Frances Baard District Municipality: state of municipalities

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Cooperative Governance and Traditional Affairs

16 March 2021
Chairperson: Ms F Muthambi (ANC)
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Meeting Summary

Video: Portfolio Committee on Cooperative Governance and Traditional Affairs, 16 March 2021

The meeting was scheduled so that municipalities could respond to the questions posed in the earlier meeting. However, the politicians from Phokwane, Francis Baard and Magareng missed the meeting, and Members expressed their disappointment, stating that this was a sign of disrespect. They had known in advance there would be a meeting, but had decided to be absent without valid reasons. There should be consequences for such acts, as they were in contravention of the Committee’s rules and the Act. The Members agreed that the transgressors should be summoned to Parliament at their own cost.

Members asked the Sol Plaatje municipality whether the council had approved the section 106 report. If so, the report could not be challenged unless the municipality was hiding behind the sub judice rule to conceal something else. 

They enquired into why the municipality had taken so long to implement the audit plan. The annual financial statements for 2018/19 had an understatement of irregular expenditure as well as a qualification of the financial statements. What had the municipality done to address this, and what systems did it have in place to prevent bidders who were in the employ of the state or connected to anyone working for the state? On consequence management, there were two matters and the municipality had resolved only one. Why were others not mentioned, given the high irregular expenditure? What other misconduct had there been? How many officials that were implicated in allegations of theft and irregularities had been arrested, and what was the status of their cases? 

Members commented that irregular expenditure had been on an upward trajectory since the 2016/17 financial year as a result of a complete disregard for supply chain laws and regulations.  Irregular expenditure from prior years had not been investigated, so there was no assurance that the R41 million from the 2018/19 financial year had been investigated.  The Committee asked for a breakdown of that amount, as well as an update on the progress made by the Hawks regarding its investigations.

 

Meeting report

The Chairperson said that the executive mayor of Sol Plaatje municipality would be responding to questions. This was a continuation from the Committee’s morning session that day. 

Mr Patrick Mabilo, Executive Mayor: Sol Plaatje municipality, said that the municipal manager (MM) and the chief financial officer (CFO) had been “placed on ice” for about two years. There were service delivery challenges, as the municipality had water outages. Water was interrupted from 06h00 and reopened the next day. The levels of the reservoir were a challenge, and the infrastructure was old. More chemicals had to be used to purify the water as a result of the floods. Revenue had been affected by Covid and non-payment by residents, so collection of rates was very low. 

The payment to ESKOM was not a result of compulsion by a court of law – there had been intervention from the Premier’s office, and support was received from Treasury and the Department of Cooperative Governance and Traditional Affairs (Cogta). They had all worked together to salvage the situation. ESKOM had been paid R43 million, and monthly commitments had been renegotiated. The municipality still owed the Water Board, but it would break even. 

At a technical level, there were challenges in that there was no city engineer for water and sanitation, or for roads and storm water. CoGTA and the South African Local Government Association (SALGA) had stated that the municipality should prioritise and fill strategic vacancies, and administration had been instructed to fast track the process. Those were not the only vacancies -- the integrated development plan (IDP), revenue and supply chain management (SCM) managers were all in acting positions. The municipality did not have an industrial policy, and scholarships for the youth were a challenge. 

The section 106 report had been tabled in council, and would be referred to different committees, including law enforcement agencies. On the use of consultants, the Auditor-General (AG) had been consistently stating that electricity and water losses were excessive. The potholes had not been fixed at the desired rate because of financial constraints, but the municipality had received the necessary support from the district and provincial Department of Public Works, and that had alleviated some of the pressure. Service delivery had deteriorated. The city was dirty, the wards were dirty and there was illegal dumping. While this was mainly caused by old infrastructure, social ills also contributed. High vandalism and the theft of cables had also been a factor. Service delivery protests were taking place, and there was a memorandum giving the municipality seven days to respond. 

The Chairperson asked how long the MM and CFO had been acting.

Mayor Mabilo responded that the CFO had been acting for six months, and the MM had been acting for a day because the other one was hospitalised. 

The Chairperson asked how the Mayor could explain their absence from the meeting.

The Mayor said that everyone knew that the meeting would be held. 

The MM from Magareng municipality said that the Mayor had called her to say she was struggling to log in, and asked if she could continue with the questions.

The Chairperson said she had a list of six councillors who were supposed to accompany the Mayor, so why was the municipal manager alone? She asked the MM to tell them that they were disrespecting the Committee, and asked for input from the Members of the Committee. 

Ms E Spies (DA) said that the Members had been working since the morning, and they had also prioritised the meeting. How could the people who were supposed to be here not have prioritised it? People were using connectivity as a scapegoat. 

Mr B Hadebe (ANC) said that everyone had different commitments. Members had been in back-to-back meetings since the morning, and had just concluded a sitting in Parliament and had to rush back to attend this meeting for oversight. Those who were responsible for making oversight effective by providing answers were now frustrating and demoralising the Committee. It could not be that everyone had connectivity issues. It would be a futile exercise to proceed without the relevant parties to provide answers.

The Chairperson said that it was frustrating, because MEC Bentley Vass had been here since a quarter to seven. He was one of the first participants to login, but the colleagues from the municipalities were not here. 

MEC Vass said that he was very disappointed. The Committee should summon them to Cape Town. Everyone had known about this since last week, so they should have been here.

The Chairperson said that they would incur their own travelling and accommodation costs. Could the CFO explain why they were late?

Sol Plaatje Municipality responses

Mr Khuza Bogacwi, Acting MM, said he sincerely apologised, because they had had trouble connecting to the meeting. They had tried to log in using the previous log-in details, but had recently got the new details. Kimberly indeed had ageing infrastructure -- it was the oldest city. 

The interruption of water was due to major leaks, because the municipality drew water from the Vaal River and the leaks affected the reservoir levels. In an attempt to solve the problem, there was a contractor who was dealing with the leaks and as he was working, water had to be interrupted so that the reservoir could rise. Someone from CoGTA had previously alluded to the fact that during the flooding, the clarifiers had got blocked. The technical manager would be working on the clarifiers by Friday. The fixing of clarifiers would also affect the water level. The section 106 report had been challenged in a court of law, and the matter would be heard in May, so the municipality could not comment on it.

The Chairperson said that the section 106 report had been prepared by the MEC. He then presented it to the council which then adopted it, because it must implement it.  

Mr Bogacwi responded that it had been approved, but added that he was speaking under correction.

The Chairperson said that if it was adopted, then it could not be challenged, so what exactly was being challenged here? Was the municipality hiding behind the sub judice principle? The MM and CFO had been suspended and as a consequence were challenging that, as opposed to putting the section 106 report as a contributing factor. Basically, they were saying the MEC had no right to do that. 

Mr Bogacwi said the MM and CFO were the ones who had challenged the report in court.

The Chairperson said that was not sufficient. The Mayor should be able to deal with the matter. 

Mr Bogacwi said that the budget was always approved on time. A consultant had been procured for the economic recovery plan while the municipality was in distress. It was done in-house by the Local Economic Development (LED) component, but the Anglo American mining economic programme, which was supposed to fund the plan, had not funded it. The emergency services were accredited, and there was a training centre that trained firefighters from other provinces, and everyone was qualified. There were a few satellites, including one in the city, one 30km from Kimberley, and two others. 

On 25 February, the council had approved the unauthorised fruitless and irregular expenditure plan, and the CFO would expand on this. There were assurance structures such as internal audit, the municipal public accounts committee (MPAC) and an audit committee which were functional and had the necessary capacity. The audit committee had some members whose term was coming to an end, but a new committee had been appointed. On fruitless expenditure, some regulations required that there be a disciplinary board where, if there were any acts of misconduct, the board would deal with the matter. The disciplinary board had been approved, and there was a prescription on who should be a member. Those individuals had been written to, and the municipality was awaiting their acceptance.

The Chairperson asked when these people had been appointed by the council, when their letters had been sent, and what their starting date was.

Mr Bogacwi responded that the council had given approval on 5 November.

The Chairperson asked when the municipality had received its audit outcomes for 2017/18, because that was when the AG had raised this matter. She said that the acting MM had been appointed because he was a seasoned council member and had the requisite skills and competency for the position. The audit action plan had been developed and adopted by the council in November. So it had taken up to November 2019 to implement one aspect of the audit action plan. 

Mr Bogacwi said that the CFO would take the Members through the audit plan.

Mr Kenneth Samolapo, Acting CFO, Sol Plaatje Municipality, said that of the issues indicated on the report, there were 96 raised and the municipality had resolved 71 and 30 were outstanding. Since March 2020, the action plans had been affected by Covid, and that was when the bulk of other issues were supposed to happen. For instance, with revenue, there were issues under billings and tariffs. There was an indigent management issue. With a population of about 10 000, 1 600 could not be done at that time. As of 30 June, the municipality had been at only at 49%, but as the officials returned, they had shared more information. The council had been able start approving those actions that needed its approval, like the establishment of the disciplinary board. After consulting with Treasury, it had said guidance should be sought from the council, and the market had to be tested, and then letters were sent, so management was ensuring that there would be impartial parties to serve in the board. 

The bulk of the issues came from information technology (IT), and it was a highly specialised area so issues could not be quickly dealt with -- minds had to be applied. In the latest report, some issues would be repetitive, but the AG would indicate that some of the matters raised in 2019/2020 had been adequately dealt with. Sometimes there had been incompleteness of information in the system, whilst work on the ground had been done but not reported. The municipality was making enhancements in this regard.

On Unauthorised, Irregular, Fruitless and Wasteful (UIFW) expenditure, the council had approved the unauthorised and wasteful expenditure prevention plan. According to section 62, the accounting officer had to do everything to ensure that there was a prevention plan, and that it was approved. As the AG was auditing, it picked up issues with the register, which dated back to three years. The municipality wanted the AG to clarify those issues before referring the matter to the MPAC, so in the next meeting it would get an audited report so that it could do its work. The register and prevention plan had been shared with Treasury, and now it was up to the accounting officer to do his job regarding prevention and await the other processes as the MPAC would see fit, as far as the investigation went.

The Chairperson said that the municipality had not answered all the questions, and had to indicate action taken regarding the investigation report and why the CFO had interdicted it. In the annual financial statements for 2018/19, there had been an understatement of irregular expenditure, as well as a qualification of the financial statements. What had the municipality done to address this, and what systems did it have in place to prevent bidders who were in the employ of the state or connected to anyone working for the state? On consequence management, there had been two matters and the municipality had resolved one. Why were others not mentioned, given the high irregular expenditure? What other misconduct was there? The Members had expected an update on the Hawks’ investigation into allegations of theft and irregularities in the SCM processes. 

Mr Somalapo responded that on the supply chain, the last time the irregular and fruitless expenditure register had been updated was three years ago, so it was going to be futile to deal with one specific challenge. The municipality had therefore had to start updating from three years ago to date. It had to investigate all the possible fruitless expenditure and look at the SCM processes that were faulty so that they formed part of the register which had been audited in 2019/20. It covered all the findings, and the lack of disclosure which had created an element of misstatement had been dealt with, because it was done retrospectively. There was now an audited register which would be given to MPAC to interrogate and consider for investigation. The prevention plan had clarified the roles for each officer so that all the elements of irregular expenditure in terms of prevention could be dealt with. For those irregularities which occurred, there was a month to month register which would be given to MPAC. Suppliers that were in the employ of the state had been identified, as the register was categorised. Whenever there was a legal matter, it qualified as irregular, as well as where supply processes where flawed or where contracts expired. 

Mr Bogacwi said there were no cases of financial misconduct in the municipality. He could not respond on the Hawks, because they interacted directly with the accounting officer. 

The Chairperson said that Mr Bogacwi was the accounting officer, and since the municipality had reported a matter to the Hawks, it had to follow up on the progress and not the other way around.

Mayor Mabilo responded that the 106 report was first tabled by CoGTA in a formal council meeting. After that, based on the report, there were recommendations that some matters should be referred to the Special Investigating Unit (SIU) and others to the Hawks. The municipality dealt with internal issues. The first one involved anti-theft and anti-corruption in the SCM, as well as the fruitless and irregular expenditure register which had been put in place. Before the centralisation of the SCM process, every directorate acted like a federal structure, so the intervention had been to centralise the supply chain. 

Regarding the interdict, there had been a formal meeting, and different components of the report had been referred to the relevant committees to deal with, and that had not been brought forward. The CFO had interdicted a section of the report, and after that the MM had done the same, so those issues could not be dealt with because of the court proceedings. The IT system had also been raised as a key challenge. The 106 report had been tabled formally by Cogta and the council. 

MEC Vass said that the municipality was not taking responsibility regarding the 106 report. An investigation had been conducted by the SIU, SALGA, the office of the Premier, Cogta and the Treasury, so this was a competent team. The issues highlighted were non-compliance and political interference. The Hawks had completed their investigation. The report would be defended, and there was a meeting with lawyers tomorrow to check the legal stance. If the municipality would take responsibility and ownership of the report, it would help the municipality to address some of the service delivery issues it was facing. 

The Chairperson said she agreed. If the council had done its oversight, the Committee would not be where it was. When the MEC commissioned a Section 106, it was because the council had failed to do oversight. What specific measure had the municipality taken, in line with its oversight function, to ensure that the municipality complied with the prescripts and laws of financial accounting that referred to fraud and corruption? The MEC had been called only when things were falling apart. 

The MEC, the CFO and the MM had said that the Hawks had been doing an investigation into the allegations of theft and irregularities in the supply chain management process. The Committee wanted a progress report on these matters. How many officials who were implicated had been arrested, and what was the status of their cases? 

Mayor Mabilo responded that the municipality had adopted the report in a formal meeting. What was outstanding was the progress report from different committees to whom matters emanating from the report had been referred. Since then, there had been no report. There had been no progress report on the Hawks investigation, but he would follow up with the accounting officer. By adopting the report, the municipality had taken ownership of it. The report raised a range of issues which had been referred to the relevant stakeholders while the municipality dealt with internal matters. There had to be financial accountability, and there must be a follow up on the implicated officials.

The Chairperson said the AG’s report had indicated that in 2016/17, irregular expenditure had amounted to R3 million. It had then skyrocketed to R17 million in 2017/18, and still further in 2018/19 to R41 million. 100% of this was supply chain-related, so there had been a disregard for laws and regulations. Normally supply chain policies had not been followed. The prior year’s irregular expenditure had not been investigated, so what assurance did the Committee have that the R41 million had been investigated? The R3.4 million had been written off at the same time the AG had said that the municipality did not investigate the prior-year irregular expenditure. Nearly 5% had been related to multi-year contracts that were not done properly. In the whole SCM, each department had disregarded supply chain protocols,  so it could not be said that there were only two matters when there was an irregular expenditure of R41 million. What was the breakdown of this information? It was clear that there had been no consequence management. The MM and CFO had to account for this.

Mr Samolapo said that a lot of work had been done in trying to create a new atmosphere, where there were the right processes in place, like the fraud prevention plan which had been updated last year. Irregular expenditure incurred in the prior year but detected in the current year amounted to R165 million. This had created a lot of problems, so the municipality had wanted it to be audited before taking it to the MPAC, and from there it would be an issue of investigation. The only challenge was that control was not exercised for a while, but now there would be changes, even in the supply chain. Last week, professionals had been identified to occupy certain offices and monitor risk and performance in that unit. This irregular expenditure would be updated correctly, and processes were in place to make sure information was escalated to the relevant structures as soon as possible so that information could be given to those who investigated these issues adequately. The foundation had been laid to escalate information to support actions that remedied the behaviour. Certain issues needed the attention of the MPAC to investigate, because the municipality could not be the referee and player at the same time. The concerns raised by Chairperson had been noted.

Mr Bogacwi added that previously, the supply chain had been decentralised and there was a prescription on when to procure with a verbal and written quotation, and which amounts required a tender. The system had been abused like in 2016/17. Usually, wasteful expenditure would be referred to MPAC to be investigated, including other years. Now the MPAC committee had been strengthened by appointing a disciplinary board with members who were outside the council so that officials had to account. Council had adopted a consequence management policy that supplemented the normal disciplinary code. The unauthorised expenditure had been increasing, so supply chain procurement had been centralised to strengthen the control measures. Corrective action had been taken. 

The Mayor said that the municipality conceded that it had had shortcomings and weaknesses, and it was unacceptable to have fruitless and wasteful expenditure on the rise. The evergreen contracts were supposed to have been given due attention. Consequence management had been all talk, but the mayoral committee was now beyond talking. The issue of multi-year contracts would be dealt with. The municipality wanted to stick to good governance and clean financial management. This approach was being promoted, as well as transparency and value for money regarding goods and services that were procured correctly. The municipality accepted the observations of the Chairperson as constructive and assistive, and would ensure that everything was in order concerning the issues raised.

The Chairperson said that by Friday, there should be an update on the progress made by the Hawks regarding the investigation, a breakdown of the R41 million and what measures had been taken to address matters. The MPAC report that dealt with the UIFW issues for the past three years, and how they had been resolved, should be submitted. The implementation plan should be submitted with clear timelines to address the issues. The Committee would monitor this on an ongoing basis.

Magareng Local Municipality

The Chairperson asked what the way forward should be, since the politicians involved were absent.

Ms Spies said there was no option but to skip the proceedings and summon them to Parliament at another time.

Mr I Groenewald (FF+) said that the Committee should consider consequences regarding what to do when people did not come to meetings. This was in contravention of the rules of the Committee and the Act.

Ms D Direko (ANC) supported this, and said that it showed disrespect to the Committee. They knew in advance there would be a meeting, but had decided to be absent without valid reasons. The attendees were supposed to have a backup. It could not be that in the whole district there was no backup generator, and so that when people were supposed to attend a meeting, they could blame load shedding, especially as an institution. It would have been better if it were an individual. The administrator should be released and appear later, because the oversight involved political and administrative aspects.

The Chairperson said the officials would be written to. 

Francis Baard District Municipality

The Chairperson said the same principle applied here, because the politicians were not in attendance.

Phokwane Local Municipality

The Administrator said everyone had agreed that they would join the meeting. 

Mr Willem Potgieter, a councillor from Marageng, said he did not know where his colleagues were. They all knew that they were supposed to attend the meeting, and he could not account for them. They should have been responsible enough to attend the meeting.

Mr Hadebe said the same principle should apply here, and Ms Direko agreed.

This Chairperson said this needed to be condemned at all costs. The delegates that were here would convey the message of the Committee, but they would still be written to. If they did not attend, the law empowered the Committee to summon them. She thanked those who had attended for making time to attend. 

The MEC thanked the Committee for the engagement. He said that service delivery could be improved. The audit report was a concern, as many municipalities had regressed in audit outcomes. What had happened was disappointing, and it was unacceptable for political principals to not pitch up. The Committee should act, and directives would be sent stressing the disappointment of the Committee. The Phokwane administrator’s term was coming to an end, so he may not be present in the next meeting, so the acting MM would be part of the delegation. 

The meeting was adjourned.

 

  

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