Ekurhuleni Metropolitan Municipality briefing

NCOP Finance

18 November 2008
Chairperson: Mr T S Ralane (ANC)
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Meeting Summary

Ekurhuleni Metropolitan Municipality provided a full briefing on its operations. The City Manager made it clear that it had the most townships in South Africa, hence the high levels of poverty. In terms of the service delivery backlog, 205 000 houses needed to be built and that excluded 130 000 service stands. The budget was adjusted in August 2008 to focus on wiping out the backlog by 2011. An amount of R17 billion would be spent over the next five years.

City of Tshwane was not allowed to present its briefing as the Accounting Officer was not present and representatives had been sent in their place. The Chairperson made it clear that such delegation had to be made in writing.


Meeting report

Mr Patrick Flusk, City Manager: Ekurhuleni Metropolitan Municipality (EMM), provided an overview of the region. He noted the importance of Oliver Tambo Airport, the geographic size of the metropolitan area was over 2000 square kilometers. It contained 826 000 households and contributed just under 8% of the national economy. There was a slight increase in density because of the urbanization that had taken place. In 2003, the unemployment rate was at 40% whereas in 2005 it was 38%. The latest statistics for 2007 were being finalised. The average per capita income had increased. However, the number of persons living in poverty had also increased. In 2003 it was 27% but in 2005 it increased to 28%. In terms of assisting the poor, the municipality provided extra water and electricity for free. An amount of 9kl of water and 100 kWh of electricity was given free.

In terms of the Municipality’s 2008 / 2009 budget, the Capex budget was approximately R3 billion and the Opex budget was close to R13 billion. The personnel budget was less than 30% of the total budget. Maintenance costs was almost R1.4 billion which was 11% of the budget. The municipality was one of the highest spenders in terms of maintenance due to spending on water, sanitation, electricity and roads.

In terms of the service delivery backlog, Mr Flusk said that 205 000 houses needed to be built and that excluded 130 000 service stands. Furthermore, he added that the metropolitan area had the most townships than any other city in South Africa. Therefore, the budget was adjusted in August 2008 to focus on wiping out the backlog by 2011. An amount of R17 billion would be spent over the next five years.

With regards to local incentives that people received, the free basic services were 9 kl of water and 100 kWh of electricity. There was also an additional 40% rebate that people received and there was 100% remission on land value up to R20 000. Municipal vacant land had an approximate value of R4.5 billion which related to an amount of about 470 000 vacant properties. 

In terms of financial issues, there was a budget of between R2 billion and R3 billion per year for the next three years but that amount could decrease in the following year. Loans were avoided. In order to achieve their objectives, the municipality was in discussion with National Treasury. The Municipality was also looking at innovations in the market and was aware that Cape Town and Johannesburg had taken up bonds and the Municipality had studied these bonds. Yet, the Municipality was very cautious on the issue of taking up loans. There were still challenges in grants, particularly the backlog in housing as previously indicated. In terms of income, an amount of R12, 5 billion was expected and to date, just under 32% was collected of that total. With regards to expenditure, external repairs and maintenance was at 37% two months ago. Bulk purchases were adjusted because of Eskom increases.

With regards to revenue collection, because of poverty levels, there was a target of 95% for the 2008 / 2009 financial year. Currently the payment level was at 91%. The Municipality’s outstanding debtors were in excess of R6 billion.

Mr Flusk looked at compliance with the Municipal Finance Management Act, saying that Ekurhuleni was doing well. He added that compliance did not mean that there was no fraud and corruption. He gave a factual account of land corruption that he had come across.

Mr Flusk said that over R70 million of the conditional grants were spent. They had a good relationship with departments. A project of importance was the renaming of the OR Tambo Airport. He referred to the demilitarization project for those ex-combatants who were accommodated within the municipality who had fought for change. Their skills were assessed so as to place them and there were those that were afforded business opportunities.

Regarding capacity constraints, the Municipality had a staff complement of 17 000. Mr Flusk added that HIV/AIDS had affected them but that they had a good programme in place for staff. The Municipality had a challenge that was faced by many other municipalities and that was a shortage of project managers. The vacancy rate was high with approximately 2000 vacancies. The Municipality had responded well to the learnership programme. The bursary programme focused on the shortage of identified skills. The Municipality had a relationship not only with the University of Johannesburg but also with Wits where staff attended a Public and Development Management Programme which was designed by the Municipality.

There were 419 859 households and 19 395 businesses connected to electricity.

In the special programmes section, there was a Sustainable Development Project for Nigel. It was an area that had been neglected for many years. There was a move away from RDP houses and a focus on giving better quality houses in that area.

The overview of their five year plan included customer care centres based on taking government to the people. The strategy was to put customer care centres within the townships where 70% of the population was established and they would be within a 5 kilometre walking distance. The customer care centres would be equipped with internet connection in order to get access to businesses and Department of Labour in the search for jobs. Big areas like Katlehong and Tembisa both had two customer care centres. People had been trained in community-based planning and there had been an impact on the Integrated Development Plan (IDP).

Mega projects included the updating of infrastructure and the establishment of new customer care centres. Mr Flusk said that in terms of the finalisation of plans and the budget, the Municipality was one month ahead of the norm.

The Chairperson said that Mr Flusk had appealed for the support and the protection of all managers. With regards to Section 14, the Committee was instructing that a report be submitted within the next 30 days on the issue of land corruption in terms of the capital assets disposal issue. Those issues needed to be highlighted and to be placed in the public domain.

Mr Bernard Mokgabodi, Director:
Local Government Budget Analysis, National Treasury, said he questioned the 30% spent on personnel costs which was set by National Treasury.

The Chairperson stated that the salary bill in the operational budget was outstripping everything and added that the Department of Provincial and Local Government (DPLG) had set the norm. Furthermore, the departments were not talking to each other.

Mr Mokgabodi said that he hoped the indigent register had been updated.

The Chairperson noted that there were so many townships and thus many poor people. He asked whether the indigent register had been updated and whether the correct numbers had been given.

Mr Flusk stated that the register had been updated but suspected that one third of the households in the Metro should be on that indigent register because of the levels of poverty.

Mr Mokgabodi asked that one issue that needed to be highlighted was that of capacity building.

The Chairperson responded to Mr Mokgabodi, saying that he was speaking as if he were the city manager.

Mr K Bologo, Senior Manager: DPLG, mentioned that Mr Flusk had been their Deputy Director General. He said that things were improving but there were still plenty of challenges in the townships, those being roads and sewers. The money should focus on poor people and that things were improving but were not yet the way they should be.

Ms F Makhubu, Executive Manager:
Municipal Infrastructure Grant, DPLG, referred to construction in Katlehong. Some of the contractors dug holes with the intention of putting in pipes but no pipes were put in. The sight was hazardous to children. She suggested that inspections should be done in that area. Construction had stopped and nobody was on site.

Mr Ramphele, Senior Manager: DPLG said that the implementation of the property rates had key challenges. There was a gap in the report on this. He asked what the level of the outstanding debt was and what did government owe. With regards to the additional grants, he noted that there were transfers of money due to the municipality.

The Chairperson said that the matter had been raised. The municipality was spending but from which fund were they spending.

Mr C Van Zyl, Department of Minerals and Energy, said that R8,9 million had been transferred but that no connections had been made. He was uncertain as to whether money had been transferred or not and said that it could have been in September or October.

The Chairperson said that one did not want to distort the budget but that one had to ensure that the transfer had taken place and if it had, that the money was found.

Mr Van Zyl then said that the money had not been transferred.

The Chairperson asked Mr Flusk for when was his meeting with the Department of Minerals and Energy (DME) scheduled.

Mr Flusk said that the money was meant for the Winnie Mandela Community Builders Project. He was not sure if the money had been transferred as Mr Van Zyl had then said that the money was not transferred.

The Chairperson said that the matter had to be resolved and wanted to know when Mr Flusk’s team would meet with DME.

Mr Flusk responded that there was a commitment from his side to meet.

The Chairperson wanted to know whether Eskom was doing what they were supposed to do in line with the IDC and whether monthly reports were being submitted.

Mr Flusk responded and said that a large section of the community was being serviced by Eskom which was a challenge but that their relationship with Eskom was a good one.

Ms P Papu, Portfolio Manager: Eskom, said that monthly reports were being submitted.

Mr H Muller, Chief Director: Department of Water Affairs and Foresty, asked Mr Flusk to expand on the relationship between the council and the service authority and the provider. His second issue was around water conservation. He said that if more water was being saved then the new water project could be postponed. The tariff increase promoted water conservation.

The Chairperson responded to Mr Muller and said that he should go to the municipality and see for himself what was happening and also address those challenges. Furthermore, he suggested a meeting to take place with the municipality. This would establish what type of programme was to be set up, whether a community study needed to be conducted and who was going to fund it.

Mr Muller asked for information regarding the quality of the drinking water.

The Chairperson said that Mr Muller should go and work with them.

Ms Mchunu (ANC) said that Ekurhuleni was growing so fast and suggested that perhaps flats should be built. She pointed out that the foundations that were built for the houses were not good and needed to be stronger.

Ms Robertson (DA) said that they should project manage adequate quality control for all building processes and asked what processes were being implemented in this regard.

Mr Sogoni said that one had to be very careful when driving on the roads in the township areas. There was no indication of anything being done to improve the roads. Katlehong was an old township yet there were no streets. How was he to get people to vote for him if the roads were not in a good state.

The Chairperson told Mr Flusk only to respond to the last set of questions.

Mr Flusk said that for the past two years, the budget total was R5.8 billion for capital spend and for the past three years R2.8 billion was spent. He indicated that some of the townships were old and nothing had happened to them. The number of roads tarred in Soweto equalled 496 kilometres but during that same period the EMM had tarred 700 kilometres of road. He point he was trying to make was that EMM had more townships than anywhere else. One needed to take into account the difficulty of trying to please everyone. In August, R3.4 billion was put aside for the next three years and it seemed plenty of money but the levels of poverty and numbers of poor people were high. A question he raised was: did one allocate money to poor people or to poor places. Furthermore, he questioned whether it was about capital spend or rather quality spend. In terms of water, the expenditure on water was always below 60% and they had already saved nearly half a billion rands on maintenance.

The Chairperson said that the municipality had 150 000 indigent households and one was not sure what the cost implications would be. On the register, 9 kl of water was given as well as 100 kWh of electricity. If 150 000 indigent households had to be electrified what would the cost implications be. It was something that the National Treasury and DPLG had to look into. There should be a proper and clear indigent register so as to deal with the matter. The amount written off could be understated. There was the problem of the alignment of the IDP. He asked Mr Flusk whether EMM had investments and how much was invested.

Mr Flusk replied that there were investments of just over R2 billion.

The Chairperson said that money should be invested that was not needed immediately. On the matter of the 2000 vacancies, he wondered if these were filled what would then be the challenge. He said that an audit should be conducted on the infrastructure of the old townships so as to know how much was being spent. Lastly, he said that a team should assist the City Manager in establishing all those who owed the Municipality money.

Mr Sogoni commented that when housing development was done, proper infrastructure should be put in place.

The Chairperson said that part of the problem was alignment with Municipal Infrastructure Grant (MIG) and the public transport system improvement grant.

Mr Flusk said that he would take the points made in the meeting as guidance. He said that once you started off with the poor, you could not go wrong.

Tshwane briefing: postponement
The Chairperson did not allow the representatives of Tshwane to make their presentation but said that the Committee took the report as presented. He said that the Municipal Manager should come on 20 November. People had to earn their salaries and be accountable. He thanked the representatives for coming.

Mr Sogoni said that there were constitutional obligations for municipal managers to attend.

The Chairperson commented that Tshwane’s most under-performing grant was public transport. National Treasury had provided the Chairperson with a report on the reduced capital budget. One could not burden mere representatives who had been instructed by their seniors. Certain questions needed to be addressed by the municipal manager. One of the problems that needed to be raised was that of service delivery.

Mr Vincent Malepa, Director:
Local Government, National Treasury, said that without the accounting officer in attendance, Tshwane should not present.

The Chairperson said that he had already taken that decision. The right people should be sent. He continued and said that the IDP was misaligned. A classic example was Ekurhuleni. It was supposed have received R8 million but it was not in their coffers. He was pleading with the national departments to assist the municipalities. The system needed to improve and the national departments also needed to appear in front of the Committee. It was only National Treasury talking on behalf of others.

Regarding the Department of Water Affairs and Forestry (DWAF), the Chairperson asked what track was DWAF on if the dams were running dry yet they say they were on track. A meeting should be set up with DWAF and the municipalities. The Chairperson gave an example of the community taking responsibility and elderly ladies who had done their own irrigation for their gardens and who had dug their own trenches. The quality of the water was a competence of DWAF. What was worrying was that money was being spent, but one did not see where the money was being spent.

A representative of Tshwane made an appeal that they continue with the presentation since they were there. Otherwise money would have been wasted.

Mr Sogoni said that the Accounting Officer was needed and he could not accept that everybody was now an accounting officer. He said that local government was very clear as to who was the accounting officer.

The Chairperson said that the law was clear and that Tshwane needed to have established in writing to the Committee that it intended to make such a delegation and explained who would taking responsibility for all the decisions that were made. He said that what needed to be questioned was what areas did the Municipal Manager of Tshwane compromise for not being there. He said that the Minister of Finance had appealed to the National Departments that R3 billion had to be saved in respect of traveling expenses. Tshwane had to accept the consequences of what they had done.

Ms N Mkhari, CFO: City of Tshwane, apologized on behalf of the Tshwane Municipality.

The Chairperson accepted the apology and adjourned the meeting.


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