ATC190219: Report of the Select Committee on Cooperative Governance and Traditional Affairs Inspection in Loco on the Notice of Intervention in Terms of Section 137 of the Municipal Finance Management Act, 2003 (ACT No. 56, 2003) in Ngaka Modiri Molema District Municipality, dated 19 February 2019
The following report replaces the report of the Select Committee Cooperative Governance and Traditional Affairs which was published page 74 in ATC No 16 – 2019, dated 20 February 2019.
Report of the Select Committee on Cooperative Governance and Traditional Affairs Inspection in Loco on the Notice of Intervention in Terms of Section 137 of the Municipal Finance Management Act, 2003 (ACT No. 56, 2003) in Ngaka Modiri Molema District Municipality, dated 19 February 2019
1.1 The Select Committee on Co-operative Governance and Traditional Affairs, having considered the request by the National Council of Provinces (NCOP) to consider and report on the intervention notice invoked in Ngaka Modiri Molema District Municipality in terms of section 137 of the Municipal Finance Management Act, reports as follows:
1.2 In terms of NCOP Rule 101, the Office of the Chairperson of the NCOP referred the notice of intervention by the North West MEC for Cooperative Governance, Human Settlement and Traditional Affairs (CoGTA), to the Select Committee for consideration and reporting. On 29 January 2019, the Multi-Party Delegation of the Select Committee conducted a loco inspection in Ngaka Modiri Molema District Municipality.
2. Objective of the Loco Inspection in Ngaka Modiri Molema Disitrict Municipality
2.1 The main objective was to interact with the internal and external stakeholders of the Municipality in order to solicit their opinions on the constitutional, procedural and substantive matters related to the invocation of section 137 of the Municipal Finance Management Act.
3. Composition of the Delegation
3.1 The Select Committee delegation was composed of the following Members of Parliament and officials: Hon T Wana, Eastern Cape (ANC); Hon G Oliphant, Northern Cape (ANC); Hon D Ximbi, Western Cape (ANC); Hon H E Mateme Limpopo (ANC); Hon M Chetty, KwaZulu-Natal (DA); Hon B Engelbrecht, Gauteng (DA); Mr TM Manele, Committee Secretary (Committee Section); Mr B Mahlangeni, Researcher (Research Unit); Mr N Mfuku, Content Advisor (Committee Section); Mr P Bongco, Committee Assistant (Committee Section) and Mr M Mbebe, Procedural Officer, NCOP.
4. General Overview of the Loco Inspection at Ngaka Modiri Molema District Municipality
4.1 On 29 January 2019, the delegation of the Select Committee interacted with senior officials of the Department of CoGTA, representatives of the African National Congress (ANC), Democratic Alliance (DA), representative of South African Local Government Association, and the representatives of the South African Municipal Workers Union (SAMWU) and IMATU.
4.2 The departmental official made a presentation on the constitutional, procedural and substantive reasons for the intervention. The representatives of the political parties and Organised Labour, shared their opinions with regard to the intervention as tabled by the MEC for CoGTA.
5. Presentation by Department of CoGTA
5.1 The Department briefed the delegation of the select committee on the invocation of the intervention in the district municipality. The presentation focused on governance, administrative and financial matters related to intervention in terms of section 137 of the Municipal Finance Management Act
6. Governance and administrative Matters
6.1 The district municipality depended on grant funding which accounted to 99.4 percent operations during the current financial year. As a water authority responsible for provision of water and sanitation, the district was unable to provide sustainable services to its constituency.
6.2 The District Municipality has failed to developed integrated infrastructure plan to address challenged related to water and sanitation. The Department of Cooperative Governance, Human Settlement and Traditional Affairs indicated that the lack of formal institutional arrangements for the provision of water and sanitation between the district municipality and its local municipalities continued to compromise service delivery and consequently resulting to communities not have access to water for several years.
6.3 The Department of Cogta further reported the collapsed of intergovernmental relation in the district and lack of political will and commitment for resuscitation of the IGR. The failure of the IGR has resulted to the local municipalities losing confidence in the district as it failed to execute its legislative mandate.
7. Financial Management Matters
7.1 Inability of the District Municipality to pay its creditors due to cash flow challenges and has persistently defaulted on bulk supply of creditors particularly Sedibeng water board to the amount of (R365 million).
7.2 The District Municipality experienced increased irregular expenditure over the past three years from R40 million in 2014/2015 to R1.4 billion in 2016/2017. The total unauthorized, irregular, fruitless and wasteful has already increased from R878 million in 2014/2015 to R3.2 billion in 2016/2017 financial year. The district municipality is one of the top ten contributors of irregular expenditure in the country.
8. Progress Made Since the Commencement of the Intervention
8.1 The District Municipality has made gradual progress in developing a process to deal with high budget related to personnel expenditure. The Administrator has engaged the Sedibeng water board and the department of water affairs to resolve the disputed water debts. The District Municipality has appointed a service provider to develop maintenance plans that would inform budgeting of operations and maintenance of waste water treatment plant. Municipal procurement plan has been developed in line with service delivery budgeting and implementation plan.
8.2 The District Municipality has developed through the assistance of the administrator the financial recovery plan to assess the actual backlog of water and rural sanitation projects; introduction of new revenue streams at firefighting and health services and, consideration of alternative service delivery mechanisms.
8.3 Some of the additional progress reported by the administrator included the development of compliance check list, training of Supply Chain Management and Bid Committee members; development of post audit action plans based on 2017/18 audit outcomes and; development of virement policy and electronic record management system.
9. Opinions of Political Parties and Stakeholders of the Municipality
9.1 During loco-inspection, the Select Committee interacted and solicited opinions of the political parties, internal and external stakeholders of the Municipality. Their opinions are tabled below:
10. Opinion of the African National Congress (ANC)
10.1 The representative of the ANC indicated that the municipal council has acknowledged the PEC’s decision to invoke section 137 of the Municipal finance management act in the District Municipality. The ANC member raised concerns with regard to the tabling of termination reports of the previous interventions.
11. Opinion of the Democratic Alliance (DA)
11.1 The representative of the DA tabled an opinion that supported the intervention. However, concerns were raised with regard to delay of invoking the intervention; long historical debts of Sedibeng water board; high personnel salary budget and the need to ensure skills transfer during the period of intervention.
12. Opinion of South African Local Government Association (SALGA)
12.1 The Senior Official of SALGA North West Province tabled an opinion that supported the intervention, and further raised the about lack of tangible progress made by the previous interventions. The official emphasised the need to place municipalities under constructive intervention that can ensure traceable evidence and skills transfer. Emphasis was also made with regard to positive working together at political and technical level on matters relate to interventions in the municipalities.
13. Opinion of the Municipal Organised Labour
13.1 A representative of the Independent Municipal and Allied Trade Union (IMATU) did not clearly stated the union position on intervention. However, the representative raised concerns with regard to litigation cases, payment of lawyers, and lack of tools of trade for municipal workers.
13.2 A representative of South African Municipal Workers Union (SAMWU) tabled an opinion that supported the intervention. However, the representative of the Union raised concerns with regard to non-spending of infrastructure grand; irregular appointment of service providers; service delivery challenges related to water and sanitation. Recommendation was made with regard to the extension of the period of the administrator by six months.
14. Select Committee Observations and Opinion
14.1 In terms of the constitutional and procedural matters, the Select Committee has observed that the National Minister for CoGTA, the NCOP, the North West Provincial Legislature and the Municipality were notified of the intervention.
14.2 The Select Committee has further observed service delivery and financial management challenges related to sanitation, water, litigations, debt collection, contractors property and the valuation-roll, revenue collection, Eskom debt and billing system, data cleansing and money owned by government departments to the Municipality.
14.3. Furthermore, the Select Committee has observed also the lack of institutional capability with regard to the critical positions in the Municipality.
15. Recommendations of the Select Committee
15.1 Having conducted the oversight visit to Ngaka Modiri Molema District Municipality and interacted with internal and external stakeholders, the Select Committee on Co-operative Governance and Traditional Affairs recommends as follows:
15.1.1 The NCOP approves the intervention in Ngaka Modiri Molema District Municipality in terms of section 137 of the Municipal Finance Management Act.
15.1.2 The Administrator should fast-tract the process of implementing the municipal financial recovery plan in accordance with the terms of reference assigned by the North West MEC for CoGTA.
15.1.3 The North West MEC for CoGTA must conduct Forensic Investigation on Supply Chain Management in the District and table the report to the National Council of Provinces.
15.1.4 The North West MEC for CoGTA should table quarterly progress report to the NCOP on the status of the intervention in the Municipality; including challenges encountered.
15.1.5 The Select Committee on Co-operative Governance and Traditional Affairs, in co-operation with the relevant Portfolio Committee in Free State Provincial Legislature, should in future conduct a follow-up oversight visit to the Municipality in order to evaluate the progress made in respect of the intervention in the Municipality.
Report to be considered.
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