Lejweleputsa District Municipality: state of municipalities

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Cooperative Governance and Traditional Affairs

09 March 2021
Chairperson: Ms F Muthambi (ANC)
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Meeting Summary

Video: Portfolio Committee on Cooperative Governance and Traditional Affairs, 09 March 2021

The Committee convened virtually to engage on the state of municipalities in the Lejweleputsa District Municipality, in the Free State. Members were briefed by officials from Lejweleputswa and its local municipalities on their audit reports for the 2018/19 financial year. These included the Matjhabeng Local Municipality, Tokologo Local Municipality and Tswelopele Local Municipality

Both Tokologo and Matjhabeng Municipalities recorded high levels of unauthorised, irregular, fruitless and wasteful expenditure during the 2018/19 financial year. The Auditor-General of South Africa (AGSA/AG) reported that this was mainly due to poor internal processes and controls, a lack of oversight by senior management and a lack of consequence management by the political leaders and management. Members indicated that the municipalities had to improve in their implementation of consequence management, as several officials had been suspected or found to be involved in financial misconduct. The Committee suggested that the district should assist with the establishment of disciplinary boards for its municipalities to better tackle financial misconduct by officials.

On the other hand, Members were pleased to hear that the Lejweleputsa Municipality had been able to drastically reduce its irregular expenditure from R14 million in the 2017/18 financial year, to less than R600 000 in the following financial year. The Committee requested that the district impart its lessons to its municipalities, in order to ensure that they are also able to reduce their irregular expenditure.

The Free State CoGTA mentioned that there was a trend in the province for municipalities to disregard financial and municipal rules and regulations. An example of this disregard was on display in the Tswelopele Local Municipality, where the Council wrongfully placed the Mayor on an indefinite leave, after the MEC had indicated that he would be instituting Section 106 investigations in the municipality. Council did not include in its agenda that it would discuss placing the Mayor on indefinite leave; the only item on the agenda was the MEC’s address to Council on his decision. After the MEC had concluded his remarks, Council included a new item to its agenda, which was to discuss placing the Mayor on indefinite leave. The Mayor subsequently challenged the decision in court.

Members commented that this was a flagrant disregard of rules and regulations in the municipality and questioned how Council was able to take the decision. Officials from the Free State CoGTA indicated that Council had been pre-emptive in its decision and it would lose the case against the Mayor.

Members were informed that Eskom had attached 158 of the Matjhabeng’s farms as collateral for the municipality’s outstanding debt. In addition, Eskom has taken the municipality to court to resolve the matter. The Committee expressed its concern that the entity had chosen to take the matter to court before it had exhausted the Intergovernmental Relations (IGR) mechanisms.

Members were also concerned by the lack of assistance provided by the National Department of Cooperative Governance and Traditional Affairs to the municipality on this issue. This served as another example of how provincial and national CoGTA’s have, at times, failed to prove support to municipalities in distress. Members questioned how distressed municipalities would be able to correct their issues if they did not have adequate support from provincial and national government. The Committee encouraged national and provincial government to show more initiative in providing assistance to municipalities.

Due to the seriousness of the issues they are facing, the Committee indicated that it would schedule follow-up meetings with Tswelopele and the Tokologo. Members expressed hope that this would allow for the municipality’s to better prepare their responses for the Members.

The Committee also mentioned that it has resolved to meet with all municipalities on a quarterly basis, to monitor developments.

Meeting report

The Chairperson reopened the virtual meeting after it was recessed earlier on in the day.

[See the previous meeting report tab for more details on the first session]

Discussion

Matjhabeng Local Municipality

The Chairperson indicated that the Committee would first focus on the Matjhabeng Local Municipality (MLM).

Ms H Mkhaliphi (EFF) mentioned that there are allegations that it has been ten years since the municipality last built Reconstruction and Development Programme (RDP) houses for its residents. She asked if this was true, and if it was, why it had not done so.

She asked whether the allegations that Section 106 (of the Municipal Systems Act) reports were not tabled in Council by the municipality’s management.

Much of the infrastructure of the municipality has collapsed, particularly the water and sewage infrastructure. She asked whether the infrastructure has been refurbished recently.

She asked for the municipality to comment on the allegations of the unlawful deviations that were sanctioned by the Municipal Manager (MM), and also on the bribes paid by service providers to municipal officials for tenders.

Mr K Ceza (EFF) mentioned that certain schools in the municipality are closed due to water shortages. He asked whether the municipality has the necessary capacity to ensure that water is provided to schools.

Previously, there was a Chair of Chairs meeting, which sat and resolved that a plan to source water tanks for the municipality would be formulated. He asked whether the municipality is able to deliver services to its residents, and if so, why it had not done so yet. The municipality should inform residents when they should expect to receive services.

Some residents in Welkom have not had access to potable water. He asked why they did not have access to potable water, as it is their right.

When did the municipality anticipate filling the Director of Corporate Services position?

Were there timeframes put in place for the delivery of electricity to the residents in municipality.

The Chairperson indicated that former President Zuma initiated the Special Presidential Package (SPP) in 2012. It sought to address issues in mining towns such as those in MLM. She asked whether this policy is still in effect and if it had brought benefits to the municipality.

The municipality has remained on a qualified audit opinion (with findings) since the 2017/18 financial year. This has been due to the high unauthorised, irregular, fruitless and wasteful (UIFW) expenditure recorded. The AG found that the municipality has not investigated UIFW and that there has been no consequence management implemented. Several allegations of financial misconduct by officials in the municipality have not been investigated.

She asked why there has been a lack of environmental management planning and implementation.

The Mayor of MLM, Mr Nkosinjani Speelman, referring to the question on the RDP’s, said that the municipality last built RDP houses in 2014, in the area named 2010. In 2020, 100 homes were built for military veterans. Prior to his term as Mayor, Council took a resolution that it would build RDP houses in the whole area. The Department of Human Settlements (DHS) has been allocated land, but due to Covid-19, the process of building homes has been delayed. In 2019, Council resolved to start the process of reallocating GAP homes to its residents. However, it has been a challenge, as many of the homes are registered to individuals who don’t reside in the municipality.

Referring to the question on Section 106 reports not being tabled to Council, he said that new investigations have been instituted by the current MEC. The investigations have not begun yet, due to delays caused by the pandemic.

Infrastructure in the municipality is older than 100 years. Much of the sewage system is either collapsing or has collapsed. As a result, the municipality has requested funding to assist with the refurbishment of its sewage plants.

On the question of deviations and bribes paid to officials, he said that the Municipal Financial Management Act (MFMA) allowed deviations, but the Mayor must report it to the Council within a period of 30 days. The municipality found that in some areas, people had stolen electrical cables, thus cutting of electricity. Council then decided to do deviations in terms of Sections 24-26 of the MFMA.

A pipe burst along several schools in the municipality. It was subsequently removed and a new one has since been installed. It was a challenge to replace the pipe, as the pipes in the area are asbestos pipes.

During the Chair of Chairs meeting, it was agreed that water would be provided to all areas that do not have access to running water. In several instances, where the municipality has provided JoJo tanks, they have been stolen. Some tanks were found at the Mozambique border gate. Providing additional water to Ward 13 has been difficult, as it is a large ward. However, the municipality would ensure that water is returned to the area. 

There were riots by members of the community when the Director of Corporate Services was appointed, as they wanted someone from the FS to be appointed. This was unfortunate, as any South African (SA) citizen should be able to work where they want. These rioters were sending a wrong message to society. Due to the protests, the municipality has had to re-advertise the post and it expressed hope that the position would be filled by time the new administration comes into office later this year.

Electricity is being installed to all areas within the municipality.

The municipality is in the process of formalising some of its informal areas. All six towns in the municipality have been provided sites to begin the process.

Referring to the SPP, he said that it had never been implemented.

Consequence management is implemented in the municipality: for instance, in 2017 the former Municipal Manager (MM) was fired, as there had been no improvement in supply chain management (SCM). Investigations on allegations of financial misconduct by some senior managers are underway, and a report will be provided to the municipality.

The Chairperson mentioned that the municipality had not addressed the issue of Eskom taking over its farms as collateral for debt it owed the entity. She asked if the farms were not important assets to the municipality and whether they had been neglected.

Whilst it was true that deviations, with clear and correct motivations, are permitted by the MFMA, this did not permit officials to abuse them. Municipalities should look to rather appoint contractors and set terms that follow procurement policies. Deviations will continue the trend of disclaimer audit opinions in the municipality, as it also increases UIFW expenditure.

She requested that the National Department of Cooperative Governance and Traditional Affairs (COGTA) respond to the question on the Eskom debt. She asked why the entity had not utilised the intergovernmental relations (IGR) mechanism to deal with the matter.

No answer had been provided on whether the SPP had benefitted the municipality.

Had the municipality benefitted from the District Development Model (DDM)? Had it been in contact with the deployed champions in the district? What experience did the municipality have with the DDM?

Mayor Speelman said that the municipality did not reap the benefits from the SPP. No Ministry had approached the municipality on the project. Only one or two meetings took place from the Office of the Presidency, but no work has been forthcoming. Letters have been written to the President and relevant Ministries, with no reply.

Prior to the implementation of the DDM, government had initiated the Siyenza Manje Programme. Presently, the municipality is working with the Executive Mayor of the district and have been informed of a project development at its airport.

Small, Medium and Micro Enterprises (SMME) had been utilising the farms for agricultural purposes. He was unsure as to how Eskom had taken the farms as collateral, as he had been on suspension at the time. The municipality is currently attending to the matter.

Ms Mkhaliphi appreciated the responses provided by the Mayor. She asked what the plan was to address the ageing infrastructure in the municipality.

Whilst she appreciated the fact the municipality had built homes for military veterans, it was also important that it built RDP homes for the rest of the community.

More details need to be provided on the deviations in the municipality. Many officials have used Sections 24-26 to steal the resources of the municipality.

Ms D Direko (ANC) said that the Chief Financial Officer (CFO), the MM and the Chair of the Municipal Public Accounts Committee (MPAC) should assist the Mayor in his responses.

It was correct that the municipality had not received any benefits from the SPP.

She applauded the Mayor for taking responsibility for the municipality’s failure to build RDP homes. It is a challenge for the municipality to build RDP homes, as it is not accredited to build RDP houses. As a result, it has to depend on the DHS to build them. The municipality’s application for accreditation to build homes was rejected because of its Eskom and water debts. As such, the DHS recommended that they should only apply for the accreditation once the situation in the municipality improved.

There is poor maintenance of infrastructure, which the municipality had to attend to. She asked what measures they have followed to gain assistance to refurbish its ageing infrastructure.

She asked what the municipality has done to gain assistance to allocate land to its residents, as it has a high population density.

The Committee must applaud the Mayor for his work during his term and for his ability to provide honest answers to the questions asked by Members.

The Chairperson requested that the National CoGTA provide answers on the SPP.

The MM of MLM, Ms Zingisa Tindleni, indicated that the municipality had taken action against several officials over the past year. For instance, one employee has been suspended for his role in supply chain irregularities. An automated system has since been approved, and both the CFO and MM have to approve all transactions conducted by the municipality.

The municipality reported R240 million in deviations. Management has advised Council that it should appoint a service provider to investigate the issue; the investigations are currently underway.

The municipality had had a meeting with the Office of the Presidency, to gain financial assistance for its infrastructure projects. It has also spoken to the Development Bank of South Africa (DBSA), and the new section in the National CoGTA Project Management Unit that provides assistance to municipalities on their infrastructure. The municipality is following all avenues to assist it with infrastructure development.

The municipality is currently disputing the interest incurred from its debt to Eskom in court, as no service delivery agreement has been signed between the two. Eskom has countered the claim made. The matter is currently in the FS High Court. Eskom does not want to follow the IGR processes. In a separate matter, the Supreme Court of Appeal ruled that Eskom should first look to exhausting the IGR processes when dealing with municipalities, before turning to the courts.  

An investigation into why the service provider had left site without completing one of the municipality’s project is currently underway. The municipality is awaiting the report and would lay charges against the service provider if wrongdoing were found.

A National Executive Member of the South African Local Government Association (SALGA), Mr Bheki Stofile, indicated that the Mayor had sufficiently answered all of the questions asked by the Members.

Mayor Speelman mentioned that the municipality provided land to residents in several communities within the municipality. It had written to the Presidency for assistance on its infrastructure. Subsequently, officials from the Presidency were sent to the area and a team for infrastructure in the municipality has been established. All projects must provide economic development in the municipality.

There has been consequence management in the municipality. All departments are analysed, and if there are deviations, the MMC’s in question must justify why they have occurred. The municipality does not allow for deviations to occur without the administrative and political officials being held responsible.

The Head of the FS CoGTA, Mr Mokete Duma, indicated that issue between the municipality and Eskom occurred whilst the Mayor was on suspension. Eskom demanded that the municipality pay its R371 million debt to it in full or that it should at least pay half of it. The municipality could not, thus Eskom indicated that it would attach the municipality’s main bank account – which would have affected the municipality’s ability to function and provide services. To avert this, the municipality informed both the FS CoGTA and Eskom that the entity could attach some of its farms as collateral. The Department agreed with the proposal but advised that there should be conditions attached, such as that the municipality would continue servicing the debt; outstanding issues would be dealt with using the IGR mechanism. The asset value of the farms amounts to R5 billion. Recognising that the farms offer great value to the municipality, the Department advised that Section 14 of the MFMA must be complied with. Council must condone management’s proposal, and subsequently engage with the public on the proposal.  

The Department advanced R10 million to the municipality, so that it could pay outstanding debt to the Sedibeng Water Board, as it had threatened to restrict water supply in the area.

Council was advised by the Department to appoint a service provider to conduct verification on the former MM’s deviations, which amounted to R240 million. It provided this advice, as it was concerned that certain officials who were appointed by the former MM would obstruct the process. In its investigation, the service provider found that less than R20 million had been verified as value for money.

The Deputy Director-General of the National CoGTA, Mr Themba Fosi, mentioned that CoGTA would take the issue between the municipality and Eskom to the Eskom Political Task Team (EPTT).

Referring to the SPP, he said that the Department of Planning, Monitoring and Evaluation (DPME) coordinated the programme. CoGTA would engage with the DPME to find out why commitments made to the municipality were not fulfilled. It will also inquire on whether a closeout report had been finalised.

Presently, the Department is engaging with National Treasury (NT) and the Department of Water and Sanitation (DWS) on how to repurpose existing grants, so that there is additional funding for refurbishing infrastructure. CoGTA is looking at ways to improve funding for asset management.

Cabinet approved the DDM model in August 2019 and it was officially launched in the subsequent four months. The first phase focused on the amount of money spent by both national and provincial government on the pilot sites. In June 2020, the President appointed the champions who would assist districts in the implementation of their Covid-19 response plans, and they would also provide oversight. Support to municipalities from national and provincial departments would be outlined in the One Plan, which would include projects and funding provided. The Department has issued circulars to provinces and municipalities, to guide them on the processes that have to unfold. It has also engaged with provinces and has support teams working with them. The target is for the One Plans to be implemented in July 2021. Once the national and provincial departments finalised their annual performance plans (APP) the principles of spatial mapping of their budgets and projects will be incorporated. The Department also wants to facilitate discussions between the three spheres, so that by the time municipalities finalise their Integrated Development Plan (IDP) budgets, commitments made by provincial and national departments will be known. One of the issues it has experienced so far is that not all champions have visited the districts.

A structure has been set up to ensure that the principle of spatial mapping is incorporated in the national departments’ planning processes. This would ensure that they account for the budgets and projects in the 52 spaces.

The Chairperson said it seemed that Eskom has been run as a privately owned entity as it does not follow the IGR Act. She asked what the Department has done to hold the entity to account.

Mr Fosi indicated that the Department has engaged Eskom on numerous occasions when it has had issues with municipalities. The Department reached an agreement with the Department of Public Enterprises that Eskom must first exhaust the IGR mechanisms, before going to the court. With the challenges they are facing, Eskom has tended to think and act unilaterally.

The Chairperson said the National CoGTA is responsible for the implementation of the IGR Act.

Not much had been said about implementation timelines for the DDM from the Department.

It seemed as if the Department relied on news reports for information on what is happening in municipalities (as its information on Eskom debt was incorrect).

She asked if the DDM champions had been deployed. The champions are meant to service the constituents in the municipality and not the district.

Mr Fosi said that the Department has organised itself into teams to ensure that it provides assistance to municipalities in the various provinces. Officials in the Department have been deployed to act as provincial coordinators, and these individuals work hand-in-hand with the political champions when they visit municipalities.

The Chairperson said that at some point, those coordinators should report to the Committee on the work they had done so far.

Mr Fosi said that the department would prepare responses and documents for the next meeting.

Mr Duma explained that the FS CoGTA had requested the municipality deviate on its assessment, rather than advertise because those who were implicated would have escaped the consequences.  

Lejweleputswa is the first district municipality that has formulated its One District Plan.

Ms Mkhaliphi mentioned that the municipality had surrendered 135 farms as collateral to Eskom. She asked what the status quo of the farms surrendered was. The National CoGTA had referred to this issue in its presentation, yet it was unable to provide adequate responses on the matter.  

Ms Direko said that the National CoGTA presentation did not reflect the realities on the ground in the municipalities. She asked for clarity on whether the Department had engaged the municipality, to understand the contents of the agreement between it and Eskom or if they had obtained the news from the media.

Executive Manager: Monitoring and Evaluation at the National CoGTA, Ms Silvia Gelderblom, said the Department has not engaged the province on the Eskom issue. It was informed by certain FS CoGTA officials on the matter.

Ms Direko said that the Committee has on several occasions, raised the concern that the national and provincial departments have not provided adequate support to municipalities in the country. Often the National CoGTA presents incorrect information to the Committee, which illustrated that the Department had not taken the initiative to conduct its work.  

Ms Mkhaliphi found it disappointing that the National CoGTA was not able to provide further information on its own presentations. She asked how the Department had obtained the information on the farms surrendered. She requested that the Director-General (DG) of the Department should appear before the Committee, and account for her Department’s misinformation.

The Chairperson said the Department must brief the Committee on this issue in another meeting.

Mr Fosi said that the Department noted the concerns raised by Members, and it took the matters seriously. In future, it would ensure that all matters are verified before they are presented.

Tokologo Local Municipality

The Chairperson requested that the officials of Tokologo Local Municipality (TLM) respond to the questions asked in the earlier meeting.

The Mayor of TLM, Mr Boitumelo Seakge, mentioned that he is also currently acting as the Speaker of the municipality.

He indicated that the municipality had developed a financial recovery plan (FRP).

He refuted claims that the municipality had resisted support from the Municipal Infrastructure Support Agency (MISA). In fact, it had sought assistance from the agency.

There had been a breakdown in communication between the offices of the MM and the Technical Director, but it had since been resolved.

The municipality has spent its grant allocation. However, it has faced challenges in spending its Municipal Infrastructure Grant (MIG). It advertised a tender for a project in 2020, but due to the pandemic, it could not appoint a service provider. Poor network connectivity in the municipality also contributed to its inability to appoint contractors for other projects. The municipality was only able to appoint a service provider to work on the water network, as it was a priority.

As the MIS system does not capture financial information well, the municipality has faced issues with its financial report. To ensure that information is captured and provided to MISA in time, management has requested that when capturing financial records, the managers must use offices in Bloemfontein.

The MM of the municipality, Mr Kelehile Motlhale, said there were challenges between him and the Technical Director, but after the intervention of the Mayor, the issues were resolved amicably.

After advertising a project, the municipality found that the majority of service providers tendered bids higher than requested. Payment of service providers was delayed because of the change in VAT from 14% to 15%. This change also had an impact on financial reporting, which was mentioned to MISA. The municipality has not at any stage rejected assistance from MISA.

Referring to financial misconduct, he said that the municipality has received a disclaimer audit opinion because it had an incomplete asset register. In 2018/19 the municipality found that some of its documents had been stolen. It subsequently opened a case on the matter. The municipality asked the AG for assistance on the appointment of an individual who could conduct an evaluation on all missing assets.

As it had conducted is 2018/19, 2019/20 annual financial statements (AFS) back-to-back, it requested an extension from the AG to complete its 2020/21 AFS. The municipality plans to resubmit its AFS by the end of the month. He was pleased that the municipality had functional audit and risk committees.

The CFO of TLM, Mr Thabo Matile, mentioned the municipality had received a report from National Treasury (NT) in December 2020. In addition, the audit committee would soon be sitting to analyse the outstanding AFS. He confirmed that the municipality did have a FRP.  

A Supply Chain Manager has been appointed to assist to deal with internal controls, to decrease UIFW expenditure.

The Chairperson asked whether SALGA, the Provincial and National CoGTA had addressed the municipality on its inability spend its MIG. This money needs to be used to benefit the communities that need it most. She asked which communities and wards had suffered the most as a result.

Ms Mkhaliphi asked the municipality to confirm whether the allegations that there has only been service delivery in Ward one, where the Mayor currently resides.

Ms M Tlou (ANC) asked why services in the municipality were levied at the incorrect tariffs.

Mr Ceza found it concerning that the municipality had obtained a disclaimer audit opinion, with the AG citing inadequate consequences for poor performances and transgressions as part of the reasons for the opinion. He asked what the Mayor had done to address these matters, and what were the timelines.

The municipality did not have a permanently appointed senior manager (except the MM) at year-end, which contributed to the poor audit outcomes. He asked when the municipality would make these appointments. Furthermore, what mechanisms and controls would be implemented to curb irregular expenditure in the municipality, as it is currently the second highest contributor of irregular expenditure in the province?

Mr Motlhale confirmed that both the provincial and national CoGTA’s have made interventions in the municipality, particularly during the time when it had challenges uploading its financial reports.

There are currently two projects underway in the municipality: the upgrading of the water network and the construction of a 1.5 kilometre road. He admitted that the municipality did not perform up to the expected levels on its expenditure.

The positions of the Director Corporate, Director Technical and CFO were filled last year in July. With their appointments, management has been able to operate as a fully-fledged team.

The municipality has used its grant allocations properly, but it has had challenges with the DWS regarding its regional bulk infrastructure grant (RBIG). It managed to settle matter with them outside of the courts, spending R48 million. In addition, the municipality has not been able to appoint contractors for MIG projects.

The delivery of Personal Protective Equipment (PPE) materials has been a challenge due to delays from supplier companies in China.

The Chairperson said that she did not understand the answer provided on why the municipality did not spend its MIG.

Mr Motlhale said that the municipality issued two adverts last year, one in February 2020 and another in August. It was able to appoint contractors for the advert issued in August and not the one issued in February.  

The Chairperson asked why no contractors had been appointed for the first advert, as several individuals had applied.

Mr Motlhale mentioned that as the contractors had quoted higher than the budget allocated for the work, the municipality could not appoint one.

The Technical Director at TLM, Mr Mpho Sehloho, referring to the MIG expenditure, said that due to the pandemic, the bid committees could not sit. Council had anticipated that it would utilise the R16 million allocated to it to complete two or three projects. With the high quotations from bidders, it had to reject them. Thus, it extended the validity of the bids. There were bidders who quoted lower sums for the work, but they did not meet other requirements, such as tax clearance, etc.

Mayor Seakge, referring to the question on tariffs, said that the municipality is utilising a flat rate for water provided in the townships, as they do not have water metres. In two of the towns in the municipality, Eskom was distributing directly to consumers.

He denied that there were only projects taking place in his ward. There are other projects taking place, such as the bulk water project. Council felt that the R16 million was a small amount of money, but it would do all it could to address its infrastructure backlogs.

A CFO and the two vacant director positions have been filled.

The high levels of UIFW in the municipality have been a direct result of the missing information in the asset register. A consultant has been appointed to evaluate the municipality’s assets. Once this process is complete, the municipality would provide the updated register to the AG.

The Chairperson said that the municipality had received consecutive disclaimer audit opinions from 2016-19. The AG reported that the municipality had not spent is grant money correctly, whereas the municipality has said otherwise. She asked why the municipality was disputing the AG’s claims.

The municipality reported unauthorised expenditure amounting to R166 million and fruitless and wasteful expenditure amounting to R6.8 million, yet there had been no consequence management taken. The MFMA imposes a responsibility on the political officials to act against financial misconduct. She asked how long the MM had been in his position for.

Mr Ceza mentioned that the municipality had not responded adequately to the questions asked. The AG has stated that the municipality is a repeat offender. He asked what has been done to implement consequence management. Has there been an improvement in irregular expenditure?

The Chairperson asked what the FS CoGTA had done to address financial misconduct in the municipality and the zero expenditure of its MIG allocation.

Mr Duma mentioned that the Department has made plans with the municipality to fasttrack MIG spending. It encouraged the municipality to finance projects that are of value. Due to non-compliance, the municipality is being paid on a prepaid basis, meaning that it cannot claim money before it presents a project.

The Department did provide assistance to municipality to solve the issues between the MM and the Technical Director.

Some of the transactions are currently with the Special Investigative Unit (SIU), as there have been allegations of irregular expenditure.

Senior Manager: Community and Stakeholder Facilitation, National CoGTA, Ms Malerata Macheli, reported that the Department has an efficient system for monitoring performance of MIG expenditure, including deliverables of the project.

The Chairperson disputed that it was effective, as the municipality did not spend any of its MIG money. In terms of norms and standards, there is a particular amount that it has to spend.

Ms Macheli withdrew her comment that it was effective. She explained that municipalities are expected to spend 45% of their MIG by December. Those that did not meet the target would receive support from the Department on how to improve its expenditure. The Department advised TLM to intervene on the matter between the MM and the Technical Director; it was currently awaiting a report from the MM on the implementation of advice it provided the municipality.

Mr Simon Rapulane, MISA, said that the standoff between the MM and the Technical Director delayed the commencement of projects in the municipality. As of the end of February 2021, the municipality has managed to spend 17% of its MIG allocation. A meeting was scheduled to take place the following week between the FS CoGTA, and the municipality to address outstanding issues.

The Chairperson asked for the agency to confirm whether the meeting was taking place on the following day.

Mr Rapulane confirmed that the meeting was scheduled for the following day.

The Chairperson asked the municipality to outline what consequence management had been taken against officials responsible for UIFW expenditure.

Mayor Seakge said several of the documents relating to the municipality’s assets had been stolen. A case had been opened to find out who stole the documents.

As recommended by the AG, the municipality has appointed a supply chain manager. It has also been able to reduce some of the paragraphs in its audit report. The municipality is preparing an FRP.

Mr Ceza asked which paragraphs had been reduced.

The Chairperson asked for the municipality to be more specific when answering questions.

Mayor Seakge said that the municipality had been to address problems relating to salaries, landfill sites and debt impairments.

The district wrote to the municipality, informing its officials that it would provide them with a shared MPAC service.

The Chairperson asked why the municipality required shared services to implement consequence management. It was alarming that all three disclaimers had occurred during the current Mayor’s term. She asked if the politicians in the municipality were involved in financial misconduct.

Mr Ceza asked why the Mayor should still remain in his position if the municipality could not attain a clean audit. What action had been taken by the municipality to hold people account for the UIFW expenditure that has been occurring since 2016?

Provincial Executive Officer of the FS SALGA, Mr Zanoxolo Futwa, mentioned that the prolonged vacancy in the CFO position was part of the drivers for the poor audit outcomes obtained by the municipality.

The Chairperson asked how many years the position was left vacant.

Mr Futwa said it was left vacant for two years. SALGA, with the support of the FS CoGTA, has tried to provide assistance with the filling of posts. However, as TLM is a rural municipality, it has struggled to find qualified individuals. SALGA has assisted the municipality in developing its audit response plans. The SALGA Provincial Executive Committee (PEC) has resolved to send its officials who are currently allocated to the district, to the municipality, to find out why there has been a delay in filling in critical vacancies.

SALGA was not aware that the dispute between the MM and TD had contributed to the non-expenditure of MIG.

SALGA has established a platform for training and peer learning to better capacitate municipalities. A session has been set for the 16 March 2021 and it will focus on consequence management implementation. SALGA hopes that these sessions will ensure the implementation of the financial management system and also strengthen processes and controls.

He clarified that only the CoGTA is responsible for the monitoring of MIG expenditure.

Mayor Seakge requested that the municipality be given time to look at its post-audit action plan, to analyse what consequence management has been taken thus far. It would refer back to the Committee in two months.  

The Chairperson asked why the municipality required that amount of time, as it has access to its previous annual financial reports. In addition, the post-audit plan for the 2018/19 financial should have already been implemented.

As a smaller municipality, TLM should be easier to run for the political and administrative officials.

Ms Direko said that the post-audit plan has not been implemented and consequence management has not been affected.

She suggested that the Members accede to the municipality’s request but when it next appeared before the Committee, it should outline a plan to rectify all the issues mentioned in the meeting.

She asked why had the CoGTA and Treasury (both provincial and national) had not assisted the municipalities with their challenges. What has been their role in supporting municipalities? SALGA should be able to assist with the smaller municipalities.

Ms Mkhaliphi disagreed with the proposal put forward by the municipality. The Mayor, as the political leader, should have all the information of the municipality’s actions at his disposal. The municipality had failed its residents for the past three years. She suggested that if the Mayor could not conduct his duties, he should resign with immediate effect.

Mr Ceza also rejected the request put forth by the municipality. This indicated that the municipality was unprepared and showed its lack of urgency on the matters. There has been interference in the municipality’s administration, which has made oversight impossible. Individuals should be appointed on merit and not through their political contacts. He requested that the municipality provide detailed answers to the questions posed by Members.

The Chairperson requested that the Tswelopele Local Municipality provide answers to the questions posed by Members in the earlier session.

The MM of Tswelopele, Ms Matiro Mogopodi, indicated that the Council decided to place the Mayor on indefinite leave after the MEC of the FS CoGTA instituted Section 106 of the MSA in the municipality.

The Chairperson asked if there are provisions in the regulations for one to be placed on indefinite leave. Who had incurred the costs for the Mayor’s leave?

Ms Mogopodi indicated that there is no provision in the regulations that permits for one to take or to be placed on indefinite leave. Council resolved that the Mayor should stay at home until the investigation is completed. The Mayor has challenged this decision in court.

The Chairperson asked whether the MM advised Council that the decision was not in line with the law, as she had a fiduciary duty to ensure that Council makes decisions that are in line with the law. Had an Acting Mayor been appointed by Council?

Ms Mogopodi confirmed that an Acting Mayor had been appointed.  

Mr I Groenewald (FF+) asked for clarity on whether it was mentioned that the Mayor had taken the issue to court.

Ms Mogopodi mentioned that the MEC instituted Section 106. Subsequently, Council resolved that the Mayor should be placed on indefinite leave, and an Acting Mayor was then appointed.

The Chairperson asked if the MEC, when he appeared before Council, had indicated his intention to invoke Section 106 of the MSA or if had he informed Council that he had already taken the decision.  

Ms Mogopodi mentioned that he had indicated his intention to invoke Section 106.

Mr Groenewald asked what the details of the Mayor’s legal case against the municipality were.

Ms Mkhaliphi asked how long it would take for the MEC to conclude the Section 106 investigation.

The Chairperson asked what the municipality meant by indefinite leave.

Ms Direko asked what process Council followed when it decided to place the Mayor on an indefinite leave. What was the Agenda of the Sitting?

Section 106 investigations take three months to conclude. She asked if Council would reinstate the Mayor if he were not implicated in the matter.

Ms E Spies (DA) asked what the process was to place the Mayor on indefinite leave.

Mr Groenewald asked if the municipality could provide details on why Section 106 was invoked.

Ms Mogopodi, referring to the Mayor’s legal action, said that he is challenging the resolutions taken by Council that led to him being put on indefinite leave.

Three months is the maximum period that the MEC has to conclude the investigations. Council agreed to convene to hear the presentation by the MEC. However, subsequent to his presentation, Council added three other resolutions in the same Sitting.

There was community unrest within the municipality in September 2020, which centred on poor sewage and the lack of consistent water supply. The protestors marched and handed over a memorandum to municipal officials. Based on the allegations contained in the memorandum, the MEC decided to invoke Section 106.

Mr Duma confirmed that the Department received a memorandum, which contained several allegations against the Mayor and other councillors. After receiving the document, the MEC visited the municipality and decided to invoke Section 106 to investigate the allegations. When the MEC addressed Council, he informed it on why he was invoking Section 106. Council then resolved that the Mayor should be placed on special leave, as it feared that he might interfere with the investigations. The Department informed them that it was not in line with the regulations. It also mentioned that by placing him on leave, the municipality was also implicating the Mayor in wrongdoing without establishing facts. If there were concerns over a particular individual interfering with the investigations, the Department would have informed the municipality. He described Council’s decision as pre-emptive. The Department was not surprised by the municipality’s actions, as several other municipalities in the province have flouted the rules.

The Chairperson asked how many councillors had been implicated in the memorandum.

Mr Duma said he would have to verify how many councillors were named in the memorandum.

The Chairperson said the MM had a fiduciary duty to advise Council to reverse the decision, as it was unlawful. She asked what steps the MM had taken to correct this decision. The Public Finance Management Act (PFMA) allows for her to take action. Who would pay the costs for the Mayor’s leave?

Ms Mogopodi said she had been afraid to advise Council otherwise, as the situation in the municipality is volatile. She is often not given the opportunity to advise Council and the reasons she is given is that she does not form part of the caucus.  

The Chairperson asked how long she had been an employee of the municipality.

Ms Mogopodi said that she had been an employee of the municipality since 2017 May.

She had not advised Council to reverse its decision.

The Chairperson asked how the decision was made under the Speaker’s watch. If such decisions could be made, then how could the Committee be confident that the public finances were safe? The Mayor should have been able to provide his version of events before he was placed on leave.

The Speaker of Tswelopele, Ms Motshabinyana Raseu, mentioned that she had advised Council against taking that decision. The decision taken to place the Mayor on indefinite leave was not part of the agenda; it was just arbitrarily added. Council also refused for the MM to provide it with advice on the matter.

Ms Direko asked why the FS CoGTA had failed to enforce the right decision in the municipality. If it did and the municipality has rejected its enforcement, what other measures did the Department have to ensure that the right decision is implemented?

Ms Spies said that Council must rectify its mistakes. The decision was made wrongly, and Council was certain that the Mayor would win his case. She asked whether it was a unanimous decision taken by Council, or only certain Councillors voted in support of the motion. If Council sought to suspend the Mayor, it should follow the correct procedures.  

She requested that the Committee allow for the Council to rectify its decision, and then it would engage with it once the matter was resolved.

Mr Ceza sensed that the officials were not open to speaking freely on the matters because of the volatility in the municipality. It was clear that are no proper working conditions in the municipality. There seemed to be an element of patriarchy within the Council. He asked how the municipality has been able to effectively work together.

He said the officials did not provide enough information on what informed the decision taken by Council.

Mr M Montwedi (EFF) said that the MM had lied to the Committee, as her claims that she advised Council were refuted by the Speaker’s claims.  

The Chairperson clarified that the MM did not state that she had advised Council on the matter.

Mr Montwedi said there is a provision in the MFMA, which states that officials who have taken wrong decisions must carry the costs. He asked who would carry the costs, the taxpayer or the councillors.

The Chairperson said that the Department is empowered by the Constitution and the legislation to take further action against the Council.

Mr Duma said the Department wrote to Council stating that the decision did not follow the legislation and it requested them to review the decision. The Department does have other options to enforce its decision, such as applying to the courts for a declaratory order. However, it did not want to do that as it would sour relations between it and the Council. Instead, it would prefer to sit down with Council and resolve the matter amicably.

Members of the ANC Caucus in Council tried to justify the decision to place the Mayor on indefinite leave by alleging that the Mayor’s wife had been receiving a grant. In the future, the ANC Caucus within Council must provide terms of reference before it takes such a decision. Municipalities in the province have a tendency to defy the provincial department.

The Chairperson agreed with Ms Spies’ proposal that the Committee should meet with the municipality on a later date.  

She asked whether there was a Council resolution to defend the decision taken. Was the Mayor’s court action filed on an urgent basis?

Ms Mogopodi said that Council had been given three weeks to respond to the matter.

Mr Duma said an issue affecting a political official should not be taken to the labour court, as it is not their jurisdiction. Such mistakes are why the Department believed that the matter should be dealt through discussions.

Nala Local Municipality

The Chairperson requested that the Committee allow the Nala Local Municipality (NLM) to provide answers to questions asked in the earlier meeting by Members.

The Mayor of NLM, Mr Theko Mogoje, informed the Committee that he had been feeling unwell for the past three weeks, but he had prepared the answers to questions asked by Members.  

The Chairperson requested that the engagement with NLM be postponed due to his illness. Members valued his commitment to appear before the Committee.

Ms Mkhaliphi seconded the proposal.

Lejweleputswa District Municipality

The Committee moved onto the Lejweleputswa District Municipality (LDM).

The Chairperson asked that the officials respond to questions on the DDM.

The Executive Mayor of the LDM, Mr Sebenzile Ngangelizwe, said that the district did not form part of the districts chosen by the President’s for the DDM pilot project. However, it has tried to position the district as an example for how the DDM model should function. The two political champions who have been appointed at national level were Mr Sdumo Dlamini and Minister Lindiwe Zulu. At the provincial level, it was Mr Mashinini.

In a meeting organised by the district last year, the political champions were provided a report of its plans. The district has used other municipalities as partners to improve its profile. It has used a circular crafted by the National CoGTA, which focuses on the consolidating plans for three spheres of government. All its municipalities have been informed that they must consolidate their IDP’s whilst the district continues its work to create one financial budget.

Two weeks ago, the district had a strategic planning meeting, which included national and provincial officials. A follow up has been scheduled in next two weeks and it will include the political champions. The district has targeted the end of March 2021 to conclude its draft budget. The district’s MM and the FS CoGTA continuously provide guidance to its municipalities.

The district is also consolidating all of its programmes, because in the past it found that there was a duplication of projects by the government. For example, the FS CoGTA earmarks an area where it plans to build a stadium, whilst the district had earmarked the same area for a similar project. The FS CoGTA has ensured that there is better coordination between it and the district. Key projects have been identified by the municipalities and have been communicated to the district. Support was needed from the Provincial and National CoGTA to ensure that municipalities complete their projects.

The district has found that some municipalities have not utilised their local economic development (LED) managers effectively. It has since tried to ensure that LED managers act as the key drivers for LED in the municipalities.

The district’s Performance Management System (PMS) is working efficiently, with the district recording performance above 90%. It has been able to table its quarterly reports on time. Each report is assessed by management and is then taken to MPAC, who, after conducting further checks on the report, table it to Council. The annual report was tabled to MPAC, who then tabled it to Council in January. It was then communicated to the residents in the municipalities.

After receiving a report that the TLM was not spending its MIG, he visited the municipality. He advised that the FS CoGTA and MISA should the municipality with spending its money.

The AG’s reports have found a common denominator of non-compliance in municipalities. However, the district has learned how to provide better assistance.  

The district has launched an Information and Communications Technology (ICT) hub. The objective is to provide better network connectivity for municipal officials to conduct their work. R8 million was spent on the project.

It is not easy to detect irregular expenditure because the district does not have the software used by National Treasury to analyse its bidders. For instance, it was unable to detect that one of the bidders was an official of the district. District officials are trying to place measures to better monitor these issues.

The MM of the LDM, Ms Palesa Kaota, said that the Executive Mayor had answered all questions.

Mr Duma mentioned that had confidence that the district would be able to implement the DDM efficiently. The district has created a platform for the One Provincial Plan, which has been adopted in other provinces. Discussions are underway between the district, the provincial government and the Gambling Authority to construct an international racecourse (named Phakisa Freeway) in the district. The airport in the district will also be developed into an international airport and a new hotel will also be built. He applauded the district for its efforts.

The Chairperson said that the comments by the Department had instilled her with confidence in the district’s trajectory.

Ms Mkhaliphi said that issues of procurement must be dealt with adequately. Some requests for quotations (RFQ) were given to bidders who were not up to standard. She asked how the bid committees held the implicated individuals responsible.

Why had the district taken long to provide the report on the irregular expenditure found? It was concerning that there was a lack of urgency by senior managers to implement consequence management in the district. She asked whether the district implemented the Provincial Treasury’s advice that it should establish disciplinary boards, to address misconduct in the municipalities.

What implications did the debt impairment have on service delivery?

The Chairperson said the district should be lauded for decreasing its irregular expenditure from R14.2 million in the 2018/19 financial year, to less than R600 000 in the following financial year. Did the district have a structured programme to ensure that it transfers its good financial management to its local municipalities?

The Chairperson noted that it was reported that the Masilonyana Local Municipality’s 2019/20 MIG funds were redirected to district because of fears that the municipality’s officials would mismanage the money. She asked what the district had done with the money.

She requested that in future that the district shared the best practices of their political champions.  

It was concerning that only officials from Matjhabeng provided adequate responses to questions posed. She asked if there was a structure in place to support municipalities. What usually takes place in IGR meetings?

Executive Mayor Ngangelizwe asked for Ms Mkhaliphi to provide an example on a specific area of concern relating to the RFQs issued.

Ms Mkhaliphi said the AG reported that some of the RFQs were awarded to bidders who did not meet the requirements. She asked how the district had dealt with the issue.

The Chairperson said the AG indicated that awards were made to officials, or individuals connected to them. She asked how the district was looking to deal with that. How were individuals who did not meet requirements awarded appointment letters?

Local communities were not invited to submit their representations for the 2017/18 annual report.

She asked what the district had irregularly spent money on. 

How had the district rated the state of service delivery in its municipalities?

Mr Duma said LDM was the first district in the province to achieve a clean audit. Both the Executive Mayor of the district and the Mayor of Matjhabeng are working together on implementing projects in the municipality. District officials have consistently provided support all the municipalities, with notable improvement seen in Matjhabeng. The Department, along with the district and its local municipalities, will, at a later stage, brief the Committee on their progress thus far.

Ms Koata said that the electrification grants received from Masilonyana have been used by the district to provide electricity to the communities in the municipality. Currently, they are in the second phase of electrification of the households and upon finalising an ongoing process with Eskom, they will be able to fully electrify households in the area.

The district’s internal controls and processes are not able to detect when an individual provides false information on the SBD (Standard Bidding Document) forms. This led to the R80 000 irregular expenditure documented on the presentation. It has reported this issue to the AG, and further informed the institution that this would remain a problem until it utilised the system NT currently operates.

Explaining the reasons for the R583 000 irregular expenditure incurred, she said that in some instances even if the district has followed due process in appointing a bidder, the AG may flag the appointment as irregular expenditure due to a typo found in the district’s tender advert. Many of the lowest bidders for tenders do not have the capabilities to perform the work required. If it is able to provide reasons, the district is permitted to appoint the highest bidder. Each year MPAC investigates all irregular expenditure in the municipality and presents it to Council.  

The district is grant-reliant. It also has shared services with its local municipalities. For instance, MMC’s and Directors from its municipalities are able to sit in portfolio committee meetings.

Financial support has been provided to municipalities and this would reflect in their IDP’s. One example of this support is the R8 million allocated to service ICT in its municipalities.

Executive Mayor Ngangelizwe said the district’s constituents are its local municipalities and not the residents in the municipalities. As a result, it did not have discussions with the communities on its 2017/18 annual report. The district has tried to clarify this to the AG, as they have not seemed to understand.

The Chairperson said that as a water service authority it must be consult with the residents in its local municipalities.

Executive Mayor Ngangelizwe said that section 78 of the MSA states that the district only has the duty to consult its local municipalities’ constituents if it is rendering a service, such as water.  

In 2006, the national CoGTA released a draft upper limit gazette. A final gazette was then issued, and it changed the previous formula for allocating points to bidders. District municipalities were affected by the change in points system and engaged the Department to correct the issue.

For the past three years, the FS CoGTA has provided concurrence to keep district at level five for its salary grading. Council has agreed that the district needs to change its salary grading to level four. A specific portion of the debt owed by councillors would be paid back. As it stands, the district cannot write-off the debt impairment of councillors, until it has met with NT and the National CoGTA. He requested that the Committee assist with setting up the meeting with NT.

The AG has been invited by the Speaker to present the district’s final audit report in Council. The MM has managed to develop the FRP.

He explained that when he was Mayor of Matjhabeng, the municipality managed to achieve an unqualified audit opinion after receiving consecutive disclaimers.

The Chairperson indicated that she was unaware that all FS local municipalities are water service authorities, not the districts. That did mean that the district’s constituency was its municipalities and not the wards.

She requested that TLM municipality respond to all questions in writing by midday on Friday. Another engagement would be scheduled in the next term with Tswelopele and NLM (depending on its written responses to the Committee). The Committee requested that the district provide details on the support provided to both Tswelopele and NLM.  

She apologised to the Mayor of NLM.

The Committee would continue to provide oversight over the municipalities in all provinces. It has also planned to schedule meetings with each municipality once every quarter, to assess progress.

She thanked the officials and the Members for their input during the meeting. She also thanked the Committee support staff for their work.

The meeting was adjourned.

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