Conditional Grants & Municipal Housing Accreditation: briefings by Gauteng Department of Public Transport, Roads & Works & SALGA

NCOP Finance

25 January 2006
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Meeting report

FINANCE SELECT COMMITTEE

FINANCE SELECT COMMITTEE
26 January 2006
CONDITIONAL GRANTS AND MUNICIPAL HOUSING ACCREDITATION: BRIEFINGS BY GAUTENG DEPARTMENT OF PUBLIC TRANSPORT, ROADS AND WORKS AND SALGA


Chairperson: Mr T Ralane (ANC)

Documents handed out:
Gauteng Department of Public Transport, Roads and Works Report
Gauteng Department of Public Transport, Roads and Works presentation
Gauteng Health Capital and Maintenance Programme
SALGA presentation

SUMMARY
The Gauteng Department of Public Transport, Roads and Works presented details on budget allocation and expenditure including conditional grant expenditure for 2005/06. Six key strategies driving departmental activities were explained and a budget increase had been received in the past year. Grant expenditure per project was outlined and solutions to address current weaknesses conveyed. The South African Local Government Association explained the municipal housing accreditation process. A draft framework had been formulated for the proper accreditation of municipalities to provide adequate housing. Most municipalities struggled to find appropriate land for low-income housing projects. Accredited municipalities should receive substantial fiscal transfers to support housing delivery. Municipal capacity-building should be undertaken to drive the process.

Members raised questions relating to the reasons for over- and under-spending, the promotion of small scale and black-owned construction companies within tender allocations, priorities within provincial budgets for social spending, whether the general public was aware of the lack of municipal accreditation for housing provision at this juncture and the urgent need to improve capacity within rural municipalities.

MINUTES
Presentation by the Gauteng Department of Public Transport, Roads and Works (DPTRW)

Mr R Sedumo (Acting Head of Department: DPTRW) outlined six core strategic objectives driving Departmental activities. The budget had been increased by R270 million last year to facilitate the acquisition of new office space for the Department. The total budget stood at R1.4billion. Detail was provided on Medium Term Expenditure Framework (MTEF) budget allocations and conditional grants. The majority of conditional grants had been spent on the maintenance and rehabilitation of roads. Information was provided on grant expenditure per project and infrastructure expenditure trends. An increase in infrastructure expenditure had occurred during the past five years. Measures had been introduced to improve current weaknesses within the Public Works branch. Key challenges for infrastructure delivery were explained. Current interventions to improve service delivery were emphasised.

Discussion
The Chairperson referred to plans to build stadiums and refurbish existing facilities and asked which stadia were involved and where they were located.

Mr Sedumo replied that four stadia were included in the development plans and stated that the Rand Stadium had been removed from the list and allocated to the Johannesburg Metro.

The Chairperson noted that departmental overspending was increasing and that the trend was likely to continue in the short term. R35 million had been overspent in November 2005. He asked what measures were in place to address the overspending.

Mr Z Kolweni (ANC) noted that the Department was submitting business plans to National Treasury as required and competent strategy plans were in place. Underspending characterised the Department of Social Development and he asked what areas of focus had been identified to improve expenditure. The Department had decided to be less lenient on poor performance for contractors but he questioned what effect this might have on less experienced, start-up companies that would probably experience problems in the short term.

Ms Mchunu (IFP) referred to green houses established within rural areas and asked whether the Department had been responsible for erecting such structures. The health budget focused extensively on the building of hospitals but day-care centres and drop-in centres also required attention. More clinics were needed to assist in the treatment of terminally ill patients.

The Chairperson enquired as to who owned the stadia referred to that were receiving state financial assistance. He asked whether underspending in capital expenditure had been addressed and why 103% of the total budget had been spent in three months last year. Reasons were sought for fluctuations in budgeted amounts between quarters. He asked whether a sharp decline in projected spending was due to poor planning or an attempt to balance the books.

Mr Sedumo replied that a R35 million overspending had been projected in November but no overspending would actually occur in reality. Higher amounts were budgeted to ensure adequate financial provision. He admitted that the practice was inappropriate and would be discontinued. The Department was striving to achieve more constant expenditure throughout the financial year.

The Chairperson declared that ownership of the stadia should be determined as the Committee suspected that subsidisation of commercially viable stadia was taking place. The stadia should be self-sustainable. Acquired money could have been utilised elsewhere where need was greater.

Mr Sedumo responded that the Sport and Recreation Department was better qualified to provide a meaningful answer.

The Chairperson asked that the relevant information be provided within two days to the Committee.

Mr Sedumo agreed to the request and declared that the majority of Social Development funding was spent on places of safety and the upgrade of sewerage systems in various localities. All contractors, large and small, were expected to perform to acceptable standards. Projects had to be implemented in accordance with financial and legal obligations to a high standard. The Department was not ignoring the vital priority of Black Economic Empowerment. Forty percent of contracted work was to be allocated to small and medium enterprises. Small-, medium- and micro-sized enterprise (SMME) partnerships with big companies were promoted. Green houses had been erected within Department of Agriculture projects that included nature reserve and tourist-related projects. More information would be forwarded to Members in due course on green house developments and health care facilities. The Department of Education was currently responsible for their own infrastructure but the function would be moved to the DPTRW in the near future. Two accounting reports were in use, namely item and objective-level reports, that contributed to the 103% expenditure in three months. Expenditure did occur in the remaining nine months that was not reported in the correct manner. The problem was an administrative rather than a performance problem. Discussions were underway with National Treasury to rectify the anomaly.

Mr J Weidemann (Director: Transport, DPTRW) stated that the R28 million under spending was due to adequate road conditions that did not necessitate additional maintenance that had been initially projected. Various fluctuations between quarterly budgets were due primarily to incorrect salary projections and the rescheduling of projects.

The Chairperson noted that accounting statements reflected zero collections for licence and traffic fines and asked why no revenue had been garnered. Gauteng issued the highest number of vehicle licences in the country. A mechanism was in place to raise additional revenue and should be utilised.

Mr Sedumo declared that the particular account statement was incorrect and that additional revenue was collected through road-related payments.

The Chairperson asserted that the Committee would monitor the expenditure performance in the 4th Quarter. He proposed that the Department be present at Division of Revenue Bill public hearings in May to assist in providing meaningful answers to questions raised by interest groups.

South African Local Government Association (SALGA) presentation
Mr T Moremi (Director:Integrated Service Delivery, SALGA) provided information on the municipal housing accreditation process. He declared that no municipality was, at that juncture, accredited with housing delivery. Agencies tended to be involved on behalf of municipalities. A conference in June 2005 had developed a strategy for sustainable human settlement and formulated a draft framework for the proper accreditation of municipalities. A survey had been conducted to evaluate municipalities' ability to undertake the proposed housing provision function. The majority of municipalities did not have strong housing departments although Metros had greater capacity and potential ability. Pressure existed within most municipalities to find appropriate land for housing projects, in particular, low-income housing. Detail was provided on the Municipal Housing Indaba held in October 2005. Housing provision would hinge on adequate fiscal transfers to accredited municipalities. Suitably-qualified accounting officers within municipalities and proper capacity-building programmes were imperative to achieve results. Three levels of accreditation would exist and housing could only be provided once a workable framework was in place. Suitable municipalities for accreditation had been identified and the necessary process would be initiated shortly.

Discussion
Mr Kolweni declared surprise that no municipalities had been accredited at this stage and asked whether the general public was aware of this fact given the recent high levels of unrest and protest at the municipal level. He asked which entity was responsible for informing the public of the lack of accreditation.

The Chairperson asserted that the Committee was responsible for oversight to ensure that accreditation took place and housing delivery was escalated. The activities of relevant provincial government departments had to be closely monitored to ensure improvements. He asked what other steps were available to provincial departments to ensure delivery at the local government level. Capacity-building programmes should be developed in the interim to assist the process. He asked what progress had been achieved within identified municipalities to complete the accreditation process. Low-capacity municipalities should also be focused on as housing needs tended to be particularly severe within their jurisdictions. Uneven capacity and development between regions had to be addressed.

Cllr C Johnson (SALGA National Executive Committee) stated that all initiatives had to occur in line with the Inter-governmental Relations Act framework. Accreditation of municipalities would be approached in a phase-by-phase manner. Agreement from all three spheres of government was necessary. He acknowledged that citizens did not understand the current legal situation and councilors tended to be blamed for shortcomings. Various blockages hindering housing delivery had to be removed to dramatically improve the rate of provision. An audit of 284 municipalities would be conducted to determine capacity. A technical task team would be established to drive the accreditation process. A progress report on latest developments would be produced for the Committee. Current levels of underspending within certain budget items were inexcusable. District municipalities would also be included in the audit.

Mr Moremi stated that public hearings on the Division of Revenue Bill in May were a positive development as provincial governments needed to account for capacity-building activities. Section 17 of the Division of Revenue Bill had to be enforced.

The Chairperson stated that a clear implementation programme had to be drafted and the Committee would monitor the accreditation process. Pressure should be placed on provincial housing departments to deliver. Provincial governments had to work in a co-operative manner with local government to achieve results. Intergovernmental relations had to be respected and municipalities should be consulted in all planning endeavours.

The meeting was adjourned.

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