DCoG, DTA & MISA 2022/23 Annual Reports; Traditional and Khoi-San Leadership Bill (with Deputy Ministers)

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Cooperative Governance and Traditional Affairs

11 October 2023
Chairperson: Mr F Xasa (ANC)
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Meeting Summary

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Department of Traditional Affairs

Department of Cooperative Governance

Municipal Infrastructure Support Agent

The Portfolio Committee on Cooperative Governance and Traditional Affairs (the Committee) convened virtually for briefings on the 2022/23 Annual Reports of the Department of Cooperative Governance (DCoG), the Municipal Infrastructure Support Agent (MISA), and the Department of Traditional Affairs (DTA). In addition, the DTA briefed by the Committee on the processes to be complied with in terms of implementing the Constitutional Court order in respect of the Traditional and Khoi-San Leadership Act (TKLA).

The DCoG received a qualified audit opinion based mainly on the inability to substantiate that management had properly accounted for movable capital assets and minor assets for the Community Work Programme (CWP).  The Auditor-General (AG) was unable to confirm the existence of selected assets which appeared on the asset register. The Department attributed the control weaknesses in managing the CWP assets to the lack of adequate resources and the termination on 31 March 2023 of the Implementing Agents (IAs) contract which was declared irregular by the Court and National Treasury. The Department advised that a new CWP architecture is being developed. Additionally, the Department undertook to meet regularly with the AG for guidance on managing movable assets. The Committee resolved to monitor the Department’s audit action plans to ensure proper recordkeeping of CWP assets.

The Committee commended the MISA for achieving unqualified audit outcomes for the past five years consecutively. The agency was encouraged to be bold in setting future targets. The Committee was assured that the Annual Performance Plan included aspirational targets in support of municipalities. Technical teams have been assisting municipalities to build capacity for delivering on the CWP. The Committee resolved to develop a coherent plan to help departments and entities to improve performance outcomes.

The DTA achieved a clean audit for the seventh consecutive year. However, the work of the Department is being restricted due to an inadequate organisational structure and the limited budget to deliver on its mandate. The Department appealed to the Committee for a permanent solution to the funding problem because it was impeding issues of development in the sector. The Committee resolved to consider the Department’s request for a substantial budget increase.

The Traditional and Khoi-San Leadership Act was declared invalid because Parliament failed to comply with the obligation to facilitate public involvement before passing the Act in 2019. The Constitutional Court judgement of 30 May 2023 granted Parliament 24 months to either re-enact the statute or to pass another statute in a manner that is consistent with the Constitution. The Committee is required to select either the Committee Bill or Executive Bill option to introduce the Bill in Parliament. The Department suggested the Executive Bill option because it would expedite the process. The Committee resolved to monitor the process and ensure that the Bill is tabled in Parliament by 30 April 2024.

Meeting report

The Chairperson acknowledged the apology submitted by the Minister.

Deputy Minister’s opening remarks
Deputy Minister Parks Tau, DCoG, remarked that some of the issues in the Annual Reports were highlighted in a discussion with the AG. The AG's view that coordinating ministries should elevate Performance Plans and coordinate responsibilities is noted. The perennial problem of the CWP remained challenging. The contracts with the IAs ended in March 2023 and were not renewed. A new CWP architecture is being developed. The Department will be engaging in current interventions to overcome the historic problem of appointing IAs.

DCoG presentation
Performance Overview
Mr Xolani Xundu, Director-General (DG), DCoG, reported a decline in departmental performance from 79% in the 2021/22 financial year to 63% (19 out of 30 targets) for the year under review. The Department received a qualified audit opinion. The adverse audit outcome is mainly attributed to inaccurate recordkeeping of CWP assets. Although the CWP is the riskiest programme with more than 250 000 participants countrywide, it is not provided for in the organisational structure.

Financial Performance
Ms Funani Matlatsi, Chief Financial Officer (CFO), DCoG, said the Department was not proud of the qualified audit opinion. Some of the CWP assets are not traceable, not barcoded and not recorded in the asset register. The incomplete state of the asset register complicated the value-for-money calculation in terms of the assets that were paid for. The approved budget for the year under review was R115 billion. Transfers to the departmental programmes accounted for 96% (R110 billion) of the budget. R3.4 billion of the remaining R4 billion could not be transferred to municipalities due to irregular expenditure and was returned to the fiscus. A condonement application for R2.4 billion of the R3.4 billion was submitted to National Treasury for approval.

(See Presentation)

MISA presentation
Performance Overview
Ms Mapatane Kgomo, Acting Chief Executive Officer (CEO), MISA, reported an overall performance outcome of 91% (32 out of 35 targets) for the year under review, similar to the 91% in the 2021/22 financial year. The Agency maintained a performance outcome of above 75% over the past five years. MISA achieved an unqualified audit opinion without material findings on the 2022/23 annual financial statements.

Financial Performance
Ms Kgomo stated that the approved budget for the year under review was R640 million. Actual expenditure of R576 million (90%) was incurred. The ring-fenced funding for the Eastern Seaboard project accounted for the under-expenditure of R53.5 million. A request to retain the unspent funds for this project was submitted to National Treasury for approval.

(See Presentation)

Discussion
Mr J Smalle (DA) requested that the Department submit a report to prove that people are being held accountable for the R3.4 billion of unwanted expenditure. The Local Government Support and Interventions Management (LGISM) branch spent 100% of the allocated funds on Programmes 1, 2 and 6 although it reported under achievement of targets in these three programmes. He asked the DG to explain this outcome. The Department aimed to achieve 60% of the Municipal Infrastructure Grant (MIG) expenditure but achieved 54.9%. He linked this outcome to the AG's observation supporting her reasons for not commenting on some of the actions, due to vacancies in the Department. In terms of the Division of Revenue Act (DoRA), the Department has the ability to shift funds to municipalities that are able to spend 100% of their budgets. He asked why the Department was not transferring the expenditure to avoid the low expenditure percentage. The under-expenditure of the LGISM branch is measured against the dysfunctionality of municipalities. He wanted to know why more money was not being invested in the programme or if the under-expenditure could be linked to the instability in the Department or sections of the Department. He had difficulty in reconciling the MISA and DCoG reports on the dysfunctional Water Authorities. MISA is supporting only five of the 22 dysfunctional Water Authorities. It was unclear which of the remaining Water Authorities are being supported by the Department. He was concerned about the DG’s comment that less focus should be placed on irregularities. He wanted to understand if the Department was suggesting to not deal with accountability and not adhere to regulations. He asked if the Department was at loggerheads with the AG in terms of previous negative findings. He reiterated his request for an additional report on dysfunctional municipalities and the actual allocation of grants.

Ms P Xaba-Ntshaba (ANC) enquired about the plans of the Department to address the decrease in performance to 63% in the current financial year. She requested details about the alleged fraudulent case and asked if the corrective measures were aligned with the investigation report. She noted that the MISA had an acting CEO since the previous year. According to the Budgetary Review Report, the previous CEO was released from his contract position. She enquired about the details relating to the previous CEO’s release and the timeline for recruiting a functional CEO. The DCoG referred to a partnership with municipal and environmental services. She asked if the MISA had adequate capacity to take on this responsibility.

Ms E Spies (DA) remarked that it must be difficult for the DCoG to do effective oversight and make recommendations when the Department itself is unable to obtain a clean audit. The Department should be leading from the front and be an example for municipalities to follow. She disagreed with the DG that the AG was misreading the report on dysfunctional municipalities. The COGTA had designed a Municipal Support Implementation Plan (MSIP) but the interventions were not timely completed and there was no correlation between the indicators and outcomes. The appointment of municipal managers and other senior managers was not in compliance with the advertisements for the positions. The vacancies in the Free State and the Northern Cape remain outstanding. She wanted to understand the plans for making progress on dysfunctional municipalities and for accountability from officials. She asked that the proposed CWP workshop with the Committee be prioritised and for the outcomes of the forensic investigation to be included in the discussion. She did not regard the appointment of IAs as a solution. She had spent time with CWP participants in her constituency and noted that administrative support for site management was non-existent. She enquired about capacity building for site management and about collaboration with municipalities. She asked if the Local Reference Committee (LRC) structure still existed. She suggested that services should be filtered to functional municipalities to empower CWP participants instead of the Department collaborating with private sector partners. She commended the MISA for setting the standard in achieving excellent results. She recommended that the entity should be bolder and more aspirational in setting future targets.

Mr G Mpumza (ANC) said the AG’s report on the outcomes of the DCoG and its entities proved that the Department had overstayed its qualified audit outcome. The stagnation in the audit outcome had no acceptable explanation because other departments and entities have done well to sustain clean audit outcomes. The AG’s report emphasised the role of leadership and decision-makers in ensuring good governance and accountability. The AG noted inadequate financial management monitoring, failure to monitor audit action plans, and lack of leadership in critical areas. Although the AG praised the Department for the progress on the CWP programme, the inability to address challenges over the past four years had been noted. A sense of urgency was needed to ensure that the CWP is working on addressing the situation in communities. The AG cited the lack of implementation of the Development District Model (DDM) targets due to late submission by the provinces. He held the view that the national department should be exerting some authority and start cracking the whip. The delay by provinces should not be used as an excuse. He enquired about the Department’s plans to ensure that the MSIPs are gaining traction at the municipal level to turn dysfunctional municipalities around. He drew attention to the serious water crisis in Ward 20 in Port St Johns. The former CEO promised to intervene and was planning to send engineers to drill a borehole. The river in the area is posing a health hazard because of pollution caused by the same community. He enquired about the progress made to salvage the situation in Port St Johns.

DCoG response
Mr Xundu stated that the Department had agreed to almost all of the AG's recommendations and was not at loggerheads with the AG. He explained that enforcing accountability requires investigations based on a framework. The investigations had started and resulted in eight officials being charged following a forensic investigation of the 2018 IA contracts. Recommendations were made to the HAWKS and other law enforcement agencies who had appeared before the Committee. Two of the eight officials had been acquitted, one had resigned, while another had passed on, and one was found guilty. The case was handed to the HAWKS for investigation because the Department does not have jurisdiction over private service providers. He responded to Mr Smalle that the reallocation of funds was tantamount to committing collective punishment on communities. Moving funds to better-performing provinces was not a solution. Section 20 of the DoRA provides for the conversion of a portion of the MIG into an indirect grant. The restructuring process was disrupted in some places by local government operations and support programmes. The Department was trying to address all of the challenges, but he acknowledged that the change management aspect was not well managed. Staff had been in acting positions for some time. The MIG staff complement has been reduced from 40 in the past to only 13 at this point. The vacancy rate had been significantly reduced from 27% at the beginning of the year to 12% at the end of the year. The norm is to keep the rate below 10%. The only vacant post at DDG level was in Corporate Services but the position is likely to be filled within the next two months. He agreed that the dysfunctionality in municipalities needs to be dealt with. The issue was about the need to improve contract management abilities and draft contract management plans in the APP. The goal is to increase the number of functional municipalities and thereby decrease the number of dysfunctional municipalities. He stated that the appointment of IAs is prescribed in the policy. The services of IAs are needed to manage the contracts with service providers and to help implement the programmes. The CWP was the riskiest programme, but it did not have a branch. The Department was not designed to manage the programme directly. The IAs are providing the capacity to move between the more than six thousand sites.

Mr Xundu explained that the AG had raised the MSIP as an audit issue. The Department had not managed to customise indicators for provinces due to the different approaches to support municipalities that the various provinces are following. The process of signing contracting agreements with provinces had started. He agreed with Mr Mpumza that the Department had overstayed its welcome in the qualified zone and that it was not good for governance and public confidence in the work of the Department. The Department would be focusing on the CWP space to deal with all the challenges and will be meeting regularly with the AG for guidance to manage movable assets. Dealing with the retention fees is problematic. The fees cannot be paid to the IAs until the asset reconciliation is done. The IAs will forfeit the retention fees if the asset register is incomplete. To verify the value of the CWP work is a time-consuming exercise. He agreed that the implementation of the post-audit action plan is a priority. The Department is aiming to present the plan to the Minister and to conclude it before the end of the calendar year. He stated that managing concurrence is a challenge because municipalities are an independent sphere of government. Councils cannot be micro-managed when political leadership is in charge. The Department nevertheless accepted that it has to provide leadership and hold people accountable when targets are not met. He explained that the LRC is an official design feature of CWP to advance public participation and play an oversight role to ensure that the norms and standards of the programme are observed. Based on the findings of the quarter two performance reports, the majority of the LRCs are functional. Remedial action is implemented where some LRCs are experiencing problems. LRCs are non-existent in Nelson Mandela Bay, the City of Cape Town and Mangaung because the Department is unable to facilitate councillors to adopt a council resolution, which is a prerequisite for establishing an LRC. Some progress has been made in Nelson Mandela Bay and there is hope that the problem will soon be resolved.

Ms Matlatsi said the AG cited poor leadership and lack of good governance as reasons for non-compliance to supply chain management procedures. The post-audit action plan should be able to assist in resolving the errors relating to CWP assets which were identified by the AG. The Department had developed standard operating procedures (SOPs) based on practical internal controls, i.e. putting in place the Lost Control Committee and changing policy requirements that were stifling progress.

Mr Kevin Naidoo, DDG: Institutional Development, DCoG, said most employees in the LGSIM branch were required to wear two hats. This situation contributed significantly to the suboptimal performance. It was a year of transition and for most of the year, the DG was working in an acting capacity.

MISA response
Ms Kgomo, replied to Mr Smalle about support for the 22 dysfunctional municipalities which is provided for in the current year APP, using grant funding. The agency was helping municipalities by targeting the MIG in terms of water treatment works and wastewater treatment works. Technical teams will be deployed to support the basic municipal services programme and to build capacity to deliver on the CWP project.  She noted the comment by Ms Spies about being bold in setting targets. The MISA had started being more aspirational and intentional in setting targets to support municipalities. She noted the commitment made by the former CEO to assist in providing a borehole in Port St Johns but advised that the agency had budgetary challenges. Depending on the savings in the third quarter, a direct intervention will be considered, in addition to the support that the technical team will be providing.

Deputy Minister Tau said the responses placed emphasis on stability in management and the consolidation of senior management positions. He noted the AG's comments which partly related to the high turnover in management positions. The Department and entities set collective objectives to measure the Department’s performance against the extent of improved municipal services. The focus is on improving grant expenditure and avoiding the return of the equitable share due to penalties charged by National Treasury. The need to convert direct grants into indirect grants is being considered to avoid creating a backlog for municipal services. The most important focus area is the development of capacity in municipalities.

DTA presentation
Deputy Minister Zolile Burns-Ncamashe, DTA, said the Department was pleased to account for the work of the Department during the 2022/23 financial year. A point of serious concern was the identification of areas that were limiting support due to historical underfunding of the sector. Notwithstanding the fiscal situation of the country, the inadequate situation would be raised continuously unless it is resolved. A significant part of the meagre budget of the Department is transferred to the CLR Commission, and the Khoi-San and Traditional Leaders housing, leaving no budget to deliver on the real mandate of the Department. The Department’s organisational structure is inadequate for the sector. The Department achieved a clean audit for the seventh consecutive year. The performance outcomes based on the set targets were above 80% and the Annual Financial Statements were in good standing. The Department sought the support of the Committee for a substantial increase in the budget.

Performance Overview
Mr Mashwahle Diphofa, DG, DTA, said the Department achieved an overall performance outcome of 82% (18 out of 22 targets) for the year under review. The clean audit outcome for the current financial year is similar to the outcomes for the past seven years. An unqualified audit opinion was achieved for the 2022/23 financial year.

Financial Performance
Mr Diphofa reported that R174 million (97%) of the final approved budget of R180 million was spent. The underspent amount of R5.6 million was mainly attributed to COE accounts with respect to funded positions which became vacant during the financial year.

(See Presentation)

TLKA presentation
Ms Reshoketswe Mogaladi, DDG, DTA, briefed the Committee on the processes to be complied with in implementing the Constitutional Court order as it related to the Traditional and Khoi-San Leadership Act. The Act was declared invalid because Parliament failed to comply with the obligation to facilitate public involvement before passing the Act in 2019. The judgement issued on 30 May 2023, granted Parliament 24 months to re-enact the TLKA statute in a manner that is consistent with the Constitution or to pass another statute in a manner that is consistent with the Constitution. An urgent decision was needed on the preferred option, i.e. Committee Bill or Executive Bill, to introduce the Bill in Parliament. The Department recommended that the Executive Bill as the better option to expedite the process. In terms of the proposed timelines, drafting of the Bill should commence on 31 October 2023 and the Bill should be tabled in Parliament by 30 April 2024.

(See Presentation)

The Chairperson invited the Legal Team to comment on the process of drafting the Bill.

Mr Lonwabo Sapela, Parliamentary Legal Advisor, Constitutional and Legal Services Office, said the presentation was discussed with the Legal Team. The opinion of the Legal Team was more inclined to choose the Executive Option.

Discussion
Mr Mpumza requested an explanation for underspending the budget allocation by R5.6 million. He was concerned that not a single Khoi-San leader had been recommended to the Minister for recognition. The matter has been in existence for two years.

Ms Spies sought clarity for the digression in the Department’s performance outcome to 82% of targets achieved. She requested a breakdown of the fruitless and wasteful expenditure and asked if consequent management had taken place.

Mr K Ceza (EFF) asked why the Committee is being informed about the TLK Bill at this time. He was concerned about the loss of life at illegal initiation schools and expected the Department to deploy specialists to minimise injuries and deaths and to ensure that the commercialisation of the practice is curbed. He enquired about the plans to address the human rights violation of the initiates. He requested details of the fruitless and wasteful expenditure.

DTA response
Deputy Minister Burns-Ncamashe said he had met with the Khoi-San Commission to discuss the concerns raised by Members. There are clear cases that did not require an intense investigation process. He was aware of two leaders in Platfontein in the Northern Cape who had both been recognised as leaders by their communities. The process of confirming leadership requires a methodical approach. The Department agreed to present the recommendations to the Minister before the end of the financial year. The deaths of initiates should concern the whole society because it is a societal issue and not the exclusive function of traditional leaders. Families and the whole society should take responsibility as custodians of traditions. He cited an incident of an initiate who had suffered an epilepsy attack before leaving for the initiation school because he was afraid of taking his medication for fear of being stereotyped. The incident was clearly a health issue and not related to any custom.

The CFO, Mr Bheki Mathunjwa, stated that the Department was not in the position to request a rollover because the underspending did not meet the requirements. Rollovers are mostly applicable to capital projects. Operational costs does not fall within the ambit of rollovers. In response to questions about fruitless and wasteful expenditure he explained that although the Department became autonomous, some functions remained within the bigger COGTA group. The pensioners information was never transmitted to the DTA and the matter was still under investigation.

Follow up discussion
Mr Ceza acknowledged the involvement of traditional leaders and surgeons at initiate schools but was particularly concerned about the illegal schools in Gauteng and Vereeniging. He suggested that initiates in these areas attend the schools for the wrong reasons and return as gangsters. He urged the Department to clamp down on criminals because the lives of children must be protected.

Deputy Minister Burns-Ncamashe agreed with Mr Ceza that the illegal initiate schools in urban centres are doing great harm in vulgarising and adulterating the sacred ethos on which the right of passage is predicated. As preparations are being made for the summer season, the Department was hard at work with the security cluster to isolate criminal cases and to deal decisively with criminals. He appreciated the support of the Minister and the efforts to review the inadequate funding of the Department and the recapitalisation of the sector. The issue will continue to be raised at every opportunity where traditional leaders interact with government. He solicited the support of the Committee for a permanent solution to the problem so that the Department can start focusing on issues of development.

The Chairperson said the recommendations in each of the presentations had been noted and would be considered in line with the recommendations of the AG. The Committee would be developing a coherent plan to help departments and entities to improve the outcomes. The Committee also noted that recommendations and processes regarding the TLK Bill and would be monitoring the progress in order to meet the timeframes. The goal is to meet the targeted deadline by the time Parliament closes.

The meeting was adjourned.

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