ATC151013: Report of the Select Committee on Appropriations on the Limpopo oversight visit to Municipal Infrastructure Grant Projects, dated 13 October 2015

NCOP Appropriations

REPORT OF THE SELECT COMMITTEE ON APPROPRIATIONS ON THE LIMPOPO OVERSIGHT VISIT TO MUNICIPAL INFRASTRUCTURE GRANT PROJECTS, DATED 13 OCTOBER 2015
 

  1. Background

The Municipal Infrastructure Grant (MIG) is a conditional grant to municipalities and is administered by the Department of Cooperative Governance and Traditional Affairs (CoGTA). Its purpose is to provide specific capital finance for eradicating basic municipal infrastructure backlogs for poor households, micro enterprises and social institutions servicing poor communities. The MIG funds various basic services such as water and sanitation; municipal roads; solid waste disposal; sport and recreation facilities; street lighting and other public facilities such as community centres.

CoGTA conducted a policy review of MIG during 2014, focusing on its future direction, which will result in some proposals being introduced in the 2016 Budget. The 2015 Budget introduced a new condition allowing MIG funding to be used for refurbishment projects, subject to proof of the proper maintenance of assets, and clarifying that MIG funds can also be used to upgrade informal settlements.

 

  1. Terms of Reference

The Select Committee on Appropriations (the Committee) was established in terms of section 4(3) of the Money Bills Amendment Procedure and Related Matters Act, No 9 of 2009. In terms of section 4(4) of this Act, the Committee has the powers and functions conferred to it by the Constitution, legislation, the standing rules or a resolution of a House, including considering and reporting on:

  1. Spending issues;
  2. Amendments to the Division of Revenue Bill, the Appropriation Bill, Supplementary Appropriations Bill and Adjustment Appropriations Bill;
  3. Recommendations of the Financial and Fiscal Commission, including those referred to in the Intergovernmental Fiscal Relations Act, No. 97 of 1997;
  4. Reports on actual expenditure published by the National Treasury; and
  5. Any other related matter set out in this Act.

 

Furthermore, the mandate of the Committee encompasses the Committee’s functions to legislate, conduct oversight of the Executive; promote public participation, facilitate international agreements and review matters of public interest in relation to the National Treasury. 

 

  1. Objectives

The objectives of the oversight visit were to:

  1. Assess the appropriateness of the infrastructure built – if it is fit for purpose, functional and operational;
  2. Assess whether the projects have met the objectives of increased access and delivery of basic services to poor households;
  3. Elicit whether the MIG funding was complemented by any other grant funding such as the Expanded Public Works Programme Integrated Grant for Municipalities. And if so, how many people from the community benefited from working on the infrastructure project; and 
  4. Assess whether municipalities have maintenance plans in place for the infrastructure delivered to ensure that its lifespan is extended to its optimum.

 

  1. Methodology

The Committee resolved to convene hearings on conditional grant expenditure reports, followed by oversight visits to identified projects.  The Limpopo Province’s Department of Cooperative Governance, Human Settlements and Traditional Affairs and Provincial Treasury were invited to make a presentation to the Committee on 11 August 2015. The presentation covered the financial and non-financial performance of the Municipal Infrastructure Grant (MIG) in Limpopo. The National Treasury and the South African Local Government Association (Salga) were also present in the meeting at Parliament. The second phase of the Committee’s interaction with the Limpopo Province was the oversight visit conducted on 07 and 08 September 2015.

 

 4.1 Hearings

During the initial hearing, the Committee received briefings from National Treasury and the provincial Department of Cooperative Governance, Human Settlements and Traditional Affairs (COGHSTA) and Provincial Treasury on the performance of the MIG in Limpopo as at 30 June 2015. Salga was also invited to make an input.

 

  1. Financial performance

The Limpopo provincial Department of COGHSTA, Provincial Treasury and National Treasury reported that in the 2014 Division of Revenue Act, the allocation of the Municipal Infrastructure Grant to Limpopo municipalities was R3 064 billion for the 2014/15 financial year. However, due to under-spending, during the Medium Term Budget Policy Statement in October 2014 that allocation was adjusted downwards by R315.6 million. The Limpopo Province’s adjusted allocation was R2 748.4 billion for the 2014/15 financial year. Due to further under-spending, a sum of R224.3 million was stopped and re-allocated to faster spending municipalities. The Limpopo provincial Department of COGHSTA and Provincial Treasury further reported that as at 30 June 2015, the municipalities had spent R1 994 billion (73 per cent) and R753.9 million remained unspent.

 

National Treasury reported that Limpopo municipalities were faced with key financial management challenges. These included inappropriately qualified staff in budget and treasury offices; poor financial controls and record keeping; weak political oversight over the implementation of budgets and capital infrastructure projects; poor infrastructure planning and project management due to unqualified staff; inefficiencies in the municipal supply chain management process and procedures; poor maintenance of indigent registers resulting in growing numbers of beneficiaries that are not indigent; and general lack of adherence to existing policies and procedures, supply chain management processes and corporate governance.

 

  1. Non-financial performance

On project implementation, the Limpopo provincial Department of COGHSTA and Provincial Treasury reported that through MIG a total of 367 projects were implemented during the 2014/15 financial year. Some of the projects were multi-year projects. The projects were at various stages of implementation at the end of the 2014/15 financial year. Only 23 per cent of implemented projects were completed. The Committee was told that as a result of slow implementation, the Premier’s Intergovernmental Forum directed that all municipalities should utilise the first quarter of the financial year to finalise plans and start implementation, at the latest, in the second quarter. The Committee was further informed that projects on design and tender were very few, this meant that most municipalities were not ready to appoint contractors in July and August 2015.

 

  1. Challenges

The challenges reported by the various presenters were as follows:

Provincial Department of COGHSTA and Provincial Treasury

  • Very few projects were in the design and tender stage;
  • Municipalities were not ready to appoint contractors; and
  • There were delays in Supply Chain Management.

 

National Treasury

  • Poor financial controls and record keeping;
  • Inadequately staffed budget and treasury offices;
  • Poor infrastructure planning and project management due to unqualified staff;
  • Non-compliance with existing policies, regulations, legislation; and
  • Supply Chain Management challenges.

 

Salga

  • Poor political oversight;
  • Regulations on new packages for senior managers are disadvantaging municipalities;
  •  The slow process of approving MIG projects by COGHSTA;
  • Critical vacant posts like Chief Financial Officers; and
  • Non-payment of municipalities by government departments.

  

  1. Site visits to projects
    1. Mmotong wa Perekisi Regional Water Scheme Project 

The project is located in Seshego in the Polokwane Local Municipality. The project commenced on 21 September 2012 and it was meant to be completed in February 2014 but the actual completion date was September 2014. This project was projected to cost R45.9 million, however the municipality appointed a contractor who was willing to construct it for R38 million. As at the end of June 2015, R33 million had been spent and the project was 99 per cent complete. 

 

The water reservoir will take 30kl of water and with that quantity it would be able to supply water to five schemes. During the Committee’s visit, the water reservoir did not have a water supply. Old water infrastructure and drought were reported to be the contributing factors to this problem. The reservoir was once filled with water, but when it transpired that it was leaking, water was opened for use by the communities. The Polokwane Local Municipality reported that 19 boreholes which will supply water to the reservoir had been drilled.  The Committee was also informed that this project was Expanded Public Works Programme compliant. A total of 51 people (one female, 26 males, 24 youth) were employed.

 

 

  1. Mohodi Sports Complex Project

The Mohodi Sports Complex Project is located within the boundaries of the Molemole Local Municipality. The project commenced on 19 December 2014 and the projected completion date is 29 March 2019. The purpose of the project is to construct a grandstand with 2000 seats; soccer, rugby, and cricket pitches; basketball, netball, and volleyball courts; a ticket sales office; a guard house; ablution facilities and change rooms. The total project cost was estimated to be R23.8 million of which R4.4 million (i.e. 18.5 per cent) had been spent on erecting a fence and construction of the guard house.  The Municipality reported that it was complying with the guide to project management units (PMUs) at local government which states that 5 per cent of MIG should be allocated for PMU operations. The Municipality explained that 95 per cent of the MIG allocation was used on capital budget. Moreover, the Municipality had a projected budget of R55 000.00; R150 000.00 and R300 000.00 for maintenance of the completed project over a period of three years following the completion date. 

 

The Committee was assured that the project was being implemented in line with MIG policies and in compliance with the 15 per cent portion of MIG allocation per financial year. The objective of the Municipality in rolling out this project, is to support sports infrastructure in the area. The Committee was further informed that the EPWP guidelines were used to maximise labour intensive construction methods in the project. This project is projected to benefit 4 265 households.     

 

  1. Senwabarwana 5 Internal Streets and Storm Water Project

This project is located in the Blouberg Local Municipality and is comprised of the conversion of a 5.59 km road from gravel to pavement bricks. The project was divided into three phases. Phase one and two were completed by the time of the Committee visit. Phase two of the project commenced on 27 July 2007 and was completed on 19 May 2008. During the Committee’s visit, 4.59 km of pavement road had been constructed with the remaining 1 km near completion. The total project cost is estimated at R18.7 million of which R15.8 million (i.e. 84.5 per cent) had been spent. The construction of  phase three, 1.2 km road of interlocking pavement bricks and storm related structure commenced on 03 March 2015 and the projected completion date was 03 September 2015. However, during the Committee’s visit the project was still in progress, but reported to be practically complete.

 

The Committee was assured by the Municipality that the PMU business plan that outlined management cost breakdown (5 per cent of the project costs) was submitted and approved by the provincial Department of COGHSTA before implementation of the project. The Municipality reported that a maintenance plan which was being updated upon completion of each project had been adopted. The Municipality added that a process of training EPWP workers on roads and storm water maintenance had begun.     

 

  1. Road D3356 (Road between Mohlonong and Diana Clinic)

This project is located in the Aganang Local Municipality, it links Mohlonong and the Diana Clinic. The project commenced on 29 July 2011, with a total estimated cost of R55.5 million of which R48.0 million (i.e. 86.5 per cent) has been spent to date.  The scope of this road project was to upgrade 12 kilometers of gravel road (i.e. Road D3370- 2.1 km, Road D3353- 3.7 km, Road D3356- 6.2 km) to tar roads in order to connect the clinic to the main road. The Roads D3370 (2.1 km); D3353 (3.7 km); D3356 (3km) has been completed. The remaining 3.2 km was of D33 still under construction. This phase of the project was projected to cost R3.5 million.

 

The project was divided into four phases. By the time of the visit, only phase four was under construction. The unskilled labour force of 20 people working on this project, was paid R170 per day. However, during the time of the oversight visit very few employees were on site. When asked by the Committee why workers were not on site, the Municipality reported that they were on strike because the contractor had not paid them.  

 

  1. Tibane Stadium Project

This project is also located within the jurisdiction of the Aganang Local Municipality. The commencement date for this project was 8 September 2012. The project scope required an upgrade of facilities (ablution facilities; changing rooms; administration block with three offices; boardroom; kitchen; reception; refurbishment of a soccer pitch into an artificial pitch; rubber-running-track field) and equipment (water irrigation system and high mast lights). The total project cost is estimated at R8.0 million of which R6.4 million (i.e. 80.0 per cent) has been spent to date. The Municipality reported that R70 000.00 was set aside to train the unskilled labour force on fixing of potholes, laying of storm water pipes and paving of streets.

 

In this project, 14 work opportunities were created. Each unskilled labourer was paid R120 per day. This project had not been completed. The outstanding work was that of the field track; extension of the soccer field; and the construction of the tennis, basketball, and volleyball court. The stadium was reported to be servicing five villages.     

 

4.2.6 Hwibi Water Supply Project

This project is located in the Capricorn District Municipality and it is comprised of the construction of a reticulation line, the commissioning of new boreholes, the formalisation of 567 yard connections and the installation of bulk water meters. The project commenced on 21 January 2015 and was projected to be completed on 22 June 2015. However, it was completed on 02 August 2015. The total estimated cost of the project was R4.3 million of which R3.9 million (79 per cent) had been spent by the time of the visit. The final claim was yet to be submitted to by the contractor.  

 

On non-financial performance, the Hwibi Water Supply Project used labour intensive refilled excavated lines. The excavation plants were, however, used to excavate the pipe lines. Unskilled labourers were paid R120 per day. The water plant was connected to four boreholes. The Committee was informed that 567 households were connected to the water plant. The Municipality reported that it took eight hours to fill the big tank and three hours to fill two small tanks. The water supply to households is controlled by opening the water at 5 am and closing the supply at 10 am. When the Committee picked up that taps were dry, the Ward Councillor and municipal official quickly issued a directive that water be opened for the Committee to see that the project was operating. The Committee acknowledged that water is a scarce resource and therefore it was wise for the Municipality to control water usage.     

 

  1. Findings and observations
    1. Financial performance
      1. The Committee was not impressed with the overall expenditure by the Limpopo Province. Especially because the MIG funds were revised downwards, stopped and a portion was re-allocated because the spending patterns of certain municipalities were below expected targets.
      2. The stoppage of MIG funds to certain municipalities is an indication of non-compliance with spending and reporting requirements.
      3. In some instances the Committee was sceptical about the prioritisation of road construction when community members did not have water supply and sanitation facilities. This may be interpreted as an indication that municipalities prioritise basic residential infrastructure projects above basic services to the people.
      4. The Committee observed that it was normal practice to complete projects beyond the set completion dates. The contributing factors varied between bad weather conditions; poor monitoring of projects by consultants and municipal monitoring and evaluation units; poor financial flow of contractors and lack of capacity from contractors who had been graded at higher levels by the Construction Industry Development Board.   

 

 

  1. Non-financial performance
    1. The MIG projects visited in Limpopo Province were paying the unskilled labour force different amounts per day, from the EPWP minimum of R95 per day to R120 per day.
    2. The visited projects were in various stages of construction development, from early construction phase to completion phase.
    3. The quality of the projects also varied. The reservoir at the Mmotong wa Perekisi Water Project leaked when it was filled with water. During the time of the visit it had no water, therefore there is no guarantee that the leaks had been properly sealed.
    4. Even though the Mohodi Sports Complex was still under construction during the time of the visit, the Committee was not impressed by the quality of the guard house which was still being constructed.
    5. The Tibane soccer field was too small, markings appeared to have been changed, and the field had not been installed with a proper water system for periodic brushing and rinsing to maintain the artificial pitch. The pitch also does not have a drainage system to control any flooding.
    6. The Committee was very impressed by the quality of the five interlocking pavement bricks and storm water related structure in Senwabarwana. However, the Committee had reservations about the training of unskilled labour and the seeming lack of skills transfer.
  2. Mmotong wa Perekisi Regional Water Scheme Project

5.3.1  The reservoir has not yet been commissioned due to a shortage of water and this delay has the potential to compromise the quality of the facility.

5.3.2  The Polokwane Local Municipality is unable to fill the reservoir with water because the Department of Water and Sanitation refused to grant additional water allocations. According to the department, if the municipality could address its current water leakages, there would be sufficient water to fill the reservoir.

5.3.3  Due to aging infrastructure, the Polokwane Local Municipality is currently experiencing water losses of close to R60 million annually.

5.3.4  The current water losses at Polokwane Local Municipality is compromising the water supply to the needy areas within the Municipality.

5.3.5  The Municipality had erected a concrete palisade with a lockable gate for security to lessen the threat of vandalism and theft with regard to the reservoir.

5.3.6  To mitigate the shortage of water supply into the reservoir, the Municipality had already drilled 19 boreholes and also budgeted for equipping those boreholes during this financial year. There is also a plan to upgrade the Olifants Water Treatment Works as an alternative source of water to the reservoir.

  1. Mohodi Sports Complex Project

5.4.1     The quality of the work done on the guard house is substandard and need to be rectified.

5.4.2     Although the projected cost of the project was R23 million, the contractor was appointed for a contract amount of R15 million.

5.4.3     An amount of R4.4 million (which is 18.5 per cent) has been spent to date, but the Municipality could not provide a detailed cost breakdown.

5.4.4     While there are toilet facilities at the complex, there was however no water at the time of the visit.

5.4.5     There seems to be no coordinated funding for this project between MIG funding and other sporting grants that are administered by the Department of Sports and Recreation.

5.4.6  There is a need for the assessment of the project for its compliance with applicable sporting norms and standards.

  1. Senwabarwana 5 Internal Streets and Storm Water Project

5.5.1     The Municipality’s overall MIG spending was 89 per cent for the 2014/15 financial year.

5.5.2     Construction of 1.89 km road from gravel to asphalt surface commenced on 27 July 2007 and was completed on 19 May 2008 at a cost of R2.4 million.

5.5.3     Construction of 1.5 km road from gravel to asphalt surface with storm water related structure commenced on 22 September 2009 and was completed on 25 May 2009 at a cost of R2.5 million.

5.5.4     Construction of 1.2 km road of interlocking pavement bricks and storm water related structure commenced on 04 July 2013 and was completed on 04 December 2013 at a cost of R7 million.

5.5.5  Construction of 1.2 km road of interlocking pavement bricks and storm water related structure commenced on 03 March 2015 and was completed on 03 September 2015 at a cost of R6 million.

  1. Road D3356 (Road between Mohlonong and Diana Clinic)

5.6.1  At the time of the site visit the workers were not on site due to strike action because of the alleged failure by the contractor to pay wages.

5.6.2  Phase 1 (which is upgrading of 4.5 km road from gravel to tar using double seal aggregates and construction of storm water control) was completed on 02 November 2012 instead of 30 April 2012 with an overall expenditure of R16.5 million against the budget of R20.3 million.

5.6.3  Phase 2 (which is upgrading of 3 km road from gravel to tar using double seal aggregates and construction of storm water) was completed in October 2013 instead of February 2013 with an overall expenditure of R9.1 million against the budget of R10 million.

5.6.4  Phase 3 (which is upgrading of 1.3 km road from gravel to tar using double seal aggregates and construction of two bridges, plus storm water control) was completed on 30 June 2014 instead of 07 November 2013 with an overall expenditure of R19 million against the budget of R19 million.

5.6.5  Phase 4 (which is upgrading of 3 km road from gravel using double seal aggregates and storm water control) is still under construction. The projected completion date of the project was 29 May 2015 and the contractor is now on penalties. The expenditure to date is R3.5 million against the budget of R11 million.

5.6.6  For the 2014/15 financial year the Municipality had spent only 68 per cent of its MIG funds and it had to return unspent MIG funds of R6.8 million in the past.

5.6.7  The under-spending on MIG funds is reportedly due to planning challenges, tensions between administration and council and also a delay in council decisions.

  1. Tibane Stadium Project

5.7.1     The Municipality is still consulting with the sporting association to determine the suitability of the proposed track field. This clearly shows that there was no proper prior consultation with the relevant stakeholders on compliance of the project with sector norms and standards.

5.7.2     There seems not to be coordinated funding for this project between MIG funding and other sporting grants that are administered by the Department of Sports and Recreation.

5.7.3     The project is further complicated by poor planning. While phases 1 and 2 of the project are completed, phase 3 that is budgeted for R8 million and was scheduled to start during the 2014/15 financial year, could not start due to disputes with the consultant. The consultant required R11 million instead of R4.5 million for adding the field track which was not included during the design stage.

5.7.4     The main items in phase 1 that cost R2,086 million were the main office block at R775 350.00, ablution facilities and change rooms at R327 560.00 and two flood lights at R242 389.85 as well as professional fees at R279 756.00.

5.7.5  The main items for phase 2 that cost R4.2 million are an artificial pitch at R1.540 million, general obligations at R544 820.00 and structural steel works at R844 930.00, as well as professional fees of R616 000.00.

  1. Hwibi Water Supply Project

5.8.1  The total amount spent is R3.4 million with a cost breakdown of the main items of the project as follows:Earthworks for pipe trenches R404 600.00; medium pressure pipelines and ancillaries R1.279 million; erf water connections R540 000.00; pumps R242 000.00 and ancillary water supply works R257 430.00.

5.8.2  One of the challenges is vandalism of certain items, especially Eskom transformers for the pumps.

5.8.3     There is a need for collaboration between the local municipality, district municipality and the local residents on the safety of the facility as well as the control of the water usage.

  1. Recommendations
    1. Financial performance
      1. The Limpopo municipalities should ensure that they spend conditional grant funds to avoid having funds taken away. The municipalities should always remember that spending conditional grant funds properly is followed by incentive allocations.
      2. The municipalities should ensure that they comply with quarterly spending patterns and reporting requirements.

 

 

  1. Non-financial performance
    1. The Provincial Treasury and Department of Cooperative Governance, Human Settlements and Traditional Affairs should closely monitor the Mohodi Sports Complex Project to ensure that the quality of the project is of a high standard. The Molemole Local Municipality should also ensure that they closely monitor the consultant that is responsible for overseeing that project.  
    2. The quality of projects that municipalities are rolling out should be of high quality. These projects should be viewed as the legacy of the current generation for the benefit of future generations. Therefore, the municipalities and the Provincial Treasury and Department of Cooperative Governance, Human Settlements and Traditional Affairs should strengthen their monitoring and evaluation units.
    3. Municipalities should train and capacitate the unskilled labour force.

 

  1. Mmotong wa Perekisi Regional Water Scheme Project

6.3.1     The Polokwane Municipality should prioritise the commissioning of the project to avoid compromising any contractual obligations of the contractor in this project. The Municipality should report to the Committee on further developments within three months after the adoption of this Report by the House.

6.3.2     The Polokwane Local Municipality and the Department of Water and Sanitation should, within three months after the adoption of this Report by the House, provide the Committee with information on developments with regard to plans to provide the reservoir with a sustainable water supply.

6.3.3     The Polokwane Local Municipality should prioritise upgrading and refurbishment of its aging water infrastructure to avoid any further water losses.

  1. Mohodi Sports Complex

6.4.1     The Molemole Local Municipality should, within three months after the adoption of this Report by the House, report to the Committee on corrective measures taken for the shoddy work on the project.

6.4.2     The Molemole Local Municipality should source further funding for the project from other conditional grants administered by sector departments such as the Department of Sports and Recreation.

6.4.3     The Molemole Local Municipality should, within three months after the adoption of this Report by the House, provide the Committee with a breakdown of the costs in the project.

  1. Senwabarwana 5 Internal Streets and Storm Water Project

6.5.1     The Blouberg Local Municipality should liaise with the provincial Department of Cooperative Governance, Human Settlements and Traditional Affairs and the national Department of Cooperative Governance and Traditional Affairs for technical support with regard to their Municipal Infrastructure Grant spending.

  1. Road D3356 (road between Mohlonong and Diana Clinic)

6.6.1     The Aganang Local Municipality should liaise with the provincial Department of Cooperative Governance, Human Settlements and Traditional Affairs and the national Department of Cooperative Governance and Traditional Affairs for technical support with regard to their Municipal Infrastructure Grant spending;

6.6.2     The provincial Department of Cooperative Governance, Human Settlements and Traditional Affairs should support the Aganang Local Municipality to address planning challenges, tensions between the administration and the council as well as council delays in making decisions about Municipal Infrastructure Grant funded projects.

6.6.3     The Aganang Local Municipality should ensure that the contractor pays the workers on time to avoid any exploitation and unnecessary work stoppages within the project.

  1. Tibane Stadium Project

6.7.1     The Aganang Local Municipality should liaise with the provincial Department of Cooperative Governance, Human Settlements and Traditional Affairs and the national Department of Cooperative Governance and Traditional Affairs for technical support with regard to their Municipal Infrastructure Grant spending.

6.7.2     The Aganang Local Municipality should source further funding for the project from other conditional grants administered by sector departments such as the Department of Sports and Recreation.

6.7.3     The Aganang Local Municipality should, within three months after the adoption of this Report by the House, provide the Committee with information on further developments regarding the project, especially compliance of the project with applicable sporting norms and standards.

  1. Hwibi Water Supply Project

6.8.1     Both the Capricon District Municipality and the Aganang Local Municipality should report to the Committee, within three months after the adoption of this Report by the House, on any further developments with regard to measures in place to ensure the security of the high risk items in the project.

Report to be considered.

 

 

 

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