ATC180912: Report of the Select Committee on Appropriations on the Oversight visit to the Oliver Regionald Tambo District Municipality (Eastern Cape Province) dated 12 September 2018

NCOP Cooperative Governance & Traditional Affairs, Water and Sanitation and Human Settlements

REPORT OF THE SELECT COMMITTEE ON APPROPRIATIONS ON THE OVERSIGHT VISIT TO THE OLIVER REGIONALD TAMBO DISTRICT MUNICIPALITY (EASTERN CAPE PROVINCE) DURING THE PERIOD 30 JULY TO 03 AUGUST 2018, TO ASSESS THE MUNICIPAL INFRASTRUCTURE GRANT EXPENDITURE AND PROJECTS UNDER CONSTRUCTION, DATED 12 SEPTEMBER 2018
 

1. INTRODUCTION

Subsequent to a petition (dated 3 May 2017) received from the Mayor of O.R. Tambo District Municipality regarding the decision of National Treasury to reduce the Municipal Infrastructure Grant (MIG) allocation of O.R. Tambo District Municipality (ORTDM) by R90 million in the 2016/17 financial year, the Select Committee on Appropriations conducted a hearing on the matter on 6 June 2017. The reasons for this reduction were reportedly improper reporting and non-registration of projects by the ORTDM and the slow take-up of projects. The reduction was done in compliance with the Division of Revenue Act 3 of 2016.

 

The Committee invited the ORTDM, Eastern Cape Provincial Treasury, National Treasury, the Eastern Cape Department of Cooperative Governance and Traditional Affairs and the national Department of Cooperative Governance and Traditional Affairs. Following this hearing, the Committee made a number of observations and recommendations including a resolution to conduct an oversight visit to the ORTDM.

 

The objective of the oversight visit was to assess the MIG expenditure and projects under construction and their implementation by the ORTDM. The specific locations of the visited projects were Mhlontlo, Nyandeni and King Sabata Dalindyebo Local Municipalities. The Committee identified three MIG projects per local municipal area to visit.

 

The oversight visit was divided into one day of receiving reports on financial and non-financial performance in a boardroom setting and three days of site visits to conduct inspections in loco of MIG projects. The following stakeholders were invited to make presentations on the ORTDM’s MIG performance: National and Provincial Treasuries, national and provincial departments of Cooperative Governance and Traditional Affairs, the Auditor-General, and the ORTDM itself.  

 

1. REPORTS ON FINANCIAL AND NON-FINANCIAL PERFORMANCE

2.1 National and Provincial Treasuries

National Treasury reported that the purpose of the MIG was to provide specific capital finance for eradicating basic municipal infrastructure backlogs for poor households, microenterprises and social institutions servicing poor communities. In this regard, the outputs are as follows:

• Number of poor households impacted through the construction of new infrastructure and the upgrading and renewal of existing infrastructure for –
  • basic water and sanitation services;
  • central collection points for refuse, transfer stations, recycling facilities and solid waste disposal sites;
  • sport and recreation facilities; and
  • street and community lighting and public facilities.

• Number of kilometers of municipal roads developed and maintained.
• Number of work opportunities and Full-Time Equivalents (FTEs) created using the Expanded Public Works Programme (EPWP).

 

It was further reported that the OR Tambo DM had been allocated a total of R645 million in MIG funds in the 2017/18 financial year, and that it had spent 100 percent by the end of June 2018. (This preliminary expenditure would be confirmed upon submission of the pre-audited annual financial statements by 31 August 2018.)  In addition, the DM’s fourth quarter MIG performance had increased by 36.6 percent from the third quarter performance.

 

The Treasuries reported that, whereas previously procurement processes had been delayed due to vacancies in senior management posts, with bid committees not being able to sit as scheduled; these positions had now been filled and contractors appointed for 2017/18.  The DM had spent the minimum of 40 percent of the total allocation at the end of December 2017 and had met all minimum requirements of MIG conditions to avoid a stopping of funds as per section 19 of the Division of Revenue Act.

 

It was further reported that sessions had been held between national and provincial Treasuries, the national and provincial departments of Cooperative Governance, the Municipal Infrastructure Agent (MISA) and the DM in support of the implementation of the MIG. In addition, site visits were conducted by the team (MISA, Cogta-EC, ECPT and municipal officials). The DM had been advised to adopt forward planning for all infrastructure projects; and Treasury recommended continued support by sector departments and the province and regular site verification.

 

National Treasury reported that, subsequent to the 2018/19 benchmark outcomes engagement with the DM, it was of the opinion that the 2018/19 Medium Term Revenue and Expenditure Framework (MTREF) budget was funded, relevant and sustainable. However, the following recommendations arose from the engagement:

 

The OR Tambo DM should –

• Continuously improve capital budgeting and spending by optimising the funding mix.
• Align the procurement and project implementation plan with the Service Deleivery and Budget Implementation Plan and Integrated Development Plan to accelerate spending on the capital projects.
• Budget for cost reflective tariffs on water and sanitation services in order to realize surpluses.
• Intensify the implementation of its of credit control policy to residents and businesses who can afford to pay, in order to increase the collection rate.
• Review and improve its service delivery operating model in order to reduce the high employee-related costs, particularly overtime, cell phone allowances and medical aid contributions.
• Improve budgeting and spending on repairs and maintenance by approving and implementing a comprehensive asset management framework.
• Improve on multi-year budgeting so as to correct the disjuncture between the base line estimates and create certainty in the infrastructure spending and project sequencing.
• Adequately capacitate appropriate teams to drive the planning and implementation of catalytic projects as reflected on the Spatial Development Framework policy.
• Implement the strategy to reduce  turn-around time for implementation of projects identified on the corridors of nodes for local economic development of the District.
• Invite the municipal managers of the four local municipalities in OR Tambo District to the benchmark engagement.

 

1. Auditor-General of South Africa

The Auditor-General of South Africa (AGSA) provided an overview of the ORTDM’s 2016/17 audit opinion. The AGSA reported that the audit opinion (qualified audit) of the ORTDM had remained stagnant since the 2014/15 financial year. The qualified audit opinions emanated from repeated predetermined objectives such as reported information not being useful or reliable. In addition to that, the ORTDM consistently failed to comply with laws and regulations. The AGSA further reported a number of key focus areas that needed urgent intervention within the ORTDM. These included the quality of submitted financial statements, performance reports, supply chain management processes, and information technology.  

 

Linked to the key focus areas that needed urgent intervention, the AGSA identified the three contributing factors to weak internal controls as leadership, financial and performance management, and governance. On leadership, the AGSA reported that there was an urgent need to strengthen oversight responsibility, develop audit action plans and strengthen IT governance within the ORTDM. Secondly, the AGSA submitted that the financial and performance management lacked proper record keeping and that there was a need to intervene on processing and reconciling controls, compliance monitoring and IT system controls. With respect to spending, the AGSA reported that the ORTDM audit opinion showed consistent unauthorised, irregular, fruitless and wasteful expenditure since the 2014/15 financial year.

 

On irregular expenditure incurred by the ORTDM, the AGSA reported that it had amounted to R995 million in the 2014/15 financial year and soared to R1.1 billion in 2015/16. In the 2016/17 financial year, the irregular expenditure decreased to R679 million. The main contributors to irregular expenditure were reported to be inappropriate deviations; inappropriate use of Regulation 32; the preference point system not being applied to bids above R30 000; and the composition of Bid Adjudication Committees not in line with prescripts. The AGSA further reported that the main reason the irregular expenditure balance had decreased, related to the write-off of R2.5 billion by the ORTDM Council, leaving a balance of R2.8 billion which was yet to be investigated and dealt with by the Council.              

 

The AGSA explained that this state of affairs has contributed to the ORTDM leadership not responding fully to the messages of the AGSA and other key stakeholders, such as Cooperative Governance and Traditional Affairs and National and Provincial Treasury. Added to that, the AGSA submitted that the ORTDM leadership had not addressed key concerns impacting the general control environment, more specifically the following:

1. Oversight controls (operational, strategic and reporting) have not improved to the extent that it impacts the general control environment positively, thereby driving the way towards an improved audit outcome.
2. The level of non-compliance in terms of the municipality’s SCM policy is at an unacceptably high level. This has been reported for a number of financial years and leadership has not instituted any constructive interventions to correct this situation.
3. The organogram has not been fully filled and key skills shortages still exist in core and non-core services. Although extensive use has been made, and is continued to be made, of consultants, specifically in the areas of financial management and reporting, no noticeable skills transfer has occurred to improve the capacity of staff in the municipality.
4. The municipality has not established a performance culture amongst all staff. Only directors are subject to performance assessments. Officials falling under director level are not subjected to performance assessments relative to their assigned roles and responsibilities.
5. In addition to SCM compliance, leadership has not entrenched a compliance and performance culture. Leadership has not demonstrated a zero tolerance stance towards non-compliance, specifically where non-compliance has led to irregular expenditure.
6. Consequence management has not been applied consistently to all officials flouting laws and regulations.

  

2.3 National and provincial departments of Cooperative Governance and Traditional Affairs

During the hearing held on 6 June 2017, the Committee had requested stakeholders to support the ORTDM in acquiring the requisite technical and project management skills and expenditure reconciliation; readiness for the 2017/18 financial year and compliance with the MIG requirements. Subsequently, the national Department of Cooperative Governance and Traditional Affairs (Cogta), in collaboration with the Eastern Cape Provincial Department of Cooperative Governance and Traditional Affairs (Cogta-EC), National and Provincial Treasuries and the ORTDM had scheduled a series of engagements to reconcile the municipal 2016/17 MIG performance for both infrastructure projects and project management-related costs. The verification included training the ORTDM on the project management reporting system; that is the MIG-management information system.

 

During 2017/18, Cogta and National Treasury transferred 53 percent of the MIG allocation (R345 million) as part of support in dealing with all the projects that had stalled after the stopping process was implemented. This was to ensure that the ORTDM had reasonable funding to accommodate the R90 million shortfall and the new programme funding for the 2017/18 financial year.  Between 15 June 2017 and 26 June 2018, six bilateral meetings were held with the top management of the ORTDM to assess project readiness, which included registration, procurement, and site visits. Accounting treatment of MIG-funded sanitation facilities was also among the issues discussed at the National Treasury mid-year budget review in February 2018.

 

In addition to the support mentioned above, MISA had initiated a management support programme known as Regional Management Support Contract (RMSC). This programme was designed to empower municipalities to create changes within their systems, processes, human resources, governance, financial management, infrastructure and service delivery; which they would continue implementing and managing themselves after the support contract was finished. The programme comprised of three phases - Start-Up (Diagnostic) Phase; Turnaround Strategy and Turnaround Action Plan Design and Approval Phase; and Implementation Phase. MISA had completed Phase 1 through a Professional Service Provider - EOH Mthombo (Pty) Ltd.

 

For the 2018/19 financial year, the ORTDM intended implementing 47 projects of which 24 projects were for sanitation services and 23 for water services. The project status of the ORTDM indicated that as at the end of April 2018 (implementation plan) 21 of these projects were in the construction stage; 14 in the design stage; and 12 were in the tender stage.

 

With regard to intergovernmental support, the Cogta-EC and national Cogta, in partnership with the Provincial Treasury, were rolling out councillor training on the 2018 Division of Revenue Act (DORA) and the ORTDM’s training had been planned for 27 June 2018 and had been rescheduled to 8 August 2018.  The purpose of the training was to orientate the Councillors on the DORA and Conditional Framework requirements and to assist them to understand their roles and responsibilities.

 

With regard to value for money, Cogta reported that the policy making and regulatory functions of each of the national and provincial departments responsible for municipal infrastructure, remained intact. Provincial departments responsible for local government must monitor project implementation in collaboration with sectors and submit site visit reports to Cogta. MIG management at municipal level must occur within the planning, budgeting, financial management and operational arrangements of the municipality. Effective management and utilisation of capital funding fell within the responsibility of the municipal manager. National government, through the MIG programme, assisted municipalities in the development of appropriate capital programme management capacity, typically achieved through the establishment of project management units (PMUs) within municipalities. The DORA framework made provision for a maximum of 5 percent of a municipality’s MIG allocation to be used for project management costs that directly relate to infrastructure projects and only if the business plan was approved. The Department indicated that the ORTDM’s project management unit comprised of a PMU Manager, responsible for overall project administration; 12 Project Managers; 10 social facilitators or community liaison officers; and seven finance practitioners. However, six occupational health and safety positions, as well as three data capturing positions remained vacant.

 

Cogta reported the following challenges experienced by the ORTDM in the implementation of the MIG, followed by proposed mitigating actions:

• There was misalignment of bulk water provision and reticulation. Backlogs in water provision were mainly on the reticulation to households or to closest point of drawing water. There were huge infrastructure backlogs in the district - 55 percent on water and 60 percent on sanitation of the total households amounting to 314,080.

A programme to accelerate the provision of reticulation needed to be devised and implemented.

• The ORTDM would not be able to meet the Medium Term Strategic Framework (MTSF) target of 90 percent delivery of reliable water services.

A differentiated approach to planning and implementation of projects was needed to accelerate the delivery of infrastructure.

• Infrastructure installed on the existing schemes get vandalised upon completion.

The ORTDM must implement measures to secure and protect the infrastructure.

• The vastness and quantum of projects made the monitoring of projects difficult.

   The Department of Water and Sanitation and Cogta-EC should deploy more capacity to intensify the monitoring of projects.

• There was poor operation and maintenance of existing water and sewer infrastructure.

   Proper asset management and budgeting for operation and maintenance were needed.

• The PMU needed to be optimally utilised for project management and over-reliance on service providers should be avoided.

 

2.4 Oliver Reginald Tambo District Municipality

The O.R. Tambo District Municipality (ORTDM) provided an overview of its geographical distinction, population, and rural-subsistence economy relying on agriculture. In addition, the ORTDM explained that it comprised of five local municipalities, i.e. King Sabata Dalindyebo, Mhlontlo, Nyandeni, Port St Johns, and Ingquza Hill. On the provision of water, the ORTDM reported that it had been a Water Service Authority and Water Service Provider since 2003. Only 47.3 percent of the ORTDM population (141 453) has access to above-minimum service levels (piped tap water inside households, piped tap water inside yard, piped tap water on community stands within a distance of less than 200 metres from households). Those with access to below-minimum service levels were reported to be 52.7 percent of the population (157 320), and 28.2 percent of the population (84 139) have no access to piped tape water. The ORTDM emphasised that its primary focus was to implement water services projects in order to address the backlogs and improve the socio-economic environment of the district.

 

With respect to governance matters, the ORTDM reported that it was implementing a separation of powers model which emphasised the oversight of the Council over the Executive and Administration. The ORTDM added that an embedded performance management system, which gave effect to legislative requirements governing local government was in place. Reported examples were Chapter 6 of the Municipal Systems Act 32 of 2000 and Sections 52(1)(d), s71 and s116(2)(d) of the Municipal Finance Act 56 of 2003. It is fundamental to note that the ORTDM reports directly to the National Treasury as a non-delegated municipality and was participating at various National Treasury oversight activities such as the Budget Benchmarking Exercise. The ORTDM confirmed that for the past three financial years it received qualified audit opinions from the Auditor-General of South Africa.

 

On the Municipal Infrastructure Grant (MIG) allocation and expenditure, the ORTDM reported that in the 2017/18 financial year, it had spent all of the allocated amount of R645 million. The essential objective of MIG is to provide a basic level of services to the communities and it was also intended to provide social infrastructure to redress backlogs. The ORTDM reported the following list of MIG projects:

Table 1: ORTDM Municipal Infrastructure Grant Projects

Project Name	Award amount	Expenditure	Scope of work	Construction period	Implementing Agent, Consultant & Contractor	Progress
Projects in King Sabata Dalindyebo Municipality area
P037 Coffee Bay Regional Water Supply Scheme	R202 m	R202 m	Construction of storage reservoir, Bulk Distribution Mains, Break pressure Tanks, Reticulation network	13/05/2014 t0 31/08/2018	Amatola Water, Aurecom & Umso Construction	99% Complete Mechanical & Engineering outstanding
Upper Mhlahlane Regional Water Supply	R13.9m	R13.6m	Construction of 1 mega litter reservoir, Bulk main and reticulation	27/03/2013 to 12/01/2018	OR Tambo DM, Gibb Consulting engineers & Sakhe Construction	100% complete
Upper Mhlahlane Regional Water Supply	R5m	R5m	Mechanical and electrical (Pump house)	18/06/2013to 31/07/2018	OR Tambo DM, Gibb Consulting Engineers & RJN Projects	96% c
Upper Mhlahlane Regional Water Supply	R14m	R13m	Upgrading of existing water treatment works to 3.2 mega litres per day capacity, and construction of relevant reservoir, bulk infrastructure	04/11/2013 to 31/07/2018	Gibb Consulting Engineers & Anix Trading 129 CC	99% complete
Upper Mhlahlane Regional Water Supply Phase 3A	R24.4m	R24.3m	Construction of Bulk Main, reticulation, 2 Mega litres Reservoir	28/07/2015to 31/07/2018	OR Tambo DM, Gibb Consulting Engineers & Anix Tradding 129 cc	98% complete
Upper Mhlahlane Regional Water Supply Phase 3C	R18.4m	R18.4m	Construction of Mpeko Bulk Gravity and Mega Litre Reservoir	28/07/2015 to 29/09/2017	OR Tambo DM, Gibb Consulting Engineers & Mnadi Civil JV Phumi	100% complete
Upper Mhlahlane Regional Water Supply Phase 3D	R9.7 m	R9.7 m	Construction of DN 160 pumping Main from Tabase to kwaDlomo I Mega Litres Reservoir	28/07/2015 to 31/01/2018	OR Tambo DM, Gibb Consulting Engineers & Ludumo Trading	100% complete
P051 Mqanduli Bulk Sewer	R16.3 m	R14.5 m	Construction of Waste Water Treatment Works, Bulk Sewer and Toilet Structures	22/02/2014 to Completion date To be decided	OR Tambo DM, Camdekom & Nangamso	90% complete. Challenge was to get servitude of the pipe line passing through a private farm. Negotiation are underway to compensate the farm owner with land adjacent to the farm
P051 Mqanduli Sewer Reticulation and Watste Water Treatment Works: Phase2	R16.3 m	R15.2 m	Construction of sewer reticulation, supply and installation of Un-Plasticized Polyvinyl Chloride pipes, Construction and connection of 414 new waterbone toilet structures	14/02/2014 – Completion date To be decided To be decided	OR Tambo DM, Camdekom & Anix Trading	83% due to land claim issues.
Completion of 13km DN250 GRP pipelines to kuGxwalibomvu & Mahlahini in Mqanduli	R28.2 m	R5.5 m	Completion of 13km DN250 GRP pipelines to kuGxwalibomvu & Mahlahini	June 2018 to February 2019	Amatola Water, Gibb & Mvezo JV Governer	20%. Previous contractor terminated and new contractor appointed
P039 Libode & Ngqeleni Corridor Bulk Water Supply Scheme	R36.5m	R21.6m	Construction of 6.8 DN 300 GRP- Ngqeleni gravity main	29/08/2016 to 17/10/2018	Amatola Water, Gibb & Mvezo governer	90% complete
P039 Libode & Ngqeleni Corridor Bulk Water Supply Scheme	R36.8m	R10.3m	Construction of 5.3km DN400 Steel Misty Mount Rising Main (SV0 – SV5300)	13/03/2017 to 16/12/2018	Amatola Water, Gibb & Lihlenathi	38% Complete. Works were suspended fpr months due to drowning of Children and this caused huge delay. Letter of non-performance has been issued to the contractor and instructed to increase resources on site to catch up with the program
P039 Libode & Ngqeleni Corridor Bulk Water Supply Scheme	R35 m	R21 m	Construction of 5.4km DN400 steel Misty Mount Rising main (Sv5300 – SVv10700)	06/03/2017 to 16/12/2018	Amatola Water, Gibb & MIS Pipeline	60% complete
P039 Libode & Ngqeleni Corridor Bulk Water Supply Scheme	R16.3m	R10.8m	Construction of 1 Mega Litres Lalini Reservoir and Pump station	24/04/2017 to 15/12/2018	Amatola Water, Gibb & Choloza	50% complete. Contractor experienced cashflow challenges and there was slow progress on site
P039 Libode & Ngqeleni Corridor Bulk Water Supply Scheme	R25.4m	R15.2m	Construction  of 10 Mega Litres Polini Reservoir	13/09/2018 to 16/10/2018	Amatola Water, Gibb & Mpumalanga Construction	51% Complete
P039 Libode & Ngqeleni Corridor Bulk Water Supply Scheme	R32.4m	R0	Construction of 5.5km DN300 GRP Mdoni Gravity Main	24/06/2018 to 15/06/2019	Gibb & Anix	0% preogress due to project initiation delays
P039 Libode & Ngqeleni Corridor Bulk Water Supply Scheme	R29.7m	R8.5m	Construction of 5,5km DN300 GRP Mdoni Gravity Main	01/01/2017 to 15/06/2019	Amatola water, Gibb and Anix	40%
P039 Libode & Ngqeleni Corridor Bulk water Supply Scheme	R26m	R21m	Construction of 5,6km DN300 GRP Polini Rising Main	13/07/2016 to 15/06/2019	Amatole Water, Gibb & Anix	65% complete, cashflow problems
P039 Libode & Ngqeleni Corridor Bulk Water Supply Scheme	R27.8m	R25m	Construction of 1,5 Mega Litres Engqeleni reservoir, I Mega Litre Mdoni Reservoir & Pump station	29/08/2016 to 28/09/2018	Amatola Water, Gibb and Mazangwa	99% complete
P039 Libode and Ngqeleni Coeeidor Bulk Water Supply	R39.4 m	R12.9 m	Construction of 5,4km GRP Gravity Main	22/08/2017 to 22/10/2018	Amatola Water, Gibb and Overland	55% with delays on supply of GRP500 diameter pipe fittings
Nyandeni Ward 117A Sanitaion	R9.8m	R9.8m	Construction of 1381 VIP Unit Toilets	13/05/2014 to 20/11/2017	OR Tambo DM, In0House & Makhathini Projects	100%
Nyandeni Ward 19 Sanitation	R7.7m	R7.7m	Construction of 771 VIP Unit Toilets	14/03/2017 to 18/07/2017	OR Tambo DM, Mandleni, Mnandi	100%
Nyandeni Ward 2A Sanitation	R6.6m	R2.5m	Construction of 600 VIP Unit Toilets	17/05/2018 to 17/11/2018	OR Tambo DM, Zizame & Consulting Engineers	83%
Nyandeni Ward 28(14) Sanitation	R7,6m	R3,7m	Construction of 750 VIP Unit Toilets	04/05/2018 to 04/09/2018	OR Tambo DM, Ziizame Consulting Engineers	80%
Nyandeni Ward 4A	R4m	R3.5m	Construction of 353 VIP Unit Toilets	11/04/2018 to 11/07/2018	OR Tambo DM, Gaba Consultants & Sosk	100% complet
Nyandeni Ward 48	R4m	R3.4m	Construction of 353 VIP Unit Toilets	11/04/2018 to 30/07/2018	OR Tambo DM, Gaba Consultants, Sosk	100%
P050 Libode Waste Water Treatment Works: Sewers into Waterborne System	R45.3m	R14,2m	Construction of inlet works, settling tank, Humus tanks, Sludge drying beds	29/01/2018 to 12/02/2019	OR Tambo DM, Element Consulting & Thubalam Trading	25% due to community land dispute. Contractor is back on site
Projects in Mhlontlo Local Municipality Area
P041 Mangxamfu Water Supply Phase 2	R17,2m	R16,2m	Construction of storage Reservoirs, Bulk distribution mains and Reticulation lines	30/04/2018 to 31/08/2018	OR Tambo DM, Thuso Development Agency & Kwalos	98% complete. Underperforming Reservoir subcontractor was terminated
P041 Mangxamfu Water Supply Phase 3	R18.7m	R17m	Construction of concrete weir, Storage Reservoirs, Bulk distribution mains and Reticulation lines and Pump Station	30/04/2016 to 31/08/2018	OR Tambo DM, Thuso Development Agency, Bitline	98% complete. Underperforming Reservoir subcontractor’s contract was terminated and a new contractor has been appointed
P110 Ntabasigogo Phase 3 Water Supply	R7.5m	R6.6m	Construction of Storage Reservoirs, Bulk Distribution mains and reticulation lines	26/05/2015 to 31/08/2018	OR Tambo DM, Beacon & Sosk	97% complete. Project was delayed due to budget adjustments
Mhlontlo Ward 2 Sanitation	R7,5m	R2,7m	Construction of 530 VIP Toilets	16/04/2018 to 16/08/2018	OR Tambo DM, In-House & Bitline SA 1060 CC	19% complete. Slow progress due to scattered villages
P048 Tsolo Waste Water Treatment Works	R74m	R43.6m	Bioreactor, 2 Sedimentation tanks, Chlorination tank, Pipe Works, Operators House, Access road	12/08/2016 to 30/04/2019	OR Tambo DM, Uhambiso, & L&P Construction	83 % complete
P049 Tsolo Waste Water Treatment Works and Raw water pump station:  Phase 2	R68,9m	R66,5m	Construction of inlet works, Sludge drying beds, emergency ponds, Palisade fencing, operators room and access road	12/08/2016 to 31/08/2018	OR Tambo DM, Uhambiso, & Zanamanzi services	99% complete, additional work has been assigned to the contractor
Projects in Port St Johns Local Municipality Area
P042 Port StJohns Regional water Supply Scheme Phase 5	R31,9m	R12,6m	Construction of abstraction tower, completion of pump stations and connections	15/12/2017 to 26/12/2019	OR Tambo DM, Thuso Development Agency, Tipp Con	25% completion. Contractor was unable to commence with the works due to high tide
PSJ Ward 1A Sanitation	R9.6m	R9.4m	Construction of 849 VIP Unit Toilets	14/04/2016 to 05/09/2017	OR Tambo DM, BM Consulting, Mbesi Consulting	100% completed
Port St Johns Ward 1B Sanitation	R9,5m	R8,8m	Construction of 849 VIP Unit Toilets	22/04/2016 to 15/07/2017	OR Tambo DM, BM Consulting, & Excellence at Work	100% completed
Port St Johns Ward 11A Sanitation	R6,5m	R6,5m	Construction of 660 VIP Unit Toilets	20/04/2017 to 15/12/2017	OR Tambo DM, BM Consulting, & Corpclo 1189 CC	100% complete
Port St Johns ward 11B Sanitation	R7,5m	R7,5m	Construction of 661 VIP Unit Toilets	18/04/2017 to 31/08/2017	OR Tambo DM, Beacon Consulting, & Igorha Construction	100% Completed
Port St Johns Ward 11C Sanitation	R7,5m	R7,5m	Construction of 661 VIP Unit Toilets	18/04/2017 to 31/08/2017	OR Tambo DM, Beacon Consulting, & Bitline SA 1060 CC	100% complete
Port St Johns 11C Sanitation	R6,6m	R6,4m	Construction of 661 VIP Unit Toilets	22/08/2017 to 15/12/2017	OR Tambo DM, Beacon Consulting, & Bitline SA 1060 CC	100% Completed
Projects in Ingquza Hill Local Municipality Area
Flagstaff Regional Water Scheme: Phase 3 ORTM CMU 20/11/12 B	R23,9m	R22,2m	Construction of Storage Reservoirs, Booster Pump, Bulk Water supply pipelines and Reticulation	21/08/2012 to 20/11/2017	O.R. Tambo DM, Thuso Development, Inyameko Trading/ Radee	99% completed. Company owner deceased. Outstanding work is testing and commissioning
Flagstaff Regional Water scheme-Phase 2 ORTM CMU 20/11/12 ME	R37,4m	R33,9m	Mechanical & Electrical Phase 1	04/12/2012 to 31/08/2018	OR Tambo DM, Thuso Development, KSB Pumps	99% completed. Eskom delays in connecting the sites. Pipe leaks in the pipe line at various points on the system.
Flagstaff Regional Water Scheme Phase 3A	R23m	R21,7m	Construction of Storage Reservoirs, Bulk Water Supply pipelines and Reticulation	03/02/2016 to 31/08/2018	OR Tambo DM, Thuso Development, Ludumo	97% complete. Eskom delays in connecting the sites
Flagstaff Regional Water Scheme Phase 3D1	R17m	R14,9m	Construction of Storage Reservoirs, Bulk Water supply pipelines and Reticulation	01/03/2016 to 31/08/2018	OR Tambo DM, Thuso Development, & Raddee	96% complete. Eskom delays in connecting the sites.
Flagstaff Regional Water Scheme Phase 3D2	R9,8m	R9,5m	Construction of Storage reservoirs, Bulk Water supply pipelines & Reticulation	01/03/2016 to 30/04/2017	OR Tambo DM, Thuso development, & LNP Construction	100% completed
Ingquza Ward 3A Sanitation	R5.6m	R5,6m	C0nstruction of 5011 VIP Unit Toilets	14/03/2017 to 28/11/2017	OR Tambo DM, In-House, & Sosk	100% completed.
Ingquza Ward 3B Sanitation	R4,8m	R4,8m	Construction of 501 VIP Unit Toilets	14/03/2017 to 28/11/2017	OR Tambo DM, In-House, & Eyethu	100%
Ingquza Ward 19A Sanitation	R7,8m	R5,8m	Construction of 815 VIP Unit Toilets	20/03/2018 to 20/08/2018	OR Tambo DM, In-House, & Boboshe Trading	78% completed
P046 Flagstaff Bulk Sewer	R39,4m	R15,2m	Construction of Outfall Sewer, Pump Station and Pumping Main	28/01/2018 to 01/06/2019	OR Tambo DM, Sontinga, & Egxeni	12% Completed. Community from Ward 7 was preventing the Main contractor from commencing works on the treatment plant
P114 Lusikisiki Waste Water Treatment Works	R25,7m	R25,5m	Construction of Treatment Plant: i.e. Inlet Works, Sewage distribution chamber, Biological Reactor, Settling Tank, Drying Beds, Sludge Pumping Station, Administration and Control House	01/11/2013 to 21/06/2018	OR Tambo DM, Hatch Goba, & Anixx Trading	100% completed

 

With respect to socio-economic impact, the ORTDM reported that in the process of implementing MIG projects, local contractors are utilised and they are encouraged to comply with the 30 percent Sub-Contracting Regulation. In addition to that, the ORTDM reported that after due process was followed, the Integrated Development Plan (IDP) was approved in May 2017. The IDP complied with the Municipal Systems Act which requires annual review of the IDP taking into consideration changes and circumstances that would have been experienced during each year of its implementation.

 

With regard to project management challenges, the ORTDM reported that some contractors encountered cash flow challenges during the implementation of projects and this resulted in completion delays in some projects. Other projects were blocked and/or delayed for several years due to land claim cases and slow or none electricity connections to project sites by Eskom. Some projects required variation orders during implementation due to additional community demands during the implementation process. ORTDM added that there was a shortage of funding for linking primary bulk and secondary to reticulation. The ORTDM further reported that its infrastructure was dilapidated and as a consequence it was losing a lot of water, at times there are interruptions of services, including sewer spillages. Over and above that, the ORTDM reported that there were reverse backlogs due to failing infrastructure, illegal and unauthorised connections, drying sources and full pit latrine toilets.      

 

1. INSPECTIONS IN LOCO

3.1 Projects in Mhlontlo Local Municipality Area

3.1.1 Mangxamfu Water Supply Scheme

This project is located in Wards 10, 11 and 12 of the Mhlontlo Local Municipality, and a total of 10 villages, comprising of 632 households are expected to benefit from the scheme. The project is divided between two contractors (Bitline and Kwalo’s Construction) and consists of the construction of pump mains; pump stations; bulk gravity pipelines and village reticulation. Construction started in July 2015, but the project encountered several challenges, including cash flow issues which halted progress and necessitated the appointment of a sub-contractor to complete the works. The projected completion date is now the end of September 2018. The amount approved for this project is R39.8 million, with the accumulated expenditure to date standing at R35.3 million.

 

The Committee was taken to view a spring collection point, a pump station and reservoirs located along the water reticulation network. The spring structure was small, given the scale of the project, raising concerns whether the spring collection point held sufficient capacity to provide water to the 10 villages. To this, the ORTDM explained that it had not taken into account times of drought when the project started. The spring collection point was also not completely fenced to prevent people and animals from entering; which could lead to contamination of the water as well as loss of life. The pump station is operated using diesel generators, as currently there is no electricity supply. The ORTDM indicated that discussions are still ongoing with Eskom regarding the supply of electricity. It was also reported that the pump station had been vandalised and diesel generator stolen. Because the project is still underway, the contractor was liable to replace the diesel generator and secure the pump station.

 

 

The Committee was shown two reservoirs that formed part of the reticulation network. There appeared to be no standard material to be used to construct the reservoirs as the first reservoir was constructed using prefabricated material and with metal sheeting, while the second reservoir, which was still under construction, was comprised of cement-casted blocks. Members expressed concern about the quality of the workmanship of the reservoirs, as it appeared shoddy with a number of holes and patches observed.

 

The ORTDM reported that 82 direct construction jobs had been created by this project. The Committee engaged the labourers working on the project. The labourers reported that payment for work had not been received, in some instances the full amount due was not paid and the number of labour days was reduced. The project manager and contractor indicated to the Committee that they had not received any communication regarding any labour disputes on the site prior to the project site visit.

 

The Committee requested a detailed breakdown of the R35.3 million spent to date, as there were doubts as to whether there had been value for money. The ORTDM further undertook to provide more information about the local labour used.  By the time of the writing of this Report, a breakdown of the 82 jobs (60 males, of which 35 youth and 22 females of which 15 youth) had been received, but no detailed breakdown of expenditure had been submitted.

 

1. Tsolo Waste Water Treatment Works

This project is located in Ward 6 of the Mhlontlo Local Municipality and is set to benefit the town of Tsolo; surrounding smallholdings; the future development at Tsolo Junction and the local hospital. Once completed, the plant will use a process known as “activated sludge” and have a capacity of 1.2 mega litres per day. The project is divided between two contractors (Zana-Manzi Construction and Lihle Nathi Property) and consists of palisade fencing; inlet works; sludge drying beds; pond construction; internal access roads; a bio-reactor; sedimentation tanks; a chlorination facility; control buildings and site works. Four local sub-contractors had been used, amounting to R4.2 million and 86 direct project construction jobs had been created, with R3.9 million spent on labour. The contract also allowed for the training of plant operators, with between six and twelve to be stationed at the plant after completion.  A total of R152.6 million had been approved for this project and the expenditure to date amounted to R110 million. The project was originally approved in 2012, but was suspended due to a land dispute. Construction started in August 2016, with the civil and structural work expected to be completed by November 2018, and the final completion date, including the mechanical and electrical work, expected to be April 2019. It was reported that the one contractor had completed its original scope of works and were busy doing additional works, which were covered by the project savings, and thus still within budget. The other contract was progressing very slowly due to cash flow problems and was at 83 percent completion of the original scope of works, with the contract being under penalties. 

During the site inspection, good workmanship with regard to the quality of the wastewater plant infrastructure was observed.

 

3.2 Projects in Nyandeni Local Municipality Area

3.2.1 Libode Waste Water Treatment Works Phase 1A

This project is located in Ward 7 of the Nyandeni Local Municipality and is expected to benefit Libode town and provide sewer connections to 787 households, comprising of 4 721 people. The project scope included construction of inlet works, primary settling tanks, recirculation pump station, bio-filters, intermediate tanks, humus tanks, chlorination, flow splitter box, sludge drying beds, supernatant, interconnecting, bio-filter tower, electrical works, control room and a generator. At the time of the visit, the project was under construction and the projected cost to complete was R45.3 million. A total of 15 people were employed at the projects site and the project schedule was from 29 January 2018 to 12 March 2019. At the time of the visit, the construction progress was at 20 percent with expenditure of R14.2 million. The challenges experienced related to a land claim by the Mdlankomo-Moyeni community, under the leadership of Chief Jongintaba, which resulted in work stoppage between 14 March 2018 to 17 April 2018.

 

When the Committee visited the Libode Waste Water Treatment Works, there was an unresolved dispute over the land the project was being constructed on. The ORTDM reported that when the project was planned, the Nyandeni Local Municipality claimed ownership of the piece of land and its Council re-zoned the land for sewer plant construction. The Mdlankomo-Moyeni community attempted to interdict the project, and the contractor was forced to backfill all trenches already dug, However, the case was struck off the roll in the High Court. At the time the Environmental Impact Assessment (EIA) and Integrated Development Plan (IDP) had been conducted. Chief Jongintaba confirmed that the piece of land where the Libode Waste Water Treatment Works was being constructed was handed over to the community by the Minister of Land Reform in 2006, and the community was still expecting the Title Deed which will be handed over to the Mdlankomo-Moyeni Community Property Association. As such the community had demarcated plots around the project to such an extent that some are directly adjacent to the project. The Committee expressed concern over the health and pollution challenges this would pose, and it was not clear how the ORTDM planned to address this concern. The Nyandeni Local Municipality and the affected villages were communicating but there was no settlement even though the construction was proceeding. The local people from the affected villages were part of the workforce of the project, that was reported to be some sort of compensation by the ORTDM. Again, pricing for the project was found too low and this might be further exacerbated by price escalations. This was seen as an indication that there is poor project design as well as poor supply chain management processes.

 

3.2.2 Nyandeni Ward 4 Sanitation

This project, which covered Marubeni and Mbobeleni Administrative Areas, was for the construction of 706 VIP toilets (Marubeni: 3 611; Mdina: 66; Mcwili: 48; Mbobeleni: 27; Dungu: 33; Ezinkumini: 66; Mhlanga: 89; and Makhotyana: 46). The overall financial allocation for the project was R8 million, and at the time of the visit the expenditure was at R7 million. The project team included Sosk Civils (Contractor) and Gaba Consulting (Technical Consultant), they were expected to implement the project from 11 April 2018 to 11 July 2018. However, the project completion date was revised to 31 July 2018 because the Ward Councillor had requested that an additional 150 VIP units be constructed. At the time of the oversight visit the original project was completed, with the contractor attending to the snags and the practical handover yet to be scheduled; and 30 of the additional 150 VIP units had been constructed, funded from the 5 percent contingency fee. The ORTDM indicated that it would apply for additional funding. The need for an additional 150 VIP toilet units is an indication that projections at the planning stage were inaccurate.

 

The overall number of jobs created was reportedly 475. It was further reported to the Committee that the Council had resolved that the VIP toilets should have pre-cast top structures. The size of the pit was reported to be 1.8 metre by 1.2 metres deep before construction of the pit and 1.5 metres by 1.2 metres deep after construction. The VIP units viewed on the site inspection were single pit latrines. An official from Cogta indicated that the single VIP latrines were in contravention of the Department of Water and Sanitation regulation requiring that all VIP units have double pit latrines and a wash basin attached on the outside of the unit. The project manager indicated that the ORTDM was not aware of this regulation. This raises concern as to the role of the Department of Water and Sanitation in the business planning of this sanitation project.

 

In total each VIP toilet costs R10 500. It was reported that the top structures were ordered from a Durban company at the cost of R4 000 including transportation, but were assembled by local labour.   

 

3.2.3 Libode-Ngqeleni Corridor Project

(a) KSD PI Bulk Water Package 6: Libode Corridor

This project entailed the construction of bulk water infrastructure to supply the Libode Corridor at an estimated cost of R127 million. The accumulated expenditure at the time of the visit was R53 million. The scope of the project included construction of (i) 5.2 kilometre of 500 millimetres dia gravity main connection from Mayden Farm to Lalini, which was reported to be 60 percent completed at the time of the visit (contractor: Overland); (ii) 1 mega litre Lalini Reservoir and pump station , which was 75 percent complete (contractor: Choloza); (iii) 5,4 km of 400mm dia rising main from Lalini pump station to 10 mega litre Misty Mount Reservoir, which was 27 percent complete (contractor: Lihlenathi); and (iv) 5,4km of 400mm diametre rising from Lalini pump station to 10 mega litres Misty Mount Reservoir, which was 66 percent complete (contractor: MIS). The overall project progress was at 56 percent completion. At the time of the visit, the project was under construction and was expected to create 114 jobs by the time of completion. On site there were 25 local labourers (11 male youth, eight female youth, four male adults, and four female adults). The project was scheduled to be constructed from March 2017 to July 2019. The project challenges were reported to be poor performance due to cash flow problems in the Lihlenathi and Choloza contracts. Also there was late delivery of steel pipes which delayed the contracts.

 

The Committee conducted an inspection of the project and interacted with local labourers who expressed satisfaction over the benefits they were receiving and the future spinoffs for their communities. This project was meant to provide additional water services to Libode town due to a new housing development. The project line begins from Mthatha Dam all the way to Libode. The Committee noticed that the projects did not have local sub-contractors appointed in terms of the 30 percent Regulation for MIG projects, which demands that there should be skills transfer and supervision when there is a lack of capacity.

 

(b) KSD PI Bulk Water Package 7: Ngqeleni Corridor

This project entailed the construction of bulk water infrastructure to supply the Ngqeleni Corridor. The project scope included contracts for installing 5,5km of 300mm dia rising main Mdoni Gravity Main, which was 25 percent complete (contractor: Anix); 5.5km of 300mm dia rising main from Lalini Gravity Main to Mdoni booster pump station, which was 5 percent completed (contractor: Anix); 1 mega litres Reservoir and pump station in Mdoni and 1,5 mega litre Reservior in Ngqeleni constructed by Mazangwa, which was 99 percent completed, the remaining 1 percent to be used for testing; 5,6km of 300mm dia rising main from Polini Rising Main, which was 87 percent completed (contractor: Anix); 10 mega litres Reservoir in Polini, which was 66 percent completed (contractor: Mpumalanga); and 6,8km of 300mm dia gravity main from Polini Reservoir to Ngqeleni Reservoir, which was 91 percent complete and it constructed by Mvezo JV. The projected cost of the projects amounted to R178 million and at the time of the visit, the expenditure was R96 million. Overall the project was 62 percent completed. The project was scheduled to be done from July 2016 to May 2019 and was expected to create 102 jobs. With respect to challenges, the ORTDM reported poor performance by all contractors due to cash flow problems. Poor supply chain management processes are seen a reason for the municipality appointing contractors who do not have capacity to deliver.

 

This project was meant to benefit Ngqeleni Town, Canzibe Hospital and 23 villages of Ngqeleni. The labour force breakdown was reported to be 29 labourers to date, comprising of 12 male youths, nine male adults, four female youths and four female adults. In this project, the 30 percent Regulation for subcontractors for MIG projects was split between labourers (7 percent) and small medium and micro enterprises (23 percent). The 7 percent labour allocation was reported to have been R750 000 and R1.2 million was spent on payment of the SMME (subcontractors).  The Members expressed concerned that the identity of the main contractor was not known by the team accompanying the delegation, creating doubts as to whether the contractor met the broad-based black economic empowerment requirements.

 

3.3 Projects in King Sabata Dalindyebo Local Municipality Area

3.3.1 Coffee Bay Regional Water Supply

The aim of the project is to supply water to the KSD Local Municipality Wards 24 and 25. The implementing agent is Amatola Water; the contractor Umso Construction and the consultant, Aurecon. Once completed, the project is set to benefit 48 villages, comprising of around 4 700 households. The project was scheduled to commence in 2012, but a two-year litigation process regarding the awarding of the contract, meant that construction only commenced in 2014. Since then major delays have been experienced due to a lack of funding. The ORTDM indicated that its MIG funding was not sufficient to enable it to allocate the necessary amounts in each financial year to pay the service provider. The ORTDM reported further challenges, including delays by Eskom to install power; availability of treated water from the current treatment works; and expired notification of works. The original budget had amounted to R178 million, but the current budget to complete the project is R217 million, of which R211 million has been paid out. According to the ORTDM, the civil works were completed in May 2018, with the mechanical contract commencing in June 2018. Even though there was no labour on site during the time of the Committee’s visit, the ORTDM reported that a total of 1 547 local labourers had been employed at the project, 1 107 of whom was youth.

 

The local councillor present during the visit expressed concern regarding the proposed completion date and the delays caused by the non-payment of the contractor. After the Committee queried the cost breakdown in terms of value for money, the ORTDM indicated that the amount of R29 million for material procured, related only to material procured locally and that some materials had to be imported from overseas.

Members expressed doubts about some of the information that was provided, emphasising the importance of documents being presented being credible. The ORTDM undertook to provide the Committee with further clear and detailed information on expenditure, labour and training given, among other things. However, by the time of the drafting of this Report, detailed information about expenditure and training had not been received.

 

3.3.2 KSD Upper Mhlahlane Waste Water Treatement Works: Phase 3A

This project, to upgrade the existing waste water treatment works, is located in KSD Local Municpality’s Ward 15, covering Magontshini, KwaBhonga, Mafusini, Qolweni, Bhaziya, Waqu, Ezingcuka and Elubangweni villages. The project was reported to target 11 706 beneficiaries for all the villages, with 52 jobs created.  The project was meant to cost R22.6 million but was approved for R24.8 million. The variation order of R2.1 million was reported to have been approved. At the time of the visit, the expenditure was at R24.7 million. The upgrade included replacing the compressor filters with a more cost-effective system and increasing the electrical voltage to operate the pumps. It would also increase the capacity from the current 1.5 mega litres to 4.5 mega litres. The project scope included construction of a 1 mega litre concrete reservoir; 52km bulk main and reticulation pipeline; 170 community stand pipes; brick chambers and four river crossings. Extra work done included completion of a 600 kilo litre concrete reservoir and completion of a pump station. The project was awarded in July 2015, with an expected completion date of 29 May 2016, which was revised to 31 August 2018. The progress implementation was reported to be 98 percent complete, outstanding works included water tightness tests on reservoirs; pipe fittings around reservoirs; and electrical work.  The reported challenges included additional work and ordering of materials for Variation Order 1; and the contractor’s cash flow problems. The ORTDM was also delaying payments to the contractor and consultants, which was reported to have affected their cash-flows.  

 

In this project, like in almost all others, the Committee noticed that the contingency fees which were used to settle variation orders were incorporated and utilised in the total project costs. The retention fee was reported to be 5 percent of the value of the project.  In terms of major construction works, all civil work had been done when the Committee was there. 

 

1. GENERAL OBSERVATIONS

4.1 The poor and substandard reports of the project manager lend further evidence to the fact that construction sights are not visited regularly nor managed.

4.2 There is no evidence of skills development and continuity within the communities residing around these projects visited.

4.3 The Committee observed that the same consultants and contractors are being utilised on various projects, raising concerns about the SCM processes and possible fronting.

4.4 While the patterns of spending were found impressive it was however of concern to the Committee that monitoring and evaluation was not properly done to ensure value for the money spent.

4.5 The ORTDM has accumulated R680 million in outstanding debt and increasing accruals.

4.6 The Committee observed that the majority of the projects visited are characterised by variation orders, escalation in costs and that some  projects run over several financial years beyond the projected completion time.

4.7 Consultants are being employed and contracted at huge costs to the municipality without any clear indication of skills transfer to the locals.

4.8 The municipality was found not compliant with the regular reporting in terms of Sections 10 and 12 of the Division of Revenue Act of 2018.

4.9 The Auditor-General attested to the fact that no performance assessments are being conducted under Director level.

4.10 The Committee is concerned that SCM policies appear not to be complied with  and that consequence management is  not being implemented in instances where SCM policies  and regulations are being flouted.

4.11 The appointment of Amatola Water Board without following correct procurement processes is a matter that remains to be investigated.

4.12 The incorrect opening balances on financial statements was found misleading and the cause of material misstatements that is ongoing from year to year.

 

5. OBSERVATIONS ON SPECIFIC MATTERS

5.1 The Libode Waste Water Treatment Works Phase 1A was being constructed on a piece of land that the nearby Mdlankomo-Moyeni community, under the leadership of Chief Jongintaba, claimed was awarded to them through a land claim process. The Nyandeni Local Municipality and the community were communicating but there was no settlement even though the construction was proceeding.

5.2 The financial expenditure report submitted was impressive and all MIG funds were spent on the conditional grant related projects. However, when the Committee asked for a breakdown of expenditure reports of projects visited, the ORTDM officials, project consultants and contractors present were unable to provide concrete details such as SMMEs benefiting from the projects, the amount of funds spent on paying labourers, and funds spent on capacitating subcontractors.

5.3 The audit outcomes of the ORTDM remained stagnant at qualified for the past three financial years. ORTDM’s qualified audit opinions were due to recurring predetermined objectives such as submission of unusable and unreliable information to the AGSA since the 2014/15 financial year. In addition, over the same period, ORTDM appears to have failed to comply with some laws and regulations as pointed out by the AGSA. Over and above the audit outcomes, the Committee noted the specific issues pointed out by the AGSA which needed intervention. These include factors such as weak internal controls, leadership, financial and performance management, and governance within the ORTDM.

5.4 The ORTDM had incurred irregular expenditure which amounted to R995 million in the 2014/15 financial year, that increased to R1.1 billion in 2015/16; but was reduced in the 2016/17 financial year to R679 million. The Committee noted that the key contributing factors to the irregular expenditure in the ORTDM was inappropriate deviations; inappropriate use of Regulation 32; the preference point system not being applied to bids above R30 000; and the composition of the Bid Adjudication Committee not being in compliance with prescripts. The ORTDM also wrote off R2.5 billion of irregular expenditure even though there was still a balance of R2.8 billion of irregular expenditure which had not been investigated by the Council.

5.5 Application of the Variation Order approach, which appeared to be constant, was noted by the Committee in financial expenditure reports of the visited projects. When the Committee questioned this, the ORTDM officials could not provide concrete responses why it was normal to have variations in all projects whereas engineers and consultants including project managers had developed clear specifications for all projects.

5.6 The Committee observed that the resolution taken in the meeting of 6 June 2017, that National and Provincial Treasuries, Cogta and Cogta-EC should provide assistance to the ORTDM in the quest of acquiring requisite technical and project management skills and expenditure reconciliation specialists critical to ensure readiness and compliance with the submission of a credible 2017/18 financial year MIG expenditure report as required by the Municipal Finance Management Act; was complied with.

5.7 The Magxamfu project was behind schedule due to the exclusion of one village within the targeted wards. This led to community protest and project property destruction. Ultimately, the initial excluded village was added and the project construction was in progress with installation of underground pipes completed.

5.8 Magxamfu elders pleaded with the Committee that one of the community taps be relocated from close to the reservoir site to next to the households across the gravel. Another matter that was raised by community members was late payment and/or non-payment of labourers who were working on the project.

1. There was a lack of detailed financial expenditure information by ORTDM officials when asked for breakdowns of costs. The outstanding information required by the Committee has not been submitted yet.

5.10 The Tsolo Waste Water Treatment Works project impressed the Committee. The project structure and workmanship appeared to be of high quality. Once the plant is operational, the sludge/waste, after being dried on dry beds, will be given to the Tsolo Agricultural College to use as fertiliser.

5.11   The Members were concerned about the absence of the Executive Mayor as well as the participation of the municipal manager during the site visits. While the acting Mayor was present throughout, the municipal manager only appeared in the meeting on the first day.

5.12      During the meeting the municipal manager responded to questions very casually and openly contested the National Treasury and AGSA findings, instead of providing leadership in addressing issues raised. In his follow-up submission the municipal manager wrote referring to National Treasury and AGSA “The Management of the district municipality felt that the two institutions misrepresented the facts in the presentations / or some of the matters were out of context”.  The Committee found this unacceptable and this has potential to compromise the credibility of the two organs of state.

5.13 The attitude of the municipal manager is an indication that the Committee’s earlier recommendation in 2017 was never taken seriously. The Committee recommended in 2017 that “The OR Tambo District Municipality should ensure that officials responsible for the inaccurate reporting are held accountable for their poor performance. Within three months after the adoption of the report by the House the municipality must report to Parliament about steps taken”.

5.14      Despite the denial by the ORTDM of the accuracy of the figures presented by National Treasury and the AGSA, the Committee found that there was a lack of credibility in some of the information received from the ORTDM compared to what was observed during the site visits.

5.15 The Committee was also concerned with the effectiveness of the MPAC and relevant portfolio committees’ oversight role because the Committee found that there was no evidence of regular visits to projects by managers overseeing the projects.

5.16 The ORTDM seemed to have challenges with information sharing or communication of decisions of certain Council structures. This was evident when some of the local councillors were not even aware of the reports presented to the Committee.

5.17 A number of projects were delayed due to contractors experiencing cash flow challenges related to the ORTDM delaying the awarding of the contract long after the tender proposals was submitted.

 

5.18 It is not clear what role the Department of Water and Sanitation had in the approval of the ORTDM’s water and sanitation project plans, in light of the fact that the district was not aware of the regulation that all VIP sanitation must include double pit latrines and a washbasin.

 

 

 

 

1. RECOMMENDATIONS

6.1 Both the national Department of Cooperative Governance and Traditional Affairs and the Eastern Cape Department of Cooperative Governance and Traditional Affairs should support the municipality in developing action plans to address the audit findings within the municipality. The two departments should provide a report to the Committee within three months after the adoption of this Report by the House.

6.2 The district municipality must improve on its project planning and execution and IDP processes to avoid project delays due to poor planning and community disputes about the projects. The municipality should provide a progress report to the Committee within three months after the adoption of this Report by the House.

6.3 The OR Tambo District Municipality should, within three months after the adoption of this Report by the House, provide a clear action plan on how the municipality is going to implement the consequence management as recommended by the AGSA.

6.4 Within three months after the adoption of this Report by the House, the OR Tambo District Municipality should provide the Committee with an action plan on how the MPAC and portfolio committees will strengthen its oversight role, especially on project site monitoring.

6.5 The OR Tambo District Municipality should strengthen its communication strategies to ensure that decisions of Council structures are properly communicated to all the stakeholders concerned.

6.6 While the Committee has noted the improved grant spending, there is, however, a need for the municipality to improve on its projects design, implementation and monitoring to ensure value for the money spent. The national provincial departments of Cooperative Governance and Traditional Affairs should strengthen their support to the municipality in this regard.

6.7 The OR Tambo District Municipality should speed up the investigation of the questionable appointment of the Amatola Water Board without following correct procurement processes. The municipality should provide a progress report to the Committee within three months after the adoption of this Report by the House.

6.8 Within thirty days after the adoption of this Report by the House, the OR Tambo District Municipality must provide the Committee with written responses to the recommendations contained in the Committee Report dated 28 June 2017.

6.9 Both the National Treasury and the AGSA have Constitutional mandates and the findings of these institutions should be respected and implemented by all organs of state. The Eastern Cape Department of Cooperative Governance and Traditional Affairs should employ measures that will ensure that the senior management of the municipalities in the province respect and comply with the findings of both National Treasury and the AGSA.

6.10 Based on what was observed during the oversight visit - lack of value for money, significant escalation costs linked to variation orders and projects running years beyond the projected completion time – National Treasury and the Department of Cooperative Governance and Traditional Affairs should investigate whether the Municipal Infrastructure Grant funding is being spent for the intended purpose in the OR Tambo District Municipality.

6.11 Once lifestyle audits are being implemented as per the announcement of the President, such audits should be conducted in municipalities that have significant irregular expenditure.

 

Report to be considered.