Sarah Baartman District Municipality: state of municipalities; with Minister and Deputy Minister

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Cooperative Governance and Traditional Affairs

01 June 2021
Chairperson: Ms F Muthambi (ANC); Mr B Hadebe (ANC, Acting)
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Meeting Summary

Video: Portfolio Committee on Cooperative Governance and Traditional Affairs, 01 June 2021

In a virtual meeting, the Committee convened to hear briefings regarding the state of municipalities in the Sarah Baartman District. The briefings included engagements with the South African Local Government Association (the SALGA), the Eastern Cape Auditor-General of South Africa (the AGSA), the Provincial Treasury, the Provincial Department of Cooperative Governance of Traditional Affairs, the Sarah Baartman District Municipality, and various local municipalities (including the Kou-Kamma Local Municipality, the Kouga Local Municipality, the Sundays River Valley Local Municipality, the Ndlambe Local Municipality, the Makana Local Municipality, and the Blue Crane Local Municipality). The Committee was addressed by senior politicians and administrators representing these institutions.

The District Mayor of the Sarah Baartman District Municipality informed the Committee that they are committed to assisting local municipalities to keep the water flowing to communities. To this end, they were drilling and equipping additional boreholes, and ensured the provisions of water tanks and water trucks to directly supply households with water. Accelerated ground water development projects are also being implemented to ensure residents are not without water. The Kouga Dam is expected to run dry by the end of July 2021. The Provincial Department informed the Committee that they were already actively supporting the municipalities with the supply of water tankers and the development of electricity and water and sanitation masterplans. A desalination water plant is also envisaged for the Sarah Baartman District. Municipalities are helped to ensure proper community participation and consultative process, including economic development projects. Representatives from the various municipalities also asked the Committee to assist them to negotiate reducing historical debt owed to Eskom.

The Committee called on the Eastern Cape Department of Cooperative Governance and Traditional Affairs, along with the National Department, to ensure that proper support is in place to assist the Sarah Baartman District Municipality to effectively manage the crippling drought threatening to destabilise the area. The Committee has noted that in the Makana Local Municipality there have been signs of serious distress in terms of service delivery, administration and finance, including two consecutive disclaimers in the 2018/19 and 2019/20 financial years. The civil unrest of the previous week, where protesters staged a shutdown of the town, are a symptom of this distress. The challenges in the municipality have recurred over long periods of time and have been highlighted repeatedly in the Eastern Cape Auditor-General’s reports. At some point the municipality could not be entrusted with grants from national government, and the district had to manage these on its behalf.

The Committee is aware of the famous Makhanda High Court order compelling the Eastern Cape Provincial Executive to intervene in the affairs of the Makana Local Municipality. This has drawn much public interest, including the interest of Parliament. The Standing Committee on Public Accounts (SCOPA) undertook an oversight visit to the municipality in May 2021, and the Committee noted that the municipality presented the same report it presented to the Public Accounts Standing Committee.

In August 2020, the municipality also appeared before the Select Committee on COGTA in the National Council of Provinces (the NCOP), in relation to the issue of intervention. The National Assembly Committee hopes that the municipality is drawing lessons from these experiences and is accordingly restructuring its administration to better serve the people of Makhanda, Alicedale and Riebeek East.

The Committee raised its concerns about the long list of repeat audit findings in the Ndlambe Local Municipality, in relation to the abuse of Supply Chain Management processes. Its Bid Adjudication Committees have not always been composed in accordance with Supply Chain Management Regulations. Awards were made to service providers in the service of other state institutions, including those in the service of the municipality itself. Persons in the service of the municipality, who had a private or business interest in contracts awarded by the municipality, failed to disclose such interest, and further construction contracts were awarded to contractors that did not qualify. The Committee noted that this is an indication of a municipality that has zero regard for Supply Chain Management protocols and Regulations.

The Committee has noted that the South African Local Government Association has dispatched a technical team to the Dr Beyers Naude Local Municipality to assist the municipality out of its current quagmire. The municipality has previously appeared before this Committee on 19 August 2020, following its concerns around its consecutive disclaimed audit opinions in the 2018/19, 2017/18 and 2016/17 financial years. Since its inception during the 2016 demarcation cycle, the municipality has been under increasing financial pressure and has realised continuous financial losses. The Dr Beyers Naude Local Municipality is a classical case study of a demarcation process that went wrong. The Committee will afford the Association’s technical team the space to do its work and reschedule the municipality for a report back as soon as the team concludes its intervention.

Members were concerned about the National Department when it envisaged declaring a state of local disaster in respect of the drought in the Sarah Baartman District. This will enable the affected municipalities in the Sarah Baartman District to access the relevant disaster management funding. The Chairperson of the Committee welcomed initiatives to ensure that the residents of the Sarah Baartman District Municipal area do not run out of water. She also applauded the improvements in the financial management and audit reports of the municipalities

Meeting report

Acting Chairperson Hadebe opened the virtual meeting, welcoming the Members and the delegations in attendance – from the relevant governmental departments, entities and municipalities. He stood in for Chairperson Muthambi, who would join the meeting at a later stage after the plenary proceedings.

The purpose of the meeting was for the Committee to hear briefings regarding the state of municipalities in the Sarah Baartman District. The briefings included engagements with the South African Local Government Association (the SALGA), the Eastern Cape Auditor-General of South Africa (the AGSA), the Provincial Treasury, the Provincial Department of Cooperative Governance of Traditional Affairs (the COGTA), the Sarah Baartman District Municipality, and various local municipalities (including the Kou-Kamma Local Municipality, the Kouga Local Municipality, the Sundays River Valley Local Municipality, the Ndlambe Local Municipality, the Makana Local Municipality and the Blue Crane Local Municipality).

The ministerial delegation consisted of Dr Nkosazana Dlamini-Zuma (the Minister of Cooperative Governance and Traditional Affairs), and Mr Obed Bapela (the Deputy Minister of Cooperative Governance and Traditional Affairs). The delegation from the SALGA consisted out of Councillor (Cllr) Bheki Stofile (the Chairperson for Councillor Welfare, Governance & International Relations Working Group), and Ms Janine van Niekerk (the Parliamentary Logistics Coordinator at the SALGA).

Dr Mmaphaka Tau (the Deputy Director-General of the National Department of COGTA) was also in attendance. The delegation from the Eastern Cape Provincial Department of COGTA consisted out of Mr Xolile Nqatha (the MEC for COGTA), and Mr Andile Fani (the Head of the Department). The delegation from the Eastern Cape Provincial Treasury consisted out of Ms Bulelwa Nqadolo (the Deputy Director-General: Municipal Finance & Governance), and Mr Dalu Majeke (the Head of the Department). Various other representatives from the Sarah Baartman District Municipality were in attendance, alongside other representatives from the respective municipalities in the Sarah Baartman District.

Opening remarks by the Chairperson

Acting Chairperson Hadebe stated that the Committee is mandated to conduct oversight over relevant organs of state to ensure that there is sound financial management, effective service delivery, and accountability for transgression of applicable laws. The Committee notes the sound financial management in the Sarah Baartman District that has led by example, by obtaining unqualified audit opinion over the last four financial years. The efforts towards the improvements in the financial management and audit reports of the municipalities are commended, and the Committee encourages more progress in this regard. The state of the municipalities is a cause for serious concern regarding the signs of serious distress in terms of service delivery, administration, and financial aspects for the 2018/19 and 2019/20 financial years. The Committee encourages these municipalities to go further to strive for a clean audit and would also like to see this good practice replicated. The violent events of the previous week, where protestors staged a shutdown of the town, are a symptom of this distress. The challenges in the municipality have recurred over long periods of time and have been highlighted repeatedly in the financial reports and audit outcomes. At some point, the municipality could not be entrusted with grants from national government, and the district had to manage these on its behalf.

He stated that the Committee is aware of the famous Makhanda High Court order compelling the Eastern Cape Provincial Executive to intervene in the affairs of the Makana Local Municipality. This has drawn much public interest, including the interest of Parliament. The Standing Committee on Public Accounts (the SCOPA) undertook an oversight visit to the municipality early May, and the Committee noted that the municipality presented the same report it presented to the SCOPA. In August 2020, the municipality also appeared before the Select Committee on COGTA in the National Council of Provinces (the NCOP) in relation to the issue of intervention. The Committee hopes that the municipality is drawing lessons from these experiences and is accordingly restructuring its administration to better serve people of Makhanda, Alicedale and Riebeek East.

The Committee raised its concerns about the long list of repeat audit findings in the Ndlambe Local Municipality, in relation to the abuse of Supply Chain Management processes. Its Bid Adjudication Committees have not always been composed in accordance with Supply Chain Management (SCM) Regulations. Awards were made to service providers in the service of other state institutions, including those in the service of the municipality itself. Persons in the service of the municipality, who had private or business interest in contracts awarded by the municipality, failed to disclose such interest. Further construction contracts were awarded to contractors that did not qualify. The Committee noted that this as an indication of a municipality that has zero regard for SCM protocols and regulations.

Briefing by the SALGA on the state of the municipalities in the Sarah Baartman District

The first item on the agenda was for the Committee to be briefed by the SALGA on the state of the municipalities in the Sarah Baartman District. Cllr Bheki Stofile, the Chairperson for Councillor Welfare, Governance & International Relations Working Group, presented the briefing to Members.

Introduction and background

The Sarah Baartman District Municipality is located in the central part of the Eastern Cape Province. The district measures about 58 242 square kilometres in size and has the largest number of Category B municipalities in the country. It is one of the six district municipalities (Category C) in the province. The population of the Sarah Baartman District Municipality is 527 062 people. With annual population growth rate of 1.14%, the population is estimated to increase to 564 000 people by 2025. In 2019, the district had a total number of 152 208 households, with a population density of 11.2 people per square km. There have been trends where municipal office bearers are changed due to political instability in the Sarah Baartman District.

The state of the municipalities in the Sarah Baartman District

Generally, the district and the local structures are in place and functional – including the Ward Committees, the Ethics Committees, the Audit Committees and the Municipal Public Accounts Committees (the MPACs). This is evident in the audit outcomes for the 2018/19 financial year. It is important to acknowledge how difficult it is for Ward Councillors and Executive Committees in the Dr Beyers Naude Municipality to service their constituencies due to the size and dispersed nature of its topography.

The TROIKAs in the Sarah Baartman District Municipality are fairly coherent. Hence, the prevailing relative social and political stability. While there is general socio-political stability in the district, the Makana Local Municipality remains the only one with remnants of social unrest due to historical challenges that relate to service delivery; an emerging, litigious and antagonistic relation between the municipality and civil society; the widening social gap or trust deficit between municipalities and citizenry; as well as the destructive, invisible external influence on the affairs of municipalities. Although functional, Ward Committees are proving not to be the best mechanism to expediently facilitate the require interface with the general public and community organisations.

Regarding human resources, it was reported that all of the Municipal Manager positions are filled in the Sarah Baartman District Municipality area of jurisdiction, with only one suspension. In addition, all of the positions for Chief Financial Officers (CFOs) are filled in the same area of jurisdiction with one suspension. All of the positions of Corporate Services Directors and Technical Directors are filled in the area. Out of eight Municipal CFOs, only one is vacant due to suspension (the Dr Beyers Naude Municipality).

Regardless of known historical factors, recently amalgamated municipalities continue to survive on their own with meagre resources – an example of such is the Dr Beyers Naude Local Municipality. There are administrative tensions leading to high labour turnover, litigation and labour instability. There are also declining levels of interests by professionals to work in the local government sector. There is also some destructive labour unrest, which, on close analysis, represents an inherent contradiction between the hard-won central bargaining system and the divisive onsite bargaining. The same labour unrest shows elements of political manipulation and fiddling with the constitutional and executive responsibility of the leadership of municipalities.

Recently amalgamated municipalities continued to experience serious financial distress that was a result of historical factors, such as the Dr Beyers Naude Local Municipality. Most municipalities at Sarah Baartman District Municipality area of jurisdiction are experiencing serious financial distress. Some of our municipalities are battling to meet statutory financial obligations such as payment of third parties and, in some cases, even payment of salaries – such as the court order for the Blue Crane Local Municipality, to honour its commitment to pay third parties. Noticeable trends in municipal audit outcomes reflecting substantial irregular, fruitless, wasteful and unauthorised expenditure. All municipalities at Sarah Baartman District Municipality area of jurisdiction are suffering the negative impact of the economic meltdown and the overlapping effects of the COVID-19 lockdowns and a shrinking revenue base. Only one municipality in Sarah Baartman District Municipality has adopted an unfunded budget.

The municipal unfunded budget faced the following challenges: employee-related costs higher than the 40% norm of the National Treasury; municipalities adopting operating deficits budgets; low collection rates by municipalities on billed revenue with some at 40%; high operating expenditure, including administrative services that can be performed internally; contribution of internally-generated funding towards capital outlay, though municipalities are not funded; the inability of municipalities to honour financial commitments, resulting in high creditors from prior-years; water and electricity losses above the norm; various municipal areas not billed for electricity and water; and the weak assets management. The Dr Beyers Naude Local Municipality has been adopting unfunded budgets for the past three financial years and is financially distressed.

Concerning the amounts owed and the age profile of outstanding amounts relating to Bulk Electricity Sales to Eskom, it was reported that the top three municipalities with the most debt include the Dr Beyers Naude Local Municipality (R110.68 million), the Makana Local Municipality (R58.43 million) and the Sundays River Local Municipality (R10.46 million). It was reported that the Makana Local Municipality adheres to payment arrangements. Dr Beyers Naude Local Municipality has agreed to pay R5 million, but the municipality could not honour the signed agreement. There is a pending court case between the municipality and Eskom.

Some challenges reported in the municipalities include the overstretched and ageing bulk infrastructure, the deepening levels of inequality, unemployment and poverty; the general failure of the sector to leverage the benefits of the Spatial Planning and Land Use Management Act (the SPLUMA); enforcing proper land use management; the worrying growth of non-functional water schemes across districts; and that most municipalities have not yet established a wall-to-wall land use scheme. Almost all municipalities within the District Municipality have developed Spatial Development Frameworks (the SDFs). However, to ensure compliance, there is a need to assess the SDFs to ensure full compliance with the SPLUMA. So far, no support has been provided by the SALGA to improve the situation. The general implementation of the SPLUMA in the province is delayed due to lack of capacity within the municipal administration, as there is uncertainty about the provisions of the SPLUMA. The credibility of the MPTs that have been established as well as the MPT options that municipalities have chosen should be reviewed. Given the number of possible financial implications such as human capital as well as cost of land administration and development, emphasis is made when advising municipalities to implement the low-cost options when deciding on the type of municipal planning tribunal to choose. This is due to the fact that expertise can be outsourced from other governments at no cost. There is a need to lobby for funding to assist some of the municipalities that have financial challenges to develop LUS. Top amongst challenges across districts in the province is a growing number of non-functional water schemes. This means that, while in the SALGA’s records an area may reflect as though it has access to clean water, there are prospects that the said area does not have access to water due to non-functional water schemes. The cause of the problem relates to droughts, vandalism, pump failures, mechanical faults, continual bursts, faulty chlorination systems, illegal connections and capacity constraints.

As is generally the case across the province, municipalities within Sarah Baartman lack capacity to implement proper land use management schemes. Across the local government spheres funding for planning remain insufficient. Almost all municipalities are far from full compliance with the SPLUMA regulatory precepts. Almost all municipalities lack appropriate planning expertise, which is very crucial for compliance with the SPLUMA, processing development applications as well as hosting a geographical information system (GIS) capability. Notwithstanding the above, the Sarah Baartman District Municipality has made some progress regarding implementation of the SPLUMA provisions. As such, an Appeal Authority has already been established.

Support and interventions by SALGA

The SALGA’s Political Task Team engaged with the Executive Committee of the Dr Beyers Naude Local Municipality on 19 May 2021, and the meeting placed particular focus on the recent ongoing challenges pertaining to the impact of the 2016 amalgamation, the water crisis linked to the drought, electricity distribution (Eskom debt), and the outcomes of recent court cases placing a financial burden on the resources of the municipality. It was agreed that the Technical Team should meet and develop Programme of Action to address the challenges, and meetings are scheduled for 01 and 02 June 2021.

Briefing by the Sarah Baartman District Municipality on the state of the municipalities

The second item on the agenda was for the Committee to be briefed by the Sarah Baartman District Municipality on the state of the municipalities in the district. Mr Ted Pillay, the Municipal Manager of the Sarah Baartman District Municipality, presented the briefing to Members.

Introduction and background on the state of governance

The Sarah Baartman District Municipality and constituent Local Municipal Councils are sitting virtually per municipal calendar. The Local Municipal Technical and Political JOC meetings are held regularly. Information is shared with Sarah Baartman District Municipality Command Council. All local municipalities and the Sarah Baartman District Municipality have tabled the Final Integrated Development Plan (IDP) and Budget for 2021/2022 financial year. The District Municipality is developing a District Development Plan with stakeholders.

Regarding public participation and communication, it was reported that the Sarah Baartman District Municipality and the Local Municipalities have had to think out of the box to deal with the “new normal” and have embraced the use of social media platforms and community radio to reach communities and engage with them on the Draft IDP and Budget. The briefing outlined the audit outcomes, revenue and the employee costs for the municipalities in the Sarah Baartman District (see the attached presentation).

The revenue collection was reported at 85% for the Blue Crane Local Municipality; 87.18% for the Dr Beyers Naude Local Municipality; 95.42% for the Kouga Local Municipality; 55.08% for the Kou-Kamma Local Municipality; 80.79% for the Makana Local Municipality; 89% for the Ndlambe Local Municipality, and 68% for the Sundays River Valley Local Municipality. It was reported that the Sarah Baartman District Municipality is not collecting revenue but is grant-funded. The employee costs were outlined at 31% for the Blue Crane Local Municipality; 35% for the Dr Beyers Naude Local Municipality; 35.87% for the Kouga Local Municipality; 36% for the Kou-Kamma Local Municipality; 45% for the Makana Local Municipality; 39% for the Ndlambe Local Municipality; 42% for the Sundays River Valley Local Municipality, and 35% for the Sarah Baartman District Municipality.

On litigation costs and cases, it was reported that there are a total of 137 active legal cases ongoing, relating to the municipalities in the Sarah Baartman District area of jurisdiction. The Dr Beyers Naude Local Municipality is liable for an amount of R12.5 million in respect of a judgment against the former Ikwezi Local Municipality in the matter of a harassment suit. Payment was due by the end April 2021, and the Dr Beyers Naude Local Municipality has no funding to make this payment and abide by the judgment of the court.

District development models

The Sarah Baartman District Development Model (DDM) provides a detailed profile with the intention to show case the district’s economic, demographic and socio-economic environment. The analysis of data is broken down in the context of the district vis-à-vis neighbouring districts in the province and South Africa. Understanding the changes in the composition of the population with respect to population group, age and gender is vital in the face of growing pressure on food, energy, water, jobs and social support on the country's citizens. The Sarah Baartman District Municipality has engaged with the Provincial COGTA, and support discussions were held. The District Municipality would need support in terms of reviewing the existing template and profile to assess the institutionalisation of the District Development Model, profiles and gap analysis, access to the national and provincial budgets, quick interventions, and the fixing of problems.

Drought in the district

According to the Sarah Baartman District Municipality Disaster Risk Assessment Report of 2017, community-based workshops identified drought as the leading disaster that the district faces. The most vulnerable groups in the district include farmers (smallholders and commercial), the urban poor who are vulnerable to food price increases, casual farm labourers can potentially face longer periods of unemployment and merging farmers who may not have limited capacity and resources to adapt and withstand the downturn in production. An assessment of the magnitude and severity of the drought being faced in the district has been prepared and submitted to Provincial Disaster Management Centre, as per the Disaster Management Act (No. 57 of 2002).

The Provincial Department of Water and Sanitation (the DWS) gazetted water restrictions on water schemes in the district in November 2020. According to the Seasonal Outlook, May and June months should experience a drier than normal rainfall patterns over most part of the district. Most areas in the district have reduced yields from boreholes due to the drought and are not able to meet the demand from its community.

The water level at Nqweba Dam supplying Graaf-Reinet is at low levels and cannot be abstracted below the 10% level. Boreholes in Klipplaat and Jansensville, which have a high sulphur content, must be blended with boreholes with better water quality. Unfortunately, the boreholes with the better quality have greatly reduced yield due to the drought. The dam levels at Sarel Hayward Dam were at 2.6% (March). This is the dam that supplies the town of Port Alfred. The Central Belt and East Dune wellfields are now the only source of water for this town. The Golden Ridge Dam, which supplies Bathurst, was sitting at 0%. The community of Alexandria is currently served with bulk water from the Fish Kraals and Cape Padrone Coastal sea-wells, which have reduced yield due to the drought. The community of Kenton-on-Sea receives its bulk water supply from the Bushmans Reverse Osmosis Plant, which is supplied with saline raw water from local boreholes. Despite this supply not fully meeting demand for its community, it is now being used to augment water in areas with more severe water shortages. The towns of Cape St Francis, Jeffery’s Bay, Humansdorp, Hankey, and Patensie receive bulk water from the Algoa Water Supply Scheme (WSS), with low average dam levels and water restrictions. Boreholes drilled in Hankey and Patensie are of poor water quality and will need to blend with water from the Algoa WSS. In Hankey, water from the Klein River now has high salinity levels due to reduced stream flows. There are reduced yields from boreholes and springs in Oyster Bay and Cape St Francis. Louterwater receives bulk water from the Louterwater Irrigation Board, which is not able to meet the demand of the town. Groundwater exploration has not yielded water of usable quantities Settlers Dam and Howiesonspoort Dam, which supply the western side of Makhanda; the two dams have very low levels, leaving the town to rely on the inadequate supply from the James Kleynhans Water Treatment Works. New Year’s Dam, which supplies Alicedale, is below the level that water can be pumped to the water treatment works. The community is relying on one solar powered borehole. There is a lack of water in informal settlements in the SRV area (Addo).

Regarding the drought interventions, it was reported that water restrictions are applied, and notices of water restrictions have been issued out through notice boards, municipal website and local newspapers. Water awareness campaigns are being conducted, especially during peak holiday seasons, so that tourists are aware of the water situations. Water truck tankers are being used to deliver water to all areas affected by drought, including farms. Water tanks are installed in strategic places throughout the municipal areas, and they are regularly filled by water trucks. A contractor was appointed to construct a Seawater Reserve Osmosis System (SWRO) and a Wastewater Resources Plant (WWR Plant), for five million litres per day, in Port Alfred. Arrangements were made for the drilling and equipping of additional boreholes in Graaff-Reinet, Aberdeen and Willowmore under the Water Service Infrastructure Grant (WSIG) and the Regional Bulk Infrastructure Grant (RBIG). The repairing of the Graaf Reinet Water Treatment Works is ongoing to ensure enough water supply. Refurbishment and installation of new pumps at Nqweba Dam, to abstract from the low dam levels, are ongoing. The RBIG project is being undertaken in Misgund to equip two boreholes, extend the irrigation pipeline, to construct a Water Treatment Works, and for a reservoir. The Rapid Response Unit of Amatola Water is working in Krakeel River to refurbish an existing borehole. They are also drilling and equipping two additional boreholes. The development of the existing borehole field to the west of Hankey, equipping of existing boreholes with pumps, and installation of conveyance infrastructure to connect boreholes to Hankey Water Treatment works is ongoing, alongside the equipping of an existing four boreholes with pumps, and installation of conveyance infrastructure to connect boreholes to Jeffrey’s Bay Water Treatment Works. In addition, arrangements are made for the supply and installation of two pump sets at James Kleynhans Water Treatment Works will improve water pumping capacity.

It was reported that the drought has exceeded the ability of the local municipalities as Water Service Authorities to provide water using their own resources effectively. The combination of the drought and the COVID-19 pandemic have dealt a devastating blow to the district’s economy, which is heavily reliant on agriculture and tourism. The effects of the drought on both water provision and the economy have caused a significant disruption to the life of the Sarah Baartman community. The District Municipality is requesting National COGTA to classify the drought as a state of local disaster for the district.

Service delivery and financial challenges

The challenges relating to service delivery and infrastructure include the lack of water meters for bulk supply and household metering, resulting in revenue loss; the replacement of indigent household toilet cisterns that are contributing to increase water usage; the requirements of water tanks for households and Water Trucks to assist during drought; the lack of Water Conservation and Demand Management; requiring Sanitation Jetting Machines to unblock sewer drains and sanitation trucks to collect sewer from properties; reticulation system in poor state leading to high maintenance fund; as well as the insufficient capacity for existing infrastructure. In addition, further challenges include ageing infrastructure, the lack of infrastructure funding to address challenges, lack of materials to repair potholes, poor maintenance planning, and poor asset management. It was reported that the municipalities have high debtors’ balances, and that the recoverability of these debts is questionable. Also, there is poor revenue collection, high employee costs and a heavy reliance on government grants. There are challenges in enforcing payments from consumers.

Areas requiring national intervention

An urgent classification of the district as a state of local disaster is needed by National COGTA. Amatola Water (AW) is the implementing agent across the district, and WSAs have concerns on project implementation delays. There is a need for funding support and partnerships for the building of an Integrated Emergency Response Centre in Paterson, which has an estimated cost of R31 million. There is a need for road infrastructure upgrades, including the reconstruction of R335 Motherwell to Addo and R75 from Uitenhage to Kirkwood. Thus, budget constraints must be unblocked. Other areas needing support relate to internet connectivity, as the COVID-19 pandemic has highlighted the urgent need for rural communities to have access to broadband. Other areas for intervention include economical support, township establishment and planning support, small town revitalisation, and improved system implementation to address the internal control deficiencies identified by the AGSA.

Briefing by the Eastern Cape AGSA on the state of the municipalities

The third item on the agenda was for the Committee to be briefed by the AGSA, on the state of the municipalities in the Sarah Baartman District.

Overview of the audit outcomes for the Sarah Baartman district

It was reported that none of the municipalities in the Sarah Baartman District had improved audit outcomes between the financial years of 2017/18 and 2018/19. Six of the municipalities had unchanged audit outcomes, while the Makana Local Municipality and the Sundays River Valley municipalities had regressing audit outcomes. It was reported that 12% of the municipalities produced quality performance reports. The AGSA’s findings included that the performance targets and indicators were not useful, the achievements reported were not reliable, and there was a lack of underlying or planning documents. The impact is that the performance reports are not a true reflection of the delivery by the municipalities, in line with what was promised in its IDP, as agreed with the communities. The preventative controls that failed included the defined performance management systems and processes, disciplined recordkeeping, and document control, and regular in-year reporting and monitoring.

There were significant concerns relating to the non-compliance with key legislation and protocols, and the most common non-compliance areas related to procurement, contract management, the quality of financial statements, and the prevention of unauthorised, irregular, and fruitless and wasteful expenditure (UIFW). All of the municipalities have regressed in their levels of compliance. It was reported that most of the auditees were in a vulnerable financial position, meaning that they might not have the finances to continue with operations. All of the auditees had more than 10% irrecoverable debts; 20% of auditees took longer than 90 days to collect debt from debtors and 40% took longer than 90 days to pay their creditors. The irregular expenditure incurred decreased over two years but still remains at R1.42 billion, which does not include the R250 million that has previously been written off. Reasonable steps were not taken to prevent irregular expenditure, which was caused by the non-compliance with SCM protocols. It was reported that the unauthorised expenditure increased over two years and that reasonable steps were not taken to prevent the unauthorised expenditure, which amounted to R254 million incurred. In addition, the fruitless and wasteful expenditure also increased over two years. Reasonable steps were not taken to prevent fruitless and wasteful expenditure, which were caused by the interest from late payments and penalties.

The AGSA recommended that the municipalities implement preventative and detective controls within the control environment for financial and performance management. Oversight bodies should continuously monitor the control environment of municipalities and ensure that adequate risks assessments are performed and that the necessary risks are mitigated by leaderships. Liability investigations relating to the UIFW expenditure should be performed. The issues experienced are embedded within the municipal system, and serious considerations are required in this regard. Consequence management is a concern, as it is important to create a culture in which wrongdoers are held accountable.

Briefing by the Eastern Cape Provincial COGTA on the state of the municipalities

The fourth item on the agenda was for the Committee to be briefed by the Eastern Cape Provincial Department of COGTA, on the state of the municipalities in the Sarah Baartman District. Mr Andile Fani, the Head of the Department, presented the briefing to Members.

Support provided to the municipalities

Seven municipalities were supported with community participation and citizen empowerment partnership. The challenges that the district municipality encounters are in Dr Beyers Naude Local Municipality; the Ward Rapid Response Task Teams were established in few wards. Regarding the Sarah Baartman District Municipality, the Provincial Department of COGTA resourced the district with technical support to improve the functionality of the District Municipal Planning Tribunal (DMPT) and trained the MPT-members. Regarding the Blue Crane and Kou-Kamma Local Municipalities, it was reported that these municipalities were supported in the development of their Integrated Land Use schemes and SDFs. Regarding the Dr Beyers Naude Local Municipality, it was reported that the Provincial Department of COGTA supported the municipality on its review of the SDF and funded it in the implementation of the cadastral databank project and assisted in the identification of site beacons for housing development (Umasizakhe, Aberdeen and Willowmore). The support provided to the municipalities were outlined to the Committee (see the attached presentation).

The Community Work Programme created 7 534 job opportunities to reduce the level of unemployment in line with the National Development Plan, and the job opportunities are targeting vulnerable members of society who are unemployed or under-employed within needy families. The Programme Management Unit was established to enhance the support rendered to municipalities. The briefing outlined the expenditure on the provincial drought allocations, status of the disaster management plans; the Sarah Baartman District’s MIG (Municipal Infrastructure Grant) allocations, adjustments, and overall performance (see the attached presentation).

Good governance and financial viability

The Provincial COGTA has supported the Ndlambe Local Municipality in the establishment of Section 80 Committees with a view that the council can play an effective oversight role over the administration. Through the continuous assessment of the functionality of the Councils and their structures, all the municipalities in the district have been given support in areas that were identified with weaknesses.

Regarding Audit Response Plans, the Provincial COGTA monitored the implementation of Audit Action Plans by local municipalities in ensuring that the Auditor-General findings are adequately addressed. Concerning Risk Management, support and training were provided to the municipalities regarding the review of its Strategic Risk Registers and Fraud Risk Assessments.

On financial management, the Department provided hands-on support to the Sundays River Valley Local Municipality in preparation of its Annual Financial Statements (AFS’), assisted on recovering of debt from government departments, and assisted municipalities owing Eskom through engagements with Eskom on managing municipal debt.

Building institutional capabilities

The Provincial COGTA supported the Sarah Baartman District Municipality and its locals in processing its appointments, except for the Kouga and Ndlambe Local Municipalities. In addition, the Department supported the municipalities in reviewing their organograms; technical support, in reviewing HR-plans, was extended to the municipalities. Labour relations support was given to the Makana Local Municipality and has resulted in stabilising the situation at hand. Provincial COGTA has supported the development policy framework for the Dr Beyers Naude Local Municipality and review of the policy framework in the Makana Local Municipality.

Discussion

Acting Chairperson Hadebe thanked the delegations for the presentations made and said that Members would have received the information from the relevant local municipalities in writing.

Mr C Brink (DA) stated that the situation with the drought in the Eastern Cape is quite dire, and the poorly managed municipalities are worse off in states of disaster, as they are poorly equipped to manage their resources. There are serious concerns that if the drought gets worse that it would affect the municipalities’ ability to continue operating. How will the communities be assisted if the drought gets any worse?

Regarding the Makana Local Municipality, Mr Brink noted the judgment given against the province, relating to the Makhanda High Court order, which compelled the Eastern Cape Provincial Executive to intervene in the affairs of the Makana Local Municipality. This has drawn much public interest, including the interest of Parliament. He expressed hope that the municipality is drawing lessons from these experiences and is accordingly restructuring its administration to better serve the people of Makhanda, Alicedale and Riebeek East. The court judgment is currently on appeal before the Supreme Court of Appeal, but the situation in the Makana Local Municipality is continuously deteriorating. He asked for a check-in with the Provincial Government regarding its goals and progress on the situation and process in the Makana Local Municipality. He referred to the extent to which municipalities deduct pension fund contributions from its employees, but then fail to pay it over to the pension funds. He asked for clarity on this matter from the Provincial Government.

Ms P Xaba-Ntshaba (ANC) asked for clarity on the audit findings of the municipalities relating to awards made to the service providers that are in the service of other state institutions. What is preventing the municipalities from combating this abuse of SCM protocols? She noted the issue of residents having to rely on water tanks to provide them with water. She asked that the municipalities set the record straight on the allegations.

Mr K Ceza (EFF) raised the concern regarding the ability of the Sarah Baartman District Municipality to improve the lives of its communities. Unemployment and poverty levels remain at unacceptably high levels. He asked for clarity on the measures taken by the Sarah Baartman District Municipality to drive economical change and improvements in this regard. The other problem is that the municipality is plagued by a massive migration in terms of how it is structured, as it is a large municipality. What is the remedial action implemented by the Sarah Baartman District Municipality to deal with the migration of residents from rural municipalities with the goal of improving local economic development within the district? He asked for clarity on the permanency and the sustainability of the jobs created by the CWP as reported. He also asked how much money is owed by and to the respective municipalities.

He then asked what the main challenges are in implementing the emergency services in the Disaster Management Plans, relating to fire services. Water shortages compromise public safety for fire departments. What is the status of resources in this regard? Regarding the functionalities of the MPACs as oversight bodies, he asked for information on the number of complaints or investigations that were undertaken or completed in the last financial year. How many of these have been resolved in the agreed-upon timeframes and what is the status of recordkeeping in the MPACs?

Ms H Mkhaliphi (EFF) thanked the delegations for the presentations made to the Committee. She said that it is clear that the drought has a direct effect on the communities. The Committee cannot ignore the fact that communities are suffering with water shortages. She asked for clarity on the allegation that the politicians mishandled a tender for a reverse osmosis plant, resulting in many residents having to rely on water tankers to provide water to households. She asked that the municipalities set the record straight on this matter. She asked how the housing projects are being supported by the Provincial and National Government, in ensuring that progress is made and that explanation is given to the people on the ground when there is no progress.

Why are there delays in filling the key positions? The Makana Local Municipality has had no water since December 2020, and having water tanks that are only available twice a week is not sufficient. She asked for clarity on why people are not getting water as much they should and why municipalities are still using bucket systems and do not have flushing toilets.

She expressed concern that there is a lack of reasonable steps being taken for the prevention of unauthorised, irregular, and fruitless and wasteful expenditure. It amounts to pure corruption. She asked the district to explain the ballooning levels of preventing the expenditure. What steps are taken by the management to prevent such expenditure?

Ms S Graham-Mare (DA) noted that the Dr Beyers Naude Local Municipality was a classic case of a demarcation gone wrong. She recounted that she spearheaded the DA’s opposition to the amalgamation in 2015 and submitted a substantial report as to why this amalgamation should not go ahead. The demarcation board then followed up with their own private, independent study and used an organisation called Bakers and Associates that issued an 84-page report similar to the arguments of the DA. The organisation’s final declaration was that it did not propose that the amalgamation go ahead. The demarcation board then decided to request that the amalgamation proceed against everyone’s sensibility. When the municipality was amalgamated, only the finance workstream had been functional and nothing else was in place. There was no proper support from national government, although the District Mayor did their best to get those workstreams functional, but very little support was received from the provincial and national government.

She asked for clarity on what the government is going to do to assist the municipality in either just establishing over the next five years or in getting the municipality onto a sound financial footing because it started in a deficit and has not been able to recover from it. What support will be provided to get this municipality functional? How will the impact be measured by the Sarah Baartman District Municipality?

She raised the issue of the CFO and stated that it is her understanding that the CFO is not qualified to be in office. This means that the incumbent should not be in an acting capacity but has been for a period of over 18 months. There is also a Director of Corporate Services that is alleged to not meet the requirements for the position. It seems as if it is a mere box-ticking exercise to say that the positions in these municipalities are filled. Who is actually checking to make sure that the people that are in these positions are qualified to do the job and are effecting the much-needed change?

Mr G Mpumza (ANC) asked for clarity on the functionality of the financial recovery plans and whether there is any traction to ensure that the municipalities make progress in becoming financially viable. What are the future plans to ensure that the communities have access to water should there be future droughts? Regarding the problems with Eskom, he stated that it is problematic that there are such high levels of debts.

Acting Chairperson Hadebe stated that when the SCOPA met with the municipalities, the potholes that were in the streets or roads adjacent to municipal offices and the council chambers were pointed out. They are not hidden. SCOPA does not need one to report or write a report to the municipalities. When the municipality was engaged on this issue, the municipality indicated issues or challenge in relation to insufficient funding from National Government, which is one of the contributing factors why the problem was not resolved. He asked for clarity from the National and Provincial COGTA in terms of intervening in the matter of infrastructure, more especially potholes in other municipalities that are well run. He reckoned that it takes less than 48 hours to repair and fix potholes, and he asked what the turnaround time under normal circumstances for the municipality is when fixing these potholes over and above challenges of finance. Do the municipalities have the capacity to respond to these problems?

The matter of drought and the current construction of additional water resources, the Committee had gotten the impression that the water needs would be addressed before September 2021. He asked for an update on the progress thereof.

Responses by the various governmental departments, entities, and municipalities

Ms Unathi Daniels, Director: Planning & Development, Sarah Baartman District Municipality, reported that the municipality is in the process of preparing a drought contingency plan that will seek to reduce the impact of drought through such measures as water conservation and water demand management. It is also targeting accelerated groundwater development. The municipality is also in engagements with stakeholders to ensure the permanency and sustainability of the jobs that have been created. In terms of employment, it is ensuring that the first preference will be people that are coming from the local municipality, and then people are considered from the wider district. No financial support was made to the Dr Beyers Naude Local Municipality except for guidance in implementing the relevant sexual harassment policies.

Cllr Khululwa Ncamiso, the Executive Mayor of the Ndlambe Local Municipality, responded that there is no money that has been misused in the projects that Members have referred to. She stated that R20 million was given by the Provincial COGTA and it was used by the Ndlambe Local Municipality, as outlined in the briefing by the Department, alongside the R63 million received by the Provincial Department of Water and Sanitation. She stated that the local council took a decision to refer the matter of the allegations to the MPAC for investigations, which have been underway.

Regarding the questions on housing, she responded that the 120 houses that are not yet finished will be finalised soon. In order for the Ndlambe Local Municipality to be able to build houses, it is necessary that the challenge of water has to be resolved.

Cllr Mzukisi Mpahlwa, the Executive Mayor of the Makana Local Municipality, referred to the questions on the water supply to the communities on a rotational basis and the use of bucket systems. He said that the Makana Local Municipality is unable to draw water from the nearby dam, as it is completely dry. It is an informal settlement that has been established and it still needs to do a proper township establishment to make sure that the bulk infrastructure is put in place.

On the potholes issue, he explained that in the Makana Local Municipality, funding has been received to resurface all of those streets completely afresh, at the tune of R15 million; funding has also been received to put paving in the major routes that are used by taxis. There is a road masterplan put in place to address the technical capacity.

In terms of the financial recovery plan, he stated that it is being implemented and the Provincial Treasury has noted that the Makana Local Municipality has been improving its financial management, despite still being in financial distress. There is a project that will be completed by September 2021 to get 20 million litres of water per day.

Cllr Horatio Hendricks, the Executive Mayor of the Kouga Local Municipality, responded that the Kouga Local Municipality has a relationship with the St Francis NPC, which is a non-profit organisation, and has entered into a service level agreement with respect to establishing special ratings. This allows the Kouga Local Municipality to collect the extra levies that are then paid over. These monies have been used for public safety cameras and for completing upgrades of roads in the community.

Cllr Ted Pillay, the Acting Municipal Manager at the Sundays River Valley Local Municipality, said that the municipality’s payments to third parties are up to date. He indicated that the municipality’s income accounts are also up to date so as to avoid any interest on late payments. There are significant employee costs at the municipality, which is an issue that needs to be addressed and this will be done by the local council to ensure that the municipality reduces its salary cost and makes sure that more resources are diverted to addressing other issues. The debts that cannot be recovered hamper the cash flow projection of the institution and place limitations on the municipality’s operations. There is also a need to heavily invest in the municipality’s infrastructure that has aged and are giving significant problems.

Cllr Bheki Stofile added that the SALGA appreciates the oversight work done by the Committee. The Association expressed its deep concern about the state of municipal finances detailed in the audit outcomes for local government for the 2019/20 financial year. There is a profound sense of disappointment at what it sees as deteriorating levels of accountability in the recent audit outcomes of local government. SALGA called for accountability and consequences for any malfeasance in the management of local government finances. It is important that Mayors and Speakers, in the respective municipalities, extract accountability and implement consequence management, as empowered by the legislation as well as the National Treasury. It is the SALGA’s position that where there are clear actions of fraud and criminality, it is the Mayor’s and the Speaker’s fiduciary duty to refer these matters to law enforcement agencies.

Follow-up Discussion

Mr Ceza asked for clarity on the situation regarding skills development of the youth within the communities. He asked what local platforms are available in this regard. He then asked for the amount of people that have been placed out of the skills development programmes. It is crucial that the results of the CWP be provided so that the Committee can monitor the impact of the programme. What actions are taken in the district to ensure that there is a holistic approach of dealing with the skills development of the youth?

Mr I Groenewald (FF+) thanked the delegations for the answers presented. He asked for clarity on how much money was collected in terms of debts, and he asked what services are provided by the NPC that the Kouga Local Municipality works with, as reported in its responses.

Ms Mkhaliphi noted that the housing projects are being finalised. She stated that communication with the Committee and the communities is paramount. Why are the community saying that there are unfinished and abandoned housing projects whereas the municipalities say differently?

She asked why the Municipal Manager of the Sundays River Valley Local Municipality has been suspended. She asked for clarity on the municipality that has been implicated in allegations of corruption, irregularities and maladministration. What is the current status of the investigation of the municipality in Kouga? What measures are put in place to address the issues relating to farmworkers? They are also faced with evictions and this is a very serious concern because those are vulnerable and exploited as the poorest of the poor. What is the leadership doing in this regard, and are there any programmes in place to address the situation? The interventions put in place to address the drought are not sufficient, as the communities need the basic services such as continued and interrupted access to water that is safe to use. The local government elections are approaching fast, and it is a dire situation that there is a serious lack of good governance.

Chairperson Muthambi stated that all the local municipalities are Water Service Authorities, as agents of the Provincial DWS uses Amatola Water as an implementing agent. What is the impact of using Amatola Water as an implementing agent? The municipalities have the obligation to provide water. Has the implementing agent been chosen in the spirit of good governance?

The briefings mention the support given to local municipalities in the district on recovering debts from government departments. She asked whether the National Treasury would assist in ensuring that these debts are collected as it impacts the annual financial statements and financial situations of the municipalities. She asked for clarity on why some municipalities are more litigious than others and why there is such a high level of litigation.

She welcomed initiatives to ensure that the residents of the Sarah Baartman District Municipal area do not run out of water. She also applauded the improvements in the financial management and audit reports of the municipalities.

She thanked the delegations for the presentations made, and thanked Members for their questions and inputs during the meeting. She asked that all remaining questions should be answered in writing and submitted to the Committee for the attention of Members.

The meeting was adjourned.

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