Progress Report by the Administration of Thaba Chweu Local Municipality

Meeting report

LOCAL GOVERNMENT AND ADMINISTRATION SELECT COMMITTEE
9 May 2006
PROGRESS REPORT BY THE ADMINISTRATION OF THABA CHWEU LOCAL MUNICIPALITY

Chairperson: Mr S Shiceka (ANC Gauteng)

Documents handed out:
Progress Report on Thaba Chweu presented to the National Council of Provinces 9 May 2006

SUMMARY
Ms Gladys Sibeko (HOD: Department of Local Government and Housing, Mpumelanga) briefed the Committee on the progress that had been made at the Thaba Chweu municipality and on why the Mpumelanga Department of Local Government and Housing and the Department of Provincial and Local Government felt that the Thaba Chweu Administrator’s term should be extended.

Mr Oupa Nkoane briefed the Committee on the Development Bank of Southern Africa’s sustainable community intervention programme. Members were concerned that there was no clear indication as to when the intervention team would be replaced by a new Council and municipal manager. Many questions relating to the action taken against corrupt officials, and the quality of the service provided by private service providers were also raised.

MINUTE
Adoption of Minutes on Abaqulusi Local Municipality
The Committee would draft a letter to inform the MEC of their continuous monitoring and to detail the areas that the municipality needed to concentrate on. Committee members agreed with Mr Moseki (ANC North West) who felt that the Committee should rather undertake a follow up visit to the municipality. It needed to ensure that services were delivered. The process of planning for the visit would be set in motion.

Department of Local Government and Housing (Mpumelanga) Presentation
Ms Gladys Sibeko (HOD: Department of Local Government and Housing, Mpumelanga) briefed the Committee on the progress that had been made at the Thaba Chweu municipality. The report detailed the background to the intervention by the Mpumelanga Provincial Council (MPC). Much progress had been made in terms if human resources and finance management. The report detailed developments in revenue collection as well as the action taken against those implicated in the widespread corruption. The report concluded with the way forward since the intervention, the intervention team’s recommendation and their response to the recommendations made by the National Council of Provinces (NCOP).

Mr Oupa Pilane (Director Municipal Interventions: Department of Provincial and Local Government) said that he had found the Thaba Chweu case very interesting. When the case was presented to the DPLG the impression was created that councillors and politicians had done much of the wrongdoing. Upon closer investigation it was found that while councillors were also involved, officials were among the main culprits. He informed the Committee that while the investigation was underway someone had tried to set light to the municipality building in the hope of destroying evidence. He said that a "value chain of theft" operated at the municipality: everyone - men, women, black, white - was involved.

Extending the administrator’s contract would facilitate the proper handing over of functions. The Department wanted Mr Mnisi, an attorney who was part of the intervention administration task team, to remain at the municipality because these cases were ongoing and every day new things were discovered.

Ms Sibeko said that very important lessons had been learnt at Thaba Chweu. It was important to ensure that finance systems were in place. The councillor appointed within the portfolio for finance needed to be assisted and capacitated to ask the correct questions in order to maintain the oversight of financial matters. It was hoped that by recruiting all the new officials through the database system of graduates the Department should begin to develop a cadre that had sound financial governance. The Department’s intervention team would continue to monitor the situation closely even beyond the administrator’s end of term. Thaba Chweu was an eye opener in terms of the role provincial departments needed to play as far as municipalities were concerned. It sharpened the manner in which provincial departments needed to assist the Council in its oversight role.

Discussion
The Chairperson reminded the Committee that the intervention was to have ended in January. The date was then extended to after the local government elections. It was now two months after the election and still the intervention had not ended. He wondered how far the transformation of the municipality had progressed and when the municipal manager would be appointed.

Mr N Mack (ANC Western Cape) asked how the new Council would be made aware of what had happened in the previous one. The Chairperson wondered whether the new council had been trained yet.

Ms Sibeko informed members that all the new councillors had had their first orientation session organised by South African Local Government Association (SALGA) and the Department of Provincial and Local Government (DPLG). The Department was planning on catering to the specific needs of certain municipalities. Thaba Chweu fell within that category.

Ms Castle added that discussions with the department as far as specialised training was concerned, were underway. The intervention team had had their first meeting with the Council about Section 139 of the Constitution, amongst other things. New council members had very little knowledge about this section and could easily be misled. It was felt that the training would be vital for Thaba Chweu. This would also go a long way towards explaining what the intervention had been about.

Mr Pilane said that the DPLG took the training of councillors very seriously. They would meet with SALGA on the following Thursday to discuss interventions that could be taken. They would also finalise the second round of the councillors’ orientation. A much closer interaction with the councillors would be necessary. He emphasised that the Municipal Finance Management Act (2004) posed a serious challenge to many municipalities. The DPLG thought it necessary to bring this to the attention of the Committee.

Mr Manyosi (ANC Eastern Cape) noted that the presentation indicated that all officials at the municipality were corrupt. He wondered what was wrong with the municipality’s deployment process. He asked what criteria interviewers were looking for.

Ms Sibeko said that the investigation had found that the candidates were properly skilled but did not have sound systems of supervision. The municipal manager and the administrator were "very, very weak". People managed to defraud the municipality for many years without being detected. The intervention team was putting in proper systems, and had introduced a capacitating programme. The new municipal manager would have to be trained in combination with the capacitating of the new unit in order to build a sound system of governance. The new system should be understood as a system that would not have any misconduct go undetected. Monitoring and supervision would happen on a regular basis.

Mr J Le Roux (DA Eastern Cape) asked what the municipality was looking for in their Chief Executive Officer. Perhaps the salary package was not sufficient.

Ms Sibeko informed the Committee that Thaba Chweu was a low level municipality and would need a municipal manager that was trained in finance with a background in accounting and business economics. They should have had some experience in managing accounts. The best would be to get chief financial officers in all municipalities but unfortunately they were rather expensive. The Department used the national database of qualified professionals to hopefully draw people to Thaba Chweu in the event that there were no locals that were qualified for the position.

Mr Z Ntuli (ANC KwaZulu-Natal) asked what mechanisms had been put in place in the event of the municipality not being able to find a suitable candidate for the manager’s position. He said that the province’s intervention could not continue indefinitely. The province should not be tempted to remain in control of the municipality. He was worried that no improvement to the situation would take place.

Mr Manyosi wondered how ABSA had gotten involved in approving a loan to an individual. He asked whether loans were not issued to designated individuals.

Mr Moseki asked whether the fraudulent ABSA transaction had been reported to the police. He wondered what had been done to apprehend the culprit.

Mr Mnisi explained that moneys had been invested with Nedbank. One employee had made sure that the money would be deposited into a broker’s account at Volkskus Bank in Pretoria instead of the municipality’s one. The council’s minutes indicated that the money should have been deposited into the municipality’s account. The money thus was lost due to an unauthorized investment. After thorough investigation the case was forwarded to the special investigations unit. Summons against ABSA were subsequently issued. Negotiations with ABSA were currently underway. ABSA as well as the Department were eager to resolve the matter. The matter was in the High court and ABSA had to liaise with their management and attorneys in Johannesburg. His unit would try to facilitate a pre-trial meeting to isolate issues and perhaps come to a possible settlement.

Mr Manyosi asked what action had been taken against the re-elected councillor who had refused to appear before a special committee. Mr Pilane said that the report on the councillor’s behaviour was brought before the MEC and then before the Party. The party had met two weeks before to discuss what needed to be done. The Department felt that the Party needed to take the fact that this particular councillor had refused to appear before the special committee very seriously. The Department would go to Thaba Chweu to deal with the matter. A political intervention was taking place. The situation was very difficult for the administrator who could only make recommendations. This had been done and it was up to the Chief Whip of the party in question to take the matter further.

Mr Le Roux asked how many of the officials who had been implicated in the corruption were still employed by the municipality. Ms Castle assured members that the officials had been suspended and hearings were in progress.

Mr Le Roux pointed out that a municipality not being able to provide financial statements for four years was a big problem. He asked whether any performance bonuses had been paid to people who had actually been part of the corruption. Ms Castle responded that no such bonuses had been paid thus far.

Mr Mack said that KPMG had also not done what was expected of them when they reported that the Kebble businesses were above board. He wondered whether they were still working for the municipality. He was also curious as to why the municipality had been paying them when they were clearly doing nothing. Ms Castle confirmed that KPMG had been removed due to non-performance.

Mr Z Ntuli (ANC KwaZulu-Natal) asked whether the financial statements for 2005/06 had been audited. Ms Castle said that the auditing was in progress.

Mr Ntuli wondered what the municipalities spending patterns were currently like.

Mr Ntuli asked when the municipality’s budget for 2006/7 would be passed and whether hearings had been held. Ms Sibeko replied that the Department had exceeded its budget with relation to the intervention at Thaba Chweu. The Department had applied to the provincial treasury for assistance. Since the matter related to sound financial management and Municipal Finance Management Act issues, the Department was working on an agreement with the provincial treasury whereby the Department of Finance would be responsible for the additional costs in terms of their oversight of municipalities. The Department had reported this state of affairs as soon as it started with the Section 139 intervention but that it had only received a response at the beginning of 2006. Ms Castle said that the budget had been approved by the old council. The hearings had been held and the budget would be tabled before the new Council later in May.

Mr Ntuli requested an explanation for what the ‘special branch’ mentioned in the report referred to. Ms Sibeko assured the member that the special investigation unit was not the Special Branch of pre-1994 South Africa. The unit dealt with matters related to municipal councillors.

Mr Mack asked whether the officials who were responsible for the financial mismanagement had been allowed to remain.

Ms Castle replied that as soon as mismanagement was discovered, those implicated were suspended.

Mr D Worth (DA Free State) noted that the report spoke of loans amounting to R18 million, yet no one could explain what this money had been spent on. These loans were being serviced at a cost of R350 000 per month. He asked whether this was only the interest on the amount borrowed or whether it included an amount towards the repayment of the loan.

Ms Sibeko said that these facts reflected just how bad the situation at Thaba Chweu had been. The Department could establish that the money had been used for infrastructure. It was still trying to establish where this infrastructure development took place. The loan was from the Development Bank of Southern Africa (DBSA) and the municipality was paying the servicing capital debt acquired on the loan.

Mr Moseki said that at first glance the report spoke of what could only be described as anarchy. One could conclude that the Thaba Chweu municipality posed a great challenge. A municipality’s primary mandate was to deliver services to the community. He wondered if this was happening in Thaba Chweu.

Ms Sibeko said that since the commencement of the intervention there had been fewer complaints and uprisings. The municipality used to receive a letter a month from commercial institutions, which were complaining about electricity being cut. The Department had discussions with Eskom about the matter. Discussions were also held with the mines that had been complaining about electricity and water related problems. The system of interacting with the formal business sector has been helpful. Service delivery was happening. Since the introduction of the new billing system the payment rate improved.

Ms Castle agreed that service delivery was a challenge. She said that it was important that the community as well as the business sector in Thaba Chweu should be informed of short, medium and long term plans. She assured members that the doors of communication were open.

Kgoshi L Mokoena (ANC Limpopo) said that some of the activities council members had been involved in were very embarrassing. He pointed out that the fact that the municipality functioned with only one electrician meant that it could not be delivering a full service to the community. He wondered whether the municipality could expedite the employment of additional electricians.

Ms Sibeko said that the vacancies in the electrical department posed a challenge. This matter should be addressed soon. The Department considered requesting assistance from the district municipality as far as infrastructure technology was concerned. Some local municipalities might also assist in the interim.

Mr Moseki wondered whether Mr Mnisi’s involvement in the intervention strategy at the municipality as well as other activities would not lead to a conflict of interest.

Ms Sibeko explained that the Department recommended that Mr Mnisi remained on the case because he was familiar with the problems at the municipality and has investigated the matters closely. His involvement would obviously be limited to the disciplinary cases, which would still be heard. Should more work be required the new municipal management would look into them. So far there had been no concerns or complaints about a conflict of interest. Mr Mnisi had been looking into affairs that concerned government.

Kgoshi Mokoena said that it should be appreciated that the Department had done much to ensure that activity at the municipality returned to normal. He wondered whether the delegation could give clarity on the media reports that the new mayor had requested a new car.

Ms Sibeko said that the MEC was very forthright about this matter at the premier’s coordinating forum (PCF). He publicly announced hat the question of cars for mayors was being reviewed. No new cars would be considered until the matters were finalised. Mr Pilane added that the Department of Transport together with the MEC, at a meeting that took place the previous Thursday, agreed that the grading of municipalities would be taken into consideration when it came to cars. No car that exceeded the salary of a mayor would be bought. A memo was being formulated and would be circulated among mayors. He stressed that this kind of conflict existed in relation to matters other than cars as well. The fact that there was no "municipal handbook for politicians" was one of the biggest challenges. A provisional guideline would be developed in the next three weeks.

Kgoshi Mokoena noted that only one councillor had been re-elected. Money had been deducted from their pension schemes but only R194 000 had been recovered. How would the rest of the amount be recovered?

Ms Castle reminded the Committee that the intervention team’s first report indicated that councillors took advances and cell phones. The team had categorised theses cases as "not so serious" since arrangements had been made and money had been recovered. Three councillors were involved and arrangements had been made with them. This amount came to R50 000. The councillor mentioned in the report that had just been presented was on of them. Legal action was being taken against a second group of councillors for an amount of R150 000.

Kgoshi Mokoena requested clarity on the municipality’s tendering process.

Kgoshi Mokoena noted that the municipality had outsourced some of its functions. He asked how many private companies had been involved.

Ms Castle said that Shining Star was appointed during the intervention team’s term. The IT consultancy Sebata was appointed to implement the Finstel Financial System.

The latest report on the revenue collection service provider stated that approximately 1200 units, which were not on the municipality database had been identified. Within Thaba Chweu there were about 600 illegal residential and commercial sector connections. Shining Star gave monthly updates on their progress.

Ms Sibeko explained that Mr Roodman was not a consultant but a staff member from another district. The province had a situation where some strong people were utilised in certain sectors of the municipality. Mr Roodman had been seconded to Thaba Chweu to assist in auditing.

Mr Mack wondered whether any of the outsourced service providers had had any part in the corruption. He also queried whether any action had been taken against the farmers, businesses and service providers involved in cases of corruption.

Ms Sibeko agreed that civilians should also be charged. She informed members that the officials who were involved had been charged.

Ms Castle said that the cases of the farmers and business people involved were being investigated.

Kgoshi Mokoena was pleased that the delegation reported that there was no longer any political intervention in the municipality’s problems.

Ms F Nyanda (ANC Mpumalanga) requested feedback on the R151 195 that was lost at the Mashishing office in the first 6 moths of 2005.

Ms Sibeko replied that due to the closer scrutiny of how finances flowed between cashbooks during the risk assessment it was possible to spot this discrepancy. She agreed that there were a lot of problems related to the finance management of the municipality. The long period of deflecting away from the problems that were present in finance and spotlighting it elsewhere meant that even when initial investigations were done they did not focus on the finances. Overhauling the old system would lead to implementing new systems. The large number of accounts meant that it was difficult to trace where discrepancies were. Since there were no strong administrative controls all the units that were risk units were being tracked very by the administrator.

Ms Nyanda wondered why the R10 million loan from the DBSA would be used for the building of homes for the "middle class". To her understanding there were many people in Lydenberg who did not have homes.

Ms Sibeko responded that the idea was to use the loan to create the infrastructure. The stands would them immediately be sold in order to repay the loan. It was anticipated that the municipality would make a R15 million profit. The development that would be taking place in this area would be in line with the Breaking New Ground (BNG) housing policy which seeked to integrate communities. This would cater for the up market as well as low-income sectors.

The majority of the people who required housing worked at the platinum and chrome mines. It was originally intended to take the housing to the other side of Suurpoort but then offered to resettle at Lydenberg thus contributing to the town’s development.

She reminded the Committee that the BNG policy included a system whereby low-income earners could be assisted to acquire a subsidy to contribute to their deposit. They could also be linked up with a housing finance company.

Ms Sibeko said that she did not want to leave the Committee with the impression that there was doom and gloom in Thaba Chweu. The situation has turned around. For the last 6 months the municipality had positive bank balances. The mood in the community and their reaction to the intervention changed too. The only problem that needed to be acknowledged was that not even the province was aware of just how bad the situation was. She was convinced that the problems could not have been arrested in the fashion it was if the Department had not used Section 139. From time to time municipalities had a tendency of not acknowledging provinces. Section 139 enabled the provincial department to get to what was really happening. It had revealed how the provinces needed to interact with their municipalities.

She said that one needed to live and breathe the new political oversight and that without a strong administrator municipalities tended to be weak. Part of the province’s activity should go into developing strong political oversight. The administration would be supporting the work of the administrator until the end of her term. The new senior management would also be supported. All the positive actions that had been taken needed to be consolidated.

Mr Manyosi commented that the whole council was removed. It signified a radical action on the part of the community. He said that the community should be thanked for the role.

Mr Moseki was pleased about the improvements that had been reported. He agreed that ward committees needed to be strengthened and that community workers needed to be developed.

Ms Sibeko said that ward committees were not very functional. A provincial programme was addressing issues around the functionality of ward committees. The new council needed to learn the value of community participation.

Mr Pilane added that the Department was, with the support of the Speaker, reviving the functioning of the ward committees. One of the biggest challenges centred on the resources for ward committees. The Department was looking at creative ways of addressing the situation. Most of the ward committees were functioning. Ward committee training was currently in progress. Community based workers had been deployed at all municipalities. They were being trained in working with ward committees. Thaba Chweu had become a serious pilot. Whatever was being done at Thaba Chweu could be looked at as a research study.

Mr Ntuli wondered whether there had been any community based planning programmes in Thaba Chweu.

Ms Sibeko said that ward committees and community-based workers were instrumental in the review processes. Performance could be improved. The province was addressing the functionality of ward committees. She said that in terms of the current review the province had to ensure that communities were involved as widely as possible. Ward committees were instrumental in the process.

Kgoshi Mokoena said that only one councillor was re-elected because the ANC took allegations of corruption very seriously. The ANC had even instructed communities not to vote for corrupt councillors. He said that he would not be apologetic about the action the ANC had taken.

The Chairperson asked when he new municipal manager would be appointed. The Committee knew nothing of the status of his or her appointment. He emphasised that an organisation needed a leader.

Ms Sibeko said that she would be in touch with the Chairperson with information regarding the issues that were delaying the manager’s appointment. She explained that the process should be started and managed at municipal level. Officials from the provincial department sometimes assisted during the interview stage. Once the panel made recommendations, information was reverted to the Council for their final decision.

The Chairperson advised that provinces should advise municipalities to include performance clauses in the service agreements they had with service providers. Ms Sibeko said that some of the contracts the municipalities might have entered into in the past might not have addressed performance issues. Part of the lesson learnt included that clauses needed to be included to ensure that service providers performed and that any losses may be recovered.

The Chairperson was concerned that the Department’s policies were not clear as far as the delegation of powers between the municipal manager, the mayor and the speaker. What was the case in Thaba Chweu?

Ms Sibeko said that the team would put their response in writing. She said that almost all the municipalities had been assisted in addressing this issue. She said that management was key to the success of any municipality.

The Chairperson commented that development should be sustainable. He was concerned that infrastructure development perpetuated Apartheid planning. He said that rich and poor and all race groups should be encouraged to live together.

Mr Moseki said that it was expected that the municipality would contribute to bettering people’s lives. This would include creating employment. He asked what the municipality did in terms job creation. He warned that if these initiatives were not taken the community would protest.

Mr Oupa Nkoane (DBSA development planner) said that the sustainable community intervention project was one of the DBSA’s flagship projects aimed at creating a sense of community among communities. He mentioned that townships created prior to the democratisation of the country had been in a state of neglect in the past couple of years. One of the challenges included the mobilisation of various funding models. There was funding available in the donor community that was meant to fast track development. In Thaba Chweu development efforts were focused on the Mashishing Township, which was characterised by decline, uncontrolled growth and uncoordinated settlement planning. The intention was to introduce the processes that would realise the vision of a sustainable, integrated, developmental community. The MEC and the administrators had been engaged. The intention was to have a signed memorandum that would be binding on the part of the MEC, the administrator and the municipality. These discussions had taken place already. A business plan was being developed at the moment. It would document the modalities on how roll out would take place. The programme also enjoyed the support of the Governor. The business plan that would be presented was a consolidation of the six key areas identified for the project. The DBSA was prepared to host members in some of the areas that would benefit.

Mr Pilane said that the DBSA’s presentation highlighted the importance of not only focusing on development but also on strengthening the capacity of the municipality. This would ensure that the municipality would be able to manage the infrastructure once the DBSA pulled out. From 1 June a programme would be run that was aimed at appointing financial managers, project managers, engineers, etc that would assist in achieving this. The Department was in the process of recruiting a CFO.

The meeting was adjourned.