adjourned.