ATC080523: Report Oversight visit to Mpumalanga

NCOP Finance

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

 

1)      Introduction

 

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)

 

 

2)      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

·        Eskom

 

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.

 

3)      Findings

 

(a)               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.

 

(b)               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:

(a)     Determine whether the given 1330 posts was the real figure;

(b)   The credibility of the budget that was presented to the Committee;

(c)    The sustainability of the budget were the post to be filled;

(d)   Address the issue of under-collection;

(e)    Look into the alignment of priorities to the budget; and

(f)     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.

 

(c)                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. 

 

(d)               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. 

 

(e)               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.

 

(f)                 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.

 

(g)               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.

 

(h)               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;

 

5)      Recommendations

 

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.

 

Msukaligwa

 

·        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.

 

Nkomazi

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

o       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.

 

Report to be considered.