Kwazulu Natal Local Municipality Interventions Progress Reports: Amajuba & Umzinyathi Districts, Newcastle Local Municipalities,

Meeting report

Interventions into various Kwa Zulu Natal local municipalities: Local Government and Traditional Affairs Department, Kwazulu Natal (DLGTA)
A delegation from the Kwazulu-Natal Local Government and Traditional Affairs briefed the Committee on the interventions and progress at Amajuba & Umzinyathi Districts, Newcastle   Impedle , Emandlangeni Local Municipality and Abaqulusi Local Municipalities.

The Chairperson noted that the delegation from the KZN was not led by the MEC, but by the General Manager for Municipal Finance and the General Manager for Local Government.

Impendle interventions
Ms H Krishnan, General Manager, Municipal Finance, KZN DLGTA, highlighted the core reasons why the Provincial Executive Council (PEC) had intervened in the Impendle Local Municipality. She said that municipalities tended not to follow advice or directives and that this led to great strain between local and provincial governments.

In Impendle, she noted that for an eighteen month period covering two financial years the entire senior management of the municipality had been suspended. A Municipal Manager was appointed, but without the correct resolution having been taken by the Council. The Auditor General (AG) found serious deficiencies in management systems and financial controls and he had issued disclaimed reports for two years. The 2005 Report indicated further deficiencies, as more fully set out in the presentation. The Council failed to approve its 2006 budget prior to the start of the financial year. There were several financial constraints. There was a severe shortage of qualified staff. She further cited failure to implement provisions of the MSA relating to contracts for section 57 employees, lack of progress on support programmes due to a lack in commitment and serious deficiencies in the Auditor General's annual report for the last three years as the core reasons.

She outlined the MEC's mandate, time frames and recovery plan. Corporate service and human resource expertise from Umgeni Local Municipality.

Discussion
Ms Krishnan commented in general that some municipalities did not consider constructive criticism and advice as helpful gestures. She added that the Department was at a loss regarding the scope of autonomy afforded to municipalities.

The Chairperson stated that the authority and autonomy of municipalities was enshrined and protected in the Constitution and any changes would mean an amendment to the Constitution.

Amajuba District, Umzinyathi District and Newcastle Local Municipalities / uThukela Water
Ms Krishnan  reported that in December 2007 the Provincial Executive Council resolved to intervene in terms of section 139(1)b of the Constitution in the Amajuba District, Umzinyathi District and the Newcastle Local Municipalities,  and assumed responsibility for their municipalities' water service authority functions, which were ostensibly to be offered by uThukela Water Partnership.

The partnership was established supposedly to assist economy of scale, and to provide water and sanitation services. It was a municipal entity reporting to the municipalities. It later had resiled from some functions. An investigation was instituted to address allegations of maladministration at uThukela , community dissatisfaction with service delivery and lack of parent municipalities to address key issues.

The findings of the report were conveyed to the mayors. They should have participated in a task team to address the matters. However, despite undertakings from them, there was lack of commitment . After a further meeting the municipalities had apparently adopted resolutions, including due diligence investigations into uThukela water, and eventually there was a dispute that led to lack of supply. The PEC then took the decision to intervene, appointed a task team to investigate uThukela, suspended the Directors of uThekela Water and appointment an administrator. The performance review and forensic investigation contemplated by the municipalities was now continuing. There were a number of complex issues. .An administrator was subsequently appointed to take control of uThukela Water Ltd.

She outlined the objectives of performance review and matters pertaining to the forensic investigation, scope of the performance review, the period under review and time frames.

Discussion
The Chairperson asked whether the terms of reference with regards to the investigation into uThukela were contained in the document.
 
Ms Krishnan replied that all the relevant information was contained in the document as distributed.

Mr J Le Roux (DA: Eastern Cape) said that according to the law companies were obliged to deliver their financial reports annually. In light of this he requested clarity why the Department did not act sooner when this did not happen, or when they suspected that there might be irregularities.

Ms Krishnan noted that internal processes had to be followed at municipal level, before the provincial administration could get involved. She added that the Department was not made aware of uThukela’s existence until after it was established, and the MEC was not consulted on the problems that these municipalities were experiencing with uThukela. She stressed that uThukela was a joint social partnership between the Amajuba & Umzinyathi Districts and Newcastle Local Municipalities for the purpose of improving service delivery.

Kgoshi L Mokoena (ANC: Limpopo) asked which political party controlled these municipalities before and after the 2005 elections.

Mr Lionel Pienaar, General Manager: DLGTA, replied that these three municipalities were in the past and present controlled by the Inkatha Freedom Party.

Mr Le Roux asked whether there had been an attempt to establish who the corrupt officials were and how much money was stolen.

Ms Krishnan replied that Ngubane & Co had been hired by the Department to investigate the allegations of corruption and to assess who benefited. She added that according to Ngubane & Co none of the private sector individuals involved with uThukela were implicated in corrupt practices.

Kgoshi Mokoena asked what the Department’s role had been up to now and whether the malpractices at uThukela had affected the Department’s review report by the Auditor General.

Mr Pienaar replied that the Department had been instrumental in addressing this problem. He added that proposals were made to the municipalities concerned, but they took too long to act and this prompted the MEC to get involved. Subsequently, a forensic audit was requested by the MEC’s office.

Ms Krishnan noted that the Department had not received a negative review from the Auditor General as the uThukela matter was viewed as a specific case.

The Chairperson and Kgoshi Mokoena asked why and what conditions were attached to the investigation and what other role players were involved in liaising with the municipalities in deciding on intervention from the MEC. They also asked about the progress made since the intervention by the MEC.

Ms Krishnan noted that the MEC for Local Government and Traditional Affairs for Kwazulu Natal liaised with both the national Minister of Local Government as well as the Minister of Finance. She stressed that meetings were held with the executive of these municipalities where the viability of uThukela was discussed.

In addition, Ms Krishnan said that given the background a decision was taken to investigate, and that a problem occurred when uThukela managers refused Ngubane & Co access to their files, but that this incident had since been resolved. The Amajuba, Umzinyathi districts and Newcastle local municipalities were given six months to address the issues but when this had not happened, the Minister decided to intervene in mid 2007.

Mr Pienaar added that since intervention, Mr D Naidoo of Umgeni Water was appointed as the Administrator to oversee developments and that there were contingency plans as well as processes in place to ensure a continuity of services in water and sanitation.
 
Kgoshi Mokoena requested clarity on the South African Local Government Association’s (SALGA) role, given the significance of its constitutional mandate.

Ms Krishnan replied that there had been no direct role played by SALGA during the course of the allegations or interventions.

The Chairperson asked whether uThukela served as a provider only to these municipalities or whether it was a bulk provider of water. In the same context, he raised the matter concerning the organisational structure of uThukela and requested more information.

Mr Pienaar replied that uThukela was the brainchild of the Amajuba, Umzinyathi districts and Newcastle local municipalities. He stressed that the fundamental principle for uThukela’s formation was to achieve economy of scale in these regions and that uThukela would provide water only to these municipalities, and not in bulk.

Ms Krishnan  added that one of the issues that was highlighted during the investigation was that uThukela carried no risks whatsoever as the municipalities were responsible for billing and other expenses.

The Committee was dismayed to hear of this arrangement.

Greater Kokstad Municipality Intervention
Ms Krishnan outlined the core reasons  why the MEC decided to intervene in the Greater Kokstad Municipality. The Municipality had received support from the Municipal Assistance Programme for the 2003/4 financial year, particularly to address poor cash flow, lack of comprehensive financial management plans, lack of systems for debt collection, poor property management and a corrupt housing programme. There had also been unlawful loans approved to councilors and officials, and a poor formulation of the plans.

Eskom then notified the Minister of its intention to disrupt electricity supply as the municipality had failed to pay over the last four months. It became clear that the Assistance Programme was not helping, due to lack of cooperation. The budget process was out of time. It was decided to intervene and a comprehensive recovery plan should be started. An estimated R12 million was invested in a number of projects, but little value had been received for this. There had been no improvement of financial management. The Municipality had qualified audit reports, and failed to submit an Annual Report. Therefore the PEC resolved to intervene and appoint a multi disciplinary task team. The Provincial department was providing support on financial issues, and financial and technical expertise was sourced from Development Bank of SA. A turn around strategy was being refined.

Discussion
The Chairperson stressed that service delivery was of the utmost importance. He added that structures needed to be in place in order to deal with problems.

The Chairperson raised serious questions pertaining to Kokstad’s capacity to deliver water and commented on the road infrastructure being in a terrible condition. He asked a fundamental question why the new order was struggling so much in the delivery of basic services.

Mr Pienaar replied that the road infrastructure had always been in a terrible state, even before the ANC took control of Kokstad. He added that there were wide road reserves and no storm water and drainage pipes. Service charges and costs were very low during the old order and the infrastructure was not designed to handle long term.

Ms Krishnan said that Kokstad did not have a water service authority. She noted that problems did occur with the transfer of water functions, but that a lot had been done to address the problem of water delivery. She announced that the Sisonko District Municipality allocated R59 million for the purpose of restoring adequate water delivery to the Kokstad region.

She added that the core reasons for Kokstad underperforming could be attributed to a lack of engineers and capacity building. She stressed that Kokstad also had a maintenance problem as there were numerous infrastructure backlogs. All of these factors contributed to Kokstad’s poor service delivery history. Supply chain management processes had been weak and capacity training would be given to councillors and officials.

The Chairperson stated that the issue of maintenance needed to be addressed at the national Department’s budget meeting.

Mr A Moseki (ANC:North West ) asked whether the Department had any early warning systems in place to detect irregularities and problems.

Ms Krishnan replied that the Department did have electronic early warnings systems in place.  She said that there was an electronic management system that dealt with financial reports and performances, as well as the Auditor General's report. The Department also had a KZN municipal fraud hot line that had been very helpful. She added that the information obtained from the hot line was utilised by investigating units. Departmental officials also visited municipalities on a  regular basis.

Emandlangeni and Abaqulusi Local Municipalities
Ms Krishnan reported on intervention in the Emandlangeni Municipality. She said that the Special Committee had concluded its field work and disciplinary hearings and a draft report would be submitted within seven days. The Acting Municipal Manager was still in place and financial and technical expertise had been sourced. A recovery plan was developed for the Emandlangeni municipality.

The intervention in Abaqulusi was concluded on 6 March 2006. A new Council was elected and a new Municipal Manager as well as Section 57 employees were appointed.

Discussion
The Chairperson asked whether the recommendations made by the Committee in 2007 were implemented.

Mr Pienaar replied that an Acting Municipal Manager was appointed in Emandlangeni and Abaqulusi received a new municipal manager.

The Chairperson expressed concern that not all recommendations were accepted. He instructed the Department to respond in writing. He added that the current Chief Financial Officer in KZN was likely not to stay on in her job for too long.

Mr Z Ntuli ( ANC : Kwazulu-Natal) expressed his concern with matters relating to the disciplinary hearings of the officials in the Emadlangeni municipality as there had been no hearings as yet.

Ms Krishnan replied that disciplinary processes have been concluded.

The meeting was adjourned.