South African Local Government Association Annual Report 2021/22

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Cooperative Governance and Traditional Affairs

18 October 2022
Chairperson: Mr F Xasa (ANC)
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Meeting Summary

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SALGA

The South African Local Government Association (SALGA) briefed the Portfolio Committee in a virtual meeting on its annual report for the 2021/2022 financial year. The presentation covered its audit outcomes, performance and strategy from 2017 to 2022, annual performance planning and reporting process, performance highlights, operational expenditure, and recommendations. SALGA achieved its 13 consecutive unqualified audit. SALGA achieved a noteworthy improvement of 7% over the previous year in its performance against predetermined objectives.

The Committee expressed concern about a matter that had remained unresolved for three years concerning the Local Government Bargaining Council in KwaZulu-Natal (KZN). They sought clarity on the effectiveness of the Municipal Public Accounts Committees (MPACs) put in place as part of SALGA initiatives to respond to issues concerning the safety and training of councillors, as well as direct support given to municipalities that were under section 139 interventions. The Committee also noted an increase in personnel costs and asked for an explanation. Members said the depressed economic climate and municipalities' challenges in collecting revenue posed a threat to SALGA's future, and wanted to know if it was seeking alternative funding sources.

SALGA acknowledged its limited ability to directly support municipalities under section 139 interventions. It also tabled recommendations and proposals on how it worked with the Department of Cooperative Governance and Traditional Affairs (COGTA) to address the issue of councillors being attacked and killed. The unresolved issue in KZN was being attended to. The increase in personnel costs was due to an increase in recruitment post-Covid. SALGA also stressed that political parties had to take responsibility for ensuring that councillors with capacity were elected.

The Chairperson praised SALGA's ten consecutive clean audits, and said it was an example to other organisations.

Meeting report

The Chairperson said the purpose of the meeting was a briefing by the South African Local Government Association (SALGA) on its annual report for 2021/21.

SALGA President's overview
Cllr Bheke Stofile, President: National Executive Committee (NEC), SALGA, greeted the Committee and appreciated its consideration of SALGA’s request to meet at a date later than originally scheduled. He said SALGA had been in major transition due to the 2021 local government elections. It had had to busy itself with preparations for its approach to the elections. It had established structures after the election and had to take the elected members of the councils through what was expected of them and how SALGA would work with them in turning local government around.

He said that the local government’s business was everyone’s business, and therefore everyone had to be available to perform their assigned duties per the legislation of the country. SALGA’s leadership was in transition, as new councillors had been elected and now formed part of its new leadership. Their duty was to ensure that a significant contribution was made to the local government sector and that SALGA as an organisation remained intact and operational in the future. He pointed out that the transition had resulted in administration issues. It had appointed an acting CEO and was in the process of looking for a permanent replacement.

Cllr Stofile said SALGA often trained new councillors because there were things councillors still needed to learn, and this induction was the duty of SALGA to carry out. It was in the process of walking new councillors through different portfolios. He noted that the 2021 election coincided with implementing a three-year agreement cycle with labour. SALGA had a good record of maintaining labour peace within the sector. This was due to the maturation of its instruments adopted to ensure labour stability. SALGA was happy with the three-year cycle agreement.

SALGA had been engaging with several amendments brought before Parliament, including the Municipal Structures Act and the Municipal Systems Act, which were now assigned to the law. It was SALGA’s duty to ensure that a significant contribution was being made. It was engaged with the Transport Amendment Bill and its related weaknesses, because it needed to establish what the bill would mean for municipalities.

He called for collaboration and partnership in addressing the maiming and killing of councillors and their families and restoring stability in local government. If these attacks were left unaddressed, it would deter individuals from working for local government.

Annual report presentation
Mr Lance Joel, Chief Executive Officer, SALGA, said SALGA's mandate was to act as an employer body; build capacity; lobby, advocate and represent; share knowledge and information; provide support and advice, and to strategically profile.

Its strategy since 2017 had been to achieve four outcomes:

Municipalities with sustainable and inclusive economic growth and spatial transformation.
Good governance and reliant municipal instructions.
Financial sustainability of local government and greater fiscal equality.
An effective and efficient adminstration support service for the delivery of SALGA programmes.

The Auditor-General of South Africa (AGSA) had stated that the financial statements presented fairly, in all material respects, the financial position of the SALGA as at 31 March 2022, and its financial performance and cash flows for the year were in accordance with Standards of Generally Recognised Accounting Practice (GRAP) and the requirements of the Public Finance Management Act (PFMA).

SALGA’s annual financial statements (AFS) were prepared on a going concern basis, with the presumption that funds would be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments would occur in the ordinary course of business.

Its ability to continue as a going concern depended on, inter alia, being recognised by CoGTA, in terms of the Organised Local Government Act, as the sole voice of local government. SALGA’s 13 consecutive unqualified audit results – ten of which had been clean audits – attested to its commitment to good governance, functional organisational controls and ethical business conduct
.
SALGA had achieved a noteworthy improvement of 7% over the previous year in its performance against predetermined objectives. Reasons for non-achieved targets included:
A post-Covid-19 transitional year;
The postponement of local government elections to late-2021, which delayed the finalisation of governance structures to March 2022;
The inability to exhaust internal governance approval processes (SALGA mandating process); and
Dependence on sector departments for achieving some of its targets

Mr Joel listed the following performance highlights:

Tenth clean audit in a series of 13 consecutive unqualified audits since 2009.
Structured support and guidance provided to municipalities before, during and after the elections.
7 484 municipal officials and councillors benefiting from SALGA’s continuous development and capacity building programmes.
A positive increase in net assets to R565.9 million (2021: R372.6 million).
A 5.1% increase in membership levy revenue to R686 million (2021: R652.7 million).
The achievement of 57 of 62 performance targets (92%) for the 2021-22 financial year, consistent with achieving an average of 90% of annual performance targets for the past 13 years.
61 municipalities benefiting from the Municipal Audit Support Programme (MASP) training and 43 from Municipal Public Accounts Committee (MPAC) training.
Concluding the fifth multi-year collective agreement.
Actively lobbying for inclusion of local government issues in the amendments of key legislation -- the Structures Amendment Bill, the Systems Amendment Bill and the National Land Transport Bill).
Representing local government in United Nations (UN) governance structures to coordinate the implementation of the sustainable development goals (SDGs), the Paris Agreement on Climate Change, the Sendai Framework on Local Disaster Risk Reduction, and the Addis Ababa Agreement on Financing
 
Financial Performance
SALGA had maintained its clean audit track record for the 10th consecutive year by again delivering a set of high-quality annual financial statements and annual performance report, as well as a governance environment in which the AG had made no material findings on compliance.

The results of operations for the year ended 31 March had reflected a surplus of R192.8 million (2021: R157.0 million). Total operating revenue increased by 6.3% to R749.2 million, due mainly to an increase of 5.1% in membership levies attributable to inflationary adjustments and the organic growth of the base from which the levy amount was derived. Total operating expenditure increased by 2.1% to R591.6 million, attributable mainly to an increase in municipal support and offset partly by fewer operating costs in the wake of an extended Covid-19 lock down.

Comparatively, the expenditure trend, excluding the impact of the allowance for doubtful debt, affirmed SALGA’s increased efforts to assist municipalities, as verified by the increase in targets achieved from 85% to 92% during the year under review. Net non-operating revenue increased by 11.3% to R35.2 million, largely due to interest received on increased bank balances.

Mr Joel said it was recommended that the Portfolio Committee note the SALGA annual report for 2021-2022.

(See attached document for details)

Discussion

Mr K Ceza (EFF) asked about the training of councillors, and specifically what SALGA was doing and what their impacts were on councillors who could neither read nor write. He also started to ask about councillors being killed, attacked or intimidated, and what SALGA was doing to address this issue, but he was cut off due to poor network coverage.

Ms H Mkhaliphi (EFF) apologised in advance for any disconnection due to load-shedding, commenting that it had been difficult to hear what the CEO was presenting. She asked about the 43 municipalities reported to have benefited from SALGA’s Municipal Public Accounts Committee (MPAC). What did these benefits entail, and what were the results yielded? Her reason for asking was that oversight was concluded at Lekwa Municipality, and the situation seemed unchanged. It seemed as though SALGA was claiming to have made certain achievements through the MPAC, but the status of these municipalities did not reflect this. She asked what SALGA’s impacts were, and what its role was, as the presentation given by SALGA lacked detail and showed that its role was diminishing in all the municipalities.

Ms Mkhaliphi said there was a matter that had been brought to the attention of SALGA on numerous occasions which, to this date, it had not responded to. This matter concerned the workers of the Local Government Bargaining Council in KZN, and their complaints involved the role of the executive which SALGA was a part of. There was no accountability from the executive. The workers said there was no compliance with laws, there was no implementation of the Equity Act or implementation plans. SALGA could not explain what the problem was. The executive also included trade unions, but since SALGA was present, Ms Mkhalipi asked the CEO to provide clarity on this. She also noted that the matter had been taken to the Registrar of the Department of Labour, who seemed to not care about the lack of enforcement of the law.

Ms Mkhaliphi referred to Mr Ceza’s question concerned the attacks and killings of municipal workers. She was aware that cases had been referred to the Commission for Conciliation, Mediation and Arbitration (CCMA) through the forum which SALGA saw to. She asked for an update on what SALGA was doing about the killing of municipal workers on municipal premises due to their requests regarding salaries. She asked if these disputes were just between the workers and employers within the municipality, and if SALGA had no involvement. Even if SALGA was not involved in the killings, it still had a duty as per its mandate to ensure peace where it concerned labour disputes in municipalities.

SALGA's response
Cllr Stofile dealt with questions concerning politics. He said that there had been engagements with various political parties in the last two financial years. During those sessions, it had been stressed that political parties and community organisations were responsible for electing councillors, not SALGA. As far back as the 2021 elections, SALGA had been engaging with political parties and had asked them to identify credible people of stature who, as per the constitution, had contributed to the status of local government. SALGA picked up information in 2021 and was still assessing it. This information entailed responses given by various political parties regarding SALGA’s request. He also noted gaps and weaknesses in other areas being dealt with. This was the reason that in the last election, SALGA had introduced the induction and training of councillors on the various portfolios they occupied. He also noted that there was an opportunity for political parties to collaborate with the government, as both were in a better position to set out requirements on who should be elected as councillors. SALGA was not in this position, as their duty was to lobby, advocate and represent the interests and aspirations of the local government sector. This duty SALGA had fulfilled thus far, and had allowed political parties to respond to the challenge going into the future if they wanted to turn local government around.

Cllr Stofile referred to the killing of municipal workers, and said he hoped that Members of Parliament understood how politicised the performance of duties by councillors from different political parties had become. Through the Moerane Commission and other interventions, SALGA had picked up that there had been over 300 councillors killed since 2017. It diagnosed the reasons for these killings, ranging from internal political party conflict to contractors demanding payment from municipalities where they had not rendered services. Municipal workers who worked in procurement or were close to decision-making processes were targeted. An example would be a person asked by COGTA nationally to intervene in Manguang who was then locked in an office and forced to sign a multi-million rand payment. If this person had not responded in a manner that protected his life, he would be dead.

Resolving this issue required collaboration and cooperation in all spheres of government, as well as all committees doing their jobs. This was the reason why SALGA had started the Asisho! Let’s Say It! Programme, to address the issue of killings. He noted that traditional leaders were also being targeted. SALGA’s concern was that there seemed to be no concern for these killings, which posed a danger to councillors and their families and local democracy.
 
Cllr Stofile said that in transforming and ensuring local government was functional, SALGA found it difficult to find skilled workers because working in local government was life-threatening. The issues faced by local government were national. A Buffalo City manager had been shot almost 19 times and it was a miracle he had survived. These were the challenges municipal workers and their families dealt with.

Mr Joel said that before the November 2021 amendments to the Structures Act, SALGA had informally dealt with oversight through the creation of municipal public accounts committees (MPACs). This was done without the backing of the legislative framework. These MPACs were ineffective because they lacked teeth and there was no desire to deal with oversight in a structured and effective manner. The November 2021 amendments formalised these MPACs as section 79 committees. This had seen the full-time employment of chairpersons and their oversight structures. SALGA had used the amendments to the Structures Act to start the process of familiarising newly structured committees with what was expected and the objectives that needed to be met by each committee. He noted it was still early days, and SALGA had worked with only 43 municipalities. This year, support would be given to additional municipalities. The idea was to increase awareness about their expected roles and responsibilities and to ensure these committees were functional and effective as per the amended Structures Act.

Mr Joel said the Lekwa matter was similar to municipalities subjected to section 139 interventions. In these cases, SALGA's role was limited. In the Lekwa matter, which was a national intervention, SALGA's role had been reduced to receiving reports from administrators. This limitation posed a challenge to SALGA in effecting direct support in municipalities subjected to provincial or national interventions. It suggested that this issue be addressed to ensure municipalities were supported because it was SALGA's duty. Support through section 154 by the local and provincial government should be ensured too. SALGA would continue to work on this.

It was correct that the South African Bargaining Council matter in KZN had been raised previously, and it was locked into a process set by the Council. SALGA was one of three parties that participated in the Council. The process was at an advanced stage and a report had been made available. The recommendations made in the report were now being effected. These recommendations included an engagement with the Registrar of the Department of Labour. Once these processes were concluded the Council would speak about the matter. The matter was receiving attention, although the process was not as fast as anticipated. He hoped that the outcome would be as intended.

Concerning the killings, he said that during both the National Council of Province (NCOP) Local Government Week and the Local Government Summit, SALGA had convened with COGTA and recommendations and proposals were tabled on how to deal with this issue head-on, and the necessary steps that needed to be taken. This matter was concerning and pressing. A proposal was also made to COGTA's Ministry on 6 October on what SALGA and COGTA jointly should do to address this issue. All recommendations and proposals would be made available to the Committee to keep them in the loop.

Follow-up questions

Ms Mkhalipi said the KZN matter was long outstanding, but she appreciated that processes were in place. She noted, however, that if the process took too long, the workers were being failed. She knew SALGA was committed and had promised an update on this matter. She asked for a report to engage workers on issues such as nepotism, exploitation and corruption. Workers were being victimised.

She asked for clarity regarding the reduction, or lack of definition, of SALGA's role where municipalities were being subjected to section 139 interventions, as this did not make sense. Councillors needed support from SALGA regardless of whether there was a section 139 intervention in place or not. This support was mandated by law. There were 64 dysfunctional municipalities under section 139, and she asked if this meant that SALGA would not be intervening. This would prove a problem when the Committee later had to ask what SALGA had done. This was similar to the issue Mr Ceza had concerning councillors who could not read or write. Lekwa was under section 139, and clarity was still needed regarding a report the Committee would deal with. She said there was a new administration, but the intervention was still there. She understood Cllr Stofile's sentiment that it was the political party's duty to elect councillors with capacity, but once these councillors were elected, SALGA was responsible for training and empowering them.

Ms Mkhalipi noted that SALGA had spent 35.6% more on personnel costs, according to their annual report. In the previous financial year, the amount was R74.4 million, and in the year under review, SALGA had spent R100 million. She asked what the reason was for the increase in personnel costs was, as it was during the pandemic and people were not working in offices or travelling. People were working from home.
 
She asked for an update on the three cases at the CCMA. She asked if SALGA won the cases or if they had been declared a bad employer. She also asked for an explanation of what SALGA was doing to resolve the KZN bargaining council issue, which was three years old. Once laws were not being implemented, they needed to be concerned because the Committee was part of the implementation of the law and on the basis that SALGA was a part of the bargaining council. The non-implementation of the Equity Act by the council was troubling, as well as the allegation that all members of the executive were being bankrolled. As a result, nepotism was increasingly prevalent. The Committee could not be quiet on these matters.

SALGA's response
 
Mr Joel said that the Local Government Bargaining Council was a separate structure from SALGA. SALGA was one of three participants in the governance arrangements of the council. The participants were SALGA, the Independent Municipal and Allied Trade Union (IMATU) and South African Municipal Workers’ Union (SAMWU). Concerning the council being a separate entity, SALGA would ask whether the report was available to be shared for public consumption, and would convey the response from the council on this to the Committee. The CCMA matters had to do with local government and its municipalities. They were not internal SALGA CCMA matters -- SALGA was not the employer in question.

Regarding what had been presented concerning employers and the number of employees, the year under review had shown an increase because the previous year was during the thick of the Covid-19 pandemic. In the year under review, SALGA had had to embark on a process of recruitment, and the number of recruits was sitting at 37. These recruitments had put an additional financial burden on the organisation, but had also enabled it to respond to its mandate effectively.

SALGA agreed with Ms Mkhalipi on the section 139 interventions, but the nature of the interventions was that municipal responsibilities and its legislative authority were removed from the authority of the council and put into the authority of an administrator. This affected SALGA's ability to engage with the council, because the authority was not with the municipality or council but now with an administrator who then reported to the provincial or local government for the period of the intervention. SALGA was willing to engage further with the Committee on issues concerning interventions and their limited capacity to improve the conditions of municipalities.

Mr G Mpumza (ANC) referred to the current subdued economic climate, which posed a strategic risk to SALGA's existence, and asked if it was developing alternate funding mechanisms to mitigate this risk.

Mr Joel said it was correct that a combination of the economic climate, together with the broader cash flow issues experienced by municipalities, was a concern. Most municipalities had only now started to get back to pre-Covid collection levels. This negatively impacted the organisation's planning for the future. This was an ongoing conversation in the organisation, and one of the top risks. SALGA was monitoring this issue and was appreciative that in the last two financial years preceding the current one, it had been able to persuade municipalities to continue their financial support of the organisation. SALGA was mindful of the financial constraints, and was looking for alternative revenue streams. This issue would be presented to the SALGA NEC, and upon approval, would be shared with the Committee.

Cllr Stofile thanked the Chairperson for the opportunity to engage with the Committee. This interaction would help SALGA to deal with the complex issues it faces. It was a true collaboration that would help them to move forward. It was their interest as an association to make an impact on matters that affected their communities.

He requested the Committee to reflect on the killing of councillors and traditional leaders and the danger it posed to local government. SALGA wanted to promote interest in ensuring that local government was responsive to this issue so it could function effectively. This could not be achieved without assistance from the Committee.

Regarding the collapse of municipalities, the section 139 and 154 interventions and municipalities' inability to make collections, the Committee needed to reflect on the global economic crisis and how local government could be helped to deal with these challenges. The Committee was better positioned to deal with such issues. The Auditor-General had noted the issue of municipalities being unable to make collections. The question that needed to be asked was what other instruments needed to be made available to municipalities to assist. For example, an instrument available to lawmakers was the ability to review relevant Acts to assist municipalities. This was part of the necessary collaboration and cooperation between SALGA and government. Building on the work done by the Committee in terms of legislation amendments showed that collaboration was essential to achieve the objectives SALGA had set. Voters voted for them to render services. He noted that municipalities like Emfuleni had been under national and provincial interventions for years, but the conditions remained unchanged. Therefore, an assessment of the interventions was needed, and then an inquiry into other instruments could be useful to the communities of Emfuleni. This approach needed to be explored.

The Chairperson thanked SALGA, and said that what had not been mentioned was SALGA’s audited performance, which set a great example for other organisations that reported to the Committee. SALGA’s ten consecutive clean audits were something to applaud. It has also increased the achievement of its targets. He acknowledged the challenges of local government and the focus needed to be on how they could face these challenges. The number of dysfunctional municipalities as defined by COGTA was very high. Collaboration would be critical to decreasing this number. This collaboration needed to be between COGTA and the treasuries at a national and provincial level. This would be appreciated by SALGA.

The Chairperson said they were all in agreement that the interventions were not working, but they should work. Answers needed to be found to turn the situation around. If there were gaps in legislation, those needed to be closed, as the people of South Africa were looking to them to resolve these issues. Clarity was needed on what was meant by interventions, the roles required, and whether all the gaps had been exhausted. He said if the laws were exhaustively implemented, solutions should appear, but if there were none, Parliament needed to make amendments. He also noted there was an outstanding bill that the Committee had been discussing, as they were not the first to identify gaps in terms of interventions.

The Chairperson thanked SALGA for their presentation.

The meeting was adjourned.

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