Gert Sibande District Municipality, Bushbuckridge Local Municipality: budget & performance

NCOP Finance

04 May 2008
Chairperson: Mr T Ralane (ANC, Free State)
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Meeting Summary

Municipalities in Mpumulanga had been visited by the Committee earlier in the year, and were asked to return to the Committee to give briefings on their budgets and performance. Gert Sibande District Municipality briefed the Committee on the allocations to its seven local municipalities, noting that most of the projects were concerned with bulk water supply and treatment. Although there had been under spending at the end of March, it was claimed that full spending could take place on most projects before the end of June. Support was mostly given in the area of bulk water supply to the local municipalities. Provincial Treasury commented that it was disappointing that certain issues had not been covered, and noted that the figures had changed since the last discussions with the Municipality. National Treasury voiced concerns on the projected expenditure, pointing out that it was unlikely that the expenditure could improve to the extent predicted by the end of June. Concern was expressed also on outsourcing of the risk management function. Department of Provincial and Local Government (DPLG) questioned the plans to appoint internal capacity, and commented that it saw the fact that there were ten qualified engineers on the staff as a positive feature.  The Chairperson disagreed, saying that he found it of concern that despite such qualifications, there had been poor performance. Members expressed their disappointment that there had not been follow-up meetings with Treasury to try to address the problems identified earlier. They asked about the spending, the budget for salaries and wages, and the fact that not all the figures tallied. There seemed to be insufficient planning and lack of time frames. The challenges and allocations to the local municipalities, and the references to unfunded mandates were questioned. Concern was also expressed over compliance with the Municipal Finance Management Act, the testing of water, the backlogs for water delivery, the existence of so many small projects and under performance. The Chairperson ruled that only those questions on water service should be answered at the meeting. It became clear from responses that the Department of Water Affairs was only undertaking testing as part of the oversight function and it was requested to report urgently to this Committee as to which municipalities were not doing routine and regular testing. The remainder of the issues raised would have to be discussed between the DPLG, National and Provincial Treasuries, the MEC and the Municipality and a further report made to the Committee.

Bushbuckridge Municipality, in its presentation, noted that allocations were still being made on the basis of the 2001 census figures, although it was impacted by growth in the population, high rates of unemployment, dependence on social grants, the need for free basic services and the impact of migration and refugees. A breakdown of the budget was given. There had been 70% spending on the operational budget and 61% spending on capital expenditure. There had been improved compliance. The Municipality was attempting to rectify the problems that had led to the Auditor General’s disclaimer in the previous financial year. There was only 34% spending on the Municipal Systems Improvement Grant but it was hoped to achieve full spending by June. In addition there was a projection that there would be full spending on road funding and other grants before June. Much of the budget had gone to bulk infrastructure to try to meet national targets. There were projects to address backlogs in sanitation. The funding for maintenance was insufficient, and this would result in decline of the infrastructure. Provincial Treasury concurred that the figures were consistent with those provided to Treasury, but commented that there were still challenges and a need to transfer skills to internal staff. National Treasury was concerned that some of the projections were too ambitious, particularly those for collection of rates and taxes, and commented that there was vague reporting, with little detail as to time frames and assessments. DPLG was concerned that there was such a low maintenance budget, particularly since money had been allocated by the Department of Water Affairs. There was also disagreement as to the Municipal Infrastructure Grant figures, and dispute as to whether the 2001 figures were hampering the Municipality. There was grave concern over the backlogs. Members agreed that the figures seemed to be inconsistent, and that further clarification was needed on various issues, as well as the backlogs. More information was needed on water testing and sanitation. They noted that perhaps there were some problems with Provincial Treasury, and that there were consistent difficulties between municipalities and the Department of Water Affairs. Further questions related to the housing projects, particularly after incorporation of this Municipality into Mpumulanga from Limpopo. Once again the Committee agreed that the various departments, the Municipality and MEC must meet to sort out the issues and report back to the Committee. The figures required clarification, and a report was required on whether the staffing was appropriate to ensure service delivery. A written report was also requested on the relationship with the Bushbuckridge Water Board, and on the housing.

The Msukaligwa Municipality briefly discussed the Municipality’s background information, legislative requirements, socio-economic profile, household income and capital budget. They also looked at the compliance with the Municipal Finance Management Act, conditional grants as well as grant allocation and expenditure. Members were informed of the extent of service delivery in the municipality. This part of the presentation focused on service enhancements, services rendered to urban areas as well as rural areas, free basic services and capacity constraints and challenges.

The Provincial Treasury, National Treasury, Department of Provincial and Local Government, the Department of Water Affairs and Forestry and the Members commented on the presentation. The Provincial Treasury agreed with the contents of the report and the budget analysis while the National Treasury was concerned about the water supply issues in the Municipality. The National Treasury advised the Municipality to adopt a long-term solution for the water problem and the Department of Water Affairs and Forestry stated that they would wait for a proposal from the Municipality regarding a new pipeline project. Members questioned the role of the district municipalities in supporting local municipalities, they were concerned about water security and made a commitment to meet with relevant departments to resolve issues more efficiently.  

The Emalahleni Local Municipality provided those present at the Committee with background information on the Municipality. They spoke briefly about the legislative requirements, their socio-economic profile and budget related issues, specifically focusing on the operational budget and capital budget. The presentation also covered conditional grants, the extent to which service delivery was happening, and capacity constraints and challenges. The Municipality informed Members of a dispute between the Department of Provincial and Local Government, the Department of Water Affairs and Forestry and the Municipality about project plans that had not been approved, which had affected the Municipalities spending.

The Committee discussed resolution of the dispute and the Provincial Treasury concurred with the contents of the Report. Members also looked at the Municipality’s huge surplus, whether or not the Municipality needed the Municipality Infrastructure Grant and the amount of funds that the Municipality had in investments.

Meeting report

The Chairperson announced that a number of Mpumulanga municipalities had been asked to attend this meeting to hold a constructive discussion around their work and their performance. He noted with some disappointment that representatives of the Provincial Treasury and Department of Provincial and Local Government (DPLG) were not present at the start of the meeting, nor did there appear to be attendance by the MECs. He pointed out that part of the reason for the Committee’s meeting was to assist those departments to ensure that the municipalities were working well.

Gert Sibande District Municipality Briefing
Mr M Andrews Ncgobo, Municipal Manager, noted that there were seven municipalities in the District, with a total population of 985 632, spread across 31 842 square kilometres. He tabled the revenue of the municipality for 2007/08, showing revenue of R239 million for the seven municipalities it serviced. He noted the investment information showing R192 million invested at April, to decrease to R152 million as projects were carried out. The expenditure figures were tabled, and he noted that by the end of June the Municipality aimed to spend 65.1% of its budget. The indirect allocations to the local municipalities showed what the money was being spent on, and the projected expenditure in this area at 30 June would be 80%.The first part of the year had involved planning and the expenditure would only be taking place in the last months of the financial year. The direct allocations to the municipalities were then shown. These represented project funding, mostly in the area of bulk water supply. At the end of April this expenditure was 38.2% and would rise to 62% by the end of June.

Mr Ncgobo noted that the projects would be executed over a period of three years. The projects for Albert Luthuli Local Municipality were outlined. Similar tables were presented for Dipaleseng Local Municipality, Govan Mbeki Local Municipality, Lekwa Local Municipality, Mkhondo Local Municipality, Msukaligwa Local Municipality and Pixley Ka Seme Local Municipality. Typical projects were set out and explained and Mr Ncgobo stressed that all the projects were budgeted over a three-year project, and must be seen as rolling over (see presentation for further details).

Mr Ncgobo explained that there were a number of factors causing delays in multi year projects. These included the compliance process under the National Environmental Management Act (NEMA), township establishment restrictions, project life cycles, which were confined by both the Municipal Finance Management Act (MFMA) and investigation and design parameters, and long procurement processes.

He then went on to set out the spending and performance of the conditional grants. There had been some difficulties with the water services and transfer subsidy grant. There had not been transfers but this was hoped to be rectified by the end of June. By that date it was also hoped to achieve full spending on the Finance Management Grant (FMG) and Municipal Systems Improvement Grant (MSIG) grants, as the money had been allocated and merely needed to be spent. Capital expenditure was currently at 37.7% but would reach 93.1% by end of June.

Mr Ncgobo said that the Municipality complied with the provisions of the MFMA. There was approval and review, on an annual basis, of the delegated powers and functions. Assistance was given to personnel to improve competency levels, and budget and treasury departments were in existence, under the control of the Chief Financial Officer (CFO). There were supply chain management systems and there was a three-part Bid Committee system in place. The Executive Mayor gave quarterly reports on budget and financial matters to the Council. Various policies had been compiled and published. He stated that there were relationships and collaboration with national and provincial departments.

Capacity constraints existed, and there were also other challenges. Grant income was a predetermined amount, and actual levy income could also have exceeded the budgeted amount. The year on year increase was limited by National Treasury to 7%. Large numbers of local people tended to move from rural to urban areas and this was placing strain on the service delivery.

At this point the Chairperson asked if this was really a capacity constraint.

Mr Ncgobo thought that it was, because it had an impact on the planning. This resulted in services being unable to cope with demand. With current government initiative reforms, municipalities were often faced with taking over services without adequate resources - for instance in the area of health.

There were fortunately no constraints in technical expertise as this municipality had ten qualified engineering technicians. However, there was a gap between their existing knowledge and that specifically required by municipalities. Donor funding of R10 million was being offered by the Canadian International Development Agency. There were 29 budgeted positions in management, of which 20 were filled. Performance agreements had been signed. The internal audit function was outsourced, and there was a supply chain manager and a director of legal services. The risk management function was outsourced. A manager for Water Services had been appointed and an Acting Manager: LED had been placed. There were a number of students being supported with bursaries

The Chairperson asked that the slides dealing with Municipal Integrated Development Plan (IDP) not be dealt with at this stage.

Mr Ncgobo concluded that there were established partnerships with other municipalities and Mhlatuze Water. There was a need to enhance capacity constraints by exploring areas where shared services could benefit municipalities. There were attempts to attract professional staff. Service Level Agreements (SLAs) would be promoted with municipalities. There was support to local students and there was support to and forging of partnerships with traditional leaders.

Discussion
The Chairperson noted that the Provincial and National Treasury, and Department of Provincial and Local Government (DPLG) were now represented, and asked their representatives to comment.

Ms Beverley Tlhapane, Director: Municipal Finance, Provincial Treasury, noted that there had been interaction with the municipality. However, since the first discussions, the figures had not changed much, and Provincial Treasury had not had sight of the current presentation prior to this meeting. She had hoped that other issues would have been covered; she was concerned about the capital and operating expenditure figures that were somewhat different from those that Provincial Treasury had been given.

Mr Vincent Malepa, Director: Local Government, National Treasury, was concerned about the ability of the Municipality to spend the budget. For instance he doubted whether expenditure of 29.4% could rise to 80% in the next two months. He questioned the figures on slides 7 and 8. He also asked what the Chief Financial Officer (CFO) was doing if the risk management function was being outsourced; he felt that this should be a function of the CFO.

Mr William Ramphele, Director, Municipal Finance Management, DPLG, shared these concerns and questioned also why there was outsourcing of the internal audit, and whether there was a plan to appoint internal capacity.

Mr Kwathelani Bologo, Director Municipal Infrastructure Grants, DPLG, said that there were some positives; and one was the capacity of the District Municipality.

The Chairperson said that although this looked good on paper, he disagreed that this was a positive. The qualifications were not commensurate with the performance. This was of concern.

Mr Bologo noted that DPLG had made some suggestions as to how the small local municipalities could tap into the District. There was an MSIG that was not being spent. He thought that there was ability to build a good engineering department to service all the municipalities.

Mr D Botha (ANC, Limpopo) noted that the agreement, after the Committee’s oversight visit, had been that district municipalities, local government officials and Treasury were to meet to sort out the problems. He was surprised that this report had not been shown to Provincial Treasury. He thought that it was unfortunate that such a meeting had apparently not been held to sort out the problems, despite the fact that more than a month and a half had elapsed.

Mr Botha noted that the salaries and wages took up close to 70% of the budget. He asked what was the total figure for salaries of the District Council.

Mr Botha shared the concerns of National Treasury that the 29% spending could be raised to the projected 80% by the end of June. He was concerned that the planning process seemed to have covered ten months, and he thought it was unlikely that the projected spending would occur.

Mr Botha referred to the upgrading of water supplies set out in slide 9. He noted that the figures did not tally and questioned whether there had been roll overs, or non-spending. He noted that hope had been expressed that spending would take place, but this was not enough, in his view. He would like to hear that there had been actual commitment. The District municipalities should be assisting the local municipalities. He noted also that there were ten qualified engineering technicians. However, he queried why this was necessary, as they clearly could not spend their money despite the apparent abundance of skills. There was obviously not sufficient planning. On the other hand the local municipalities had skills shortages and there was not sufficient interaction between them. This seemed to be a management problem.

Mr Botha noted that no timeframes had been given for the outsourcing. He enquired when this would come to an end.

Mr B Mkhaliphi (ANC, Mpumulanga) asked about funding criteria in general. He asked specifically about water supply. There were special considerations for water service authorities. Some time ago, the State President had visited the District, making certain observations and raising concerns, including the disparity between the two municipalities of Albert Luthuli and Govan Mbeki, in terms of personnel and allocation of resources. He therefore asked the District whether those concerns had informed their allocations in an direct or indirect way.

Mr Mkhaliphi noted also that there had been mention during the presentation of challenges raised by restrictions in regard to township development. He pointed out that the Development Facilitation Act should surely offer some ways of facilitating development, especially since there was development of marginalised areas. He also asked Mr Ncgobo to elaborate on what he had meant by his reference to constraints imposed by Municipal Finance Development Act.

Mr Mkhaliphi noted that on paper there was the ability to achieve, yet there seemed to be lack of focus and planning. He also asked to whom the reports were being submitted.

Mr Mkhaliphi noted that squatting in urban areas was posing a problem and was overloading the infrastructure. He asked if there were any controls on squatting, and if they were functional.

Mr Mkhaliphi asked for elaboration on unfunded mandates in regard to health functions. He had thought that the Province was refunding municipalities who were undertaking these services.

Mr M Robertson (ANC, Eastern Cape) noted that investments were being made. He said that there were very specific amounts stated, and he said that in view of these investments, there should be no under spending. However, he then referred to the direct allocations for bulk water supply, noting that in this case there was evidence of under spending.

Mr Robertson noted that in the slide presentation, photographs were included to show the upgrading; these showed equipment in a poor state of repair that would clearly need to be replaced soon.

Mr Robertson referred to the spending and performance on conditional grants, set out in slide 24. He did not think that it was possible to undertake full spending in two months.

Mr Robertson asked if the reports were indeed being made to National Treasury, and if the Municipality was complying with all sections of the MFMA.

Mr Robertson, referring to the list of challenges, asked for elaboration whether people were moving to local urban areas or out of the region to other areas.

Mr Robertson also referred to the unfunded mandates. He asked if the Municipality had the personnel capacity to take on any more, even if it were to be given the money.

Mr Robertson asked for elaboration on capacity building and the donor funding referred to in slide 35.

Mr Robertson thought that service delivery estimated backlogs, on page 45, were crucial. He said that the number of households without water and sanitation were frighteningly high. Despite this, there had been no spending on water. He asked who was undertaking the Water Services Management, why the figures were so low, and how often, where and when the water was being tested.

Mr Robertson noted that the municipalities had promised that they would be meeting with the Department of Water Affairs and Forestry (DWAF) He asked if that meeting had taken place, and what had been decided.

Mr Robertson also asked for elaboration on the Integrated Development Plans (IDPs) and where they were heading.

The Chairperson noted that the question of investments versus backlogs was a major issue. There was a need for clarification on this point.

The Chairperson said that on slide 7 there was mention of discretionary funds, including mayoral excellence awards, bursaries, youth development and the like. There were already interventions from National Government through a number of programmes. He therefore queried whether it was really necessary for the Municipality to budget for these matters, noting that this was quite apart from the thorny issue of identification of bursary holders and relevant skills for the municipalities. He queried what was meant by each of the categories. There were concerns about underperformance throughout, and he asked also whether all these issues aligned with the IDP.

The Chairperson asked whether the allocations set out on page 8 were part of the equitable share or the Municipal Infrastructure Grant (MIG). He asked also if the District was doing the projects on behalf of all the municipalities. The issue of collaboration was critical.

The Chairperson noted that all these questions were linked to the credibility of the whole budget. He asked that the Municipality, Provincial and National Treasury and DPLG must go back and examine the credibility and sustainability issues, as well as the match between the skills and what was being achieved. He stressed that there should not be underperformance when there were ten engineers available. He also asked that National Treasury should comment on whether the guidelines limiting year-on-year increases were a genuine challenge. He also asked for investigation into the unfunded mandates. He noted that any Minister or MEC who was planning an assignment of power must take the costing into account. He was worried also that there were so many managerial posts. He was of the view that Districts should be essentially coordinating. He would also like Provincial Treasury and DPLG to look at shared services and the cost of outsourced activities.

The Chairperson noted that he was not given a sense of the whole organogram and therefore was not sure of the relevance of some of the positions. He was particularly concerned about the underperformance. He noted that since the last meeting there did not seem to have been any movement forward. The District Municipality, DPLG and the treasuries must address all the issues. In particular they must look at the questions of capacity and under performance. It was unfortunate indeed that there was under spending in the context of so much need. It was possible that the MEC of Local Government in the province was not performing his oversight properly (and this was why he was worried that there was no appearance by the MEC). The report seemed to be glamorous but had raised serious concerns.

The Chairperson would like all those present to state what the challenges were, what had been done, and what work remained to be done. Clearly there were major gaps, and he would like to see better collaboration between the departments. He pointed out that the fact that there were differing views expressed seemed to suggest that there was not a fully coordinated effort.

The Chairperson therefore asked that the detailed questions should not be answered at this point, apart from those critical questions around the water supply and testing. However, the team of Treasuries, DPLG and Municipality would also have to look at all issues relating to water, and they would also have to involve DWAF and discuss capacity issues. At present, he would like the Municipal Manager to respond only to the issues around water testing.

Mr Botha pointed out that on page 7 there was mention of donor funding, but he noted also that the agreement had not yet been signed.

Mr Ncgobo responded that the district municipalities were not water service authorities. They only assisted the local municipalities to do their testing frequently. DWAF was doing the testing, and he thought that this was being done regularly, and that DWAF would then table the results to the local municipality. There were remedial measures being taken to improve the system and the communication around the quality of water within the district.

Mr Robertson was concerned with this answer. Mr Ncgobo had said that he "thought" the water was being tested. In view of recent water problems elsewhere, he believed that more than this was needed. He would like to hear who was testing and what exactly was being done.

The Chairperson noted that the municipalities and DWAF should receive a follow up.

Mr Fanyana Mntambo, Chief Director, Mpumulanga Department of Water Affairs, noted that there was water quality monitoring by DWAF, but that DWAF was only doing so in its role as a regulator. The reports were tabled to municipalities once a month. The day-to-day monitoring was being done by some municipalities, but not by all. That was tabled in the national website.

The Chairperson noted that prevention was better than cure. He would like those municipalities not undertaking regular testing to be urged to do so. If there were capacity constraints, then the Committee would like to hear what must be done. He would like to get a list of those municipalities that were doing the testing regularly, and what was being done about those who were not.

Ms A Mchunu (IFP, Kwazulu Natal) would like to hear when there would be a permanent appointment to the posts mentioned.

The Chairperson felt that a programme must be firmed up, instead of having small pockets of work apparently running separately. He said again that in a subsequent report, he would like to see how this budget matched to the priorities of the IDP.

Mr Andries Gamede, Executive Mayor, Gert Sibande Municipality, noted that in 2006, when he had been elected, it had been agreed that the largest challenge in the district lay in the areas of water and sanitation. He noted that most of the projects stretched over a number of years. Planning of water purification plants was a long-term process. The reality was that the spending must be seen over the longer term. The figures were perhaps a little misleading when not taken in this context. He noted also that one engineer had been allocated to take responsibility for each municipality. He was comfortable that the Gert Sibande Municipality was moving in the right direction. In regard to the internal audit, he noted that the incumbent in that post had been poached by another government department, but that the matter was being looked into to appoint a replacement.

The Chairperson thanked the Mayor for his input. The Committee understood the multi-year project nature; this could have been stated in the presentation. He would like all those concerned to discuss the backlogs. The IDP would be looked at during another meeting.

Bushbuckridge Local Municipality
Mr Canzi Lisa, Municipal Manager, Bushbuckridge Municipality, noted that Bushbuckridge was a presidential nodal point in the North Eastern part of the Mpumulanga province. It was also part of Ehlanzeni District Municipality. It covered around 25,5 thousand hectares. It was sparsely populated, with around 235 settlements, including four peri-urban areas. The 2007 census revealed a population of about 509 970.Although the population had increased since 2001, the grants and equitable shares were still determined according to the 2001 statistical information. There was a high rate of unemployment, with only 18% of the population being employed, so there was dependency on diverse social grants. The population in the municipal was 55% female, showing the impact of migration due to labour, and the majority of the population was under 24 years of age.

Mr Lisa explained that 2007/8 annual budget income was R377 million. This was broken down into the various categories. The Municipal Infrastructure Grant (MIG) constituted 33% of the budget and there were other grants constituting 8.7% of the budget. As at the end of March 2008, there had been 70% spending of the operating budget and 61% spending on capital expenditure. He tabled further figures in respect of grants and expected income from rates. 

Mr Lisa explained that there had been improved compliance, although the due dates were not always complied with. Bushbuckridge had managed to establish the budget and treasury sections, the supply chain management unit, and had also managed to appoint a municipal manager and all Section 57 senior management, all of whom had signed performance contracts. It had also established an internal audit directorate and performance audit committee.

The Auditor General had given a disclaimer in respect of the 2006/07 financial year. Remedial measures had been put in place. An action log had been created and it was hoped to achieve a turnaround in the next financial year. There had been improvement in the submission of section 71 reports to the Provincial and National Treasury. The Annual Report for 2006/07 had been adopted by Council and forwarded to the respective departments. Various financial policies had been approved, as listed in the presentation.

In respect of the Municipal Systems Improvement Grant (MSIG) there had been 34% spending. The remaining allocation of R579 000 would be spent before June. There had been service providers appointed to implement all outstanding matters. The money was already committed. The Finance Management Grant (FMG) had been fully spent in capacitating finance staff and compiling financial statements. 98% of the MIG had been spent as at the end of April. He noted that the figures for this grant had been revised and he gave an update on the figures that were contained in the written presentation.

R6.9 million had been received from Department of Roads and Transport, and although this had not been spent, the contractor was on site and the work to be done included an intersection and 2 km of tar road. The funding had been received in October, and designs were submitted on 8 February. The tender process had taken the remaining time. It was hoped that the full allocation would be spent by end of June 2008. An allocation of R49 million had been allocated by DWAF and R13.5 million had been transferred, of which R7 million was only received in March. Only 35% had been spent to date on operations and maintenance. Development Bank of South Africa (DBSA) had given an allocation of R500 000 which had been spent on land tenure upgrading in full.

The relationships with various national and provincial departments and entities were set out (see attached presentation for details). He noted that there were challenges in regard to Public Works, and there were outstanding debts on assessment rates. There were also some problems in regard to waste disposal as although DPLG had donated dustbins there was uncertainty around the contractors.

Mr Lisa noted that the population census of 2001 was impacting negatively on the equitable share, as it was considerably lower than an independent and more recent census undertaken by the Municipality. In addition there were a number of refugees from Mozambique and Zimbabwe who had settled with their families in the area. There had been some work done on the backlogs, although there were insufficient financial resources to address the backlogs. There had been some support from DBSA and DPLG in regard to engineers and there was some difficulty in retaining staff. The Municipality was trying to encourage upgrading of skills of all technicians. There was a general shortage of professionals in the fields of engineering and municipal skills.

Service delivery was progressing positively in respect of the indigent. 1 400 families would receive free basic electricity per year. Where there was no electricity grid, the Municipality would attempt to provide alternative energy. Free basic water was provided to almost every household. Much of the budget had gone to bulk infrastructure to try to meet national targets. There were projects to address backlogs in sanitation. Road storm water drains were still a major challenge. There was support from Provincial Department of Housing. The Municipality was trying to provide community facilities. The programmes were aligned with the Provincial Development Strategy. However, the funding for maintenance was insufficient, and this would result in decline of the infrastructure.

Discussion
Ms Tlhapane noted that Provincial Treasury had assisted this Municipality and concurred with the presentation, although it had been sent only very late to Treasury. However, nothing had been said about the planning for the next year. There had not been any further comment on capacity constraints, compilation of budgets and so forth. This Municipality also had not tabled their draft budget on time, and it had been suggested that they might need some assistance from Provincial Treasury. Monthly statements were compiled by an external consultant and Provincial Treasury had asked that the skills should be transferred to internal staff. The finance development plans were requested but not yet received. In regard to capital expenditure, Provincial Treasury had come up with a scheme to assist poorly performing municipalities, including Bushbuckridge, with planning, and was intending to pay Bushbuckridge a visit this month. The challenges were noted, but she would like to urge the Municipality to keep Treasury full advised of all the challenges that may exist.

The Chairperson asked if the figures for salaries and allowances were correct.

Ms Tlhapane said that these figures reflected what had been provided to the Treasury.

The Chairperson noted that there was under-collection.

Ms Tlhapane said that Provincial Treasury confirmed the collections for three quarters.

Mr Malepa noted that in excess of R21 million should have been collected in terms of rates and taxes. However, only 18% of the population was employed, and even those employed were earning very little. Perhaps the budget figure was not realistic. In terms of the spending, he noted that there did not seem to be as many problems in under spending. However, he was concerned that the reporting on achievements was rather vague. The Municipalities were supposed to come up with service implementation and delivery plans and to set targets. He felt that this municipality should have detailed what the targets were, and should have explained whether the targets had been met, and if not, why not. He would like to have heard exactly how many toilet projects were ongoing and how many households were due to benefit. It was difficult to know what the municipality had achieved in terms of quality and quantity and place. He noted that there had been a meeting with Provincial Treasury. Furthermore it was not clear whether there was an indigent register, how the target had been identified, and the number of poor households who should receive free basic services, as also the amount per household that was being provided.

A representative from National Treasury then expanded upon the 2001 census. The challenges were recognised. It was hoped to update the allocation formula and there were ongoing discussions with Statistics SA. Bushbuckridge had mentioned how much it was intending to spend on water. Even in regard to the 2001 census figures it was clear that there was already quite a large backlog, yet it was not clear what it was doing to address that backlog. It would also be interesting to know how much of the allocation had been transferred to the Water Board.

Mr Ramphele said that DPLG would track the progress. He noted that there was a figure budgeted for maintenance. However, if DWAF had transferred money, then it must be explained why the maintenance budget was so low  at only 2.8% of budget. There was a worry that water treatment plants were not being maintained adequately and that discrepancy must be examined.

Mr Bologo said that the MIG transfers from DPLG amounted to only R98 million, and not R125 million as stated in the presentation. There had not been an adjustment of the budget. He was adamant that only R98 million had been transferred.

Mr Bologo also commented on the Census 2001. He thought that Bushbuckridge was receiving sufficient money and pointed out that it was in fact one of those receiving the highest allocations, amounting to R500 million over the next three years. The census would not determine the quantum, but the distribution, and he cautioned that there must be certainty on some of these issues. He also wanted to speak about service delivery. Backlogs were still in existence. Municipal managers must be accountable as to what they had done with the money.

Mr Robertson referred to the budget, noting that 21.8% was allocated to salaries and allowances. He asked if there was underpayment, or positions that had not been filled. He asked for more clarification on the interest received.

Mr Robertson noted the allocation from Department of Roads and Transport. He questioned why no payment had been made on the tar road, as he would find it surprising if it was true that only one payment was to be made: this was quite different from the norm. In respect of DPLG allocations, Mr Robertson agreed that further clarification was required. He asked for elaboration on the outstanding transfer allocation that was yet to be finalised.

Mr Robertson also wanted more information on the donation of tractors and graders, as also the library books and furniture. He asked if the libraries were operational.

Mr Robertson also wanted information on the capacity and constraints. He wanted to know what the backlogs were.

Mr Robertson repeated his earlier questions on sanitation and testing of water, saying that he wanted similar information in respect of Bushbuckridge as he had required from Gert Sibande Municipality.

Mr Robertson noted that there seemed to be some difficulties between municipalities and DWAF. He asked that if problems existed, they must be stated up front. He was very concerned about water and sanitation backlogs.

Mr Botha agreed that the figure for rates and taxes seemed to be incorrect, and questioned the budget in this regard. He also pointed out that if the figures for the Municipal Infrastructure Grant were incorrect, then the whole budget would not balance.

Mr Botha questioned whether the houses were to be RDP houses, and whether those houses and the roads were included in the IDP. Even if the Department of Housing was to undertake the building of the houses, he asked who would be responsible for the roads, sanitation and water for those houses, and where this was to be found in the budget. He noted that in many places within the Municipality there was insufficient water delivery. He was concerned whether the backlogs were being addressed. He asked also if the commitments from the previous financial year, which had been made when this Municipality still fell within the Limpopo Province, had been fulfilled.

The Chairperson remarked that the people of the area had expressed a strong desire that they be incorporated into Mpumulanga. He hoped that they were being given the services they had expected.

Ms Mchunu noted that the area was near the Kruger National Park. She asked how many tourist facilities belonged to the communities, or were in the process of being provided.

The Chairperson noted that he was not sure what the difference was between the operational budget of R103 million and the operating expenditure of R196 million. Spending was at 70%. He was concerned about the credibility of the figures. This then also related back to the issue of rates and taxes.

The Chairperson suggested that, similar to the decision in respect of Gert Sibande Municipality, the “team” of officials from the Municipality, National and Provincial Treasuries, DPLG, the MEC and DWAF must look again at the problematic areas. It would not achieve much if this Committee were to debate these issues, as there were divergent figures being given. The question must be asked whether the allocations from DWAF had been gazetted and were indicated in the budgets. The discrepancies between the figures were problematic. There was a general impression that the area was largely indigent, but this was not clearly demonstrated by the figures. He suspected that the comments about the census figures might not be correct; DPLG felt that this worked to their advantage whereas the Municipality believed it was to their disadvantage. There were many gaps and uncertainties in the report. The municipal establishment itself was not clear, and he wondered whether their organogram was relevant to what the municipality should be doing. He commented that the donations were interesting. He said that the salary figure of 21.8% was interesting also; he asked that this figure be verified and that Mr Robertson’s questions be looked at to determine whether positions were filled and whether the skills were appropriate to ensure service delivery.
 
The Chairperson also asked where the DBSA money had been deposited. (An inaudible response was given and the matter was not pursued further).

The Chairperson also noted that this seemed to be a one-year budget. However, in light of remarks made by the Gert Sibande Municipality, and in view of the fact that the interventions seemed to be of a similar nature, there should perhaps be a multi-year budget presented. The Committee would like to see a better budget, so that it was in a better position to consider the questions.

Mr Thapelo Shabengu, Acting Mayor, Bushbuckridge, agreed that there were some challenges. The Municipality was striving for a clean audit report. He was grateful that these issues had been raised, and he undertook to ensure that in future a fuller report would be given. He responded that the housing project was originally done by Limpopo. When Bushbuckridge was transferred to Mpumulanga, nothing more was done. This was a provincial function. However, it was agreed that the building would be done on existing plots. The Municipality would not like to deny services to its people. He agreed that the Municipality was prepared to work with the Provincial Treasury.

The Chairperson asked for a written report, within the next few days, on the relationships with the Bushbuckridge Water Board and the reasons why the debt was not being settled. He noted that the Municipality was thinking of producing rural housing itself. He pointed out that there were some good solid existing houses in rural areas, and he wondered whether people were asking for RDP houses merely because a subsidy was available. He would not see it as a priority for a person to abandon a rural home for an RDP house. Perhaps preference should be given rather to roads, clinics, and sanitation.

Mr Botha agreed that he would like a report on the housing. Often it seemed that money had been allocated but nothing built.

The Chairperson noted that he had been in Flagstaff, Eastern Cape, where he noticed numerous unoccupied and vandalised RDP houses, right across the road from a sprawling squatter area. On making enquiries, he had discovered that the houses had been standing empty for three years, because of problems between municipalities and Departments of Housing. In North West the MEC had said that he had done everything in his power, but that the mayors must be called to task to resolve issues. Mpumulanga was under performing in the housing area, and it was difficult to understand fully what was going on in Limpopo, as no figures were available. He agreed that it would be useful to get a comprehensive report.

Other issues: Emalahleni Municipality
Mr Malepa complained that many municipalities were not attending to compliance issues. He showed the Committee a large file, saying that this had only a few moments ago been handed to him by Emalahleni Municipality. The reports contained in this file should have been submitted to National Treasury last year in July. Nowhere did the MFMA prescribe that he himself should be given those documents when he attended a meeting in Cape Town, nor pay the excess baggage charge to take the files back to Pretoria. He appealed to all municipalities to submit their documents to the proper place and at the proper time. .

The Chairperson noted that this in itself told a story. He asked if Provincial Treasury had received the same package, and it was confirmed that the documents had also been received by this Department a few minutes ago. The Chairperson said that this was a serious problem. He said that if there had been non-compliance then this was indicative of misconduct. He pointed out to the Treasuries that there were sanctions available. He asked the Mayor why people were still holding positions as municipal managers, if they could not comply with the law. He asked for a written report. He questioned to what extent the budget was credible.

Ms Tlhapane said that although she had not had a chance to study the file, perhaps it contained documents relevant to today’s meeting.

The Chairperson asked that she speak to any problems concerning this municipality.

Ms Tlhapane noted that there were some challenges in getting documents, but the relationship was growing and improving.

Mr Botha said that if no budget had been submitted to Treasury in time, he would like to hear where the figures emanated from. He would like to suggest that the Mayor and Municipal Manager should tell the Committee why they had not complied with the law.

Mr Robertson said that during the Committee’s recent visit to Mpumulanga, many of the municipalities had raised issues that Provincial Treasury claimed to be unaware of. He suggested that perhaps there was a problem with Provincial Treasury as well.

Mr Bologo agreed that it was possible that the documents in the file may have been submitted earlier. However, he agreed that where this was appropriate, all departments should be implementing the prescribed sanctions. He commented that this file seemed to be a compendium of information, including information from the previous year, which he thought might have been submitted already.

Mr Botha asked that the Mayor be asked to make a statement on the issues.

Ms Linah Malatjie, Mayor of Emalahleni Municipality, said that the documents just distributed were for the information of those representatives present today. There would also be a presentation. This file was intended to be supporting information. The Municipality had done everything it was supposed to do. The draft budget had been passed and the budget for 2008/09 had been adopted on 29 April 2008. All budgetary and IDP processes had been taken into consideration. The file included the IDP for 2008/09, passed in March 2008. The information was submitted to National Treasury and DPLG.

The Chairperson asked that this be verified during the lunch break. 

Briefing by the Msukaligwa Municipality
The Msukaligwa Municipal Manager, Mr Thusi Khubeka, explained that the Municipality formed part of the Gert Sibande District Municipality and consisted of Ermelo/Wesselton, Breyten, Davel, Chrissiesmeer, Lothair and Sheepmoor. The Municipality had certain legislative requirements set out by the Constitution. Some of the requirements included the provision of a democratic and accountable government for local communities, ensuring the provision of services to communities in a sustainable manner and the promotion of a safe and healthy environment.

According to the socio economic profile, the municipality had a 37% prevalence of HIV/AIDS and a local Aids council was established to render services to Aids affected people. The profile also showed that 84%of the 29 688 households in the Municipality received an income of below R3 200 per month.

The capital budget consisted of contributions from the Municipal Infrastructure Grant (MIG), the Department of Minerals and Energy, the District Municipality, the Department of Water Affairs and Forestry and Eskom.

In terms of the Municipal Finance Management Act (MFMA), the Municipality was fully compliant with stipulations, regulations and circulars relating to municipal revenue, cooperative governance, debt, and responsibility of the mayor as well as the municipal manager. The Municipality provided assistance to personnel to improve competency levels, established a three-part bit committee system and an internal audit unit was established with the appointment of two officials to be capacitated on internal audit and risk management functions.

Conditional grants that the Municipality received came from the Municipal Systems Improvement Grant (MSIG), MIG, the Department of Minerals and Energy (DME) and the Finance Management Grant (FMG).

Regarding the extent of service delivery, a customer care centre recorded problems and complaints electronically and provided customers with the proper service to address their concerns. Other service enhancements include the installation of a vehicle tracking system to improve the utilisation of the council’s vehicles and the installation of an integrated copy-print-scan-fax solution for cost-saving and control capabilities.

Basic services rendered to households in urban areas consisted of water, sanitation, electricity and refuse removal. Informal settlements received water and sanitation services. Free basic services consisted of 6 kl of water to all consumers, 50 kwh of electricity and basic charges, and free sanitation and refuse removal. Free basic services for 2007/08 amounted to 51% of the equitable share budget. In rural areas, clean drinking water was delivered during water scarcity periods and 34 boreholes were equipped. Eskom supplied electricity in rural areas and farms.

The Municipality experienced challenges such as attracting and retaining qualified technical staff, an exceptional population growth rate, the availability of land for new residential development and the availability of funds to obtain land. Other challenges that they faced included the inability to maintain roads as a result of coal delivery trucks driving through the towns, lack of coordination between the Department of Local Government and Housing and municipalities with regard to housing projects and spending on MIG grant allocations.

Mr Kubheka concluded by saying that although Msukaligwa was a low capacity municipality, it managed to comply with most of the legislative framework requirements. The Municipality was aware that there was still room for improvement in service delivery, as it was their core function.

Discussion
The Chair asked the Provincial Treasury to comment on the report.

Ms Beverly Tihapane (Director for Municipal Finance: Department of Finance; Mpumalanga) stated that the Provincial Treasury supported the presentation made by the Municipality.  She commented that the report was a challenge because of the late submission by the Municipality and personnel constraints in the Provincial Treasury.

Mr Vincent Malepa (National Treasury) stated that the National Treasury helped the Municipality to structure their report. He commented that there was one problem that he had pointed out to the municipal manager. He wanted them to find a long-term solution to the water issue in the Municipality. Certain areas were cut off from the water supply and water was being distributed via trucks. Distributing water via trucks was not a sustainable solution and a pipe was needed to ensure that water was supplied to those areas that were not receiving water. However, the Municipality did not have the funds for this project. The National Treasury advised them to approach their district municipality or the Department of Water Affairs and Forestry (DWAF). He stated that it was not fair that the district municipalities used funds for other things when there were areas that were dependent on water that was supplied only once a month or week. They needed a pipeline that would facilitate the communities’ access to water.

Mr J Patrick (Director: Local Government Budget Process, NT) stated that the presentation was encouraging but that there were a few concerns with the budget for households. He wanted to alert the Municipality that the equitable share formula and the poverty line determined that there were more poor households than the municipality had indicated and that this should be taken in to account when claims were made for additional funds. He was also interested in how the municipality determined that the equitable share budget for free basic services for 2007/08 was 51% when the basic services component of the formula was the largest component and should have been in excess of 70% of the allocation that was spent on free basic services.

Mr William Ramphele [Director: Municipal Finance, Department of Provincial and Local Government (DPLG)] stated that the amount of direct allocations that the Msukaligwa Municipality was receiving from the Gert Sibande District Municipality had to be looked at as well as the extent to which funds were being used.

Mr Kwathelani Bologo (Director: MIG, DPLG) said that the Municipality would have to start implementing the solutions accordingly and that the DPLG and the Gert Sibande District Municipality would be inviting municipal managers to a meeting where they would address engineering and capacity challenges.

Mr Fonyana Mmtambo (Chief Director: DWAF, Mpumalanga) said that the Municipality needed to present the DWAF with the information about the new pipeline project. He was not quite sure but thought that the Department could look toward the Drought Relief Fund for funding, as it was earmarked to provide relief in instances where there were water supply challenges.     

The Chair appealed to the Municipality to draw up a proposal for the new pipeline by the following Wednesday and to wait for DWAF’s response. He also stated that the district municipality would have to support the Msukaligwa Municipality.

Mr D Botha (Limpopo, ANC) noted that the report showed progress but said that there was a question of the role of district municipalities supporting local municipalities. He thought that the local government would have to investigate the process, as some district municipalities invested millions of Rands that were supposed to go toward local municipalities. District municipalities invested a lot of funds in their own offices and money was not going to where it was needed.

Mr B Mkhaliphi (Mpumalanga, ANC) said that the municipalities, the Committee and DWAF would have to discuss the absence of water provision. There was also an issue of the security of water resources, as illegal damming of water was taking place, which distorted the flow of water and schemes that were built downstream were not receiving any water.

The Chair agreed that DWAF would need to be part of the discussions so that issues could be resolved more efficiently. He said that the law was clear; municipalities had a duty to provide equitable basics. He hoped that the engagement would result in funding being unlocked and distributed to the Municipality.

Mr Malepa stated that everybody would have to leave the meeting with a commitment to meet with all the municipalities, the PT and DWAF. He noted that Government was apt at having discussions, but did not follow through with resolutions made at meetings. He proposed that PT be in charge of the meeting and that they meet in two weeks.

The Chair appealed once again to the Msukaligwa Municipality to draft a proposal for the new water pipeline that was needed.

Briefing by the Emalahleni Local Municipality
Mr A Langa, Municipal Manager of the Emalahleni Municipality, reminded Members that the Municipality consisted of eMalahleni, Ogies, Ga-Nala, Phola, Thubelihle and Rietspruit. The Municipality’s legislative requirements were to provide democratic and accountable government for local communities, to ensure the provision of services to communities in a sustainable manner, to promote social and economic development, to promote a safe and healthy environment and to encourage the involvement of communities in matters of the government. The Constitution stated that the municipality was to strive within its financial and administrative capacity to achieve these requirements.

The Emalahleni Municipality consisted of an urban and rural area. Its development pattern was described as fragmented due to previous dispensation of separate development based on race, which separated communities.

In terms of the socio-economic profile, approximately 45% of the population was economically active and most people in the area were employed in the primary and secondary sectors. The 2001 population census showed that 69% of the municipality’s population was concentrated in the eMalahleni City.

The Council appointed a Municipal Manager and performance contracts were entered in to between the Municipality and Section 57 Managers. Of the total budget, 74.44% was allocated to the operational budget and 25.56% was allocated to the capital budget. The operational budget consisted of remuneration, general expenditure, repairs and maintenance, depreciation, contributions and income contribution to capital. The capital budget was financed through the Nkangala District Municipality, the Municipal Infrastructure Grant (MIG), the Municipal Systems Improvement Grant, the Department of Minerals and Energy, external loans, contributions out of income and donations.

The capital budget per service showed that water would be allocated most of the budget, followed closely by roads and storm water facilities. Other services that would be allocated a part of the budget included sanitation, vehicles, electricity and environment and waste management. Mr Langa indicated that the community survey completed by Stats SA in 2007 showed that the Municipality had a backlog of 1900 households that did not have access to water. The challenge would be eradicated by the end of the 2008/09 financial year.

Mr Langa discussed conditional grants. He said that 73% of MIG was spent. The money that was still available was for the water treatment plant, which was a four-year project that the Municipality was still busy with. There was still R20 million left of the MIG. He explained that for the better part of the last year, there was a dispute between the Municipality, DWAF and the DPLG because DWAF had not approved the technical reports for four treatment works. Also, there was a challenge with MSIG, as the DPLG had not approved plans that were submitted to them by the Municipality. The Municipality had written to the DPLG to inform them that they had not approved or disapproved of the plans that were submitted. The municipality has since proceeded with the projects.

The extent to which service delivery was happening was addressed. Insofar as water services were concerned, there was an availability of 98%. Challenges arose in the form of ageing infrastructure, incapacity of infrastructure and lack of sufficient water resources. Only 60% of the Municipality was getting direct access to electricity due to load shedding and electricity losses, illegal connections and ageing infrastructure. 99% of the roads were available, however recent rains led to roads being damaged. Sanitation services had 72% availability due to poor effluent standards and ageing infrastructure.

The Municipality experienced capacity constraints due to huge infrastructure backlogs, a lack of skilled personnel and rapid growth and development. Challenges were in the form of shortages of skilled staff, limited resources for meeting unlimited needs and a lack of project management skills.        

Discussion
The Chair stated that the fundamental reason for the meeting was for the municipalities and the Committee to become more proactive. He wanted the municipality to go from strength to strength. There was a matter that needed to be resolved but the Committee had to see what the DPLG and DWAF were saying about the dispute.

Ms Tihapane stated that the PT had interacted with the Municipality in preparation for the meeting but they did not see the report beforehand. After hearing the presentation, however, they agreed with the contents of the budget analysis.

Mr Malepa noted that the Municipality had a surplus of over R2 billion, yet they continued to borrow. He said that this did not make sense. He wondered why the Municipality was holding on to the surplus.

Mr Ramphele indicated that there might have been some confusion as to where the Municipality was sending the letters about the project approval. It was his opinion that the Municipality was sending the letters to the Provincial Department. The Provincial Department had not forwarded any letters to the DPLG. There was still an opportunity to divert the letters to the DPLG and to resolve the issue.

Mr Bologo stated that at some point, he had to conclude that the Municipality did not appreciate the MIG because they had so much money already. The DPLG had invited the Municipality to a meeting to talk about accountability and funds but members of the Municipality did not attend. 

Mr E Sogoni (Gauteng, ANC) asked how much money the Municipality had put in to investments. He also noted that the presentation showed a low capital budget, which indicated that they did not have many capital needs.

Mr W Voigt, Chief Financial Officer for the Emalahleni Municipality, stated that investment at the end of June 2007 amounted to R187 million and after creditors it amounted to R30 million.

The Chair stated that the municipality had to address the issue of the surplus. They would need to analyse the whole budget to ensure that everything fit in accordingly. He also appealed to the Municipality to appreciate the MIG or to say if they were not in need of it.

Ms Linah Malatjie, Mayor of the Municipality, stated that they were ready to take responsibility for the situation and would correct the challenges that were encountered.

Mr M Robertson (Eastern Cape, ANC) noted that a different figure for investments was given the previous year.

Mr Voigt stated that the figure that he had given was taken from the financial statements that were audit.

The Chair stated that they would have to look in to the matter more closely. He appealed to the municipal managers and the mayors to focus on DWAF and the water issues.    

The meeting was adjourned.

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