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PROVINCIAL AND LOCAL GOVERNMENT PORTFOLIO COMMITTEE
13 September 2005
DEPARTMENT & COMMISSION FOR PROMOTION AND PROTECTION OF RIGHTS OF CULTURAL, RELIGIOUS AND LINGUISTIC COMMUNITIES ANNUAL REPORTS; REVISED EQUITABLE SHARE FORMULA: BRIEFINGS
Chairperson: Mr S Mashudulu (ANC)
Documents handed out:
Department briefing on Annual Report and Budget
Department of Provincial and Local Government Annual Report (available shortly at www.dplg.gov.za)
CRL Commission briefing
CRL Commission Annual Report 2004/05 (available shortly at Commission's website)
Department briefing on Equitable Share Review
The Department of Provincial and Local Government provided detail on its Annual Report and the revised Equitable Share Formula. Its financial performance and expenditure patterns were outlined. Key Performance Areas within Project Consolidate were explained including plans to enhance service delivery at the municipal level. Detail was presented on its seven programmes and progress towards improving co-operation between the different spheres of government. The impact of the new equitable share formula which will be phased in over three years, was explained. An explicit revenue raising correction is included in the formula to take into account the fiscal disparities between municipalities. The developmental component played a key role in the strategy and municipalities with low fiscal capacity would be recognised. The formula would promote transparency and accountability in the intergovernmental transfers system. Municipalities that had invested in basic infrastructure would be rewarded by the revised formula.
Members asked questions about overspending by the Municipal Demarcation Board, the role of Project Consolidate in terms of skills transfer, the employment of competent staff within municipalities, progress in the transformation of traditional leadership within the rural areas, a Bill to stabilise municipal remuneration, the status of the Local Government Sector Education and Training Authority, the implementation of the Property Rates Act within rural areas, the use of the Census database to support initiatives and potential negative consequences of the revised equitable share formula.
The Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities provided detail on its vision and mission. Social transformation and nation-building remained key considerations. Mediation and conflict resolution were prime activities of the Commission. Core function committees and provincial sub-committees had been set up to promote the Commission's work. The Commission outlined recommendations including the need for inter-racial religious dialogue, moral regeneration and community-capacity building. Community Councils would be established.
Members asked questions about the total number of employees, the type of service providers used by the Commission, the relationship between its provincial committees and the respective provincial governments, the location of the Commission within the Presidency cluster, the involvement of ward committees in the Commission's activities, the storing of vital traditional knowledge within the Commission. They suggested that clear and communicable strategic plans were needed to drive the Commission's activities.
Department briefing on Annual Report
Ms L Msengana-Ndlela (Department Director-General) provided detail on the financial performance of the Department. He declared that an unqualified audit report had been received from the Office of the Auditor-General. About 99% of the annual budget had been spent and spending quality had been improved. Service delivery profiles had been completed within local government and three areas of progress had been identified with regard to Project Consolidate. ‘Key Performance Areas’ were explained. Some 136 municipalities would emerge as sustainable entities. Seven budget programmes were discussed, including development and staff issues. Financial results were provided and conditional grants clarified. Policy coherence was identified as an important component of current strategy. Collective action between the various arms of government would be facilitated through the Intergovernmental Relations Framework Bill. Members were invited to visit Project Consolidate municipalities on a regular basis.
Mr P Smith (IFP) referred to a recent meeting held with the Municipal Demarcation Board (MDB) and the Committee. Members learnt that a policy decision had been taken within the MDB to overspend on their budget that could be construed as an illegal act in terms of the Public Finance Management Act (PFMA). He asked what role the Department had played in this regard and whether such actions should not be prevented in the future. The Auditor-General appeared to have accepted the legitimacy of the decision. This was problematic. Clarity was sought on progress to confer administrative autonomy onto the National House of Traditional Leaders (NHOTL). Further detail was requested on the link between Project Consolidate and the transfer of skills. He asked whether the Department would increase the number of accountants within the local government system to enhance efficacy. The status of the Khoisan had to be resolved and institutional arrangements finalised.
Mr M Swathe (DA) asked how many jobs had been created by infrastructure investment and whether the current high salaries for municipal managers would be curtailed and stabilised.
Ms L Mashiane (ANC) asked what steps had been taken to resolve the problem of write-offs in terms of the budget. She asked whether competent staff were being acquired to administer reconciliations and implement effective internal audits within municipalities.
Mr M Nonkonyana (ANC) praised the Imbizo initiative and asked what monitoring mechanism was in place to ensure progress in addressing identified challenges. She asked what role the Committee could play to assist in evaluation. Clarity was sought on success in the implementation of the IGR Bill in rural areas in particular. The National Framework Act had stipulated the replacement of Regional Authorities with Local Houses by means of appropriate provincial legislation. He highlighted obstacles in the implementation of the legislation that hindered progress such as intransigence in certain provinces. Service delivery within rural areas would be negatively affected by the slow implementation. He asked whether veld fires were included within the definition of disaster management as many municipal officials displayed confusion over the issue.
Ms Msengana-Ndlela responded that the Department was responsible for the provision of funds to the MDB and requested any additional funds from National Treasury on behalf of the Board. Motivation for the additional amount allocated in 2004 was provided to Treasury. A Department presentation had been made the previous day to Treasury for additional funds for the NHOTL for certain requirements. Local Houses would first be established at the District level and funds for administration costs had been requested from Treasury. Provincial legislatures were responsible for the passing of traditional legislation but a Minister/MECs (MinMEC) meeting would be held in the coming week to address the issue. A workshop would be held between Premiers and the NHOTL to discuss plans to fast-track the process.
The Annual Report referred to the Department's administration of the Framework Act and not specific provincial interventions. The sustainability of municipalities was an urgent matter and skills transfer was crucial. Improvement would be demonstrated by means of reliable research and evaluation. Policy proposals had been made regarding the Khoisan position. The Department wanted the salaries of municipal managers to remain within an acceptable framework. The Department's financial systems adhered to all relevant regulations and financial guidelines for municipalities would be compiled into one manual for communication purposes. A single instruction manual on all local government grants would be produced as opposed to the present system that incorporated different manuals for various grants. A Risk Management Framework had been compiled to assist in the internal audit function. The internal audit unit had been extended and an unqualified audit report had been received from the Auditor-General.
Mr E Africa (Department Chief Director: Systems and Capacity-building) stated that an initial assessment of municipal capacity had been undertaken as part of Project Consolidate. A detailed Human Resource assessment of all municipalities would be compiled to supplement the findings. Members would receive copies of the report upon completion. Service delivery facilitators had been assigned to various areas to confirm known problems, identify additional needs and improve capacity within municipalities. The Department of Public Service and Administration, National Treasury and the Department had debated alternative remuneration frameworks for the public sector and Treasury had undertaken an independent study. The Department, Government Communications and Information System (GCIS) and the Office of the Presidency had formulated reports of all Imbizos and strategies were compiled from the information. Progress reports on implementation would be provided to Members. Members were invited to attend Imbizos within their constituencies and were encouraged to assist local government officials in whatever way possible to facilitate effective local government. Veld fires fell within the scope of the Disaster Management Act and the Fire Brigade Board had been established to ensure co-operative government between provincial and local government.
Mr C Clerihew (Department Chief Financial Officer) responded that irregular expenditure had been incurred by the Command Centre that dealt with the extensive flooding in 2000. Statutory authority for various items of expenditure had not always been obtained thereby contributing to the "irregular" label. A response was expected from the State Tender Board on the matter in due course. IRP5 reconciliation for the past two years had been completed and submitted to the Revenue Services.
Ms Mashiane asked what steps would be taken to address the staff shortages.
Mr Smith asked whether a proposed Bill on municipal remuneration would be produced during the current year to address the contentious issues. Clarity was sought on Regional Services Councils' levies in relation to revenue generation. He asked whether the Local Government SETA had improved its functions to justify the recent executive-level support despite years of inactivity. He queried the application of performance management contracts across all municipalities and asked whether general compliance had been achieved.
Mr Nonkonyana referred to reports compiled from Imbizos and asked whether the Department seriously considered the information and incorporated it into strategic plans. Members should receive copies of the reports to assist in oversight duties and enhance understanding of the issues. The implementation of the Property Rates Act in rural areas was problematic and particular concerns remained. The rollout of free basic services was a commendable programme that Members supported unconditionally. However, certain challenges remained within the rural context. The lack of adequate infrastructure within rural areas compromised the provision of free basic services. All citizens were entitled to free services irrespective of geographical location. Free water should also be provided out of a borehole to meet the constitutional mandate.
The Chairperson commended the Department on the recent Free Basic Services Conference held in July that highlighted key areas of concern. The Department should compile a list of issues raised by traditional leaders to assist local government within the rural context. The future status of the Municipal Infrastructure Investment Unit (MIIU) had to be determined by the Department. The Department should investigate the state of readiness of all municipalities for the 2010 World Cup. A workshop with all municipal service providers should be held to compile a single guideline to govern their involvement. The arrangement of Imbizos within District municipalities helped to foster improved assistance to local government from provincial government. He asked how the Department would monitor the spending of national grants by municipalities to assess the efficacy of expenditure. The SA Local Government Association (SALGA) should produce a booklet outlining all grant programmes for the benefit of municipal officials to assist in implementation. The Department should also monitor the implementation of legislation designed to transform traditional systems of governance.
Ms Msengana-Ndlela stated that Project Consolidate had resulted in improved levels of transparency within local government. The lack of capacity within certain district municipalities had been identified and a systematic approach developed to deal with the issues. The Performance Management System highlighted the nature of problems and designed appropriate responses to the challenges. A new project management unit would be established at a national, provincial and local level. Systematic programmes of capacity-building would continue to be applied to improve efficacy.
A way forward on free basic services had been agreed upon and a collective agreement reached that lack of infrastructure hindered delivery. Alternative sources and supplies had to be arranged in certain situations to meet needs. The lack of infrastructure could not be used as an excuse to justify minimal free services. A basket of funds would be provided to municipalities to assist in service provision but local authorities would be encouraged to enhance revenue generation to augment resources. Performance management within municipalities would be strengthened and steps taken to confirm the presence of management contracts within all municipalities. The impact of management and staff input on service delivery levels would be investigated. The Department would continue to work with and support the Local Government SETA.
Mr Clerihew stated that the Municipal Infrastructure Grant (MIG) process had created approximately 6 million person hours during the construction phase. Detail of permanent jobs created could be forwarded to Members. The MDB accounted to Parliament directly through the Minister and independently of the Department. Requests for additional funds were made directly to the Treasury. The introduction of Project Consolidate had raised questions over the role of the Board in terms of assessment of municipalities but additional funds had been necessary to fulfil its constitutional mandate.
Mr Africa added that the Department and the Department of Public Service and Administration (DPSA) had consulted on the issue of management remuneration and separate legislation on the matter could be forthcoming in the near future.
Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities (CRL) briefing
Dr M Guma (CRL Chairperson) stated that interaction with all communities remained a challenge. Various interfaces with different cultures and religious groups had produced meaningful information acquired from diverse communities. The Commission desired to be the voice of the disadvantaged and had played a significant role in the 10-Year Democracy celebrations.
Dr P Madiba (CEO) provided detail on the vision and mission of the CRL. The Commission would promote social transformation and nation-building and assist in mediation and conflict resolution. Core function committees had been established at a national and provincial level. Extensive research and policy development had been undertaken to identify areas of concern. Detail was provided on submissions and challenges with regard to conflict resolution within various sectors of society. The education system tended to contain complex issues that required intricate responses. Inputs from the National Consultative Conference were conveyed to Members. Various recommendations were outlined such as the need for inter-racial religious dialogue and moral regeneration initiatives. Community Councils would be established to foster community capacity-building. The Commission had received an unqualified Auditor-General Report and the appointment of various commissioners would be fast-tracked. A Council of Elders would be established to assist in strategic direction.
Mr Smith sought clarity on the number of CRL employees and the structure of the Commission. He asked how the Commission's funds were apportioned between the various programmes and noted a high entertainment account that required further explanation. The type of service providers used by the CRL should be clarified. He asked whether the Treasury roll-over was reflected in the Annual Report financial statement and whether the Conference costs were placed under operating expenses.
Ms Mashiane complimented the Commission on a successful national conference but sought more detail on staff-related expenditure. The use of consultants should be declining in line with recent government policy to reduce such expenses. She requested a breakdown of in-house staff capacity.
Mr W Doman (DA) sought clarity on the relationship between CRL provincial committees and the various provincial governments.
Ms M Gumede (ANC) asked whether the Commission's sub-committees would operate on an individual basis and why such division was necessary.
The Chairperson asserted that the Commission's staff complement was an important issue in terms of government employment policy. He asked how staff was attracted to work for the Commission and what employment requirements were in place. The employment of staff within the Commission remained a ‘grey area’. He asked whether the Department had provided guidelines to CRL regarding an operational mandate and if so, whether such a mandate was linked to measurement of performance. The location of the Commission within the Presidency cluster was important as various entities fulfilled similar functions. Ward committees could assist the CRL in carrying out its mandate. The Commission had to work closely with relevant government departments to ensure that its mandate was applied across a wide spectrum within the public sector. Parliamentary constituency offices and school libraries could also be incorporated into a collective effort. Municipalities should create space for the CRL within their activities. The Commission could play an important role in the accumulation and warehousing of traditional knowledge.
Ms Madiba requested that Members put financially-related questions into writing to facilitate accurate responses. Answers would be returned in the short term. The entertainment figure related to the nature of activities undertaken by the Commission and not to the number of executive members. A roll-over of R6 million had been received from Treasury and was referred to as ‘retention’. A portion of the amount was used for the National Conference. Provincial committees were regarded as sub-committees of the Commission and attended to provincial-related matters.
Ms M Le Roux (CRL Councillor) responded that provincial committees operated on an ad-hoc basis and worked with local government structures and other provincial structures. A strategic plan was in place to communicate with grass-roots communities and assess the relevance of programmes.
Dr M Dockrat (CRL Councillor) added that the Commission sought to create linkages between sub-committees and research would identify complaints and issues and inform appropriate responses. Sub-committees would co-operate in the production of adequate educational material. Proper relations had still to be established between the Commission and relevant government departments to improve the timeframe on addressing community complaints.
Ms Le Roux added that research would identify existing structures that the CRL could work with to fulfil its mandate. Competent and experienced staff was needed to support the activities and informed decisions needed to drive the programmes. CRL would work with ward committees to facilitate a more extensive impact.
Dr Guma concurred that improved interaction and co-operation with other government entities was vital and would be promoted. Municipalities operated within culturally and religious sensitive areas and CRL input would be relevant. The Department should define the appropriate relationship between itself and the Commission and between other departments and the Commission. CRL visited provincial Premiers last year to explain its reason for existence and to explore co-operative prospects. Visits to local government structures should be arranged in the short term.
Ms M Bethlehem (CRL Deputy-Chairperson) stated that letters of appointment had been received from the President for 17 part-time councillors.
Dr Guma asserted that a limited number of consultants had been used by the Commission. Part of the quoted financial statement referred to other service providers employed on various occasions. The annual budget could be linked to the various programmes incorporated within the strategy plan. The contingency liability related to the checking of the credentials of service providers prior to payment. The budget had not been drawn up during the first three months of the year and was reconstructed within the Annual Report.
Ms Mashiane sought clarity on the role of the CAO within the executive arm of the Commission.
Ms Madiba stated that the Commission's internal audit function was being filled by a private company at this time. The CAO was a legal officer that operated under the operations officer in terms of the organogram.
The Chairperson stated that the Committee would follow up on the policy direction applied to the Commission by the Department. CRL remained in its infancy and had to be nurtured by all relevant role-players. CRL strategic objectives and plans had to be clear and related to timeframes to facilitate oversight. The intention of the proposed engagement with relevant government departments had to be explained to Members. The Committee would ensure that the Department reflected on the issues raised. The activities of the Commission should be linked to Presidency cluster programmes to enhance effectiveness.
Department briefing on Equitable Share Review
Ms S Makotoko (Department Chief Director: Inter-Governmental Fiscal Relations) provided background on the equitable share review that took the fiscal capacity of municipalities into account. The guiding principles were transparency, equity, efficiency and simplicity and the initiative focused on the developmental needs of municipalities. The previous formula was flawed in certain respects as all municipalities were treated the same. The previous formula tended to place key issues into compartments that complicated implementation.
Ms Mafoko (Department Director: Inter-Governmental Fiscal Relations) explained the overall formula in relation to the revenue raising capacity measure. Free basic services were regarded as a national priority and the R293 formula would be phased out. The basic services component would support recurring costs and the four core functions of water, refuse, sanitation and electricity would be recognised. The impact of the revised formula was discussed in relation to urban migration. The revised formula would be phased in over three years and the developmental component was important.
Mr Malcolm Simpson (National Treasury) added that the aim of the review of the equitable share was not to increase the size allocation but to improve the distribution of the available resources. The equitable share portion had grown in relation to the conditional grants. The previous formula was complicated and had to be altered to facilitate stability. The resources allocated to municipalities were higher than the budgeted amounts such as R130 per household. A 70% guarantee to municipalities from the previous year's budget would apply for two years. Approximately R1 billion derived from RSC levies would be distributed to other municipalities to facilitate equity. The poverty indicator line would be set at R800 per household. The equitable share allocations had increased ten times since 1999.
Mr Smith asked for clarity on the relationship between the size of the equitable share and other grants. He asked whether the Census database was used to provide statistics for plans and questioned the validity of such figures. He asked whether the equitable share would fund both basic services and free basic services. Clarity was sought on possible spending guides for municipalities in terms of their allocated share. He asked whether the equitable share could assist in fast-tracking infrastructure backlogs within certain municipalities. Further detail was required on possible negative implications for municipalities arising from the revised formula. Certain local authorities were receiving less share allocation per annum than in the previous financial year.
Ms Gumede asked whether the Department or municipalities were responsible for informing community members of their rights with regard to new regulations that affected local government functions. Rural dwellers received municipal accounts that indicated the provision of free basic services that were not received in practice. The R50 fee for electricity reconnection and the R500 deposit for municipalities had to be explained to citizens and she asked who was responsible for the communication.
The Chairperson stated that a balance had to be attained between allocated resources to municipalities and an understanding within local authorities of why the money had been issued and for what purpose. Rural areas were characterised by extreme levels of poverty that placed additional pressure on rural municipalities. The Integrated Development Plans (IDPs) of municipalities had to be married to available budgets and staff capacity. Commitment to development programmes should not be made in public meetings without prior knowledge of secured funds. The Department had to ensure that resources were expended to the benefit of the community as opposed to contributions to property developers and other beneficiaries. The Department should assign individuals to municipalities to determine the effectiveness of Integrated Development Plans. He asked whether any adjustments were planned for the current administrative system in line with the revised equitable share model.
Ms Makotoko highlighted the distinction between capital grants and the equitable share with the former responsible for major infrastructure projects and the latter devised to cover normal services and maintenance of existing infrastructure. The revised formula would ensure more funding for municipalities with established infrastructure but would tend to penalise rural local government. The unintended consequence would have to be re-evaluated in future. The enhanced revenue raising capacity of larger municipalities should in theory count against an increase in the equitable share. A detailed account would be sent to each municipal manager indicating the amount allocated for free basic services. The revised formula was intended to subsidise service provision for the poor and help to close the gap. The revised formula would guarantee a minimum share of the same amount as allocated in the previous financial year. Any decreases that may have been experienced by certain municipalities were due to changes in demographic statistics and changes in powers and functions between districts and municipalities. Allocated funds had shifted in accordance with altered functions such as water provision. Statistics South Africa (StatsSA) data had been used in the planning process.
Mr Simpson stated that 2004 budget guarantees would apply until 2007/08 and would tend to reduce allocations to certain municipalities. Rural poverty had tended to be overestimated in the past and could have adversely affected the allocation figure. The revised formula would in practice penalise municipalities that had not extended adequate services. The Department was aware of shortcomings with regard to StatsSA figures but all municipalities would be treated equally. Municipalities would receive a greater amount than the housing figure to cover any shortfalls. Municipal functions had variable outcomes in different regions and the revised formula sought to promote stability in allocation. The equitable share would cover the maintenance of infrastructure.
Mr Smith reiterated that many municipalities were experiencing a reduction in equitable share in both nominal and real terms.
Ms Makotoko added that the change in powers and functions between district municipalities and municipalities should be accepted as a sound reason for any decline in equitable share allocations to particular municipalities. For example, the removal of water provision from districts would result in a reduced share. District municipalities would experience the largest impact in terms of adjusted allocations.
Ms S Molokoana (SALGA) declared that municipalities had been empowered in terms of the revised equity share formula. The capacity of municipal managers and councillors would be enhanced as an ongoing priority. Reconnection fees were a policy decision that had to be addressed at the political level. IDPs had been drawn up in consultation with communities by means of ward committees. Strategic plans would be formulated in close consultation with the budget allocation. Free basic services would be provided even in the absence of adequate infrastructure. For example, free basic water would be provided at boreholes.
Ms Makotoko added that capacity would be developed within municipalities to enhance credit control efforts and billing systems. Communities would be empowered on their rights regarding the new equitable share system. The developmental component within the new model would be enforced.
The Chairperson concurred that co-operative governance was crucial to ensure proper implementation of the revised formula. Members should convey acquired information to their respective constituencies.
The meeting was adjourned.