ATC080523: Report Oversight Visit to Eastern Cape

NCOP Finance

Report of the Select Committee on Finance on the oversight visit to Eastern Cape from 21 to 22 February 2008, dated 23 May 2008


On 22 and 23 January 2008, the Select Committee on Finance held hearings with provincial departments on conditional grants capital expenditure for the first three quarters of the previous financial year.  The Committee had concerns on a number of issues following the hearings and decided to have further meetings with the following departments:

Department of Housing, Local Government & Traditional Affairs
Department of Land Affairs
Department of Sport Recreation Arts and Culture
Department of Economic Development and Environment Affairs
Provincial Treasury 
Land Claims Commission
Great Kei Municipality


Hon E M Sogoni
Hon M O Robertson
Ms N C Chaso (Committee Secretary)
Ms N Mnyovu (Committee Assistant)
Ms M Herling (Researcher)

The meetings were held in the East London’s Regent Hotel.  

Eastern Cape – Department of Local Government and Housing: Key Challenges

The Committee observed the following issues: 

Poor planning by both the Department and municipalities. Some of the approved projects were still not ready for implementation.
Some of the emerging contractors lack capacity and there was a small pool of established contractors attracted to low cost housing resulting in the need to re-tender. Established contractors were not attracted to rural development projects due to logistical issues and the additional cost of transporting material. Established contractors were supposed to mentor emerging contractors. 
The slow start of the rectification programme was a cause for concern. There was a lot of unfinished work that needed to be redone. There was also the issue of community housing that had been inherited fromMatatiele, KwaZulu-Natal which had funding shortages. The rectification programme had been handed to the National Home Builders Registration Council (NHBRC), but this was progressing and only 5000 out of 19 800 units had been dealt with. 

The land restitution process did not prevent development but the department needed to consult with the Land Claims Commissioner to determine whether or not the development interfered with the claim. It was reported that problems arose in cases where the development did not benefit the community as a whole. Communication with the community prior to the development was critical. Road shows to municipalities regarding this matter had been conducted but it was reported that changes in the councils might have led to knowledge gaps. 
There was a need to provide land for sustainable human livelihoods. 
There was some misalignment of the Municipal Infrastructural Grant (MIG) and the housing grant. Reasons for this included the discrepancy in percentage growth in the allocation between housing and MIG, the conditions of the grants and the identification of priorities by the province and the subsequent allocation of the grants by the Department of Provincial and Local Government. 
The meeting was informed that one could still find cases where houses had been built without the necessary supporting bulk infrastructure. There was a need for an integrated approach to development. 
The capacity of the provincial Department of Housing remained a challenge and slow moving projects would be taken back by the Department of Housing.
The department also reported that all contractors were meant to be NHBRC approved and CIDB compliant but this was taking long owing to lack of capacity at the NHBRC. 

Eastern Cape – Department of Sport, Recreation, Arts and Culture: Key Challenges

The building of infrastructure was the responsibility of the Department of Public Works.  
The process of registering quantity surveyors took time, especially with respect to those who were not registered with the Quantity Surveyors Board.
There was a lack of commitment and capacity within institutions which were expected to assist in service delivery.
There was possible exemption in relation to the procurement of library materials that would reduce the turnaround time for receiving materials.
There was a concern about the number of operational libraries, their location and also the question of who was responsible for operating them. The province had 118 operating libraries and only 36 of those received conditional grants.  
The Department reported that the main cause of poor performance were the capacity within the directorate and supply chain management. 
SEDA did not attend the meeting despite being invited. 

Great Kei Municipality

The municipality showed improvement in relation to revenue collection.  
Electricity distribution was confined to the Komga area. The municipality had licences for areas within its municipality but there were still some problems with Eskom. There was a need for a smooth handover from Eskom to ensure that there were no disruptions in service delivery. Eskom received R500 million from the Department of Minerals and Energy to re-establish networks in Komga.
Refuse removal was also a big challenge and businesses such as holiday resorts were removing their own solid waste.
The condition of roads affected service delivery. There was a need for capital equipment to improve and maintain roads. 
The Development Bank of Southern Africa had committed R3 million to fund this municipality but the money had since been reduced to R1 million.
Rural housing development was engaging Thubelisha to assist in feasibility study and proposals that would be in line with spatial development framework.
Water and sanitation were a big challenge for this municipality. There was a need for assistance in relation to bulk water and water supply projects. There was almost no information available to determine expenditure and revenue for water services. The age of water infrastructure reinforced the problem of water outages. 
Questions were raised about the municipality’s ability to spend money. It was said that the municipality would get support from DBSA in the form of engineers, technicians & financial advisors.
The district reported that the local municipalities had no records to verify their asset registers. The municipality had received a disclaimer for the 2006/7 financial year. There was also no proper planning for the refurbishment of infrastructure. 
The Committee undertook to have further discussions with Eskom regarding electricity distribution. 


There should be an ongoing forum where planning issues are discussed to ensure that stumbling blocks that have a huge impact on housing are identified and removed early. Each stakeholder should play its role effectively. All line managers in the forum must attend the meetings.

The Committee resolved that it would convene a meeting with Department of Water Affairs and Forestry to establish why the Great Kei Municipality has received only R1 million out of the R3,2 million provided by the Development Bank of Southern Africa. 

Report of the Select Committee on Finance on the oversight visit to identified provincial departments and the Sol Plaatjie Municipality, Northern Cape, dated 13 May 


The oversight visit took place on Friday, 28 March 2008. A meeting was held with the Sol Plaatjie Municipality and various governments departments. The Committee’s delegation was as follows:

Hon TS Ralane (Chairperson of the Committee)
Hon EM Sogoni (Gauteng, ANC)
Hon GM Goeieman (Northern Cape, ANC)
Hon BJ Mkhaliphi (Mpumalanga, ANC)

Staff composition was as follows:
Ms TP Xaso (Committee Secretary)
Ms NC Chaso (Committee Secretary)
Ms N Mnyovu (Committee Assistant)

Terms of reference

At a meeting held between the Committee and the Provincial Department of Local Government and Housing at Parliament, the Province indicated that it had been promised R100 million by National Treasury. The Department had indicated that it was in need of that funding and the Committee had undertaken to assist in attaining the money. The Committee’s objective in meeting with the Department of Local Government and Housing during this visit was to establish whether it had been able to absorb this additional funding and whether there were any risks of under-spending as a result of that additional funding. 

The Committee had also been informed about challenges that related to building materials which had been bought three to four years ago by the Department of Local Government and Housing, but remained unused. Given that this matter impacted negatively on housing delivery in the Province, the Committee undertook to meet with the department concerned and the affected municipality of Sol Plaatjie.     

The Provincial Department of Health had reported to the Committee that the Provincial Treasury had taken over the Health Department. The Committee had undertaken to follow the matter up in a meeting with both departments. This was one of the reasons for the meeting in Northern Cape.

The Departments of Agriculture and Roads, Transport and Public works were invited to report on their third quarter expenditure of Conditional Grants and Capital Expenditure as well as personnel and non-personnel spending.  

National and provincial departments as well as other stakeholders that were invited to the meeting were as follows:
Department of Provincial and Local Government
National Treasury
Provincial Department of Roads, Transport and Public Works
Provincial Department of Health 
Provincial Department of Agriculture
Provincial Treasury
The Homeless Federation
Provincial National Home Builders Registration C

The Provincial Department of Health was one of the main reasons for the Committee’s visit to the Northern Cape. The Committee expressed its displeasure at the non attendance of the MEC and the Head of Department at the meeting.  

Both the provincial Treasury and the provincial Health departments reported that relations between the two had improved. The Committee, however, was not convinced that this was so. On two occasions the Northern Cape Department of Health had reported that they were not able to function as a result of the Provincial Treasury. The reports presented that relations were good were perceived to be making mockery of the Committee’s visit to the province. Poor relations between the two departments had led to hospitals not having medication. Furthermore, the Committee was concerned that the Health Department had not prepared a proper report to form a basis for the discussion, nor had it taken serious the matter on hand.

The Committee further informed the Department of Health that the Public Works Department reported that Health had not signed a Service Level Agreement. Moreover, the Committee still needed to enquire from the Treasuries what had brought about the need for the department to be under administrations.

Provincial Treasury reported that the decision to put Health under administration was made by the Provincial Executive Committee (EXCO). According to the Provincial Treasury, it was the media that reported about a hostile take over and this was said to be the reason for the misunderstanding between the two departments. It further disputed the statement of a hostile takeover. 

There was a concern with relating to inconsistency on the part of the Provincial Treasury given that Public Works in the province had been and was still in a worse condition than the Health Department.  The appointment of the Chartered Accountant was also a concern and questions were raised as to what the role of the CFO was in such an event. 

Local Government and Housing

The department reported that the additional allocation of R100 million had been received and that the money had already been transferred to district municipalities for housing delivery. To this end no risks were anticipated. Those were the Pixley Kaseme, Kgalagadi, Francis Baard and Siyanda district municipalities. The department further reported that monitoring and evaluation plans were already in place to ensure that the money was used appropriately. 

The Committee expressed a concern that, as far as it was aware, the only municipality that had been targeted for accreditation as a housing developer was the Sol Plaatjie Municipality and none of those mentioned by the department. The Committee further enquired as to when these municipalities became accredited. According to the Committee no other district municipalities had been targeted for accreditation. Furthermore it noted that housing delivery was the competency of the department not district municipalities. The observation made by the Committee was that money had been dumped on the municipalities by the department. The Committee enquired as to whether there were any houses delivered in the process. 

The department responded that there were projects, according to their business plan, that had been waiting for funding. This was the basis on which the additional allocation had been requested. It added that the districts were still in the process of accreditation and that the funds were transferred to municipalities that had made claims. According to the department the transfers were done two weeks prior to the meeting with the Committee. The Sol Plaatjie Municipality, however, disputed having received money from the department. 

The Committee expressed a concern at the contradiction in the versions given by the department and the Sol Plaatjie Municipality and sought clarity on the nature of communication lines in regard to transfers of funds.  

The Committee raised the matter regarding material that had been bought for the delivery of houses. A group of housing beneficiaries called the Homeless Federation had been present in a visit three years ago during a provincial week wherein decisions were taken with respect to the delivery of houses. Certain promises were made at the time to a parliamentary delegation but nothing had come of them. 

The Committee was informed that the project had stopped pending an investigation that was underway with regards to materials that had been bought. It was reported that the Premier had instituted the investigation into the matter. The municipality reported that this was one of the projects that had been stifled by the department who went into agreements with contractors, bypassing the municipality and issuing subsidies. 
It was not clear how exactly the department had come up with a list of beneficiaries given that the municipality had been excluded from all processes.  It was noted that, under normal circumstances, the indigent list should be with the municipality. To this end the department responded that it had held several meetings with the municipality and other support organisations.  The Sol Plaatjie municipality disputed this. It further reported that the current beneficiaries were not eligible to benefit from the project. 

Recommendations of the Committee
            The Committee recommends as follows:
Projects should be in line with the Integrated Development Plans (IDP) and in consultation with the Sol Plaatjie Municipality. 
The Northern Cape Premier should be asked for the report on the investigation she had instituted.
The Mayor of Sol Plaatjie and the Department of Local Government and Housing should assist by expediting availability of the report on the investigation to avoid further delays which were leading to escalated costs.

Roads and Public Works 

The Committee noted with concern that there seemed to be a communication problem within the department. A question was posed on the status of a project that related to one mental hospital in the Province. A further question related to the provision of transport to other departments and whether this responsibility lay with the transport department or not. Furthermore the Committee enquired whether the department had any Service Level Agreements with suppliers.  Spending as at 31 December was as 57% or over R2 million and now the expense was projected to be 100%.  Capacity was another area of concern raised by the Committee. 

In responding to these questions the department reported that in consultation with the Provincial Treasury, it had employed people, in terms of the IDP programme, who assist by looking into capacity issues and identifying the role of the department. With regards to the fleet management, it was reported that this service had been outsourced. At the time of the meeting the tendering process was underway.

The Committee was informed that Service Level Agreements (SLA) had been agreed to and the department was in the process of effecting them with the various departments it dealt with. It further reported that the Health department had not signed the SLA while other departments had signed. 

The department acknowledged that its expenditure was at 57% by end December and maintained that at the time of the meeting it was at 100%. To justify this leap the department cited that from 14 December to 14 January contractor closed and that invoices were forwarded to the department in January and payments only started to take place then. They added that the maintenance of access roads was also a factor resulting in what appeared to be a March spike.  

The department reported that they had approached treasury for money to build the SK road however treasury could not provide the funds. To this end the Committee felt that this was an indication that there had been no prior planning for the project, hence Treasury had no money for it. 

A concern was raised with the Provincial Treasury in respect to its allocations towards roads infrastructure which amounted to a mere R199 million coming from the equitable share while the biggest allocation of R257 million came from conditional grants. The Committee noted that the bulk of that R199 million was probably spent on salaries.  

Recommendations of the Committee 
The Committee recommends as follows:
A list of all municipalities to which money had been transferred and where access roads had been constructed should be submitted to the Committee;
Furthermore there should be an indication of how these linked to the Municipal Infrastructure Grant and the Integrated Development Plans and
This information should be forwarded to the Committee within three weeks after the consideration of the report by the Council.. 

Department of Agriculture

The department had overspent on CASP and Land Care and it argued that this was not as a result of poor planning on its part. It added that bulk of its spending took place from January because there had been outstanding completion certificates that were required before money could be paid out.  Furthermore it reported that the allocations of the conditional grants were based on each project determining how much money it required. 

The Committee enquired on how the overspending would be funded and whether there were any programmes that had been compromised to fund the land care programme. The department responded that funding would come from the equitable share and a food security fund. Some of the money came from the hydroponics project in Moreletswa which was under-spending. To this end it was pointed out that the department was compromising issues of food security. The place where the hydroponics structure had been put up had no drainage and alternative location needed to be found. The location had been in an industrial area where there were no community members. It was noted that the project had not been compromised but merely relocated. There were interactions with the Droogfontein beneficiaries with the view to moving the project to their location. 

The Sol Plaatjie Municipality reported that the report about the project was different from the information at its disposal. It added that it had not been consulted about the relocation of the said project. The department apologised for not involving the municipality in the project and undertook to improve on this front. 
The Committee encouraged the two to finalise the matter and noted that the performance of the department would be closely monitored by the Committee. It was found to be an interesting coincidence that all invoices had come through at the same time.  The Committee also pointed out that vandals would always be there hence the need to partner with communities and municipalities. 

A question was posed to the Provincial Treasury as to how much would be allocated towards agriculture in the coming year for infrastructure, given that some of its projects were in crops and live stock. Provincial Treasury indicated that the department had been given R8.8 million for the 2008/9 financial year based on their business plan and on the basis of page 108 of the Division of Revenue Act. 


Mr Goeieman and the department were tasked to visit some of the projects outlined by the department. It was indicated that in some cases, Mr Goeieman would need to conduct unannounced visits to ascertain whether the projects reported on did exist. His task would be to assess the impact of these projects on the communities within which they existed and the sustainability thereof. 

Report of the Select Committee on Finance on the oversight visit to Limpopo,   22 February 2008, dated 23 May 2008


The Select Committee on Finance conducted an oversight visit to the province of Limpopo on Friday, 22 February 2008. The delegation was follows:

Hon T S Ralane (Chairperson of the Committee)
Hon D Botha (ANC MP)

Support staff:
Ms T Xaso (Committee Secretary)
Mr M Tau (Researcher)
Ms N Tshoma (Committee Assistant)

2)         Background

From Tuesday, 22 January 2008 the Select Committee commenced with hearings wherein Provincial departments accounted for their expenditure of the 1st, 2nd and 3rd Quarter Conditional Grants, Capital Expenditure and Personnel & Non-personnel. It was evident from these hearings that the Committee needed to undertake a visit to the Province of Limpopo to follow up on matters that had been raised during the hearings. The Committee intended to meet with the following departments:
Roads and transport
Local Government and Housing
Sports, Arts and Culture
Water Affairs and Forestry
Provincial Treasury

The following National Departments and entities were invited to accompany the Committee on this visit:
Department of Housing 
Department of Sports and Recreation, Arts and Culture
Department of Provincial and Local Government (DPLG)
Development Bank of South Africa (DBSA)
Department of Water Affairs and Forestry (DWAF)

3)         Terms of reference
The Committee wanted to follow up on a report by the Department of Agriculture that they were constructing roads in farm areas. Roads and Transport in the province had been invited so that they could respond to this matter;
The Department of Health had expressed concerns that it was under-funded;
The Committee also needed to interact further with the Department of Sports, Arts and Culture to discuss their under-spending in respect of the grant for libraries; 
4)         Findings

Having discussed at length matters of concern with departments which were in attendance, the Committee made the following observations:

Provincial Departments of Agriculture and Roads and Transport
The Committee concluded that there was 
Generally no collaboration amongst departments in the province;
no collaboration between the two departments;
a lack of cooperation on the part of Roads Agency Limpopo (RAL) with regard to business plans and reporting back;
evident non-participation by departments in IDP’s;
high salaries paid by Road Agency Limpopo (RAL) when compared to Roads and Transport; 
staff component at RAL was 40 versus the department’s staff component of about 2000 despite the fact that RAL received 70% of the infrastructure budget. These issues had been raised by the Committee with the MEC for Roads and Transport, requesting the MEC to resolve issues of parity between the officials of the department and those of RAL; accountability and;
gaps were identified in terms of district roads in areas that had no powers to build road (e.g. Greater Skhukune).

The following were the recommendations of the Committee:
The Departments of  Roads and Transport, Agriculture and the Provincial Department of Local Government and Housing were requested to convene an urgent meeting to look at the issue of infrastructure in the province, inclusive of district roads, in respect of areas relating to agriculture. Out of that meeting they should draft a proposal to the FFC, Provincial Treasury and the National Departments of Roads and Agriculture requesting more funding. IDP’s were  to be an integral part of that proposal;
Mr Tooley, was tasked to coordinate this meeting and report back to the Committee within three weeks.

   Department of Sports and Recreation, Arts and Culture

The Committee observed that there was: 
disagreement between the Provincial Department and the Provincial Treasury in terms of figures on expenditure; National Department was, however, in agreement with the Provincial Department;
under-spending with respect to libraries and was of great concern;
a concern that transferred figures did not necessarily translate to expenditure; 

Whilst pointing out that reports at Treasury emanated from submissions by accounting officers, the Committee recommended the following: 
Provincial Treasury and the Provincial Department of Sports, Arts and Culture meet to resolve differences in reported figures; 
Report back to the Committee within two weeks after consideration of the report by Council;
The Committee committed itself to monitor this closely;
It was proposed that national projects should be done in consultation with the Provincial Treasury in order to provide a synergy and avoid disjuncture in reporting.   
The Committee advised the Provincial Department to draft a report outlining how the adjustment budget of R16m was to be spent 

National Department of Housing

The Provincial Department of Local Government failed to make input at the Committee’s proceedings due to their late arrival, after the meeting adjourned. 

The Committee observed that provinces were still not capacitating municipalities to become housing developers. Provincial Treasury informed the Committee of challenges they experienced when meeting with the Provincial Department of Local Government and Housing, thereby requesting the intervention of the Committee. 

The Committee reiterated to the meeting that housing was a provincial competence and that the provincial department had the responsibility to capacitate municipalities and avoid dumping money on them. It was noted that a major challenge was that of planning. 

In the absence of the Provincial Department of Housing the Committee permitted the National Department to leave stating that discussions on housing would be taken further at hearings on the Division of Revenue Bill which were scheduled to follow shortly. 

Development Bank of Southern Africa (DBSA)

The Committee was still waiting for a report from the DBSA and DPLG on what was being done to assist municipalities in need of assistance. The observation of the Committee was that assistance given to municipalities was in the context of Siyenza Manje, which did not speak to other programmes, which were also under the DBSA.  The Committee resolved that this would be taken

Provincial Department of Health 

While the department acknowledged that some of its challenges related amongst other things to issues of high procurement costs and abuse of the departments vehicles, it stressed that its biggest problem was the fact that it was extremely under funded. The department also expressed its difficulty in adhering to the PFMA given its circumstances within the province. At a recent hearing before the Select Committee on Finance the province had raised a concern at a baseline allocation of 24.1%. Furthermore the Committee was also informed that due to the gross under funding, the department would carry over into the new financial year debts of the last two months of the previous year. Some of the reasons given by the provincial department for over expenditure included costs for the transporting of bio-hazardous waste; importing of vaccines; warehousing of medicines and distribution thereof; personnel and other expenses, which include Occupation Specific Dispensation (OSD’s). The Committee resolved to verify the matter of OSD’s with the National Department of Health. 

Having heard the report of the Department, the Committee made the following observations with respect to the Department of Health in Limpopo:
For the Provincial Growth and Development Strategy of any province to work, it requires healthy people to partake in it;
Expenditure for OSD’s was very high;
There was a need to align provincial priorities with national priorities
The baseline had risen to 25.9%.

The Committee recommends that:
the MEC’s for Treasury and for Health meet and discuss funds available through OSD’s. 
HOD’s of these two departments also meet to discuss matters at an official level;
the National Department of Health conduct an audit to determine the rate at which professionals are leaving the province and come up with strategies for staff retention; 
Portfolio Committees in the provincial legislatures should be part of interactions with provincial departments.  

Report to be considered

5. Report of the Select Committee on Finance on the oversight visit to identified municipalities in Mpumalanga, dated 23 May 2008


The oversight visit took place from 18 to 19 March 2008. Meetings were held at the Gert Sibande Municipality in Secunda. The delegation was as follows:

Hon TS Ralane (Chairperson of the Committee)
Hon EM Sogoni
Hon GM Goeieman
Hon DJ Botha
Hon ANT Mchunu
Hon MO Robertsen
Hon ZS Kolweni
Hon BJ Mkhaliphi

Staff composition was as follows:
Ms TP Xaso (Committee Secretary)
Ms NC Chaso (Committee Secretary)
Ms N Mnyovu (Committee Assistant)

Terms of reference

The visit formed part of the Committee’s ongoing interaction with municipalities to monitor collaboration and coordination pertaining to the provision of municipal services and support given to municipalities by provincial and national departments. The following municipalities had been identified for the visit:
Emakhazeni Local Municipality
Emalahleni Local Municipality
Steve Tshwete District Municipality
Gert Sibande District Municipality
Albert Luthuli Local Municipality
Msukaligwa Local Municipality
Bushbuckridge Municipality
Nkomazi Local Municipality

National departments and other stakeholders that accompanied the Committee on this visit were as follows:
Department of Provincial and Local Government
Department of Minerals and Energy
Department of Water Affairs and Forestry
National Treasury

The aim of the Committee was to engage with the above mentioned municipalities, along with national and provincial departments, on the following areas:

Municipalities’ budgets;
Municipalities’ compliance with the Municipal Finance Management Act;
The spending and performance of the municipalities with regard to conditional grants;
The municipalities’ relations and collaboration with various national and provincial departments and entities;
Capacity constraints of the municipalities, if any;
The extent of service delivery; and
Determining whether municipalities’ Integrated Development Plans were aligned to the Provincial Growth and Development Strategy.


Emakhazeni Municipality
The municipality reported that it had been appointed as a housing developer and that progress had been made in delivering houses.  Only 920 people were registered on the indigent list in the 2006/7 financial year and this was a concern for the Committee which felt that the number should have been bigger than 920. 

It was reported that the municipality had a Mayor’s Discretionary Fund amounting to R5m.

Sewerage and refuse removal were reported to be free for all indigent people. One of the major challenges faced by the municipality was the deaths of the indigent people as funerals were not affordable. The municipality further reported that it had come up with a strategy to deal with this. In addition, some managers had adopted needy families. 

Other challenges reported by the municipality were:
Transportation for learners who had to travel distances of over 80km to get to school;
Provincial departments that owed money to the municipality (Education, Health and Local Government and Housing), some for over three years. To this end the municipality reported that a service provider had been appointed to deal with the collection of monies owed;
A promise not met by the DPLG of R65 million relating to a pilot project of which the municipality was a part;
Government departments that refused to participate in Integrated Development Plans (IDP’s); and
Sewerage spillages were reported as a problem.

The Department of Provincial and Local Government (DPLG) reported that it was pleased with the expenditure patterns of the municipality and encouraged the municipality’s commitments to progress. It further reported that within the current MTEF, allocations to poor municipalities in terms of the Municipal Infrastructure Grant (MIG) had been reviewed. Whereas the applicable formula would have allocated about R3m to Emakhazeni, reviewed allocations saw this municipality, and others similar to it, receiving a minimum of R5 million.
DPLG confirmed that Emakhazeni was part of a pilot project on developing an Infrastructure Management Plan. This pilot involved the development of a 10 to 20 year plan for the municipality. It was reported that banks had been included in the pilot to look at the municipality and its capacity to raise revenue. The report from the pilot would be used to come up with a plan for the whole country.  Furthermore, the DPLG disputed the claim by Emakhazeni that an amount of R65m had been promised to the municipality. 

The Provincial Treasury reported that, while the municipality was compliant with the Municipal Finance Management Act (MFMA), it still relied heavily on grants and subsidies and was not able to raise its own revenue.  The Provincial Treasury informed the Committee that it had written letters to municipalities in the province raising a concern about departments who owed municipalities huge amounts of money. In the letters it had requested municipalities to indicate the exact amounts owed and the duration of the debts. It reported that, to date, no responses had been received from the municipalities. 

 Observations of the Committee

The Committee made the following observations relating to the Emakhazeni Municipality:
According to the Municipal Finance Management Act (MFMA), municipalities were only allowed to invest money that was not immediately needed. It was the view of the Committee that the Mayor’s Discretionary Fund was not in line with the law; and
The DBSA needed to be brought on board with the pilot project by the DPLG.

Msukaligwa Local Municipality

Having heard the presentation of the municipality, the following observations were made by stakeholders present, and the Committee: 
The DPLG complained that this was the most frustrating municipality to deal with in terms of cooperation. Some of the most obvious challenges faced by the municipality related to procurement and the appointment of staff. Furthermore, the DPLG reported that it had been receiving reports signed by the Chief Financial Officer (CFO) and Municipal Manager on the municipality’s expenditure and was surprised to hear that money had in fact not been spent. 
National Treasury pointed out that the presentation by the municipality did not give specifics e.g. how many houses had been electrified. It added that, post 2010, municipalities would be getting more money and needed to gear themselves for that. National Treasury observed that municipalities neither had ability to spend nor did they have the ability to collect from debtors. It was reported that, for over three years, National Treasury had been trying to get the municipality to hire interns. It was also reported that the municipality was not using the Finance Management Grant (FMG) which was at 0% expenditure. 
Provincial Treasury also raised a concern that the report presented to the Committee was glaringly different from the one that had been presented by the municipality to the Provincial Treasury. 

The Committee made the following observations with respect to the municipality:
The number of positions was 1330 of which 741 were vacant while the salary bill was already at 40%. This meant that if the vacancies were to be filled the salary bill would be bloated. To this end, the Committee requested the municipality, Provincial Treasury, National Treasury, DPLG and Local Government to look at the following matters:
 Determine whether the given 1330 posts was the real figure; 
The credibility of the budget that was presented to the Committee;
The sustainability of the budget were the post to be filled;
Address the issue of under-collection;
Look into the alignment of priorities to the budget; and
Determine whether there was a discretionary fund or not.

The Committee was concerned about the attitude of the Auditor General given that in the context of what was presented to the Committee, there had been no forensic investigation of the municipality. The Committee noted that it considered interacting with the National Auditor-General on this matter with the objective to assist and ensure service delivery. 

Nkomazi Municipality

It was reported that the provincial Health Department owed the municipality an amount of R9 million. 

DPLG reported that it was pleased with the expenditure of the municipality which was at 76%. They added that they were aware of challenges faced by the municipality. 

National Treasury pointed out that the presented budget did not include the capital budget which was a concern.   

Provincial Treasury reported that it had challenges with the municipality and assisted wherever they were needed. 

Eskom reported that it had projects totalling 1400 connections and another 943 connections were scheduled to be done by the end of March. 

The Department of Water Affairs and Forestry (DWAF) reported that it had a very good working relationship with the municipality.

Observations of the Committee

The Committee pointed out that the MIG had been under-spent. Furthermore, the Committee was concerned that the municipality had appointed a deputy CFO (a new post) while there was funding for a properly qualified CFO. 

The water subsidy was also under-spending. To this end DWAF was requested to assist in dealing with capacity. It was noted that, in a rural municipality such as this one, every cent needed to be used and used well. The Department of Local Government and Housing was requested to be part of the discussions on capacity building.  

Steve Tshwete District Municipality

It was reported that the total number of libraries within the municipal area was eight. Eventually the municipality planned to have ten libraries with two in rural villages.  The municipality further reported that their operational budgets were ballooning as a result of high levels of legislation governing operations. All new legislation came with staff requirements which reduced the capital budget that had been aimed at service delivery.  It was further reported that the district had instructed that MIG funds be ring-fenced to deal with issues of water. 

The Committee heard that the municipality needed an amount of R18 million to assist in the provision of toilets in the place of biological toilets that were currently in place. 

The Committee was informed that the Provincial Education department also owed this municipality about R900 000. Furthermore it was said that funding was given to schools on the basis of how old the schools were, as such schools in towns received bigger allocations than those in RDP areas.

The Provincial Health Department also owed the municipality R5.5 million. The Department was reported to be taking over the provision of primary health care. The municipality reported that it was resisting this move by the Health department since it felt that it could provide this service. 

The Committee was also informed that 74% of the municipal budget was from its own revenue in which case it sometimes had to take loans. In areas where revenue was generated, refuse removal took place twice a week and in others once a week. 

Provision for the indigent:
10 kl of water, 50kwh, free sanitation, free refuse removal, 100% rebate on property tax. The municipality reported that 82.3% of its equitable share went towards the free basic services for indigent. 

Furthermore the municipality reported that it was facilitating housing delivery even though it had not been given the subsidies for this. The actual erection of the houses was said to be done by the province. In addition the municipality believed that housing delivery could be accelerated if the municipality could be accredited.

All municipal programmes were reported to be fully aligned to the Provincial Growth and Development Strategies (PGDS). 

The DPLG reported that it was pleased with the expenditure of the municipality. National Treasury commended the municipality for being able to raise its own revenue. It noted, however, that the question of unfunded mandates needed to be addressed. 

Provincial Treasury reported that the municipality complied with the MFMA and that it had an in-house financial system that worked well. It also pointed out, that the municipality’s capital expenditure was an area of concern since the municipality was not spending according to a set benchmark.  To this end the Provincial Treasury reported that it had sent out a template wherein municipalities could fill in their capital projects. 

With respect to the accreditation of the municipality, the Committee agreed that it would set up a meeting with the National Department of Housing, Provincial Treasury and Provincial Housing to address the matter.  

Albert Luthuli Municipality

The National Treasury pointed out that the report that had been presented by the municipality to it was not the same as the one presented to the Committee. It was reported that when the municipality adopted its budget there had been a deficit of R22 million. It had debtors of over R86 million. The adjustment budget that was being presented at the meeting was not credible. It further reported that the municipality was overspending by over R1 million in January 2008 on its Capital budget. Furthermore, National Treasury enquired on what the director in the Municipal Manager’s office did. 

The National Treasury also noted that in the operations budget, there was an allocated amount for “other” and this had the second highest amount of money. It enquired as to what this “other” included. It also pointed out the glaring difference in the capacity requirements of this municipality and that of Msukaligwa, adding that this municipality seemed to be doing well without the huge numbers of staff needed in Msukaligwa. The Provincial Treasury concurred with National Treasury that the presentation differed from what had been presented to the Provincial Treasury. It added that support was given by Provincial Treasury to assist the municipality.

The Committee made the following observations:

The municipality had received a qualified report from the Auditor General. The findings of the AG with respect to the municipality included among others:
Incorrect accounting framework;
Non availability of a fixed asset register;
Overstatement by R499 788 due to calculation error;
Capital Development fund overstated by R4m due to calculation error; and
Non availability of source documents.
Bushbuckridge Municipality

The Committee noted the report by this municipality but requested that, given that the Mayor and the Municipal Manager were not present, they would be invited to be part of the meeting on 5 May in Cape Town.

Gert Sibande District Municipality

The presented report did not relate the challenges faced by the municipality, but reported on behalf of other municipalities. This made it difficult for the Committee to interact with the presentation. 

The municipality reported that it had been under the impression that it needed to report on the entire district. To this end it was agreed that the municipality should also prepare itself for the meeting scheduled to take place in Cape Town.

Emalahleni Local Municipality

In the absence of the Executive Mayor and the Municipal Manager, the Committee noted the report by this municipality but requested that they be part of the meeting on 5 May in Cape Town. 

4)         Conclusion

Given the above findings, the Committee made the following conclusions:
Issues of capacity were a common challenge among municipalities;
Departments were not honouring their commitments to municipalities in terms of debt;
There were departments who were reluctant to participate in IDP’s;
Municipalities had discretionary funds that were not in line with the MFMA;
Some municipalities had very high salary bills;

Emakhazeni Municipality
The Committee recommends as follows:
Departments owing money to this and other municipalities should promptly meet their commitments or risk being in violation of the law; 
The Department of Education should meet with the municipality and address the question of scholar transportation; 
The matter of the municipality being housing developers would be taken up by the Committee with the department of housing; 
The Department of Water Affairs and Forestry (DWAF) should develop a programme of action to assist with the problems of sewerage spillages in Emakhazeni and report to the Committee;
The municipality should continue to put in place ways of raising its own revenue; Furthermore it should limit personnel spending to be no more than 30% of its budget;
The MEC for Finance and the Mayor of Emakhazeni should address the issue of outstanding debts as a matter of urgency in terms of the MFMA. 


The Committee recommends that the municipality prepare a report on the true state of affairs for a meeting that would be held in Cape Town on 5 May 2008. 

The Committee recommends as follows:
The Provincial Treasury meet with the municipality and discuss possible ways of ensuring capacity building for the municipality. 
The DWAF assist in dealing with capacity issues ensuring that the municipality was able to spend its water subsidy. 
The Department of Local Government and Housing should be part of the discussions on capacity building. 
The Mayor should inform the Provincial Treasury whenever there was money owed to it by the departments.  

Steve Tshwete 
The Committee recommends as follows:
The municipality should consider making use of its investment to address the issue of biological toilets. All municipalities should invest money that was not immediately needed, in line with the MFMA.    

Albert Luthuli 
The Committee recommends as follows:
Given the report of the Auditor General on the municipality, National Treasury should meet with this municipality, DWAF, DPLG, Provincial Department of Local Government and Housing and Provincial Treasury, to deal with all matters raised in the report so as to get the municipality on track. Some of the focal areas specified for that   meeting were:
Alignment of budgets and
Salary bill
The DWAF and the municipality needs to resolve the following matters that had been raised by the municipality as challenges; the upgrade and refurbishment of water and sewer treatment works and the huge backlogs in sanitation.



No related documents