ATC101123: Report on Interventions in Alfred Nzo District, Sunday’s River Valley & Koukamma Local Municipalities in the Eastern Cape

NCOP Economic and Business Development



1.         Background and Overview


1.1        Intervention in local government in terms of section 139 of the Constitution is an integral part of the institutional framework for developmental local government. It is a necessary corrective when a municipality fails to govern and thus jeopardises the enterprise of development. It is also an aspect of intergovernmental relations and, as such, it must be exercised within the spirit of co-operative government as outlined in Chapter 3 of the Constitution.


1.2        Against this background, three municipalities in the Eastern Cape Province received a considerable amount of section 139 interventions during the 2009/10 and 2010/11 financial years. These included, Alfred Nzo District, Koukamma and Sunday’s River Valley LocalMunicipalities. The observation, situation and gap analysis of the current situation revealed the following shortcomings:


·         Absence of co-operative governance amongst critical stakeholders

·         Poor institutional capacity and organisational systems impacting on service delivery

·         Problems with respect to municipal debt and inadequate billing systems

·         Problems with financial management and control. There was no adherence to regulations of the MFMA.

·         Public accountability has been one of the worst challenges as the municipalities continue to obtain disclaimers and qualified opinions from the Auditor-General.

·         Performance challenges of senior municipal officials.




2.         Introduction


2.1        On 19 October 2010, the Eastern Cape MEC for Local Government and Traditional Affairs, Hon S Gqobana briefed the Select Committee on Co-operative Governance and Traditional Affairs on the progress made in respect of interventions at Alfred Nzo District, Koukamma and Sunday’s River Valley Local Municipalities.


3.         Progress Report on the Intervention in Alfred Nzo District Municipality


3.1        It was reported that an Administrator had been appointed from 20 April 2009, and he assumed responsibilities on financial management (financial recovery plan); corporate services, including general administration and human resource; infrastructure development and MIG funding and public participation.


3.2        On financial management systems, progress made was with regard to the activation of a financial system (SAMRAS) which had been bought and abandoned by the Municipality. A reliable billing system on SAMRAS has been developed. It was reported that accurate annual financial statements were submitted on 31 August 2009. Furthermore, a debt recovery plan was approved and implemented, and all creditors whose payments had been outstanding for more than 120 days were paid. In addition, an improved record-keeping system and a fully integrated payroll was now in place.


3.3        Significant achievements were also registered with regards to the appointment of the Municipal Manager, as well as the Chief Financial Officer. Specific financial policies were now in place, and public participation was starting to yield the desired results. The Municipal Infrastructure Grant (MIG) projects were ring-fenced and thus used for their intended purpose only. Intervention has since been terminated and the Administrator submitted a close-out report.


4.        Progress Report on the Intervention in Koukamma Local Municipality


4.1        The Department reported on good governance and public participation. The lax attitude towards corporate governance processes and the lack of organizational leadership has been addressed. Steps have been taken to improve communication with the community through the establishment of the stakeholder forum. All of the recommendations of the Special Investigations Unit (SIU) have been implemented.


4.2        On financial reporting and billing management, progress has been made in terms of the new financial record-keeping systems which have been introduced using clean data. The annual financial reports for 2008/09 were compiled and the Auditor-General has started the audit.


4.3        Significant achievements were reported on the revenue management and enhancement strategy that has been developed. A Debt Collection Policy has since been adopted and promulgated. A total of 4 730 debtors who owed the Municipality a total amount of R47 416 683.14 have been contacted.  An Asset Register has been developed and a draft fraud prevention plan is in place, with various cost-cutting measures having been approved and implemented.


4.4        The new draft organogram was approved by Council and was costed. It is envisaged that the new positions will be advertised and interviews completed. The appointments of a new Municipal Manager and other Section 57 Managers were finalized. A Performance Management System (PMS) has since been initiated, with PMS contracts being drafted. Lastly, the disciplinary matters for the Municipal Manager and other Managers have been finalized.


4.5        The remaining challenge is the lack of water resources in the area due to a long-term drought.  Government intervention is required. In addition, the culture of non-payment for services by the community has not been completely overcome and needs more attention.


5.        Progress Report on the Intervention in Sunday’s River Valley Local Municipality


5.1        In Sunday’s River Valley Local Municipality the intervention was effected from 18 February 2010, with the Administrator assuming duties on areas of finance, human resources, infrastructure and service delivery, and legal and public participation.


5.2        Progress reported on finance related to Credit Control and the Debt Management Policy which has been reviewed and adopted by the council. The staff complement at Finance has increased, with 13 new positions, of which 10 have been filled. There are now cost-cutting measures in place, e.g. telephone and 3G cards, travelling and fleet management.


5.3        In terms of institutional development, an HR Plan was now in place. The Local Labour Forum structure was reviewed and it has started pro-active labour engagement (5 meetings to date). It was reported that service delivery is at the core of the council’s agenda, and five council meetings have taken place in the past three months. 


5.4        On good governance, it was reported that investigations of allegations of corruption, maladministration and misconduct are being dealt with administratively, but the council has been awaiting the outcome of SIU investigations since June 2010. Disciplinary processes and possible criminal charges have been considered for two officials at Community Services Directorate, with one official on suspension for alleged fraud and corruption.


5.5        What remains a challenge is the financial bailout needed for the survival of the Municipality. This is estimated at R20 million. If this is not forthcoming, the achievements on the interventions will be compromised.


6.         Committee Observations and Opinion


6.1        The Committee has observed the remarkable improvements brought about by the interventions in the three municipalities. However, the Committee is of the opinion that the success of any intervention rests on the collective co-operation of all stakeholders in a municipality.


6.2        The Committee is of the opinion that, for service delivery to be effective and efficient in a municipality, there has to be a committed political and administrative leadership with sound administrative and management processes in place.  The Department should continue providing this kind of support to all its municipalities in the Province.


7.         Recommendations


7.1        Having deliberated on the progress reports of the three municipalities in Eastern Cape Province, the Select Committee on Co-operative Governance and Traditional Affairs recommends as follows:   


7.1.1          The NCOP should endorse the progress reports on the interventions in Alfred Nzo District, Koukamma and Sunday’s RiverValley Local Municipalities.


7.1.2          The Eastern Cape Department of Local Government and Traditional Affairs should continue providing ongoing support to all its municipalities, in order to help indicate potential problems before they become crises, so that municipalities are able to implement their own corrective measures when problems arises.


Report to be considered.


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