Municipal Demarcation Board Briefing; Mohokare Municipality Intervention: Input by Free State MEC

Meeting Summary

The Municipal Demarcation Board responded to concerns raised by the Committee in earlier meetings about excessive spending of the Board. The MDB informed the Committee of the work on upon which they were focused. These were:
(i) Determination and re-determination of municipal boundaries
(ii) Assessments of municipal capacity and recommendations to MECs on the allocation and re-allocation of powers and functions between local and district municipalities
(iii) Review of District Management Areas (DMAs) with a view to withdraw all DMA declarations, if feasible
(iv) Assistance to all government departments who require that assistance, with the alignment of their service delivery boundaries to municipal boundaries
(v) Further enhancement of quality engagements and improved working relations with all stakeholders
(vi) Various areas of work to enhance and promote good governance
(vii) Various areas of work to enhance and improve organisational capacity and capability

Members were still concerned about the spending of the Board. There was particular attention on the high rental being paid by the Board. The Committee also did not understand why it was necessary to outsource projects and hire consultants, since the Board members themselves had been appointed on the basis of their expertise.

The Free State Department of Local Government and Housing explained to the Committee the background behind their request for a Section 139 intervention in the Mohokare Municipality. They told how the split in the Local Council had resulted in its failure to conduct its executive and administrative obligations. In addition it had emerged that funds were being mismanaged and a certain member of the Council had in fact managed to by-pass passwords and transfer more than R1 million into his own account. This caused a further split as Council members were divided as to whether to press charges or not. The Department had therefore requested the Minister to allow them to intervene in the municipality.

Members did not understand why the Department had let the situation deteriorate to that extent before intervening. They felt that an earlier intervention would have prevented the situation from becoming the crisis it currently was. Members also felt that it was necessary to place a time limit on the intervention, which should not be allowed to continue indefinitely.

Minutes
Dr Hillary
Monare (CEO: Municipal Demarcation Board) referred to the concerns the Committee had raised at a previous meeting with the Board. The concerns and reservations had included:
(1) The Board’s expenditure being excessive, and rising too rapidly from year to year for:
▪ Professional Fees;
▪ Office Expenses;
▪ Staff Remuneration;
▪ Board Members Remuneration;
▪ Travel and Accommodation;
▪ Consultants.
Mr Monare outlined the composition of the Board and said that the Board has approved a proposal to review the structure.


2) The Board was perhaps spending money on things that were irrelevant to its core mandate. He noted that MDB had in the past provided the Committee with the following details in a memo:
- A breakdown of all expenses incurred on professional fees and on office expenses;
- A clear indication that expenditure on professional fees was fully justified, and in direct pursuance of the Board’s core mandate
- The annual escalations on office expenses and staff salaries were perfectly normal
- An explanation of how staff salaries at the Board were made up.
- An explanation of the fact that Board Members’ remuneration and reimbursements were what the Minister has determined
- Regarding travel and accommodation, they explained that: (a) the MDB could not be expected to be largely office-bound if they were going to be effective and (b) Board Members, who were all part time except the Chairperson, must travel to attend Board meetings.

In 2007/08 year the following Strategic Themes were identified around the Board’s mandate:
(i) Determination and re- determination of municipal boundaries
- The programme was put together with the assumption that:
(1) The next national and provincial elections will take place in April 2009
(2) The next local government elections will take place in March 2011.
The closing date for submissions was 31 March 2008.
- Changes to municipal boundaries would continue until August 2008, when all boundary changes would be put on hold and they would hand over boundaries to the Independent Electoral Commission (IEC) for them to start delimitation of voting districts (VDs).
- VDs could then be determined by the IEC for the national and provincial elections in 2009, followed by the determination of wards for the 2011 local government elections.

(ii) Assessments of municipal capacity and recommendations to MECs on allocation and re- allocation of powers and functions between local and district municipalities
- This project was outsourced.
- Circulars were sent out to keep stakeholders informed of the process.
- Provinces were requested to assist where possible, often accompanying MDB data collectors to municipalities.
- Planning commenced in June 2007
- A 100% return of questionnaires had been achieved.
- Data capturing, verification and analyses were completed in September and October 2007.
- 46 District Council (DC) reports covering all 46 DCs and 231 locals drafted in October / November 2007.
- Recommendations were sent to MECs in December 2007.
- Provincial overview reports and the National Report finalised in February 2008.
- The National Report was formally launched on 18 March 2008.

(iv)
Review of District Management Areas (DMAs) with a view to withdraw all DMA declarations, if feasible
- MDB continued to review the future of DMAs 
- Provinces assisted with the gathering of information regarding DMAs in their areas.
- They collected data on the performance of local government functions in DMAs
- A framework document was developed for a discussion document on the future of DMAs.
- The idea was to have a discussion document ready for consultation with stakeholders with a view to finalising such a document during the financial year 2007/08.
- July 2007: DMA report was released for comments.
- October 2007: notices were published to withdraw declarations

- The Board had now approved the publication of section 21(5) notices with respect to all DMAs, confirming their new boundaries as part of local municipalities.
- Section 23 notices were still awaited from all local government MECs. Mr Monare appealed to the Committee to assist the Board in obtaining these notices.

(v) Assistance to all government departments who require that assistance, with the alignment of their service delivery boundaries to municipal boundaries
- They worked closely with the Department of Justice and Constitutional  Development (DoJ) and the SA Police Service (SAPS).
- They provided technical support during their consultations, with the updating and re-drawing of boundaries.
- While arrangements were made with both the DoJ and SAPS to finalise their involvement in the alignment project with them in 2007/08, DoJ had made a new request for continued support
- However their involvement in the alignment of service delivery boundaries would now be on a “need to” basis


(vi)
Further enhancement of quality engagements and improved working relations
By interacting extensively with stakeholders the Board had strengthened these relationships. These included interactions with the DoJ and SAPS, Department of Provincial and Local Government (DPLG), Department of Land Affairs (DLA), Department of Water Affairs and Forestry (DWAF), the SA Local Government Association (SALGA) Statistics South Africa (SSA)

(vii) Various areas of work to enhance and promote good governance
These projects aimed to:
- Improve administrative processes and systems.
- Ensure effective Risk Management at the Board.
- Improve the financial and procurement practices to ensure effective and efficient internal operations at the Board.
- Ensure effective internal controls.
- Ensure effective budget control.
- Improve cash flow management at the Board.


(viii) Various areas of work to enhance and improve organisational capacity and capability
These projects aimed to:
- Pursue achievement of annual strategic milestones across the organisation.
- Provide employees with necessary support for them to be capable of delivering against targets.
- Improve the performance management system
- Increase skills levels.
- Promote an orientation towards performance and accountability for results in the organisation.
- Find effective ways of recognising and rewarding innovation and dedication to one’s work.
- To develop a reliable, robust and responsive corporate system.
- To enhance smooth running of the organisation.


Mr Monare outlined the election timetable. He also highlighted the following future developments:
- The terms of the current Board expired on 31 January 2009.
- A process must start soon to appoint a new Board, to come into office on 1 February 2009.
- It would be ideal to have some interaction between the incoming and outgoing Board.
- Thus the DPLG would need to have the advertisement out by September 2008 at the latest.


Mr N Ligege (MDB Chief Financial Officer) explained the budget and expenditure for 2007/08. Expenditure was broken down into Administrative costs, Staff costs, Project expenses and Other operating expenditure. Staff costs comprised 43% of their total expenditure.

Mr Monare concluded that the Board had succeeded in meeting many of their objectives. Their work on the re-determination of boundaries, review of DMAs and alignment of service delivery boundaries was vital to ensure that the country would be ready for the national and provincial elections in 2009 and the local elections in 2011.

Meeting report

Mr F Van Heerden (FFP: Free State) noted that the Board had done their planning based on assumptions that the elections would happen on certain dates. He asked if their planning would be affected in the event of these dates changing.

Prof Nico Steytler (MDB Board Member) explained that the work of the Board was a precursor to that of the IEC. They conducted their work in five-year cycles as was required by the Constitution. They provided the municipal boundaries, which then would be handed to the IEC to determine the voting districts.

Mr Van Heerden asked which factors were taken into account when declaring an area to be a metro.

Prof Steytler explained that in determining if an area could be a metro, one had to look at the size of the area, as well as the percentage of Gross Domestic Product being generated in that area. Metros were a way of dealing with the increase in urbanisation in certain areas. There was a white paper review of the reasons for having a two-tier government system. Where the requirements had been met, an area could therefore operate as a metro.

Mr K Mokoena (ANC) referred to the fact that proposals for the creation of new municipalities had been denied. He asked if this should not be reviewed for the purposes of efficient service delivery, especially in areas where villages in the same metro were often located very far from one another.

Prof Steytler responded that one of the problems leading to poor service delivery had always been the lack of skills in rural areas. Creating smaller district municipalities would require additional skills to serve those areas. The lack of the skills therefore further hindered service delivery. One should bear in mind that municipalities required many skills to ensure that the various laws governing municipalities would be complied with.

Mr Mokoena could not understand why MDB projects had been outsourced. He asked for detail regarding the spending on outsourcing these projects. He also asked why the consultancy fees were so high.

Mr Monare responded that outsourcing was the most economically viable option. This was because of the enormity of the project, which would have required an additional 200 people. Instead of employing these people themselves (and then having to terminate these employment contracts afterwards), it was better to obtain this manpower by outsourcing the work.

Mr Mokoena asked for details on MDB vacancies and how the Board planned to fill these.

Prof Steytler replied that the difficulty was that the MDB was a small organization, which could only offer a very limited career path. Although they attempted to grow staff within the organization, they were unable to compete with the competitive markets.

Mr Monare added that the vacancy rate had dropped since their last visit to the Committee. By 31 March there were only eight vacancies and they were still in the process of interviewing more people. However not much could be done to prevent people from leaving the organization.

Mr Mokoena referred to the concerns raised by the Auditor General (AG). He asked what these concerns had been and how effective the Board’s internal auditing process was.

Mr Ligege replied that many of the concerns raised had been addressed. The AG report had stated that they had no Information Technology steering committee. This had since changed. There were concerns about their supply chain management processes and irregularities with the expenditure on consultants. The Board now had policies and proper procedures in place to select consultants. In response to the AG’s concern about data recovery, the Board had now put appropriate processes in place. The AG had expressed concern about their ability to continue as a going concern. The Board had on 31 March tabled a report showing that their assets now exceeded their liabilities.

Mr Mokoena wanted detail about the Board’s other income sources.

Mr Ligege said that this information could be found in the financial statements in their Annual Report.

Mr Mokoena asked if there was any way to lower the expense on rental, as the amount being spent on this item was too high.

Mr Ligege answered that after exploring the various options in the market; their current space had proved to provide the best value for money. However lack of space was becoming a problem and they were therefore engaging with the Department of Public Works to find new premises.

Mr D Van der Merwe (DA, Northern Cape) asked how the Board dealt with service delivery in areas like Sol Plaatjie where one ward was separated by two other wards. Wards were also located very far from each other.

Mr Van der Merwe asked if grading would be affected if district municipalities were included in municipalities.

Prof Steytler said that grading would not be affected. It would just result in better service delivery.

Mr J Le Roux (DA, Eastern Cape) asked why the Board was following the move toward metros with gusto.

Mr Monare said that the Board was following an international model of demarcating larger areas to improve service delivery. The challenge was to create participatory structures to allow people to interact with larger institutions.

Mr Le Roux asked how the Board decided on boundary changes, especially in areas where people were protesting against boundary changes.

Mr Monare replied that these protests were not linked to the work of the Board, but to provincial boundary changes. The Board was very conscious of the impact of boundary changes on people, hence their emphasis on public participation.

Mr Z Ntuli (ANC, KZN) asked how many political parties had made submissions. He also asked if Parliament had made a submission.

Mr Monare replied that it was difficult to say exactly which parties had submitted. It appeared that most submissions came from the ANC. There were submissions from IFP and DA as well. Parliament had not submitted anything in its capacity as such.

Mr Ntuli asked why consultants were required when Board members were appointed on a part- time basis particularly for their expertise.

Prof Steytler said that where detailed research was required, the Board members themselves would not have the information at their fingertips. They too would need to go out into the field to conduct the research. It would work out to the same cost from a financial point of view.

Mr Ntuli referred to areas which had been added to metros. He asked if there had been an improvement in these areas, if compared with those areas that had not been added.

Prof Steytler explained that they hoped that introducing a single tiered governance structure would improve service delivery and allow for better planning. They believed this to be a better model. Districts were not metros as the districts had rural land and including this as a metro would therefore not comply with the Local Government: Municipal Structures Amendment Act.

The Chair asked how much public participation went into the establishment of boundaries.

Prof Steytler replied that much public participation went into boundaries, as the Board was conscious of the extent to which boundary changes affected communities. They were therefore moving toward stability and not changing these boundaries unnecessarily.

The Chair referred to the Board’s request for the Committee to address the MECs who had not yet submitted the Section 23 notices. He asked which MECs these were.

Mr Monare said that responses were required from the MECs of Eastern Cape, Gauteng, North West, Limpopo and Western Cape.

The Chair said that although Members had many more questions these would have to be dealt with in the third term. It would perhaps be necessary to hold a full-day meeting for this purpose.

Prof Steytler appreciated the opportunity to report to the Committee and welcomed further discussion in future.

Mr Le Roux thanked the Board for their frank and honest approach, saying that it had been a worthwhile and informative interaction.

Free State MEC presentation on Intervention in terms of S139 of Constitution in Mohokare Local Municipality
Mr Mafeleka (MEC: Free State Department of Local Government and Housing) said that the decision to request the S139 intervention had not been taken lightly. He explained the background to the decision. A special Council meeting had been held with the Council of Mohokare municipality on 10 March 2008 to discuss (i) the challenges experienced by the municipality, (ii) the contents of the task team reporting on the financial administration and (iii) contents of a management letter by the AG.

Mr Kopung Ralikontsane (Head of Department: Free State Department of Local Government and Housing) said that in 2005/6 the AG had provided an audit report regarding the management of funds within this municipality. The Department had agreed to institute an investigation, which showed that there was a person in the Council who was able to by-pass passwords, and in so doing, misappropriate funds. The Department warned the municipality to change their passwords regularly.

The meeting on 10 March 2008 showed that the Council was not meeting regularly to address challenges and that they were not meeting their obligations. Due to the fact that the Council was a plenary body, no decisions could be taken if they did not meet. Thus because the Council had failed to discharge their executive obligations, they were unable to meet their administrative obligations. Councillors would often disrupt or fail to attend a meeting (in order to ensure that there was no quorum) when they were not in favour of an item on the agenda.

It became clear that an intervention in terms of S139 of the Constitution was needed.

There had been no regular meetings since the last quarter of 2007 due to a split in the Council. Special meetings were postponed by the Mayor/Speaker to prevent her removal. As a result the Council could not attend to and resolve the issues regarding (i) institutional arrangements, (ii) political impact on administration, (iii) financial viability, (iv) segregation of duties and effective internal control after the suspension of key staff, (v) bank accounts, (vi) overall financial position, (vii) creditor position, (viii) misappropriation of project funds, (ix) the Expenditure Control Committee (x) financial recovery.

Referring to the financial viability of the Council, Mr Ralikontsane explained that the Council was still using the cash flow system, which made it easy for the abovementioned official to simply pay R1.2 million into his own account. They were examining the possibility of collusion with the CFO and the municipal manager. However half of the Councilors did not want the Department to press criminal charges against the official concerned.

The Free State Executive Committee resolved to intervene in terms of S139(1)(b) of the Constitution by assuming the following functions (a) full administration of the municipality and (b) the functions of the Council to allow it to take decisions on (i) to (x) listed in the paragraph above.

They also resolved that (i) the intervention would not impede on the Council’s obligation to pass legislation, approve budgets, impose rates and taxes, or raise loans; (ii) the Head of Department of Local Government and Housing should appoint a person/s to manage these functions, (iii) that this administrator would arrange a Council meeting to deal with the budget and facilitate the Integrated Development Plans and compile a recovery plan. This must be done within 30 days of invoking S139(1)(b), (iv) the municipal manger must co-operate with the administrator, (v) the full Council must meet with the administrator at least once a month, (vi) Councilors must remain competent to carry out its legislative functions, (vii) Councilors and the administrator must carry out their duties in a co-operative manner (viii) the administrator must make a full written report once a month on the readiness of the Council to resume its functions and (ix) that the intervention would end as soon as the Executive Council was satisfied that the Council was ready to perform these duties, obligations and functions.

The Minister was notified of this intervention and on 20 June 2008, gave his approval subject to the following conditions (i) intervention must end immediately after the Executive Council was satisfied that the municipality would be able to administer its own affairs, (ii) intervention was limited to the obligations set out in the letter to the Minister (listed in the above paragraph), the MEC regularly informs the Minister of progress regarding the implementation of the intervention and (iv) MEC initiates criminal investigations relating to possible corruption and misappropriation of funds.

Discussion
Mr Ntuli said that the intervention was long overdue. He could not understand why the Department was only acting now.

Mr Mokoena asked when the Department first saw signs of a problem and said that this crisis would had been avoidable if the Department had gotten involved early enough.

Mr Mafeleka replied that they had seen the signs since 2005 already, especially when the Council started to run at a deficit (which was illegal). The Department had approached National Government about this and was informed to give the municipality a chance. In order for the Department to take action, the national Executive would have to agree with what the Department was proposing.

Mr Ralikontsane added that the final decision by Government to intervene had been informed by the Task Team report. The Team had been appointed to put in place financial systems. This process had highlighted the need for a forensic investigation.

Mr Ntuli asked how other municipalities dealt with the passing of by- laws.

Mr Mafeleka said that this was very complex in Free State, as there were 1400 by- laws, which still had to be repealed in this province (unlike in provinces like Northern and Western Cape where there were much fewer).

Mr Ntuli asked what the relevant political parties had said about the conduct of their members on the Council.

Mr Mafeleka said that there had been divisions between political parties. Members of the ANC supported the mayor. There had also been divisions within the ANC, and many of them been opposed the MEC taking action against the relevant persons. He said that he had to have the support of the ANC in this matter, or risk being redeployed. However his party later agreed that action had to be taken.

Mr Le Roux asked if criminal charges had been instituted against the official. He asked if the official was still receiving a salary.

Mr Ralikontsane said that the official had been suspended and was therefore still receiving a salary. Criminal charges were being instituted.

Mr Van Heerden felt that the Council members who did not want to press charges against the official should be charged as accomplices.

Mr Mokoena asked if the Council members were co- operating with the person appointed by the Department.

Mr Ralikontsane said that the appeared to be co- operation at the moment. The true test would be when the Administrator presided over a meeting regarding the budget and the IDP on 27 June 2008.

Mr Mokoena believed that the Department could not simply state that they would intervene until the municipality had their affairs in order. They had to put a time limit on this intervention.

The Chair suggested that a time limit of six months should be placed on the intervention. It should then be reviewed and extended for another six months if necessary.

Mr Mafeleka responded that the report had said that time limit for the intervention would be 90 days after which it would be reviewed. He said that this could be extended to six months if the NCOP gave the necessary permission. The Administrator would provide a progress report after 40 days. He assured the Committee that intervening in a municipality in this manner was not desirable for the Department either, especially since babysitting a municipality was not included in their budget.

The Chair asked if the public protested to this situation at all. He said that he was shocked that the situation had gotten so bad.

 Mr Mafeleka replied that the people had marched and protested about their pension fund money being stolen. There was therefore no money available in the pension account. The Council said that they were a sphere of Government and that the MEC therefore had no authority over them. They claimed that the MEC could not stop them from passing resolutions. People were calling on the MEC to dissolve the Council which was not easy to do.

Mr Mafeleka said that he was happy to see that the Department had the support of the Committee regarding the intervention.

Mr Ntuli warned that the MEC needed to be brave in tackling tasks such as this one and should act immediately and decisively where appropriate. The aim of the intervention was to provide assistance to the municipality and should not be perceived as a power struggle.

The Chair adjourned the meeting.

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