ATC220928: Report of the Standing Committee on Public Accounts on its oversight visit to Masilonyana Municipality in the Free State, from 22 to 24 August 2022, dated 28 September 2022
Public Accounts (SCOPA)
Report of the Standing Committee on Public Accounts on its oversight visit to Masilonyana Municipality in the Free State, from 22 to 24 August 2022, dated 28 September 2022.
- Introduction
The Standing Committee on Public Accounts (the Committee), having undertaken an oversight visit to Masilonyana Local Municipality in the Free State, from 22 to 24 August 2022, reports its findings and recommendations to the House as follows:
Delegation
Mr M Hlengwa (IFP); Leader of the delegation
Mr B Hadebe (ANC)
Mr S Somyo (ANC)
Ms N Tolashe (ANC)
Ms A Beukes (ANC)
Ms B Zibula (ANC)
Ms B Swarts (ANC)
Mr RA Lees (DA)
Ms Mkhonto (EFF)
Apologies
Ms V Mente (EFF)
Ms B van Minnen (DA)
Ms Mokete Duma Head: Provincial COGTA
Ms N Dlamini-Zuma Minister: COGTA
Support Staff
Mr B Kali (Secretariat)
Ms N Nkabinde (Secretariat)
Mr L Balfour (Committee Assistant)
Ms N Cenge (Content Advisor)
Mr Jabulani Majozi (Parliament Communications Officer)
Officials from the Department of Cooperative Governance, DWS and Municipality
Ms Thembi Nkadimeng Deputy Minister: COGTA
Mr Thobani Mateza PLO
Mr Shike Maripane Parliamentary Officer: COGTA
Ms Zodwa Lusabo Director: COGTA
Ms Sylvia Geldeblom Chief Director: COGTA
Mr Mxolisi Dukwana MEC COGTA & Human Settlements
Mr Stephen N Makata Speaker
Mr Sipho Thomas Acting Municipal Manager
M Diseko Ntsepe Manager: Expenditure
Mr Josiah Tooma Director: Municipal Infrastructure
Mr Kabelo Masekoa Manager: Water Services & Infrastructure
Mr Pule Tshabalala Acting Director: Infrastructure
Mr Dirontsho Molibeli PMU: Technician
Mr Freddie Malatji PMU: Technician
Mr I Aiguello Sp Engineer: DWS Free State
Mr Danis Lima Engineer: DWS Free State
Mr Simon Rapulane Provincial Manager: MISA
Mr Lwando Zonke Electrical Engineer: MISA
Mr Alex Lopet Project Engineer: Bloem Water
Mr S Mooki Chairperson: Masilo Community Leaders
Mr Tsepo Maredi Programme Facilitator: Masilo Community Leaders
Mr Michael Landsman Petitioner / Director-Founder: Lesawell
Ms Marisa Petitioner / Councilor
Mr Frans Posthumus Brandfort Forum
Mr Zongezile Ntjwabule Chief of Staff: Masilonyana Local Municippality
Mr Lebogang Kalake Community Member
Mr Chabeli Makhoana Community Member
Mr Sello E Putsoenyane Community Member
Mr LE Thlobo Community Member
Mr Mokhele Ramtsehoa Community Member
Ms Marieta Visser Resident: Theunissen
WA Potgieter Community Member
RA Tsokodibane Community Member
AJJ Kruger Business Forum: Masilonyana
Machiel du Plessis Community Member
Mr Monte Pienaar Co-ordinator: Rural Safety, Farming
Mr EWK de Bruin Committee Member: Ward Council
AGSA delegation
Ms Teresa NaidooSenior Manager
Ms Thea WeidemanSenior Manager
Mr Luthando MbandazayoDBUL
SIU delegation
Ms Simangele TshabalalaProvincial Head: Free State
Mr Katlego Lenise Principal Forensic Lawyer
Provincial Treasury delegation
Ms Matumelo KoatlaDeputy Director: Provincial Treasury – Free State
In 2019 SCOPA had a hearing with the Masilonyana Local Municipality on its 2016/17 Annual Report and Financial Statements, where it became apparent that the municipality was fraught with difficulties that included financial instability, inefficient delivery of services, unauthorized, irregular, fruitless and wasteful expenditure, and lack of internal controls. The municipality was also disclaimed for two consecutive years, 2015/16 and 2016/17, and had not tabled their annual report from 2017/18 to 2019/20.
On 15 March 2017, the Free State Provincial Executive placed the municipality under administration in terms of Section 139(1)(b) of the Constitution. Poor audit outcomes, late payment of salaries, non-payment of third parties and debts to ESKOM, SARS and Telkom were some of the reasons cited for this decision. The intervention ended in November 2019 without a close-up report being made available. Being under administration did not bring about any change in the overall performance. The financial situation worsened as the municipality struggled paying employees. The indebtedness to ESKOM escalated from R55m to R75m in one year. Administrators did not attend Council meetings. Protests ensued. Billing was marred with inaccuracies. SCOPA’s intention to conduct an oversight visit at the time was put on hold to allow for the settling of officials after the municipal elections. Nothing changed in terms of the quality of administration.
A petition dated 30 October 2019 was received by the NCOP from Mr Michael Landsman, Director of the Lesawell NGO. On 30 September 2020, the Select Committee on Petitions and Executive Undertakings heard evidence from the Masilonyana Local Municipality and the relevant stakeholders, including the South African Local Government Association (SALGA) and Free State provincial COGTA. The NCOP adopted a report on this petition on 2 December 2020. One of the resolutions was that “the House should refer the matter of lack of internal control systems within the Masilonyana Local Municipality to the Standing Committee on Public Accounts for further investigation” (ATC dated 30 June 2022).
- Objectives
Based on the Committee’s interaction with the municipality in 2019 regarding its performance and financial status, and the subsequent referral by the House, the Committee undertook the oversight visit in order to:
3.1 Determine the array of challenges facing the municipality;
3.2 Find out the reasons for the weak internal controls;
3.3 Establish reasons underlying the inefficiency in delivering basic services and why the municipality has not tabled its annual report for three consecutive years;
3.4 Understand what encourages non-compliance with legislation;
3.5 Probe into the dynamics at play which promote an attitude that seems to exonerate officials from accountability;
3.6 Examine conditions underlying lack of service delivery which in turn culminate into protests;
3.7 Obtain the municipality’s financial recovery plan, the close-up report, the preliminary forensic investigation report on cases investigated by HAWKS;
3.8 Hear the plight of the petitioner and the community.
Findings
4.1 Brandfort
The delegation met with the Petitioner and the Community Forum.The town relies heavily for its bulk water supply on the Erfenis Dam.
The Speaker was absent on the first day of oversight, but no apology had been tendered. The mayor and the CFO were also absent. The Municipal Manager who was appointed by the Council in terms of the Municipal Structures Act in January 2018 was currently on suspension since 24 May 2022. The Acting Municipal Manager was seconded from the Provincial COGTA on 20 July 2022.
The following findings were made at Brandfort:
The pump station at the Correctional Services site supplies 10 wards. It works intermittently, which means it is a health hazard, as evident from the spill of sewer on the ground within and beyond the premises. Further down from Correctional Services there is a sewer treatment plant where water should be treated and sent back into circulation. This does not happen as the pumps are not functioning. The Municipal Manager could not say how long it had been since the place was operational. Money had been spent on refurbishment of this plant, but its condition bears testimony to the contrary of what should be the case. Contractors said they were not working because they had not been paid. The municipality had asked the Department of Water and Sanitation to assist with the project, and the Department appointed Bloem Water as an implementation agent. The contract therefore which governs Bloem Water activities is between them and the Department, and not with the municipality. The contractors were said to be cleaning up the ponds, and the project was supposed to be completed by July 2022. A few workers who happened to be on site revealed that they were only called in to report for work on the day of the Committee’s oversight, contrary to what the Committee was told that the service provider is currently working, and despite physical evidence which refuted the claim. The service provider had not been on site since June 2022. Representatives from the Brandfort Forum confirmed that no work was being done on the plant.
4.2 Theunissen
The following findings were made at Theunissen:
The 10km bulk pipeline of the Theunissen treatment works which goes to the reservoir is old and needs to be replaced. Its current state results in limited pumping, which in itself affects the pace of the project meant to ensure treatment of the sewer. The project was said to be on hold because the appointment of the service provider was done irregularly. There had been two occasions of burglary and attempted robbery. In the first instance which occurred on 1 April 2022, cables were stolen. In the second instance which occurred on the night of 22 April 2022 and where gunshots were fired, the attempt was not successful. These incidents point to a security issue. Cameras were said to be in working order but nobody was watching. The security personnel did not have full resources to deal with incidents of this nature because they are unarmed, and they rely on their personal cell phones to call for help since no alarm is triggered. Following this, the town had to endure 5 days without water. Work cannot be done optimally because there is fear of being harmed by burglars. After the burglaries the municipality tried to secure security services but could not afford the cost, therefore during the day the municipality makes use of its own security services, and at night a private security company operates. Project 2 is aimed at erecting a fence around the premises.
There were pump electric motors that were lying outside which were said to be damaged and were intended to be written off. There was no explanation is to why these were sitting outside in full view to encourage theft, instead of being properly maintained or sent for refurbishment. Apart from being told that the water level at the reservoir was low and that water is shut down at 4pm each day until the next morning, the Committee could not establish from the officials what measures were in place to ensure that residents get water, when last a safety officer was there to issue a certificate, or what concrete plan of action was in place to address the water issue for residents.
The Municipal Manager conceded that the municipality was bankrupt.
At the municipal offices in Theunissen, the Committee established that:
a. Management was dysfunctional;
b. R260 million was owed to creditors;
c. Nothing had been done since the 2019 petition;
d. The Auditor-General left without concluding the audit exercise because there was no information to work on;
e. There was no capacity;
f. There was no proper record keeping;
g. Nothing has been done about the 5 years of disclaimers, and the municipality never had an action plan to address audit concerns;
h. There had been no server for 5 years;
i. There was no manual for standard operating procedures;
j. The service provider CCG, whose system was acknowledged to be inaccurate, shut down their system at a point when they were owed R6.5 million by the municipality;
k. It was not clear what CCG was doing, but their contract was extended despite them producing zero results;
l. SCM was at some point outsourced;
m. Some employees in the Finance Department refused to sign the attendance register as required each morning when reporting for work, and nothing was done about that.
4.3 Winburg
The delegation met with Municipal officials, petitioners and residents of Winburg and Theunissen. Despite having communicated with the Committee via its Chairperson, the Mayor was not present at the meeting, and no formal apology or a hint had come forth that she would not be there. A range of issues was highlighted by the petitioners and residents as their basis for dissatisfaction with the services of the municipality, or lack thereof. These included:
4.3.1 Financial instability in the municipality;
4.3.2 Insufficient service delivery;
4.3.3 Weak internal controls;
4.3.4 Life threats;
4.3.5 Over-reliance on contractors;
4.3.6 Inadequate oversight to improve internal controls;
4.3.7 Irregular expenditure, fruitless and wasteful expenditure;
4.3.8 Municipal staff being at work but not working;
4.3.9 Mismanagement, particularly of funds;
4.3.10 Fleet of vehicles not in working condition;
4.3.11 No by-laws that could help with revenue collection;
4.3.12 Municipal accounts either not available or duplicated;
4.3.13 ESKOM debt not paid;
4.3.14 Audit is outstanding;
4.3.15 Petition submitted but ignored even after follow-up;
4.3.16 Residents charged for services not rendered;
4.3.17 Attitude of staff towards community. When pre-paid meters have to be installed, officials shout and yell at the elderly when they are reluctant to open the door for who they consider to be “strangers”. Complaints about this are ignored. The arrogance and adversarial attitude displayed by those elected in key positions has a contrary effect to servicing the community;
4.3.18 No street lights in Theunissen, only 7 in Winburg. Crime is picking up, and the police service is not the best;
4.3.19 Unit Manager is never there to respond to issues, and is more in town than in office. People in acting positions deliver nothing;
4.3.20 Municipal staff cannot read the Blue Press, they have to rely on residents to identify where pipes are burst and to close taps where necessary;
4.3.21 Properties are wrongly evaluated;
4.3.22 National Treasury keeps bailing out municipalities which render no services;
4.3.23 The 4 towns Brandfort, Theunissen, Winburg and Verkeerdevlei were promised fire stations, but still there are none;
4.3.24 Tankers that are supposed to deliver water to the community turn around at the entrance of town, open the taps and empty the water on the ground as they drive back;
4.3.25 The graveyard infrastructure in Brandfort is not maintained but is instead being vandalized. People have been known to take a biological break behind tombstones;
4.3.26 No representatives from the municipality attend community meetings convened to address matters of concern;
4.3.27 The pipeline project which should have started a long time ago never took off. A tender was said to have gone out, but nothing happened afterwards. Residents claim that the information around this matter was deliberately kept from the Mayor by those who knew exactly how they would benefit after the expiry of a certain period. There is a view that the political situation that prevails further muddies the waters, and management is failing to take control. Systems have been collapsed deliberately to avoid accountability.
4.3.28 Things started getting better when Mr Rampini was Acting Municipal Manager, but then he was relegated to his original position and things became worse again.
The following findings were made at Winburg:
4.3.29 The municipal vehicle intended for refuse collection is not being used, and residents have to rely on their own resources to dispose of waste.
4.3.30 There are no fire stations.
4.3.31 Waste buckets are dumped in a field, exposing humans and animals to sickness. In one instance, sewer runs down to a dam intended for drinking water.
4.3.32 A third party, Mafumi, was selling electricity and collected payment on behalf of the municipality and paid ESKOM, but the municipality had no way of telling how much was collected in the first place. This informal and illegal arrangement subsequently ended up in court.
4.3.33 The municipality keeps defending matters taken to court and often loses, instead of doing right from the beginning. Considering that there is no revenue, it remains unclear where the money to pay legal costs comes from.
4.3.34 R9 million was intended for repairing roads but it is not known what happened to that amount. R8 million was allocated for the refurbishment of sports grounds but the structure there is still a framework, with bits of it progressively being stripped away. Sports grounds are therefore not functional, and the letter to the Councilor requesting to renovate the grounds was neither responded to nor even acknowledged.
4.3.35 Some R3 million was paid to some lady’s bank account. A case was said to have been opened and HAWKS investigated the matter. The Committee could not establish the case number and progress in this regard.
4.3.36 ESKOM is owed in excess of R114 million. Street lights are not working.
4.3.37 3 contractors were contacted regarding fencing that would cost around R200 000.00, but a R400 000.00 quote was accepted instead.
4.3.38 Audits are not done every month, and this situation is seen as encouraging corruption.
4.3.39 Tankers that are supposed to deliver water to the community turn around at the point of entry to the town, open the taps and empty the water on the ground as they drive back. Therefore no water is delivered to residents.
4.3.40 Some skilled people seem to be hampered when they are appointed and work in an environment where employees simply work the way they want to, instead of how they should.
4.3.41 There are no plans for the sites next to ESKOM stations. These plans are needed before the sites are handed out.
4.3.42 There have been no Finance or MPAC meetings during this term. Councilors are ignored in their attempts to get things done right, and are not heard despite following all protocol. Some instances where Councilors seem to be referee and player at the same time are prompted by the neglect suffered when these Councilors raise matters of concern through the appropriate channels but get no joy.
4.3.43 Regarding the Makeleketla project to eradicate the bucket system, buckets were removed, but there were no sewer stations as replacement. Pump stations are not working. The R25 million water project which was supposed to be complete in 2020 collapsed. The Municipality kept changing service providers but nothing materialized.
4.3.44 There are no fire vehicles in all 4 towns of the municipality. Cattle fences are not maintained. Cattle roam on the road and become a hazard to road users. Gravel roads are also in a bad state. It is a struggle to get deliveries to certain destinations.
4.3.45 In the midst of confusion with inaccurate billing, residents have been asked to pay 50% of their debt. However, it is not feasible to secure a 50% payment when residents do not even know how much their debt is. On the other hand, the contemplated option to write off debts cannot be fair to those who have maintained regular payments while others were not paying. This option would likely foster a culture of non-payment where everybody would stop paying with the hope that all debts will eventually be wiped off. Nonetheless, the Committee could not establish the legal basis on which the municipality would be at liberty to write off debts and start afresh.
4.3.46 Lack of proper project management and planning leads to projects spanning over years beyond the initially intended period, with cost escalation.
4.3.47 During the period when the municipality was under administration, nothing happened except regression. The Committee asked for a close-up report on the basis of which the effect of section 139 (of the Constitution) ceased. This was not produced.
4.3.48 The Speaker confirmed that workers get themselves involved in politics, some seeking promotions. Councilors insisted that for those posts where 31 workers have been acting for 3 years, those must be advertised with emphasis on making correct appointments of qualified personnel. A Legal Manager had been appointed to help revise by-laws and policies. The Acting Municipal Manager agreed that the municipality has been in a critical state for years now, identifying exacerbating weaknesses in several areas which include administration, financial matters, service delivery, communication, standard operating procedures, revenue management and lack of skills at management level (juxtaposed with skilled management at lower levels). The Committee could not establish why only now the lack of skills is identified, and how these employees were appointed in the first place.
4.3.49 Irregular activities proliferated at some stage when SCM was outsourced, but the outsourcing was later reversed under advisement from Provincial Treasury.
4.3.50 There is no formal arrangement with ESKOM to address the R127 million debt. ESKOM insists that before they can consider new areas to supply electricity to, the municipality must first address the outstanding debt.
4.3.51 According to the Municipal Manager, the municipality has no financial capacity to attend to the Makeleketla sports grounds and the fencing of the Town Hall. The municipality needs funds to pay the expert required for the nature of heritage look that needs to be maintained. He added that the bucket system was necessitated by new settlements. Old pipes need to be replaced due to constant blockages. Some of these blockages were said to be occasioned by instances like residents slaughtering sheep and dumping the skin inside manholes.
4.3.52 It was confirmed that nothing happened since the municipality’s interaction with the NCOP. Managers do sign performance contracts but no performance bonuses are paid. The municipality never checked if people are competent in committees, hence it now claims to be reviewing the composition of committees and deployment of people. Resolutions are taken but it is hard to implement them. To the question of whether or not workers are trained on health and safety matters, the municipality was unable to advance a concrete response, except to promise they would look into the matter. The Committee noted the problem arising out of a situation where people cannot tolerate opposing views, and also the appointments which are biased in favour of males. However, it was clear that there were anomalies, hence the suspension of the Municipal Manager.
- Recommendations
The Committee recommends as follows:
5.1 The SIU should investigate matters of corruption in the municipality, including Mafumi, and report quarterly to the Committee on progress in this regard.
5.2 Conduct a skills audit of the current staff in the establishment, and also ensure that all future candidates for employment do possess the requisite skills.
5.3 The Municipal Manager must submit a monthly report of progress made in all matters that have been raised, the first one being due on 30 September 2022.
5.4 Develop concrete steps to effect consequence management instead of colluding with those who seek to collapses the municipality.
5.5 Employ adequately skilled personnel in the supply chain management unit at head office, as well as at different projects where procurement takes place.
5.6 Implement proper and adequate controls in all districts and local offices as large amounts of revenue are handled by these offices.
5.7 Put in place and maintain proper record keeping and archiving systems in all offices, and assign dedicated personnel to ensure that documents are kept safely.
5.8 Criminal charges are laid against individuals who have committed financial misconduct.
5.9 Ensure that the Municipality is capacitated with adequate permanent skills in SCM and asset management.
5.10 Monitor spending on conditional grants and have properly updated records at any given time.
5.11 Ensure that the Annual Financial Statements are reviewed by the first and second-level reviewers before the audit committee sits for AFS review.
5.12 Develop an action plan to address the findings of AGSA immediately after the audit and the action should be monitored for implementation by both management and audit committee.
5.13 Monitor spending on conditional grants and have properly updated records at any given time.
5.14 Design controls to ensure that all reported performance agrees with the underlying supporting documents used to populate the annual performance report (APR).
5.15 Expedite all ongoing investigations and take appropriate disciplinary action against implicated officials.
- Conclusion
The Committee gave the municipality 14 days within which to meet with the petitioners to detail what can or cannot be done, and urged the petitioners to read the Code of Conduct for councilors. The Committee further asked for a full report on Mafumi, and encouraged anyone with tangible information to submit this to the SIU. Furthermore, the municipality must submit the close-up report to SCOPA.
The Committee was generally disappointed by the extent to which the Accounting Authority and management have failed to address the weaknesses in financial management as identified in the audit report, especially as some of these matters had been raised in the audit report of previous years.
In the light of the above, SCOPA resolves that the Auditor-General should conduct aspecial audit into the matter of financial weaknesses of the municipality.
The Committee further recommends that the Executive Authority submits a progress report on the implementation of all the above recommendations to the National Assembly within 60 days of the adoption of this report by the House.
Report to be considered.