Municipal Demarcation Board 2019/20 Annual Report; Update on delimitation process

Meeting report

Opening remarks

The Chairperson said the presentation would focus on key issues that had been raised. The Committee was concerned about the lack of information and follow-ups on the activities of the Municipal Demarcation Board (MDB). The report to be presented indicated that the MBD had received 29 proposals for the re-determination of municipal boundaries. This would continue to be monitored by the Committee. Another issue was the growing challenges associated with municipal amalgamations.

It was the view of the Committee that following the successive clean audits of the MDB, it should continue to work on improving its external footprint, with a key focus on public participation and amalgamation.

Municipal Demarcation Board’s 2019/20 Annual Report

Mr Muthotho Sigidi, Chief Executive Officer (CEO), MDB, took the Committee through the presentation, and listed its key highlights and achievements. It had:

• Maintained its clean audit status;
• Finalised spatial boundary descriptions for 199 municipalities to date;
• Finalised 24 reports on the norms and standards of municipal powers and functions;
• Conducted extensive stakeholder engagements and public consultations covering 109 municipalities on ward delimitation before the Covid-19 national lockdown; and
• Carried out an expanded media communication programme to inform stakeholders about the ward delimitation process and first draft wards. It had adopted a crisis communication plan focused on ward delimitation.

The MDB had achieved 95% of its annual targets. In terms of quarterly performance, the graph included in the presentation reflected 100% achievement in the first three quarters, and 94% in the fourth -- with 6% partially achieved.

Financial performance

The MDB had maintained its clean audit opinion on its annual financial statements (AFS) and performance information for the year ending 31 March 2020.

The surplus for the 2019/2020 year was R8 622 000. The surplus was mainly due to commitments for public participation and awareness campaigns for the ward delimitation process, and the amount that was ring-fenced for the publication of notices for the draft and final wards to be done in the 2020/21 financial year.

In the current year budgeted adjustment, there had been a reduction of R3 755 000 for the current financial year, consisting of R1 300 000 under goods and services, and R2 455 000 under compensation of employees (CoE). There would not be an annual cost of living adjustment for employees as a result of the reduction in CoE. This reduction would be effected during the budget adjustment. However, the reduction in goods and services would not have an impact on the operations of the MDB. There was also a budget cut over the medium term, which would put further pressure on its financial resources.

Progress on ward delimitation process

The presentation provided a comprehensive overview of the progress of the ward delimitation process. Key challenges faced by the MDB in this regard included:

• The reduced allocation of the MDB as a result of government’s COVID-19 relief efforts;
• High dependence on municipalities to provide a communicative interface with communities;
• The outstanding finalisation of the Demarcation Amendment Bill; and
• Sporadic outbursts of violent protesting as a result of dissatisfaction with the final wards.

The MDB had proposed an expedited process to work on the amendments to the Municipal Demarcation Act. A funding proposal to ensure that the demarcation process was adequately and appropriately resourced was submitted to National Treasury and there had been increased community engagement in order to address certain complaints.

Discussion

Mr H Hoosen (DA) said that the MDB was a prime example of good corporate governance, especially in the context of what the Committee was generally exposed to.  He pointed out that the budget allocation over the medium term was going to be reduced, and considered this as a point of concern. He asked for a comment from the MDB on this. He commented that he had not seen any expenditure related to COVID-19. Lastly, there was an allocation of ‘other income’ to the value of R1 million, and he wanted to know what this referred to.

Mr G Mpumza (ANC) commended the board for achieving a clean audit. The MDB had done well to achieve its targets, but in programme  one it had indicated under-expenditure, and he wanted to know why. In programme three, he wanted to know what the geographical challenges had been during the ward delineating process in 2016, and how these challenges had now been addressed. He also questioned the assessment and facilitation of powers between the district and local levels of government as to whether they were specifically contributing to the objectives of creating a strong local state.

Mr K Ceza (EFF) raised questions regarding expenditure, and wanted to know what causal factors were involved. Generally, the notion was that amalgamation would affect service delivery, and there had been various issues raised by local communities regarding municipal boundaries. In some areas the municipal boundaries may get confusing, and this could lead to inefficient service delivery. Had the MDB considered this when thinking about municipal borders? Did the MDB sit and consult with other departments in order to ensure harmonisation in the process of demarcation and efficient service delivery?

Mr B Hadebe (ANC) said that he welcomed the clean audit, but unfortunately this did not always indicate good service delivery, especially in terms of grass roots public participation, and he questioned whether or not any issues or complaints concerning demarcation had been adequately addressed. He asked that the amalgamation reports be sent to the Committee, as this process had raised issues, and needed to be addressed.

Ms D Direko (ANC) said that although she was aware of the economic state of the country, she was concerned that the MDB had experienced a budget cut. She therefore wanted to know the MDB’s plans to ensure that in spite of this challenge, they continued to operate efficiently. She also asked about the progress regarding the amendment to the Municipal Demarcation Act.

The Chairperson commended the MDB on their culture of professionalism and the good work that they continue to do. She said an important issue that needed to be addressed was related to the Commission for Conciliation, Mediation and Arbitration (CCMA). Since 2019, there had been a case at the CCMA regarding the top management position of the executive manager of corporate services. She asked the MDB to provide an update on progress on this issue, specifically the financial implications of this position remaining vacant.

She requested that the MDB expand on the findings of the audit committee with regard to the system of internal control over the financial reporting period. She asked about the MDB’s geographic challenges, and how the approach to these challenges had improved since 2016, considering the ward delimitation process.

Finally, the issue of public participation and demarcation remained one which needed to be addressed. She asked for commentary on this, considering that there may be a lack of accountability elsewhere, resulting in the MDB unduly receiving the blame. She also wanted details on how co-operative governance was being encouraged within local and provincial government.

Responses from MDB and COGTA

Mr Thabo Manyoni, Chairperson: MDB, said that financial constraints always affected an entity’s ability to perform well. When it came to good governance and ethical practice, this then became extremely important.

He said that it was not always easy to work with certain institutions, but the MDB was working on all the challenges it faced. Commenting on the allocation and classification of functions of municipalities in schedule 4 and 5 of the Constitution, he said that because the government takes certain decisions on the district developmental model, for instance, one may find that there might be a necessity for some of the districts to be allocated certain functions in order for them to implement the mandate given to them. This was not a fixed matter, and some of the municipalities were not aware of these functions, so these were the matters which the MDB advised them on to ensure that there was efficient service delivery.

Mr Manyoni acknowledged the need to intensify public participation, but this was difficult because the Act was silent on public participation. Although there were challenges resulting from the budget allocation, which affected public participation, the MDB had noted this as an area of key performance which needed to be improved on. 

Ms Tintswalo Baadjie, Chief Financial Officer (CFO): MDB, dealt with questions relating to expenditure and the financial implications of reduced budget allocations.

She said the reduced budget allocations had left the MDB in a perilous position, because the money that they were left with covered only day-to-day operational costs. This meant that there was no money to put towards areas such as public participation.  To compensate for this, the MDB had reduced the normal cost of living and employee compensation in terms of salary increases.

With regard to COVID-19 costs, not more that around R100 000 had been spent. This value was reflective of the money spent during the financial year, which would explain why it was so minimal.

The amounts reflected in ‘other income’ mostly reflected interest from the banks -- the MDB had an investment account into which they put their money in until they needed to use it.

Under-expenditure in programme one was mostly due to the vacancy in the position of the executive manager, whose contract had been terminated in November 2018. Irregular expenditure had occurred because an official had incurred legal representation costs without following the correct process. The case had been referred to internal auditors to conduct an investigation, and was still under consideration.

Mr Sigidi addressed issues pertaining to municipal powers and functions. In the MDB’s experience, capacity adjustments happened only twice. Where municipalities did not have the capacity to perform certain functions, there needed to be consolidation. It was of utmost importance that municipalities were aware of their functions and powers. This needed to be made clear going forward.

The intersection between municipal boundaries, and the effect it had on service delivery, ultimately involved various issues. One of these was the issue of provincial boundaries, which was a constitutional amendment which needed to happen. As far as the MDB was aware, it was not the case that just because communities found themselves on the wrong side of the boundary per se that they were precluded from receiving service delivery, or gaining employment. The MDB also considered functional boundaries in their decision making.

One of the priorities of the MDB was to deal with geographical challenges, and it had progressively addressed these kinds of issues.  When they arise, the MDB reconsiders its decision-making and re-analyses where to place the demarcation.

Mr Aluwani Ramagadza, Chief Operating Officer (COO): MDB, acknowledged that the issue with the CCMA had been going on for a long time. There had been delays due to the COVID-19 pandemic, but they had been given another date -- 24 November -- and the MDB was hoping that the issue could finally be concluded.

The Chairperson said that if the matter did not get addressed by this date, then the CCMA could be approached, since there had been undue delay, and the mandate of the CCMA was to ensure the efficient resolution of disputes.

Mr Manyoni said that the MDB would do its best to engage with communities, and address outstanding issues. It had been trying its best to do so already, and had suggested that a Member of Parliament (MP) be present when they addressed some of the issues that were raised by the various communities.

Mr B Hadebe (ANC) said that when it came to the intersection between boundary allocation and efficient service delivery, he understood that this may be a government prerogative, but the point was that before the MDB finalised its allocations, it needed to do proper research in relation to important services and facilities, particularly those which had an impact on communities. This would avoid unnecessary issues.

Mr Manyoni said he understood the issue raised, and this was something which needed to be addressed further. However, there was a problem with the way in which the government allocated services.

The Chairperson agreed.

Ms Avril Wiliamson, Director General (DG): COGTA, addressing the points raised concerning what was being done to promote co-operative governance, said that in the spirit of promoting collaboration between entities, various approaches were used. Some fell within the ambit of governmental structures, but having said that, there was a JEXCO, which was a Joint Executive Committee. This joint committee collaborated to address various issues, and they also welcomed any input from sister entities to which they had reached out.

Mr Kevin Naidoo, Executive Manager: Municipal Governance, COGTA, discussed the progress of the Demarcation Amendment Act. He said that with regard to the amalgamation that took place prior to the 2016 elections, the Constitution made provision for the separation of powers between government and the powers of the Board. Boundary determination could be done in three ways. It could be done by the board themselves, or at the request of the Minister, or by a Municipality. In 2015, 13 of the 34 requests that were put forth had passed muster.

Mr Naidoo said that it would be best for this issue to be properly discussed on 13 November, because the timing in 2015 had not been ideal. Because of the large number of amendments, it was actually the repeal and the replacement of the present Act that existed. The hope was that the Bill would go through the Parliamentary process early next year. It had also been tagged as a section 75 Bill by the Department of Justice, but he believed that this could change to a section 76 tag.

He also provided the Committee with an update on the Local Government: Municipal Structures Amendment Bill, and said that the C-list was being developed.

The meeting was adjourned.