The Committee reconvened the virtual meeting, as a continuation of the morning session. Municipal executives from five municipalities in Limpopo province were present. Those municipalities were Sekhukhune District Municipality, Ephraim Mogale Local Municipality, Elias Motsoaledi Local Municipality, Fetakgomo-Greater Tubatse Local Municipality and Makhudu-Thamaga Local Municipality.
The discussion with Makhudu-Thamaga Local Municipality focused on the current municipal manager’s involvement in the VBS Mutual Bank saga; the municipality’s exorbitant amount of wasteful and unauthorised expenditures that amounted to R183 million; the preventative measures in place to address supply chain management irregularities; financial recovery plan; the municipal property maintenance plan; the 50 awarded contracts that amounted to R2 million and the R50 million, which had been rewarded to a non-compliant service provider. The Committee was disappointed and expressed concern over the nonchalance attitude that the municipal committee had shown to the various issues exposed in the Auditor-General’s report.
The next discussion with Fetakgomo-Greater Tubatse Local Municipality focused on the R243 million loss to VBS bank and the municipality’s subsequent disciplinary measures against officials involved. The municipality informed the Committee of its detailed strategy to curb unauthorised, irregular, fruitless and wasteful expenditures. Among other key issues, they also discussed community consultation, Mabone project, R1 billion litigation cases; the status on the R50.2 million for water infrastructural grant; the municipality’s stability as well as the municipality’s strategy to recover the lost public funds.
During the discussion with Elias Motswaledi Municipality, the discussion was focused on the Special Investigating Unit report, electrification project, municipal financial recovery plan, its plan to reduce unauthorised expenditures, audit regression; the issue of a family member of a ward councillor that had been irregularly awarded a R5 million contract; the municipality’s reliance on consultants.
In the discussion with Ephraim Mogale Local Municipality, the key points were on petrol card fraud case and the establishment of the financial misconduct disciplinary board. The Chairperson expressed her concern on the many acting positions at this municipality. Among other key issues, there was the municipality’s audit regression, R80 million loss to VBS bank, as well as the legal battle with its former municipal manager.
The final discussion of the meeting was with Sekhukhune District Municipality. The discussion focused on the R5.4 million and R12 million fraud cases; R66 million VIP toilet case; R7 million irregular award; the Municipal Infrastructure project; the municipality’s learner contractor development programme; its audit regression; progress on water supply; the use of consultants. The municipality also offered its insights on the intergovernmental relation from its experience in dealing with COVID-19. Members encouraged the municipality to take advantage of its resources such as mining and farming to create more jobs in the district.
This meeting session was a continuation of the meeting that had taken place earlier on in the day. The long break between those two meetings was to allow municipalities to have sufficient time to prepare their responses to Members’ questions.
Response from Makhudu-Thamaga Local Municipality
Ms Minah Bahula, Executive Mayor, Makhudu-Thamaga Local Municipality, responded to a Member’s question on whether the current municipal manager had cooperated with the Special Investigative Unit’s (SIU) investigation process. She explained that slide 32 of the presentation indicated that the contract of the Municipal Manager (MM), Ms Nancy Rampedi, at Elias Motsoaledi Local Municipality lapsed on 27 January 2018, as it was a five-year contract. Mayor Bahula assured the Committee that the Municipal Manager had been cooperating with the forensic investigator who was appointed by the Provincial Treasury. The MM attended all the sessions when she was due to report on the matter for investigation.
Mayor Bahula commented on the municipality’s consequence management measures on the supplier chain management manager. She confirmed that the Council appointed its disciplinary force on 29 October 2018. The Chairperson of the Audit Committee managed to refer the matter to council for consideration. As a result of that, the supplier chain manager was dismissed for transgression on supplier chain management policies.
Ms Rampedi, the Municipal Manager, responded to the Committee on the write-offs of some wasteful and unauthorised expenditure. She said that the municipal council had written off the R183 million. The R48 million unauthorised expenditure had also written off by the council. She clarified that slide 36 of the presentation showed the balances of unauthorised expenditure for every financial year. It was indicated on the same slide that the R48 million unauthorised expenditure was used for non-cash items for the provision of payment of debt. She explained that the local municipality was currently in a predicament with the national Department of Public Works and Infrastructure (DPWI) on its payment on property rates. The Department stated that it would not pay property rates on properties that had not been registered. As a result of that, the municipality is facing the difficulty in not receiving that lucrative revenue every year. The municipality had referred the matter to National Treasury, but there has been no feedback from Treasury yet on the matter. The municipality was also proactively engaging with DPWI to figure out a way on the settlement of debt.
Ms Rampedi commented on the irregular expenditure after the municipality had received its audit report from the Auditor-General. The Municipal Public Account Committee (MPAC) was able to investigate regular expenditure of the financial year as shown in presentation. The Council resolved to write off the R183 million for 2017/18 after having reviewed all the transactions.
In terms of non-compliance of supplier chain management laws and regulations, what the AG’s report indicated was there had been advertisements that had been posted for less than the required period. The municipality subsequently devised its preventative measures and developed a Supplier Chain Management checklist, which has thus been distributed among municipal officials. In addition, the municipality purchased an electronic system in January 2021, which was a vetting system that could check service providers’ details. Once a service provider’s ID number is punched in, the municipality would be able to review the profiles.
Ms Rampedi explained that there was variation in the wording of the supplier chain policy. The Auditor-General’s report highlighted that for a bid it must be advertised for a minimum of 14 days. A seven-day period is fine with a quotation. After the issue had been flagged, the municipality reviewed its own supplier chain policy, and the policy was amended and approved. National Treasury shared the standard operating procedure with the municipality. Further, the municipality appealed for more support from the Provincial Treasury to train supplier chain management officials and more workshops had to be held to brief officials on those matters.
To prevent more irregular expenditures in future, the municipality also reviewed its tender documents for internal audit for due diligence.
Ms Rampedi commented on the municipality’s financial recovery plan. She said that the municipality is currently bankrupt and cannot pay its service providers when they were due. She informed Members that the ratio is a reflection to indicate a municipality’s affordability. Ratios that were highlighted in the presentation show that the municipality’s liquidity was at 0.45, which has also been confirmed on the municipal financial statement that had been audited in 2019. The ratio has dropped significantly since 2016 because of the non-payment for property rate from DPWI. The municipality currently has a debt amount of more than R400 million. DPWI indicated that the property rate must be registered before they could make payments. And for those that had already been billed, the national Department would only pay from the date that those properties were registered. This had the implication that the national Department would not pay some of the bills since 2009, which would result in further municipal revenue loss.
The municipality currently has no challenge to pay creditors. It is also preparing cash flow to ensure that creditors are being paid on time.
Ms Rampedi said that the municipality did not want to depend on equitable share or conditional grant to sustain. She said that if the municipality could get assistance from Treasury on its non-payment from DPWI, it would greatly improve the municipality’s financial viability. As an initiative, the municipality has met with the provincial Department of Public Works. There are discussions that would lead to commitments to settle payment agreements. The interest that was generated from that property rate since 2009 would also need to be discussed.
Ms Rampedi said that the municipality does have an asset register that was in the form of the municipal asset maintenance plan. It was updated annually, which informed the municipality in its decisions and budgets on the municipally owned properties. It was anticipated that in 2021/22 financial year, the plan would be developed into asset management plan and township management plan overseen by Limpopo provincial CoGHSTA (Department of Cooperative Governance, Human Settlements and Traditional Affairs).
Ms E Spies (DA) said that she might have missed some part of the response, as she only logged in after the meeting had started. She reiterated her question around the current MM Ms Nancy Rampedi and her involvement in the VBS Bank heist, where she had tendered in her resignation as Chief Finance Officer at Moretele Local Municipality before the VBS was exposed. She wanted to understand if she informed her current employer of the VBS heist when she was appointed as the MM at Makhudu-Thamaga Local Municipality.
Mr I Groenewald (FF+) said that the municipal manager had alluded to the fact that there had been a maintenance plan at the municipality and it is being currently implemented. He wanted the municipal manager to confirm that. If the response was yes, he wanted to ask follow up questions.
Ms Rampedi responded to Mr Groenewald that the municipality does have a maintenance plan. However, it does not have an asset care management plan. The municipality’s plan is to align both plans.
Mr Groenewald asked whether the plan was being implemented.
Ms Rampedi confirmed that the plan was being implemented.
Mr Groenewald said that the Minister had indicated that there was no maintenance plan in the province whilst the municipal manager had said the reverse. He wanted to know who was lying.
Ms Rampedi said that she would share the municipal maintenance plan with the Committee. She would further request the Senior Manager on infrastructure to provide an explanation and then share it with the Committee.
Mr Groenewald agreed that this must be shared with the Committee.
The Chairperson pressed on a deadline for Ms Rampedi to submit such information and suggested the next day should be the deadline.
Mr Groenewald added that Ms Rampedi must also include which part of the plan has already been implemented and which part has not.
Mayor Bahula explained to Members that Ms Rampedi did not resign while she was serving as a CFO at Moretele Local Municipality. The termination of her employment was due to the expiry of her five-year contract. Moretele Municipality has confirmed to her that Ms Rampedi was a good CFO and recommended that the municipality appoint her. Thereafter, Makhudu-Thamaga Municipality decided to appoint her as the municipal manager on a fixed term contract.
Ms Spies was not satisfied with Ms Rampedi and the Mayor’s responses. Her question was that whether or not she had declared the investigation to the mayor when she was appointed.
Ms Rampedi responded that she did not resign. She had shared the letter that proved her contract with the Committee. The contract ended on 13 October 2017, but it had to be extended for three more months till January 2018 because Moretele Municipality was in the middle of an audit. It was the Council’s resolution that agreed on the extension of her work contract. When she applied at Makhudu Municipality, she was not aware that the VBS matter was under investigation. Hence, she did not declare the matter, as she was not aware of the matter. She also reminded members that Moretele was one of those municipalities that never received any form of notifications. But she assured the Committee that she had cooperated with the investigation. As she was no longer employed at that municipality, she could not provide further information on the status of the investigation. As far as she was aware, the municipal disciplinary board was carrying out the process. She was last there to submit information with regards to her involvement in the VBS saga.
The Chairperson commended the municipality on its improvement on audit findings. However, she wanted to understand the irregular expenditure R92 million in the 2018/19 financial year. The amount of irregular expenditure had totalled R183 million over the last three financial years and also there was an amount of R46.8 million on unauthorised expenditure in the 2018/19. The Chairperson wanted to know if the municipality had investigated all these amounts before rushing to write them off.
Ms Rampedi said that the MPAC had investigated the R88 million report that had been submitted to the council. The 2017/18 irregular expenditure of R88 million had already been investigated. The writing off of the R46 million 2016/17 was also approved by MPAC. The council had also investigated the irregular expenditure for 2018/19. She said that all the meeting minutes were all recorded and were available to Members. There was still outstanding expenditure under unauthorised, which MPAC would still have to consider. The municipality decided to engage with the National Treasury and is still waiting for the formal reply from the National Treasury on the billing of the municipal non-registered properties.
The irregular expenditure of 2017/18 had also been investigated with attendance register and meeting minutes available to Members. The outcome was that no financial loss for those tenders and contracts that had been awarded and service had been rendered. The issue being highlighted was the compliance issue.
Ms Rampedi clarified that there had been some transactions in the 2018/19 that still had not been investigated as well as the irregular expenditure for 2019/20 due to the disruption caused by COVID-19.
Ms Rampedi explained the 2019/20 is the financial year that was being audited at the moment, though there are already expenditure items that have been identified as irregular expenditures. The difficulty in identifying them, she said, was because most municipal projects operate for two or three financial years. Hence, if one irregular expenditure was identified, it would carry over to the following financial year. MPAC does its own investigation as well.
The Chairperson remarked that according to the AG’s report, irregular expenditure of this municipality’s previous years of prior years had not been investigated and it has been stated on record in the AG’s report. In her view, she was inclined to believe that MPAC had written off those irregular expenditures without carrying out thorough investigations. This bad pattern has created an environment of a lack of consequence for transgressions. She wanted to know of what causes that informed MPAC to reach to its decision to write off those irregular expenditures without proper investigations. She cited one example in which the AG had flagged the award of a contract to the value of R50 million. The supplier was found to not have produced a tax certificate from SARS (South African Revenue Services). Hence, she wanted to know who the officials that were involved were and what steps had been taken to remedy the matter.
The Chairperson also flagged the issue of competitive bids for procurement in the Auditor-General’s report. In the report, it was stated that over 50 contracts amounted to R2million that had not been advertised according to the minimum of 14 days. Further, the AG’s report stated that the municipality was not investigating unauthorised expenditure to determine which officials were liable. She found it hard to believe in the municipal manager’s explanation.
The Chairperson reminded the MM that there was a clause in the Municipal Finance Management Act (MFMA) that stated municipal managers had the responsibility to act if someone transgresses the law. Hence, she did not think that Ms Rampedi needed to have waited for MPAC’s approval before taking actions.
The Chairperson raised serious doubt on the functionality of the municipal board at the municipality. The AG’s report indicates that officials at this municipality do unethical things with impunity and with no consequence for their transgressions.
Ms Rampedi acknowledged that there were cases that had not been finalised and were still under investigation. She acknowledged that there was a backlog in investigations. She agrees with the Committee that the municipality has a responsibility to ensure all the unauthorised, irregular, fruitless and wasteful expenditure were accounted for.
She explained to the Committee that the R2 million adverts were an issue of interpretation. The municipal policy on supplier chain has a gap. The convention for supply chain regulation was that quotations, which were less than R200 000, needed to be advertised for a minimum period of seven days. The bids of value between R30 000 to R200 000 were also required to advertise for a minimum period of 7 days. In the R2 million case, she admitted that the municipality had made an error in its interpretation. As a bid at the value of R2 million it was required to be advertised for a minimum of 14 days. The error had been made due to the municipal administration’s lack of clear understanding on the supply chain management issue. The municipality has informed MPAC about its error in interpretation. However, there was no loss in finance and the services had indeed been delivered.
Ms Rampedi commented on the R50 million that had been awarded to a service provider. She said that in this case the two service providers had not submitted their tax compliance certificates and acknowledged that it was a mistake. Hence, subsequent to that matter, the municipality had devised a checklist when dealing with all service providers. It will ensure that all companies will adhere to SARS tax regulations.
Ms Rampedi commented on the municipality’s internal control matter. She agreed and the municipality had identified that it was a challenge when people who were working for the government were being awarded government contracts. Usually, people opt not to disclose that information, as there is no mechanism to verify that information. However, a new system had been purchased in January and she guaranteed that such issues would not happen again.
Ms Rampedi reiterated that the issues pertaining to the supply chain. Thus, the municipality has revised its supply chain management in line with the standard operating procedure. She agreed with the Committee that the irregular expenditure caused by supply chain was exorbitant. It was time to figure out how to prevent future loss. She informed the Committee that the 2017/18 training of supply chain management officials was insufficient to make an impact on the supply chain business because of the change of officials at the municipality. This change was also a contributory cause to the gap in the municipality’s internal control.
Ms Rampedi responded to a Member’s question on the disciplinary measure taken against a former supply chain manager. She said that disciplinary measures had indeed been brought forward against the supply chain manager. Unfortunately, the manager took the municipality to court after the disciplinary measure had been taken. The matter is now at the labour court, but she assured the Committee that municipality has learnt its lesson from this incident and now will be equipped with the knowledge in AG’s report to do its work on its own without needing to refer the matter unnecessarily to MPAC.
Ms Rampedi explained that the wasteful and fruitless expenditure of R5.3 million, as indicated in the AG’s report, could probably be a typo on the Auditor-General’s side. Over the past four years, the highest wasteful and fruitless expenditure was the one in 2017/18. In the 2018/19, the amount was only R103 and the amount was R8 in 2019/20. Currently, the wasteful and fruitless expenditure was sitting at approximately R500.
Ms H Mkhaliphi (EFF) reiterated the corruption issue raised by Ms Spies. She said that in order to tackle corruption, one would need a political head that was responsible to respond to those political issues. She was of the view that the current municipal manager’s credibility was questionable, as Ms Spies had earlier remarked on. She urged the provincial CoGHSTA MEC to intervene in this matter.
Ms Mkhaliphi questioned the ability of the leadership at this municipality. She said that there had been prolonged issue revealed among constituencies that RDP houses had been left unattended to since 2013. What is the status of those houses seven years down the line now? She found it unacceptable that taxpayers’ funds were being squandered with no proper oversight and accountability, and poor people have not benefitted from public funds. She reminded the municipal delegation team that Committee Members have the interest of poor people at heart. Ms Mkhaliphi asked the provincial MEC to explain those issues that had been raised by Members.
Mayor Bahula reiterated that the current municipal manager Ms Rampedi did not resign and her contract at Moretele municipality had lapsed. Furthermore, when Ms Rampedi was appointed as the municipal manager for Makhudu Local Municipality, the VBS matter was not there in the public domain. She was appointed on the merits of her good work performance at the previous municipality.
Ms Mkhaliphi said that her questions had not been sufficiently responded to. As those were political issues, she requested the mayor and provincial CoGHSTA MEC to respond to those matters.
The Chairperson noted the contradiction between the municipal manager’s words on record that the investigation had not started and now that she said she was cooperating with the forensic investigation.
Ms Spies expressed similar sentiment and remarked that there was no correlation between what the Mayor had said to what the municipal manager was saying. She was not satisfied with their responses. She insisted that they come clear with those matters going forward.
Mayor Bahula explained that there was no financial law that could specifically deal with the VBS matter at Makhudu Municipality. The employment of the municipal manager was purely based on the information that she received from Moretele Local Municipality. The recommendation letter, which she had received prior to the appointment of Ms Rampedi, was before VBS for six to seven months.
Mr Rodgers Basikopo Makamu, MEC: CoGHSTA, Limpopo, assured the Committee that the government is taking the tackling of corruption very seriously. Law enforcement agencies as well as the provincial government were both communicating with local municipalities to see how many of them had made investment at the VBS bank. The purpose was to make sure the lost public fund would be recovered for its intended service delivery.
MEC Makamu explained to the Committee that it was the mandate of Limpopo CoGHSTA to building houses in the province. The matter, which Ms Mkhaliphi referred to, had been taken up to his office. He assured the Committee that not only that a number of houses in ward 60 had not been completed since 2013/14, Limpopo CoGHSTA also was embarking on a process to audit all the incomplete houses at every municipality in the province since 2000. The provincial Department has also adopted a new approach in paying contractors to make sure that contractors would not be running away without completing their work. The Department does not pay contractors now by the number of houses that they built. The Department is now paying contractors of the amount in proportionate to the percentage of work that they complete. In addition, he informed the Committee that provision had also been made at the provincial government to complete those incomplete houses. However, this provision would create fruitless and wasteful expenditure on the provincial government’s audit outcome.
Ms Mkhaliphi commended the MEC’s answer. She was not impressed with the mayor’s response on the VBS matter as well as the appointment of Ms Rampedi after VBS sage revealed her involvement in the matter. She accused elected leaders of showing no remorse. She reminded elected leaders that people elected them because they wanted service delivery. The mayor’s response to this Committee showed that she did not care and her lack of appreciation of the severity of the VBS matter. She said that this Committee would not tolerate that attitude. Makhudu Municipality had written off R183 million for the past three financial years and incurred R46.8 million unauthorised expenditure. In her opinion, the mayor needed to go to the ground to explain to her constituency why her council had made decision. She predicted that the Committee would find more irregular items even after the requested report were duly submitted by the municipality. She believed that the municipality was using rules to shield itself from accountability and the country cannot afford to have such mass fund disappear and not be accounted for.
Ms Mkhaliphi thanked MEC Makamu and was looking forward to his updated responses on his return on the issues that had been raised. She said that MEC Makamu’s behaviour is the work ethic that the Committee hoped to see. She expressed her huge disappointment at the mayor. She did not believe that her explanation to say that the issue only arose after Ms Rampedi’s appointment was a satisfactory response. She pointed out that it was the people who would be suffering at the end of the day.
Ms Spies concurred with Ms Mkhaliphi. She found the manner in which the mayor and the municipal manager on writing off irregular expenditure disturbing and extremely concerning. She believed that this concern needed to be properly dealt with. She agreed with Ms Mkhaliphi that the manner in which the mayor and the municipal manager articulated the issue was unacceptable. She guaranteed that the Committee would not leave the matter like this.
Mayor Bahula submitted her apology and said that she did not mean it when she said that she did not care about the VBS saga, which was exposed only after the appointment of Ms Rampedi.
The Chairperson said that she needed both mayor and municipal manager to account for irregular expenditures and requested for a breakdown, of the written off R183 million, to be submitted to the Committee. The Committee also requested to understand the reasons that led to MPAC’s decision to write off those irregular expenditures.
The Chairperson highlighted some serious consequence management gaps flagged in Auditor-General’s report that officials have been acting with impunity. She said maybe that’s the language that is being used in the municipality as the political head also had expressed this ‘no one cares’ attitude.
Response from Fetakgomo-Greater Tubatse Local Municipality
Mr Ralepane Samuel Mamekoa, Executive Mayor: Fetakgomo-Greater Tubatse Local Municipality, commented on the VBS issue. He informed the Committee that the municipality had lost a great deal of money in the VBS saga. One of the municipality’s investments was its R243million that was supposed to be spent on the municipality’s service delivery projects. Further, part of that money should be spent on electrification. After the VBS saga, the municipality has established its disciplinary committee and passed a resolution to remove of the mayor and an investigation also resulted in the charges brought against the former Municipal Manager. The Chief Finance Officer also resigned.
Mayor Mamekoa pointed out that it was unfortunate that the municipality also suffered greatly on its political structure. There was a period of eight to nine months that the municipality was without a speaker. There was only an Acting Mayor at the administrative level at one stage. Because of the municipality’s loss in VBS saga, its electrification projects had to stop. It was only after nine months that the municipality finally appointed a new mayor.
Mayor Mamekoa added that the suspended MM had resigned a day before the disciplinary hearing was to proceed. After her resignation, the municipality immediately advertised for the vacant position municipal manager to be filled. Hence, the outcome of that advertisement was that a new Municipal Manager had been appointed in August 2020 and a new CFO had been appointed in April 2020. It brought much needed confidence to the municipality. At some stage in 2018, the municipality was in such a terrible state that it could not fund some service delivery projects or pay service providers. As a result, some portion of the conditional grant had been used to pay these expenses. The appointment of the CFO brought more confidence to resolve the matter.
Mr Phala, Municipal Manager, reiterated that the impact of VBS looting had negatively affected the project spending. Some of the municipal projects had to be temporarily delayed due to the municipality was unable to pay its service providers.
Mr Phala responded to a Member’s question on why the council had written off a fruitless and wasteful expenditure item without seeking approval from MPAC. His response was that that item had not been deliberately written off without MPAC’s consent as all unauthorised, irregular, fruitless and wasteful expenditure needed to be reviewed by MPAC. The council was concerned with the increasing UIWF and decided to conduct a full-scaled forensic investigation, which was under way. By the time the process was concluded, more details would be discovered.
Mr Phala detailed the measures in place to prevent UIFW. Those internal controls were established.
- The implementation of the compliance check list before any payment could be made;
- Due diligence before final award;
- Electronic contract management system that was monitored on a regular basis;
- Document management system that recorded all documents electronically;
- Invoice register in a triple page form;
- Strengthen supply chain management policy.
Mr Phala informed Members of the municipal revenue management strategy that was developed and adopted by council in September 2020. It was being implemented. One of the key strategies was the collection of debtors over 90 days and that the municipality was currently collecting those debts. The municipality is exploring new sources of revenues and introduced COVID-19 incentive package. The municipality also procured a service provider to be in charge of electricity distribution.
Mr Phala responded to a Member’s question on how the municipality planned to deal with financial discipline. He said that compliance culture had been introduced to the municipality and a robust system was able to identify compliance as well as consequent management was being implemented.
The financial disciplinary board would be established at the end of this financial year.
Mr Phala said that the municipality still needed to compile the UIFW and the first quarterly reports. Those two reports were not been compiled because of the disruption of COVID-19.
Mr Phala explained that internal audits were being overseen by the AG’s office and further submissions had to be made to the AG’s office.
Mr Phala indicated that his team including the Chief Finance Officer could also clarify on financial matters.
The Chairperson enquired about what had prevented the municipality to spend its R50.2 million of water and infrastructure grant at the end of 2018/19 financial year.
The Auditor-General’s report in 2018/19 showed that it did not spend its budget on its intended purpose. She wanted to understand what measures were in place to prevent this from happening in future and what circumstances were that the municipality had used fund that did not belong to you.
The Chairperson also raised concern over the Committee’s observation during an oversight visit in October 2019. Members of the community revealed that community consultation was not taking place as legislated. Hence, she needed to know the progress.
The Chairperson said that the municipality litigation cases had amounted to R1 billion. She thus enquired what the prospects were of the municipality of winning those cases and what led to these lawsuits. She further asked the municipality whether it had sufficient cash reserve to pay if it loses any case among the litigation on the R1 billion.
The Chairperson wanted the municipality to explain what consequence management measures had been pursued by the municipality in respect of the SIU’s findings on the irregularities in the Mabone project. As far as she knew, there was only one employee who had resigned as a result of the SIU findings. She asked what had happened to the other accomplices and what they were doing now.
Mr Phala responded to the Chair’s question on Project Mabone. He said that the project was not like other competitive bidding but it was a section 32 bidding of which the model was taken from another municipality and was being implemented at Fetakgomo-Greater Tubatse Local Municipality. The SIU’s finding found no other officials involved in the process. It was only the accounting officer who had authorised it had to be responsible for the misconduct. Apart from holding officials accountable, there were other recommendations contained in the SIU’s findings, which the municipality has started to tackle. Those finding recommendations included contract management and due diligence. The municipality had just appointed a service provider to ensure due diligence part. At this stage, he did not anticipate any irregular expenditure would take place in this financial year.
Mr Phala responded to the question around the municipality’s R1 billion litigation. Mr Phala was very optimistic that the prospect of winning was very high as majority of the litigation cost came from the Mabone project case. In this case, he informed the Committee that the service provider could not quantify what had been completed and brought a R9 million and a R500 million lawsuits against the municipality when the municipality declined to pay him. Furthermore, Mr Phala said this service provider’s case could be corroborated in SIU’s findings that flagged the municipality’s payment issue. The municipality has in the past had issue of paying service providers while work had not been completed. Henceforth, the municipality was exploring other mechanism to circumvent such situations.
Mr Phala reassured the Committee that the municipality takes community participation very seriously and is complying with the public participation statutory requirement as legislated. However, due to COVID-19 and its related health protocols, the municipality may have scaled down some of the interactions but is trying its best to keep its engagement and consultation with communities. The municipality also uses local media to notify public decisions that were made by the municipality with regards to RDP houses and budget processes.
Mr Phala added that with regards to Project Mabone, the municipality was able to recoup R76 million from the service provider with the assistance of the SIU.
The Chairperson reminded Mr Phala to respond to her question on the conditional grant that had been used for other purposes since he is the accounting officer.
Mr Phala said that that conditional grant issue had taken place prior to his commencement of duty as the municipal manager. His understanding was that the municipality had experienced a period of time that it had cash flow shortage prior to his appointment.
The Chairperson asked Mr Phala when he joined the municipality.
Mr Phala said that he had begun his duty as a municipal manager at Fetakgomo-Greater Tubatse Local Municipality in August 2020.
The Chairperson pressed the issue and asked Mr Phala, who had been the acting municipal manager before Mr Phala took charge.
Mr Phala said that he did not know.
The Chairperson asked whether that person was still in the employment of the municipality.
Mr Phala said that the person might be.
The Chairperson remarked that that person who had been in charge prior to Mr Phala’s appointment should then come to the fore and explain what had been done and preventative measures to prevent such things happening in future.
Mr Phala explained that the shifting of conditional grant to other projects probably had to do with the municipality’s huge investment loss from the VBS saga. The loss could be negatively impacting the municipality’s budget. Hence, it had to shift money around to take care of its operational processes. For instance, to Mr Phala’s knowledge, R80 million that was supposed to be spending on electrification was part of the R230 million that had been lost in the whole VBS looting. Despite that, the municipality is on track to becoming financially stable. Conditional grant is being spent for its intended purposes. He guaranteed that those matters would be handled properly in future.
On the R50.2 million water infrastructural grant, Mr Phala assumed that it could be a misplaced item for the municipality. As the municipality was not the water service authority, he did not think it could spend any fund on water issue. He did not think that the municipality had even received the grant but will have to ask his colleague for more details.
The Chairperson said that it was included in the AG’s report.
Mr Phala said that he would have to verify the information with his colleagues.
The Chairperson enquired about the projects that had been adversely impacted by the VBS saga. She asked about the current statuses for those projects that should have been funded by the money that had been lost to the VBS bank and asked if the municipality had devised any remedial action plans.
Mr M Makgata, Chief Financial Officer, continued to respond to questions as Mr Phala had lost his connectivity. He commented on the water service infrastructural grant. He affirmed that it was a typo error when the financial statement was tabled. The R50.2 million was preserve for disaster mining town grant. The fund was transferred to the municipality through a third party company under the Department of Human Settlements.
In addition, Mr Makgata said that due to the VBS saga, the municipal budget had been negatively affected for the past three financial years since 2016/17. Hence, before the municipality could work on its new budget, it had to do restructure its balance sheet. Now it can inform the Committee that the municipality had settled all the outstanding creditors and ensured that no more companies would ever owe the municipality money for more than 90 days. On project Mabone, he said that the municipality needed to reappropriate the R80 million from the R243 million for restructure the municipal projects. The municipality had added a further R7 million to this project in this financial year and there was only R24 million left till the completion of the project.
In terms of the municipal cash reserves, Mr Makgata reported that the municipality had worked hard to turn the situation around. He could confirm that medium term report showed that the municipality had a cash reserve of R36 million, which was sufficient cash for three months. He anticipated that the amount would be at R130 million at the end of this financial year.
Ms D Direko (ANC) enquired about MPAC’s consideration, which had resulted in the written off of the municipality’s irregular expenditures. She further asked if there truly had been no other alternative option other than writing it off.
Ms Direko wanted to know if the municipality had its own financial disciplinary measures in place. She asked if any employees had been charged, dismissed or suspended as a result of their failure to exercise financial discipline.
The Chairperson commented that when a person accepts a job offer, that person automatically becomes the accounting officer who is responsible for that institution that they serve. It is thus imperative for that person to be very familiar with the institution in which they work, including its past history. According to the AG’s report, the R50.2 million was flagged as a result of the previous municipal manager being wanting on the matter, which was a serious issue. She found it unacceptable that the current accounting officer was not familiar with the situation. The Committee would expect the Municipal Manager to understand at least three to four years of the administrative history of the municipality in order to be equipped to serve in that position.
The Chairperson enquired about whether the municipality had its own audit action plan. If so, she wanted to know if it was in the process of being implemented.
The Chairperson expressed her disappointment that the same issue recurred year after year since 2016/17 at Fetakgomo-Greater Tubatse Local Municipality. It shows that there is a lack of oversight and the council had not properly exercised its power given to them by the Municipal Finance Management Act (MFMA).
Ms Mkhaliphi wanted to check with the mayor and the leadership at the municipality on an issue around the municipality owing an outstanding invoice of R9.7 million to a consulting company for over three years. She wanted to understand why it had been that long. She understood that the issue had been dragged on for far too long and was now in court. She understood that the case was going to court on Wednesday. Should municipality lose in this case, would the municipal manager take responsibility or what would happen?
Mr Makgata pointed out the challenge of the capacity issue within the Treasury office. As the municipality was a newly formed municipality after the election in August 2016, it was a merger between two municipalities. After the merger, the company faced challenge in skills shortage. So in April 2020, the restructured treasury created a new position a divisional manager solely responsible for matters related to the Auditor-General’s office. However, this is a particularly challenging task. The municipality has recently added two officials who are qualified on the subject matter. The objective is that the municipality would reduce its reliance on consultants over a period of time. Currently, skills such as engineering and valuers still can only be acquired from the expertise of those consultants.
Mr Makgata responded that a root cause analysis for irregular expenditure of the previous financial year had been conducted. The AG’s report does not mean that the municipality needs a full review. The municipality did actually review each and every contract awarded since 01 July 2017. Where there is non-compliance, the municipality would disclose those items in its irregular expenditure register. Mr Makgata assured the Committee that it had a preventative control system going forward. Certain service providers are paying now. As for those multi-year contracts, the municipality begins to eliminate those contracts one by one. There is also an electronic contract register that records contractors’ information and match them against the latest payments made by the municipality to ensure that there would be no over payments. It has also developed a comprehensive checklist to ensure proper compliance in supply chain to prevent irregularity in future. He believed that the municipality is cultivating a culture of compliance across in its working and operational environment.
The Chairperson understood that Fetakgomo-Greater Tubatse Local Municipality needed stability. Hence, she would like to understand the mayor’s political oversight role, as it was an issue that had been flagged in the AG’s report. The Chairperson anticipated that this matter would have achieved some progress when the Committee resumes its duties in the second term.
Ms Mkhaliphi agreed with the Chairperson that the Committee needed more information such as the municipality’s summary report and as well as regular updates submitted to the Committee. She said that the municipality must not always fight with service providers and be taken to court. On page 20 of the AG’s report, the court stated that it did not have enough information to proceed in the court case. She suggested that maybe in some scenarios disagreements should be resolved outside the court. She said that it would take good leadership to negotiate. Furthermore, she added that if the municipality keeps on fight with those people that had scarce skills in court, the municipality would find itself unable to procure a lot of essential services that are heavily reliant on those experts. She remarked that when those geniuses are being treated unfairly in the public sector, they would be welcomed with open arms in the private sector. This would have numerous consequences for people on the ground.
Elias Motsoaledi Local Municipality
Ms Julia Mathebe, Executive Mayor, said that it was a pleasure to be interacting with the Committee to strengthen accountability and oversight.
She responded to the question on the SIU report. She had received 12 references on 29 September 2020. Amongst one of them was a concern regarding the then acting municipal manager who is the current municipal manager, Mr Meshack Kgwale. As mayor, she then prepared a report that was tabled to the council in relation to that file concerning Mr Kgwale. The whole process invoked Municipal System Act (Act No. 2 of 2000) Regulation Chapter 2 section 5(3)(B). On 16 October 2020, the report was tabled to the council and the council resolved the matter after deliberation. It was only after the issue around Mr Kgwale had been resolved that the Mayor then handed over the 11 remaining files to Mr Kgwale for him to start instituting disciplinary processes for those affected employees. The process was underway. Amongst those included were companies that money was supposed to be recovered from. She reported that the municipality had already recovered money from one company. A comprehensive report will be submitted to the SIU in due course.
The Council Speaker elaborated more details on the question around the electrification project. He explained that the proposal included three families that would be affected. Among them, two families had made reasonable proposals to the municipality’s request for the acquisition of the land. The proposal of one family, in his view, was ballooned. Hence, the electrification project was stalled because neither party could agree to the other’s terms. Subsequently, on 28 October 2020, the municipality wrote a letter to Housing Development Agency and requested a meeting to try and resolve the matter. Although the receipt of the letter had been confirmed, it was stated that the meeting would only be feasible when COVID-19 restrictions are relaxed. For now, the municipality was still waiting for Housing Development Agency to come back with a feasible date.
The Council Speaker explained to the Committee that the land that the electrification project would be taking place consisted of portions 18 and 69. Portion 13 was also private land. The municipality had been given the go ahead sign for the electrification for land portion 13. So far the municipality only got consent from portion 18 that the municipality had already electrified. Portion 69 did not get give the municipality consent. Hence it was unable to electrify the area. The municipality tried to organise a meeting with the people that were staying there and a letter had been sent to COGTA and the Premier’s Office in order for this matter to get more attention at the higher level.
The Council Speaker assured the Committee that some potholes on the provincial road are being attended to.
Mr Moleko, the Acting Chief Financial Officer, started to explain the municipality’s audit regression.
The Chairperson interjected and asked where the actual CFO was.
Mr Moleko responded that the position had been vacated since December 2018. He had only started in December 2020. Prior to that, the six municipal divisional managers in the Department had been filling in the position in a rotation.
The Chairperson asked when the current municipal manager was appointed.
Mr Moleko said that the municipal manager was appointed in January 2021 after the position had been vacated since December 2018. The currently appointed Municipal Manager had been in the position of Acting Municipal Manager since December 2018.
Mr Moleko explained to the Committee on the technical insolvency issue, which the Provincial Treasury had presented. The municipality had drafted its financial recovery plan after consulting other stakeholders. As it is still being amended, the recovery plan would be tabled in the municipal council for approval once it is finalised. During that process, the municipality would also consult with provincial treasury and Limpopo CoGHSTA.
Mr Moleko said that the municipality also is working towards reducing its Unauthorised, Irregular, Fruitless and Wasteful Expenditures that are contributing negatively to the municipality’s unfavourable cash flow, particularly fruitless and wasteful expenditure. The municipality has also embarked on the process to contain the magnitude of contracting services to reduce the amount that was spent on this item.
Mr Moleko identified the municipality’s procurement plan a factor that deterred more cash flow for the municipality. Its current procurement plan was focused on capital expenditure procurement and now the municipality aimed to include the implementation and operation aspects into procurement as well. Once implemented, he believed that it would result in a better position to manage the cash inflow and out flow of the municipality.
Mr Moleko also pointed out that the municipality did not do well in expenditure management. It resulted in the municipality having invested fund that incurred costs that the municipality had not considered. With implementation of the new procurement plans, it would strengthen the cash inflow and outflow situation.
Mr Moleko said that the accrued invoices had totalled R45 million for the past three years. This affected the implementation of budget the following year as fund that was supposed to be processed for other items would now have to be used to service accrued invoices.
Mr Moleko commented on the current status affairs of the municipality. He acknowledged that the municipality had a history of struggling to process invoices and pay service suppliers. Usually the pressure gradually fades when it falls in the month when the treasury releases municipality’s equitable share. The municipality has just received its last equitable share. Hence, it is still in a position to process salary and payment to suppliers such as Eskom. He flagged that it was a serious challenge in the previous financial year.
As Mr Moleko began to explain the audit regression, the Chairperson interjected and asked him to not repeat the AG’s findings and tell Members what actions had been taken.
Mr Moleko responded that there were in total of seven issues. Six had been addressed from their root causes. The AG’s report flagged issues related to PPE (personal protective equipment), debt in-payment on consumerable debtors, traffic fines, cash flow statement, etc. He asked Members to bear in mind that all these issues were newly flagged issues by the AG Office and issues raised in the past years had all been resolved. The one issue that had not been resolved from the 2018/19 AG’s report was the verification of electricity metre readings for Eskom electricity. The AG’s concern was that municipality needed to verify the accuracy of Eskom electricity readings. The solution is to put a facility in Eskom substation and takes readings to compare with those of Eskom. This matter got resolved in the current financial year.
Ms Mkhaliphi asked the mayor to articulate the issues that were mentioned in the SIU’s report.
Mayor Mathebe responded that upon receiving the files on 29 September 2020. She then prepared a report to the council, which was served on 16 October 2020. Members of the Council had interacted with the report, and then invoked Municipal Act, Regulation Chapter 2 Section 5(3)(b). After that, the council decided that she should hand the remaining 11 files over to the municipal manager to start the disciplinary process of junior employees.
The Chairperson reminded Mayor Mathebe that the Committee needed to know the background.
Mayor Mathebe explained that the matter was related to the R7000 that had been paid to a service provider who was supposed to install an item. However, the municipality could not pay because work had not been completed. By the time the SIU started investigating the matter, the matter had already been dealt with internally. Hence, NPA (National Prosecuting Authority) declined to prosecute Mr Kgwale on the matter.
The Chairperson sought more information on the remaining 11 files that had been sent to the Municipal Manager.
Mayor Mathebe responded that the R7000 had been recovered. The Municipal Manager is continuously interacting with the SIU to investigate these matters as files had only been handed to her on 29 September 2020.
Mayor Mathebe said that there was also another R48 000, which Treasury had instructed the municipality to recover; the then Municipal Manager also managed to recover that amount.
Mayor Mathebe commented on Mr Kgwale’s acting period. The council decided to allow the then Acting MM, Mr Kgwale, to continue to work till the process had been finalised. After the process had been finalised, the council advertised the vacant position and then Mr Kgwale had been appointed as a result. She reported that it was difficult to refill the CFO position and the municipality is currently planning to re-advertise for the third time.
The Chairperson asked the Council Speaker about a family member of a ward councillor who had been awarded a contract worth of R5 million. She wanted to know how the council had dealt with the matter.
The Council Speaker responded to the Chairperson that the matter had been referred to MPAC for investigation.
The Chairperson found the explanation unacceptable and reminded the Speaker that this matter had happened in 2018/19; she wanted to know the turnover time for the matter that was being investigated. She was not happy that the investigation had been going on for such a long period of time. She accused the council of not having people’s best interest at heart.
The Council Speaker agreed with the Chairperson’s sentiment and reminded her that the lockdown had delayed the investigation process. The matter is currently being investigated by MPAC and he would provide a report to the Committee in due course.
The Chairperson said that there is a lack of political oversight in this municipality, an issue that had also been flagged in the Auditor-General’s report. She said that the issue was within the Speaker’s discretion and authority to resolve.
Mr Kgwale explained to the Committee on the municipality’s exorbitant bill paid to consultants and its audit regression. He said that property plan and equipment was a new additional point as well as the calculation of depreciation. He had already communicated these points with the audit team. All the issues that were flagged by the AG in previous years had been addressed with the exception of bulk purchases. He hoped that the audit outcome would improve in this coming financial year.
Mr Kgwale said that the AG’s report flagged the municipality’s use of consultants as a cause for concern but he guaranteed that improvements have already been made. Municipal officials prepared the 2019/20 working papers as well as asset evaluations. Those aspects are indications that show there is a declining trend on the municipality’s reliance on consultants. He was cognisant of the huge amount of money spent on consultants. But the resignation of the municipal CFO also negatively affected succession plan. The issue had been referred to council to get a directive on how to use consultants wisely and with the emphasis on the transfer of skills. But he also noted that consultants tended to be shady when it comes to skills transfer, as they would want to be indispensable to the municipality.
The Chairperson requested the municipality to provide its breakdown on the Unauthorised, Irregular, Fruitless and Wasteful expenditures by Friday.
Response from Ephraim Mogale Local Municipality
Mr Molaudi Mothogwane, Executive Mayor, explained to the Committee that the municipality had invested R80 million in VBS bank and the money was subsequently lost as a result of the saga. The matter had been referred to the financial misconduct disciplinary board, which resulted in the resignation of the former Chief Financial Officer. The Council has passed a resolution in line with Provincial Treasury and Limpopo CoGHSTA on the recovering of all the lost money. He assured the Committee that the municipality was on top of the matter and the issue is currently at High Court.
Mayor Mothogwane responded that the petrol card fraud issue had been refer to the municipal administration for investigation. The Acting Municipal Manager could not connect to the virtual platform due to network problem. Hence, he would ask the Acting CFO to take Members through the entire report and explain the issue.
Mayor Mothogwane responded to the question on the establishment of financial misconduct disciplinary board. He explained that as the terms of office for audit performance committee lapsed late last year. The establishing of the board could only happen after the Committee had been established. Due to COVID-19, the board was only re-established in January 2021.
The Chairperson asked where the resigned CFO was and wanted to know why the position had not been filled since 2018.
Mayor Mothogwane answered that the difficulty of filling the CFO position was due to the lack of skills at the municipality. The municipality has advertised for several times without success. It planned to advertise again, but he asked Members to understand that the municipality needed to attract necessary skills.
The Chairperson asked if the mayor was implying that those people that had been standing in and temporarily serving as CFO did not have the necessary skills and competence.
Mayor Mothogwane said that he did not imply such a thing. He believed that it was always more difficult for a person to leave a permanent position to be employed in a contract position.
The Chairperson hoped when the municipality is back at this Committee again, it will not come back with an Acting person but a person who is serving on a permanent position. She pointed out the negative consequence of not filling in vacancies for two full years while so many people in the country were looking for jobs.
Mr Joseph Madisha, Acting CFO, explained to the Committee on the issue around fuel card theft. He said that the officials who were involved in the matter immediately resigned prior to them being taken through the disciplinary process. Subsequently, the municipality tried to recover the lost money. The unfortunate part of the matter was that since the matter came back twice, it still has not been concluded. However, the municipality should be able to provide the Committee with a report on case number and progress from the South African Police Services (SAPS).
Mr Madisha addressed the issue on audit regression. He highlighted the importance of the issues around commitment and completeness accuracy, which were two aspects highlighted in the AG’s 2019/20 audit findings. Subsequent to that report, the municipality immediately prepared an audit action plan to remedy the aspects that had been highlighted. Those included developing and ensuring contract register and operational contract on a monthly basis. Those two aspects are being reconciled every month to ensure information completeness.
The Chairperson enquired about the municipality’s R80 million loss at the VBS bank. Since the fund was designated to implement service delivery projects, she wanted to know what remedial actions had been taken to ensure that communities received services.
Mayor Mothogwane said that the R80 million, which had been lost to VBS had already been invested when the municipality drafted its service delivery plans. Hence, it has no impact on the service delivery. He then asked the Acting CFO to clarify the matter.
Mr Madisha said that at the time the municipality’s investment had yielded favourable balance of more than R100 million. Hence, the R80 million was just surplus and were not budgeted for any projects. Hence, this municipality was not severely affected by the investment loss.
The Chairperson asked if the municipality had received any directive from Treasury on what steps should be taken.
Mr Madisha responded that Treasury instructed that disciplinary action needed to be taken against officials involved and lost fund needed to be recovered. Consequence management measures were implemented. As a result of that, both the then Municipal Manager and CFO were subjected to disciplinary process. The CFO immediately resigned. The matter with the Municipal Manager got dragged on for a year and a half. By the end of December 2020, she tendered her resignation. The municipality subsequently instituted recovery process. The two former officials were served with documents for them to reimburse the lost fund. The matter is in High Court.
The Chairperson expressed her confusion. She remarked that it sounded like the municipality was not at all affected by the R80 million. She asked whether the municipality was so rich that R80 million was like nothing to the municipality.
Mr Madisha said that most municipal operations in that and subsequent years were not affected by that particular investment. The R80 million was drawn from the reserve that the municipality had as there were no suitable project to spend that money on at that time.
The Chairperson said that it sounds like this municipality always had sufficient cash reserve. She questioned whether community was absolutely satisfied with the service delivery.
She further wanted to know who had funded the litigation cost for the municipal manager during that one and half year legal battle. How much did the municipality pay for settlement agreement?
Mr Madisha said that it was not at all what he meant. Of course the municipality could have done a lot with that R80 million. The point that he wanted to make was that during that time no project was in place to spend the money on.
Mr Madisha said that there was no settlement paid to the municipal manager.
The Chairperson found it hard to believe that a litigation that lasted for a year and a half would end so abruptly.
Mayor Mothogwane said that the R80 million did affect service delivery in municipality in a long term and in general. But at that year, the budget had been committed and the R80 million was not part of the budget.
He said that the long legal battle with the former municipal manager resulted in her asking the municipality to pay out her remaining months until 2022. The municipality felt that it was not an easy condition for the municipality hence the municipality took the matter to court. The case dragged on for over a year and a half until she felt that she was about to lose the case. When her resignation handed in, the municipality did not implement the decision for her to resign.
The Chairperson pressed on the settlement agreement issue again and asked the mayor to state it on record there was no golden handshake offered to the former municipal manager.
Mr Madisha confirmed it so did the mayor.
Mr Madisha could not provide the Committee with the accurate figure on the legal cost but estimated it to be more than R600 000.
The Chairperson requested the municipality to submit a detailed report of the municipality’s Unauthorised, Irregular, Fruitless and Wasteful (UIFW) expenditures breakdown by Thursday.
Response from Sekhukhune Municipality
Mr Keamotseng Stanley Ramaila, Executive Mayor, responded to Members’ question on the issue of lack of consequence management in the municipality. On the R5.4 million fraud case that had been paid into the wrong account, the municipality had suspended officials who had been involved in the matter. There was a forensic investigation that was ongoing and the municipality also opened a case at the SAPS. Mr Ramaila confirmed that the SIU was involved in the investigation. The outcome was that one suspended official resigned and the other one went back to workplace in other responsibilities as the 90-day period had passed without the case being legally concluded.
Mayor Ramaila assured the Committee that the internal process was still unfolding. He acknowledged that the process had been taking too long and he requested the Municipal Manager to expedite the matter. Of the lost R5.4 million, R4.8 million had been recovered.
Mayor Ramaila responded to the R12 million fraud case. He said that officials involved were only the director at Corporate Service who had been charged. The acting CFO resigned together with the other officials. The matter had been dealt with and was concluded. The director had been demoted to the role of manager now.
Mayor Ramaila commented on the R66 million VIP toilets. He said that no money had been lost. The then accounting officer did not agree with the adjudication committee. Instead of referring the decision back to adjudication committee, the officer should have written to Treasury within ten days notifying the deviation. In this case, neither process had been followed. As the audit season apportioned, nothing had been done so Mayor Ramaila himself had to refer the matter to Council to claim it as unauthorised expenditure upon which Council delegated mayor to execute disciplinary courses. The outcome was that the accounting officer was charged. The accounting officer then resigned and settled for a six-month settlement.
On MIG (Municipal Infrastructure Grant) reallocation for Covid-19, Mayor Ramaila said that the supply chain management process had not been adhered to properly. At the moment when the event took place, he was on sick leave but had to be back to address the matter. The outcome was the suspension of the then Acting Municipal Manager and two other officials. The then Acting CFO resigned and accepted a settlement for six months. The technical director was placed under disciplinary process. This was still an ongoing process and he had asked the current Municipal Manager to expedite the matter. With regards to the loss from the MIG project, the municipality had approached the High Court and obtained an interim order since eight contractors had been appointed without following proper supply chain management processes. He was glad to announcement that the order had been restored after the interim order.
Mayor Ramaila further added that the R66 million did not disappear and the municipality had re-advertised. The Supply Chain Management process was at its final stage and contractors would be appointed in due course.
Mayor Ramaila explained to the Committee on the municipality’s programme of learner contractor development. The mayor initiated this project. However, the project would require much more work to be done upon realisation and he suggested using the project to empower SMMEs. This programme is currently being done in partnership with the national Department of Public Works and Infrastructure for three financial years. The first phase was completed in the 2020/21 financial year. The budget adjustment allocated an additional R19 million for this programme. Mayor Ramaila acknowledged the initial challenges in the beginning of the programme but now he assured Members that the programme was up and running.
The municipality also had appointed three professional service providers handling the learner contractor development project. Workshops were held but a lot of problems cannot be resolved since the outbreak of COVID-19. As now the country is on Alert Level one, those programmes could be resumed. The objective of those programmes was to empower small businesses in the district. Since the municipality is a mining district, it hoped that those workshops and training would be beneficial for the small companies to benefit from the region’s mining resource.
Mayor Ramaila explained the municipality’s audit regression. The outcome was that the municipality suspended the former Municipal Manager for the mishandling of the R66 million. Then the CFO was appointed as the acting Municipal Manager. But then the CFO also resigned without giving notice, the series of resignations and suspension left the municipality unprepared without an accounting officer to be fully in charge of the audit. This resulted in its audit regression. The then Acting MM was also not excelled at matters related to Auditor-General’s work and Treasury. Hence, this was also another cause that resulted in the municipality’s audit opinion regression. Among some other causes, Mayor Ramaila said that the operation and maintenance plan was also a cause for its audit regression.
Mayor Ramaila said that the Limpopo Provincial CoGHSTA has been giving a lot of support and is helping the municipality in developing its IT system. The Provincial Treasury was also on board providing assistance. Currently the municipality’s financial misconduct disciplinary board is in place.
What has been learnt was that the municipality needed to strengthen its inter-governmental relation structure. It is taking good practice examples from other local municipalities and learning from their models.
Ms Maureen Ntshudisane, Municipal Manager, explained to the Committee that the audit regression was caused by the lack of supporting documents on the municipality’s working progress on property plan equipment as well as asset permits. The municipality had also submitted financial document of the incorrect financial year. Furthermore, the AG’s office also pointed out that the repair and maintenance expenditure were not capitalised. In response to these issues, the municipality has developed methodology for assets that had not had supporting documents from prior year. Those documents together with its newly devised methodology would be submitted to the AG’s office. Furthermore, the municipality would also ensure that all transactions would be reported in the correct financial year. On repair and maintenance, the municipality would carry out a thorough review to identify expenditure and ensure capitalisation.
Ms Ntshudisane assured the Committee that the VIP toilets, which Members made reference to, had been barricaded. The labourers have been paid. The municipality had received a commitment by the appointed contractor that the project will have been completed by the end of March 2021.
Speaking about the drought stricken area, she informed Members that the dam that supplied water to that area has had low level of water for some time. The solution was that the district would drill boreholes to obtain water for some villages in the area. The process is progressing. Of course the long-term plan was to get water from the dam through a pipeline.
Ms Ntshudisane informed Members that the district does not have a fire rescue team but does have emergency services that provided fire fighting and rescue activities. In some instances, the district use emergency services from Polokwane such as divers. The district is looking at the option to acquire a diver.
She informed Members of the progress on Moutse Drought Relief Project. So far R143 million had been allocated for the project. The Department of Water and Sanitation appointed an official water body as an implementing agency to carry out the installation in the district. From the fund, twenty watering trucks were purchased.
She reported on the status of the drilling of boreholes. She said that none had been drilled as yet because there were technical assessments that still needed to be done in order to find out where the water was. More equipment needed to be procured and pipes also had to be constructed to get water to communities.
She provided an update on the procurement of the storage tanks for the municipality’s water project. So far, 2 000 tanks had been procured and1 583 had been delivered. There were still 417 outstanding storage tanks that need to be delivered to the municipality.
Ms Ntshudisane assured Members that the Moutse bulk water scheme would be taking a phased-in approach.
Ms Ntshudisane highlighted the insufficient repairs and maintenance included in the audit report. She explained that the municipality’s repairs and maintenance currently accounted for three to four percent of the total expenditure. The threshold percentage is eight percent. The difference is mainly due to the unfunded budget. The municipality’s strategy is to implement its revenue enhancement plan and look at ways of using fund in a more cost-efficient manner such as buying materials in bulk as well as minimising the use of consultants gradually.
To improve audit outcomes, Ms Ntshudisane explained that the municipality also has to upskill its staff. The municipality has devised strategies asking consultants to prepare skills transfer plans. Those plans will be monitored to see skills being transferred.
What was also highlighted in the audit recommendations was the municipality’s poor record management. The solution is the activation of electronic record management system.
The municipality appealed that it would also need the AG’s office to assist in arranging workshops at the district and local levels and provide its staff with some performance report guidance.
The municipality has also developed its supply chain management checklist. The list standardises the supply chain processes. Bid committees could use the list to ensure compliance.
The municipality has also instructed its own internal audit unit to conduct due diligence on all tenders before the final awards. It will continuously train supply chain officials to ensure their familiarity with the relevant regulatory framework.
Overall, Ms Ntshudisane informed the Committee that the steps and solutions that formed the municipality’s clean audit strategy were still taking place and were still in its draft form.
Mr Colbert Mufamadi, Acting Chief Financial Officer, informed the Committee of the irregular expenditures that had been written off. In the 2014/15 financial year, it was close to R140 million. In the 2015/16 financial year, it was close to R332 million. All together, this totalled R472 million in those two years.
The Chairperson reminded the mayoral executive to respond to the municipality’s use of consultants. Although there is a trend that the amount is reducing, the AG’s report did raise a concern about the municipality continuously using the same consulting company in the past three consecutive financial years. There is also no clear indication of skills transfer plan to the municipal financial department. The Chairperson wanted to know what skills there were in the municipal finance unit vis-à-vis the skills that it uses the consulting company for.
The Chairperson noted that the residents in the district had protested for three works because there had been no drinkable water in that area for over six months. Hence, an amount of R143 million had been allocated to the municipality for the water project; she wanted to know the progress on that.
The Chairperson noted that the municipality had awarded R7 million to someone who had failed to declare that he was in the employment of the municipality as a municipal driver. She wanted to know if the municipality had recouped the money and what consequence management measures had been taken against that person.
The Chairperson wanted to know what lessons had been learnt out of COVID-19 in relation to the response plan and intergovernmental relations.
The Chairperson said that Constitution s164 indicates that it is municipality’s responsibility to ensure clean water supply. Hence, she wanted to know which one of the projects is being implemented for water distribution for local residents.
The Chairperson wanted to know whether the Minister or Limpopo MEC had been to the region to assist in the District Development Model. If so, she wanted to know what they had done.
The Chairperson enquired about the Mining Towns Project that had been initiated in 2012. She asked if the municipality had benefitted from that project and whether or not the project was still in place.
The Chairperson asked how the local economic development (LED) was being implemented at the district level and how it was being used to contribute to job creation. She pointed out that there were always long queues outside of post offices. She said that this is a clear signal of high unemployment in the country. She wanted to know if the municipality could provide any concrete measures to provide support and create employment.
Mr Groenewald wanted to know how much the total income of the municipality for a year and what percentage of that income was had been spent on paying staff salaries.
Mr Groenewald asked whether the district and municipality revenue enhancement strategies were in place.
Mayor Ramaila responded that the community of Moutse had expressed their concerns and requested intervention from the Minister. A meeting was held with the Premier last year. As a result, the Minister made the announcement and agreed to allocate R143 million as community relief for water project last year. Mayor Ramaila appealed to the Committee that the project could not proceed because of the disagreement between the water implementing agent and the Department. He said that the municipality needed assistance as itself could not resolve those issues. In addition, the service provider must supply storage tank because they had already been paid the full amount in advance. He made an appeal asking the Committee to intervene to expedite the water project matter.
Mayor Ramaila responded to the question on intergovernmental relation. In his view, he believed that it laid the basis to propel the district development model. It is imperative to strengthen cooperation between local municipalities and local government, and integrating planning is possible. He said that two MECs from the national level had been deployed into the municipality.
Mayor Ramaila iterated the importance of the learner contractor programme. As it is a three-year programme, learners will be given the equivalency of Level 5 LED grading after they exit this programme. As this level, Mayor Ramaila believed that those graduated learners would be able to more competitive in the labour market.
For the mining town project, the municipality has developed an enterprise supply development project with the objective to assist SMMEs to partake in the procurement of mines in the district. The municipality is resuscitating the programme and is reviewing options to collaborate with other projects in order to create more job opportunities.
Ms Ntshudisane explained that the municipality has developed its draft economic recovery plan. The one issue that had been identified was to attract investors and create an enabling environment for business. The district policy provided a platform of a joint municipal planning tribunal to facilitate processing development applications, which are key to ensuring streamlined processes.
The other issue from the recovery plan was to ensure the utilisation of water sanitation infrastructural project as a key economic driver. The objective is to ensure the quantity and the design of the project to be labour intensive. Further, the project also needs to enforce 30% local content that would benefit the local community.
One strategy from the economy recovery plan was the revitalisation of cotton farming programme. She said that the place was once the capital of cotton production in South Africa. The municipality is now working together with Cotton SA in identified areas to utilise the whole value chain. It is also empowering local cotton farmers to assist them to produce more cotton in the region. The strategy is being implemented. A feasibility study, which had been conducted, shows that the strategy can be beneficial to the local community.
The municipality also will use the water project to attract more investors to invest in the area.
Ms Ntshudisane informed the Committee that the municipality planned to manufacture electrical motor vehicles. The first stage of those motor vehicles that had been produced would be used to move medical supplies.
Ms Ntshudisane commented on the backlog of the VIP sanitation project. The municipality is look at partnering with potential investors on manufacturing to complete this project. Its hope was to use this project to create employment and business opportunities for SMMEs.
The CFO commented on the use of consultants. He acknowledged that the municipality had been using them for the past three consecutive years. It shows that there is decrease on the reliance of consultants, but he did concede that the municipality could have done more.
The CFO responded to Mr Groenewald that the municipality had an income of R1.1 billion per year, which was generated through its equitable share. The cost of employees was approximately between R370 to R400 million. He understood that the cost of employees was above the threshold and agreed that it needed to do more to stay within the budget threshold.
The Chairperson pressed on the R7 million that had been awarded to the driver.
Mayor Ramaila said that he was not aware of the issue. What he knew was the matter about a municipal employee had used the municipal petrol card for his own purpose.
The Chairperson said that there was an incidence at the municipality that an employee did not disclose his working relationship at the municipality but was awarded a tender worth of R7 million.
Mayor Ramaila said that he would ask Ms Ntshudisane to investigate matter.
The Chairperson said that the municipality would have until Friday to provide the Committee with all relevant information and a full response on the matter.
The Chairperson sought clarity on the assistance that the municipality had received from MEC Makamu and the Deputy Minister on the issue of Moutse. She said if this problem cannot be resolved now, it would miss the six months deadline. She would also have to liaise with the Chairperson of the Committee on Water and Sanitation.
The Chairperson pointed out the municipality’s audit regression. The particular focus was on its Unauthorised, Irregular, Fruitless and Wasteful expenditure for the past three financial years. She requested a report on the municipality’s plan to address the matter be sent to the Committee.
Mr Groenewald remarked that for the last three years, budget on capital at the municipality was only focusing on water management. He recommended the municipality to think of plans to do other developments as well. For instance, he said the municipality could tap into air pollution control and fresh producing market for revenue enhancement.
The Chairperson concurred with Mr Groenewald’s view and emphasised the abundant farms in the district.
Mayor Ramaila said that the Deputy Minister did visit the municipality but the mission was in relation to other programmes. The municipality has had discussions with MEC Makamu who also reminded the municipality to invite him to district command council meetings. He had just attended the last meeting. Mayor Ramaila said that he would start escalating matters that needed their attention.
The meeting was adjourned.
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