ATC181106: Report of the Select Committee on Finance on the five metros of Nelson Mandela Bay, eThekwini, Buffalo City, City of Cape Town and Mangaung, dated 06 November 2018
Report of the Select Committee on Finance on the five metros of Nelson Mandela Bay, eThekwini, Buffalo City, City of Cape Town and Mangaung, dated 06 November 2018
The Select Committee on Finance had engagements with the National Treasury and the Executive Mayors of the five of the eight South African metros between August and September 2018, namely, Nelson Mandela Bay, Buffalo City, Mangaung, eThekwini and the City of Cape Town. The Committee has previously engaged the three Gauteng metros (the Cities of Tshwane, Johannesburg and Ekurhuleni) in August 2017.
The objective of the engagement was to assess efficiency, effectiveness and value for money in services delivered by the Metros, in line with the fiscal oversight role of the Committee. Engaging the Metropolitan Municipalities forms part of the Committee’s strategic goal of ensuring effective oversight over government finances to ensure responsiveness of the budgets to the needs of the people of South Africa.
The metros have an important role to play in stimulating economic growth of metro’s economic growth have been growing faster than the national economy. The metro’s are the engines of job creation and the economic activities, generating close to 60 per cent of the national Gross Domestic Product (GDP). StatsSA has shown that about 50 per cent of all employment created, formal and informal, was in the eight metros. About 60 per cent of South Africa’s population is also concentrated in the metros, due to their better economic performance.
The metros engaged by the Committee presented their socio economic contexts and progress made with implementation of their respective growth and development strategies; Built Environment Performance Plans (BEPPs); Integrated Development Plans (IDPs) and Local Economic Development (LEDs). More importantly, the Metros reported on their overall budget implementation. The National Treasury also presented progress in its continued assessment of the metros based on their financial positions; audit outcomes; service delivery performance and the Medium Term Revenue and Expenditure Frameworks (MTREF).
2.National Treasury’s assessment of metro’s performance in 2016/17
Table 1 below shows that South Africa’s eight Metros are in a fairly healthy financial position, however six of them, experienced a decline in cash for the financial year ending June 2016/17. On average, the metros performed at 96.2 per cent on the operating revenue and 96.8 per cent on the operating expenditure. The Buffalo City Metro’s cash and cash equivalents decreased in 2016/17 as compared to the previous financial year, while Nelson Mandela Bay Municipality’s cash and cash equivalents increased marginally in 2016/17. The Mangaung Metro and the City of Cape Town’s audit outcomes regressed while Buffalo City improved when compared to the previous financial year. The rest of the metros audit outcomes remained unchanged. All metros except for Nelson Mandela Bay and Mangaung, presented funded budgets for the MTREF period.
Table 1: Metros financial position as at year ending June 2017
Source: National Treasury
Table 2 below summarises the assessment done by the National Treasury on metro’s performances and the challenges encountered. The assessments covered the metro’s financial health; service delivery, governance and institutional capabilities. National Treasury found mixed results in that on overall financial health, only the City of Cape Town was stable, while the others were either going in the wrong direction or still fragile, despite some improvements. On institutional and governance matters, overall the metros are going in the right direction but Nelson Mandela and Mangaung Metros need to improve governance.
The most common matters impacting the metro’s audit opinions are material losses regarding water and electricity; material impairment of consumer debtors; irregular and unauthorised expenditure; non-compliance with Supply Chain Management (SCM) processes; ineffective political and administrative leadership; slow response in improving internal controls and addressing key risk areas as well as inadequate consequences for poor performance and transgression.
Service delivery associated risks included limited planning; SCM inefficiencies and poor asset management; lack of skills and capacity in the water departments; fiscal risks; impact of the drought on revenue where some municipalities experienced a decline in water revenue; decline of electricity revenue due to alternative energy sources; unfunded mandates and lack of consequence management for transgression made.
The most common reasons for under-performance included misalignment between departmental planning; contract management and SCM processes. Asset management remains a challenge that negatively impacts maintenance of existing infrastructure due to outdated infrastructure master plans.
Table 2: Summary assessment of Metros performance and challenges
Source: National Treasury
3.Presentation by the metros on their 2016/17 budget outcomes
3.1Nelson Mandela Bay Metro
Socio economic context
The Nelson Mandela Metro’s population size stood at 1.3 million, with a total of 365 973 households, 79 of which are informal settlements. About 30 per cent of households received at least one social grant. The rate of unemployment measured 34.3 per cent, however the metro provided 100 per cent access to water; electricity; waste collection and sanitation to formal households in the urban edge and on formally surveyed sites. The metro employed about 7000 people and operated at a total budget of R9.68 billion and a capital budget of R1.67 billion.
The Metro’s budget predominantly goes to the BEPP urban network strategy and the previously disadvantaged areas. The Municipal Council has approved an upgrading plan in December 2008 to eliminate 107 informal settlements. Progress to date includes upgrading of 52 informal settlements; developing 16 greenfield sites with full water and sanitation; creating 29 600 sites and reducing the buckets from 14 476 in 2016/17 to 7 098 in 2017/18.
The Metro is working hard on mutually reinforced planning alignment through the Intergovernmental Relations (IGR) processes. The Municipality remains committed to upholding the Constitution and Local Government Legislation through such endeavours.
The key issues that currently confront NMBM included severe drought, with dam levels currently at 18 per cent. Water and electricity losses remain unacceptably high but programmes of the Budget and the IDP are aimed at addressing these. Positive negotiations have yielded competitive electricity tariffs for industrial users. The unfunded mandates remain problematic in the metro, particularly libraries, roads and housing. The three audit qualifications of 2016/17 have been addressed. IGR remains a key challenge in the metro. Arrear debt is escalating fast and about 54 per cent of the that debt occurred from June 2017 to April 2018 resulting from the increasing debt for water services. This is attributable to the drought and punitive tariffs. Arrear debt for water service has grown to greater than R800 million as at end April 2018.
The Metro has aligned its IDP to the Budget and the BEPP. The Draft Second Edition of the 5-year IDP was tabled by the Council in March 2018 and approved for public participation. The final version of the IDP was adopted by Council at its meeting held on 30 May 2018. The IDP document is placed at strategic points for public access e.g. libraries and customer care centres. The IDP was sent to all relevant stakeholders and it is monitored through the Service Delivery and Budget Implementation Plan (SDBIP) on a quarterly basis. More methods would be used to allow participation during the IDP and Budget review process. The NMBM has conducted a Customer Satisfaction Survey in 2017/18 and will be conducting a further survey in 2018/19 which will enhance the IDP participation process. There will be more engagements with provincial and national government departments in future.
The metro’s total capital budget of R1.7 billion prioritises the informal settlements upgrading (14 per cent), municipal mayor projects (10 per cent); catalytic projects (3 per cent) and the rest of the budget prioritises investments in the rest of the metro. In the last financial year, about 100 per cent of the Urban Settlement Development Grant (USDG) has been spent and invoiced. To date, invoices totalling 97 per cent have been paid with the remaining 3 per cent to be paid shortly. This includes the original amount of R911 million and the additional R178 million received in March 2018. The emergency disaster grant was also received in March 2018.
The Metros financial position is improving. On 29 March 2018, Moody’s Investor Services published a credit opinion of the NMBM based on its recalibration of the South African National Rating scale. The rating assigned was Aaa.za based on the National Rating Scale (equivalent of Baa3 Stable on the Global Rating Scale), indicating an improvement as compared to the December 2017 rating. The rating took into account the NMBM’s solid financial performance and low debt levels, though it expects debt to increase modestly over the next three years. Continued fiscal consolidation has led to a robust financial performance and a comfortable liquidity position. The rating is also supported by a relatively large economic base, though it is concentrated on the automotive industry.
Assessment by National Treasury
According to the National Treasury’s assessment, economic growth in the Metro is the basis for all strategic planning around which the administrative processes can amalgamate. The IDP, BEPP, Spatial Development Framework (SDF) and the budget are aligned. The strategic planning and coordination of the IDP and Budget process is politically led; and all Directorates and relevant Portfolio Councilors are responsible for strategic planning. Table 2 above, further provides the areas that the Metro is doing well on, and those that still need to be addressed.
3.2City of Cape Town
Socio economic context
In 2017, Cape Town’s GDP stood at R445 billion and contributed 10 per cent to the national GDP. In the same year, GDP per capita was R106 839 in current rand terms, which was marginally higher than that of the Western Cape Province. The City’s top three economic sectors are finance, community services and trade.
The City of Cape Town has reported that its population is over 4.25 million and it would reach over 4.5 million by 2021. The challenge is that its ageing population might have significant implications on the economy.
In 2016, about 82 per cent of City’s households lived in formal dwellings (1 032 000), 11 per cent of households (145 000 households) lived in informal dwellings in informal settlements, and 6.1 per cent of households (77 000 households) lived in informal backyards. In 2016 the City of Cape Town was ranked second in South Africa, after the City of Johannesburg, with the highest household access to basic services (particularly piped water and refuse removal).
As of the second quarter of 2018, the City’s working age population was 2.8 million and employment stood at 1.6 million, representing the eighth consecutive quarter of employment growth. The broad unemployment rate measured 22.6 per cent in the second quarter of 2018. This was the lowest reported broad unemployment rate relative to other metros in the country.
The number of people living with HIV in the CCT in 2017 was estimated at 300 424, with a prevalence rate of 7.5 per cent, which was down from a prevalence rate of 18.9 per cent in 2015. The City’s residents who are registered for Antiretroviral Treatment (ART) at the City clinics continue to increase steadily. There has been a downward trend in TB cases since 2010. The decline suggests improvements in TB outcomes being achieved in recent years.
Crime statistics highlight a major challenge for the city and its residents. Compared to the rest of the country, the CCT continues to experience the highest contact crimes (murder, attempted murder, sexual crime and common assault crime) and robbery with aggravated circumstances. Gang violence is also a major challenge. The city’s high murder rate is closely linked to high levels of gang activity linked to the drug trade.
The City’s net cash flows have shown an overall year on year improvement due to higher than budgeted for operating income. The impact of the water programme on the working capital was less than anticipated, both in terms of the extent of expenditure employed as well as the drop in collection rates due to increased water tariffs.
Cost coverage ratio improved from 2.28 to 3.02, exceeding National Treasury’s maximum norm of 3 times. The City’s net cash flows have shown an overall year on year improvement due to savings and underspending incurred on operating costs. The City experienced positive growth in income levels higher than growth in expenditure year on year. Cash receipts exceeds income growth with 1.19 per cent year on year.
Gross debtors increased by 11.7 per cent whilst net debtors increased by 5.8 per cent year on year. Arrear debt to the value of R1.3 billion was written off during the year under review. The rates amounted to R120 million; Electricity R14 million; Sewerage R174 million; solid waste R63 million, housing R50 million and other category R55 million. Debtors with formal arrangements to pay arrear debt amounted to R819 million, down from R142 million in 2017. Cash impairment ratio worsened slightly from 91.84 per cent to 91.66 per cent. Impairment allocation ratio increased from 53.1 per cent to 56.1 per cent.
Assessment by National Treasury
In its assessment of the CCT’s alignment between planning, budgeting and reporting; the level of integrated intergovernmental planning; spatial planning, current programmes and budget formulation; and long term budget sustainability, the National Treasury has concluded that the CCT is financially sustainable; it has put measures in place to address the drought challenges through the implementation of the new water plan. It was further found that the budget is aligned to the spatial plans and there is clear indication of how the capital and operating budget are aligned to the key focus areas and transformational priorities. There is a need, however, of a robust discussion at national level on the urban rail challenges and possible public transport funding proposals within the limited resources.
Socio economic context
The Mangaung metro was established in 2000 as Category B local municipality. It is the smallest of metros, with 771 731 people. The population growth rate was 1.47 per cent between 2001 and 2011. The expanded unemployment rate stood at 40.7 per cent.
The Metro’s IDP is informed by nine strategic development strategies including poverty alleviation; financial sustainability; spatial development; improving access to basic services and integrated public transport. Some of the issues raised during the public participation process include lack of access to water and electricity; lack of access to social services such as amenities and parks; law enforcement challenges; illegal dumpings; rehabilitation and building of roads and human settlements in terms of title deeds.
The metro plans to eradicate the sanitation backlog and provide 58 650 sites with waterborne sanitation. The Metro eradicated 23122 buckets/VIP toilets from 2009 to 2018 but currently has a backlog of 57 270. The backlog has been increasing since the amalgamation of the old Naledi municipality and Soutpan into Mangaung Metro. The current financial year budget is expected to eradicate 4 212 VIP toilets. The City needs R4.1 billion for waterborne connections; R1 billion for bulk sanitation and R1 billion for bulk water augmentation projects that will see the City recycling waste water.
In terms of upgrading of informal settlements, the Metro has developed a strategy to address that. It will adopt a phased approach in line with international best practice. They will develop social and economic infrastructure to move away from a housing only approach towards the more holistic development of human settlements including the provision of social and economic infrastructure. The metro presented progress made with provision of basic services and the status of the infrastructure projects currently implemented.
The tabled 2018/19 MTREF for the Mangaung Metro shows that its financial position is not in good standing. In terms of cash and cash equivalents, the Metro has budgeted for an operating deficit of R854 million. The metro’s budget is unfunded for the MTREF period. Table 2 above provides further challenges for the metro, that still need to be addressed.
Assessment by National Treasury
National Treasury’s assessment of the Mangaung metro has concluded that their budget assumptions are not credible, and are questionable. The revenue forecasts are not achievable and expenditure projections are not consistent with cost containment principles. Even though the budget is multi-year, its capital expenditure is not informed by the Capital Investment Plan and the master plan is outdated. In terms of relevance, the political leadership absolved its responsibility with regard to the Budget and IDP process. The public participation process has been congested and might not relate to community needs. The budget schedule was not adhered to and according to the budget book, the IDP’s strategic objectives are linked to Revenue, Operational Expenditure and Capital budget of which National Treasury questions their credibility. With regard to sustainability, the huge operating deficit projected over the MTREF is not sustainable; the budget is not funded and capital expenditure funding from own sources is not sustainable.
Treasury found that the unfunded mandate for the city is mainly on Library Services. The City is receiving a subsidy of only R2 million and raising revenue of R321 thousand on the function, however the total expenditure is R107 million, meaning R105 million is unfunded. National Treasury encouraged the City to sign a Service Level Agreements with sector departments before they render any service on their behalf. National Treasury further provides a platform to discuss this matter at the Budget benchmarking engagement.
3.4Buffalo City Metro
Socio economic context
The Buffalo City Metro is implementing its BEPP through, amongst other things, the catalytic Urban Development Programmes within the Primary Integration Zone, East London CBD Inner City Revitalization; The Meld Corridor Mdantsane CBD; the Catalytic Urban Development Programmes within the Secondary Integration Zone King Williams Town and the Bhisho Nodes and Corridor.
In terms of roads, the City has continued to rehabilitate existing roads within its jurisdiction and re-gravelling rural roads in the 2017/18 financial year, including about 38.058 km road surfaced; 80.2km of roads rehabilitated and three bridges rehabilitated. Provision of electricity in the 2017/18 financial year saw a 4 per cent of the revenue generated, reinvested back into the electrical network so that it remains reliable and meets safety standards. The main capital works that were undertaken were electrical infrastructure upgrades across the metro. In 2017/18 financial year, R40 million was committed for the roll-out of electricity to many formal households; connecting 700 households in Mdantsane Buffer Strip, 500 at Potsdam unit P; 550 at the Buffer strip Mdantsane and 197 at Fynbos and Scenery park and 250 at Phakamisa.
In the 2017/18 financial year, the Metro implemented four major water projects at the value of R146 million. These included augmentation of water treatment works at Mzonyana Dam at a value of R30 million; construction of bulk water supply reservoirs and villages reticulation to eradicate backlogs; replacement of existing bulk water infrastructure; installation of water meters and continued upgrade of Amahleke water supply scheme. This will augment water supply so that village extensions are accommodated.
About 583 Top Structures were built and 1 572 sites were provided with municipal basic services. About 20 refuse removal trucks were procured at a value of R54 million and 8 tipper trucks and 3 TLBs were also procured.
The City had a capital budget of R1.77 billion of which R1.43 billion, (81 per cent) was spent. Own funded projects had a budget of R793.78 million and R495.93 million (62 per cent) of the budget was spent. Grant funded projects had a budget of R977 million and R931 million (95 per cent) was spent. The 81 per cent expenditure is below the target of 100 per cent but a turnaround strategy to assist the municipality to improve the expenditure performance has since been developed.
The City developed an aggressive Revenue Enhancement Strategy whose key feature is the management of the City’s debtors book. The current collection rate for the period ended 30 June 2018, is 93.3 per cent (the target for 2017/18 was 92.5 per cent). The total debt to revenue ratio is 9.99 per cent as at 30 June 2018. The municipality is therefore highly solvent to meet its debt obligation as it is below the set ceiling of less than 45 per cent. The cost coverage ratio of the City is 3.9 months. This ratio denotes that the City can meet its monthly operating commitments 3.9 times, which is above the target of more than three times the fixed operating expenditure.
Some of the intervention measures that have been put in place include taking all bid committee members through formal training in an effort to improve the turnaround in processing of bids at committees. The number of bid committees has increased from 3 to 6. There are 2 bid specifications committees, 3 bid evaluation committees and 1 bid adjudication committee.
Some of the achievements of the City include the development of a precinct plan and precinct management model for Mdantsane Urban Hub and the development of the concept plan for the Sleeper Site. Council has adopted the maintenance plan for the provincial roads. The Metro has developed a draft informal trading policy for township and CBD revitalization. Upgrading and refurbishment of critical infrastructure projects is underway to provide capacity that will enable economic development and growth.
The Metro has engaged local labour to assist with water leakages. About 94 per cent of the Metro residents have access to sanitation and 90 per cent have access to electricity. On average 62 per cent of surfaced road network is in good condition, while 25 kilometres of gravel roads are surfaced to tar annually and an average of 120 kilometres of gravel roads are maintained per annum. The Metro has electrified about 4500 informal settlements in the last three years and all completed and occupied RDP houses are electrified.
Assessment by National Treasury
National Treasury’s assessment of the Metro’s performance has concluded that the budget assumptions are credible and revenue estimates are realistic but the budget is not multi-year budgeting. In terms of relevance, the IDP strategic objectives aligns to the NDP, provincial agenda and the metro’s growth and development strategy. The capital budget is reflective of IDP objectives, in pursuit of spatial transformation. In terms of budget sustainability, there is a positive cash flow projection over the MTREF and adequate cash backed reserves. The budget is therefore funded, credible and sustainable over the MTREF in terms of Section 18 of the Municipal Finance Management Act (MFMA).
Socio economic context
The eThekwini Metro has aligned its IDP to its long term strategy, informed by the national, provincial and municipal plans such as the NDP, the Provincial Growth and Development Strategy (PGDS) and the BEPP. The Metro prioritises provision of basic services; public participation; growing the local economy and job creation; fraud and corruption in Local Government Crime in Communities; Education in communities; community health; climate change; integrated communities; social cohesion and nation building.
In terms of investment, the City’s intent is to take the target to 40 per cent in the coming budget and reform the process to follow an explicit spatial strategy and improve accuracy of spatial mapping a priority this year. The metro has developed a multi-year reform action plans to achieve that. The City will also re-arrange itself institutionally and build partnerships with the private sector and engage with major customers to make the municipality more responsive to customer issues.
As part of the incentives to key investments, a policy has been developed with the aim of creating jobs by offering rates rebates to attract business to build and expand in the City. The Metro is currently finalising assessments and approvals on existing applications and have developed draft strategies for industrial revitalization and urban design upgrade. Other stakeholders involved include the World Bank Group, leadership in the other spheres of government and the Business Leadership structures in Durban.
Challenges to urban transformation for the Metro include that its population generally earns low income; living on low density areas with segregated economic and residential patterns. In response to these challenges, the Metro has introduced a prime investment corridor, a spatial target of keen interest to the metro from economic and city-integration and compaction perspectives. The Integrated Rapid Public Transport Network (IRPTN) phase one was introduced and economic nodes and catalytic projects have been identified.
The City has spent 100 per cent of its allocated operating and capital USDG budget, as at June 2018, amounting to R1.9 billion. The budget was spent on provision of basic services and economic development and planning.
The challenges in implementing the budget include work stoppages by business forums; adherence to SCM processes and approval of reports, diminishing skills within the relevant units; adequacy of water resources and increased project costs caused by work interruptions. The interventions made by the City in addressing these challenges include developing strategies for water management and supply; proactive infrastructure maintenance and improved IGR.
The City has aligned its budget in terms of IGR, with projects involving collaborations with the departments of Education, Transport, Health and Public Works. In terms of the IDP, the budget seeks to create a quality living environment by addressing household basic services needs and backlogs, through implementation of various projects. The City is currently delivering the IRPTN, which is a program made up of four phases. The programme is aimed at improving public transport, which is needed to ensure quality of access to opportunity; reactivation and enhancement of spatial structure; promotion of a liveable City, a positive image on the City’s economy, and reduction of negative impact on the environment.
The challenges include delays with procurement processes; disruption of infrastructure contracts and delays from protracted SCM processes. To mitigate these challenges, the City has, amongst other things, extended the program of engagement with communities and business entities in wards where contracts are being undertaken to sort out access to opportunities before the start of further construction.
The delays in delivery of housing are caused by lack of bulk infrastructure and serviced sites to support human settlements development. This is due to the lack of funding and/or misalignment since the USDG stipulates a minimum 50 per cent of the budget to be allocated towards infrastructure for human settlements. Spatial budgeting initiatives are required to implement this integrated approach to prioritise human settlement developments.
There is generally lack of well-located and suitable land for human settlement developments but a Unit has identified well located and suitable land for Human Settlements developments within an appropriate Integrated City Development Grant (ICDG) zones and an additional budget will be set aside for acquisitions working with the relevant forums. A further challenge is invasion of houses during construction such as what happened at Kingsburgh, Cornubia and uMlazi and this requires political intervention and ongoing stakeholder engagement.
Other challenges include high costs of suitable land and unwillingness of private owners to release land; and expropriation of land. The Housing Development Agency (HAD) is being utilised for land assessments and limited project funding from a Province resulting in less units delivered in a financial year. The Metro will explore alternative funding schemes to assist accelerating the eradication of the backlog and accelerating high numbers of units to be delivered and address the socio/political challenges including community protests, business forum and workforce stoppages.
Assessment by National Treasury
National Treasury’s assessment has concluded that the City’s budget is credible, and relevant as it is aligned to the SDF, IDP and BEPP. It has been verified that the budget is sustainable over MTREF because there is adequate cash coverage, though the reserves are deteriorating. The revenue collection rate is high, despite declining trend and the budget over the MTREF is cash backed and funded.
There is a need to monitor the increasing irregular expenditures, which are caused by awards made to entities whose members were in the service of eThekwini municipality as well as non-compliance with SCM processes. In order to assist in addressing irregular expenditure in the Metro, National Treasury conducted onsite visits to selected municipalities that incurred the highest values of irregular expenditure to obtain information that assisted with targeted training. National Treasury provided training to Municipal Public Accounts Committees (MPAC) members on their roles and responsibilities regarding investigating the recoverability of monies of the Unemployment Insurance Fund (UIF) and Workman’s compensation.
National Treasury recommended that Internal Audit Units of municipalities must become more effective, to play a bigger role in assisting management to identify and timeously address these expenditures. Regular audits of procurement processes must be introduced as a way of increasing the in-year detection of transgressions. National Treasury also issued a Regulation for the establishment of a Financial Misconduct Board to address cases of transgressing the MFMA. National Treasury also supports and advises municipalities on the functional Financial Misconduct Board, a dedicated email facility to deal with queries.
Having engaged with the five metros, the Committee made the following observations:
4.1The Committee recognized the importance and the role of cities in growing the South African economy. The Committee further noted, with appreciation, the progress made by the metros engaged, in implementing their respective economic growth and development strategies, amid challenges currently experienced.
4.2The Committee noted that successful implementation of catalytic projects and the overall BEPPs, has the potential to stimulate economic growth and investment in the Metros, the engines of growth in South Africa.
4.3The Committee noted that, in planning and budgeting, it is important for metros to strike a balance between social and economic development as well as between maintenance and repairs and new infrastructure development, for contribution to GDP growth.
4.4The Committee commends most of the metros that have aligned their IDPs and budgets with the national, provincial and municipal plans and strategies. The committee also commends the metro’s for embarking on public participation processes with the electorate prior to approval of their respective city budgets in terms of the MFMA. The City of Cape Town’s IDP achievement is also commended.
4.5The Committee noted, with appreciation that most metros finances were in a healthy position, however, higher dependence on grant funding by other metros is a concern, as that situation is not sustainable.
4.6The Committee is encouraged that the revenue collection rate at most metros stood at more than 90 per cent. The Nelson Mandela Bay Municipality’s finances in particular are viable and the Metro is no longer grant dependent like it was in the past.
4.7The Committee is however, discouraged, that the service delivery performance against the target sets across the metros, is not satisfactory. The water and electricity losses, the eradication of the bucket system and the poor management of the indigent register, challenges were common across most metros.
4.8The Committee noted that some metros receive the Urban Settlement Development Grants from the provincial and National Treasury in the beginning of year, having been approved late, and that affects spending and implementation.
4.9The Committee noted, with concern that the Nelson Mandela Bay and Mangaung Metro’s spending on personnel is high and it includes high cost of overtime.
4.10The Committee noted, with concern, stagnant and regression of audit opinions in some metros. We observed a common trend of irregular, wasteful and fruitless expenditure across most metros, which is caused mainly by non-compliance with legislation (SCM, poor management of contractors, internal control measures).
4.11It is a cause for concern to the Committee that, financial misconduct, transgressions and poor performance at the Metro level does not appear to have consequences.
4.12The Committee acknowledges and commends comprehensive support provided by the National Treasury to the three spheres of government, including the eight metros.
4.13Notable improvements in Intergovernmental relations between the three spheres of government are appreciated, with National Treasury’s support and interventions, but lack of collaboration, coordination and integration of plans and strategies should be addressed.
4.14The Committee noted National Treasury’s concern about lack of cooperation from some metros regarding information requested for implementation of the long term financial strategy (BEPP), which is a financial plan covering the financial information, statistics, data, financial projections.
4.15The Committee has noted with concern, a trend of serious unfunded mandates challenges across the metros engaged, which is understood to be a legacy issue. The metros are implementing unfunded mandates ranging from libraries, housing, health facilities, roads infrastructure for national and provincial government, without the necessary budget allocations.
4.16Political instability in some metros and the impact it has on the administration and service delivery, particularly the delays it causes in adopting the budget, is a cause for concern for the Committee.
4.17The Committee noted that the City of Cape Town is battling to create a safe City, with sufficient police presence, given a high crime rate, gang violence and drug abuse in the country.
4.18The Committee is concerned about the City of Cape Town’s infrastructure, which is not in good condition and is mostly grant funded. While the City has clear alignment between budget and plans, its planning is currently fragmented and should be reviewed to facilitate its implementation.
4.19The Committee noted and supports the National Treasury’s plans to devolve transport functions to the City of Cape Town, to partially address its ongoing transport challenges.
4.20The Committee noted the challenges that face the Buffalo City metro, ranging from fiscal risks; poor asset management; capacity constraints; delays in updating the indigent register as well as poor planning and budgeting for maintenance and repairs of infrastructure.
5.1In future engagements, the Metros have to present progress made in resolving the challenges identified in implementing their respective economic growth and development strategies, the BEPPs and economic catalytic projects that would grow their respective economies to create jobs and source much needed revenue to address service delivery.
5.2The Committee urges metros such as Mangaung, which are depending heavily on conditional grants for their operations, to develop own internal resources of revenue to supplement conditional grants. In the next engagement with the Committee, these metros should report measures taken to boost internal sources of revenue to become self-sustainable.
5.3The Committee recommends that the Mangaung metro should address all the challenges it identified, which include, cash performance, billing, revenue and expenditure. The Metro should report progress made in implementing action plans to address these challenges, in our next engagement.
5.4The Committee recommends that the metros address the service delivery challenges identified, particularly the water and electricity losses, and affect revenue collection. In the next engagement, the Metros should report progress made in addressing these challenges and they should strive towards obtaining clean audits.
5.5The Committee recommends that the National and Provincial Treasuries takes into consideration the capacity of the municipalities to spend the additional budget allocated during the adjustment process and endeavor to transfer monies to metros and provinces on time.
5.6While higher cost of personnel is considered a historical problem. The affected metros should put effective measures in place to turn the situation around and report progress made in the next engagement with the Committee. Higher spending on personnel, crowds out service delivery, requiring the affected metros to review their service delivery models regarding spending more on personnel.
5.7The Committee recommends that the metros develop action plans to resolve historical AG issues and report progress made to the Committee in the next engagement.
5.8The Committee recommends that the National and Provincial Treasuries should in addition to the comprehensive support that they provide to the metros and municipalities, consider conducting fiscal oversight to verify alignment between budgets spent and actual service delivery on time.
5.9The Committee recommends that the metros should continue to improve intergovernmental relations across the three spheres of government, conduct integrated planning and budgeting to improve service delivery and grow the economy.
5.10The Committee urges the metros to cooperate with the National Treasury and all sector stakeholders should strengthen IGR and successful implementation of BEPP, a plan that seeks to stimulate economic growth in the metros.
5.11The Committee recommends that the metros, in collaboration with COGTA and National and Provincial Treasuries address the challenge of unfunded mandates and report steps taken to resolve the matter in the next engagement with the Committee as these unfunded mandates are putting pressure on the municipalities’ budget.
5.12The metros should effectively implement their debt management strategies to collect revenue due to them. The Metros should further consider investing in IT infrastructure to maximize revenue collection and avoid revenue leakages, using the available grant.
5.13The City of Cape Town should put measures in place to address high crime levels, with support from other stakeholders and spheres of government.
5.14The City of Cape Town should engage with the Minister of Transport, to address the magnitude of the transport problems in the City and the impact it has on traffic, growth and productivity.
5.15The Committee urges the City of Cape Town to take the lead in informal settlement’s spatial planning. Furthermore, the City should plan properly and budget for in-migration, exploring various implementation models and collaboration options including the PPPs.
5.16The Buffalo City Metro should address all challenges raised by the National Treasury in the assessment of their performance and report progress made to the Committee, in particular, planning and budgeting for maintenance and repairs of ageing infrastructure.
Report to be considered
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