Viability of amalgamated municipalities: COGTA; SALGA; Treasury; MDB; SACN

Meeting report

The Chairperson thanked municipalities for attending the meeting. She said municipalities were requested to make presentations because there was poor support for amalgamated municipalities. This contributed significantly to the financial, service delivery, and governance challenges. The Committee is aware of cases of successful amalgamations. There should be a more systematic discussion on this matter, to draw lessons on best practice as the country approaches the 2021 local government elections.

During the Committee’s work, it encountered more challenges than opportunities relating to post-amalgamated municipalities. There are instances where the amalgamated budget was not responsive to demands. The onus was on the new amalgamated municipalities to source funding and harmonise pay disparities where the allocated budget was not responsive to demands, and where merger of municipalities was different.

This gave rise to cash flow problems in municipalities. This is also a sensitive labour matter and requires buy-in from labour unions. There was wasteful and fruitful expenditure prior to merging. This presents difficulties for accountability and consequence management. The newly amalgamated entity also inherits the fruitless and wasteful expenditure and it results in poor audit outcomes. A merger with a financially irresponsible municipality will retard the outcome for the new entity. Inkosi Langalibalele local municipality demonstrated adverse audit opinions. David Kruiper local municipality showed some success in its merger and received qualified support from the National Treasury.

The Chairperson noted appreciation for the wealth of information in the presentations, and said it will enrich the discussion and guide the stakeholder to solutions.

The Director-General (DG) of the Department of Cooperative Governance and Traditional Affairs (DCoG), Ms Avril Williamson, said Dr Kevin Naidoo, Executive Manager: Municipal Governance, DCoG, would present to the Committee.

DCoG Briefing: Viability and Sustainability of Amalgamated Municipalities   

The Demarcation Act is relevant to the process triggered in 2014 where the Minister can make a determination or redetermination of time frames. The demarcation must take certain factors into account on redetermination of boundaries.  When the Demarcation Board reconsiders boundaries, it must consider the capacity of the affected municipalities. In 2019, a statement was issued by the then chairpersons saying the South African municipal landscape would change after the next municipal elections. This statement is important to note. There were ten thousand objections to boundaries.

The Board recommended Emfuleni and Midvaal become the metropolitan municipality, and Lesedi should be incorporated. This did not proceed and was settled out of court in 2015.

Eight redeterminations were made in 2010 and terms of references were published in the gazettes determining the amalgamations processes.

The milestones informing the Section 22 request made by the Minister in 2014 and 2015, was triggered by the Back to Basics Programme. The pillars of this were to put people first, prioritising sound financial management, building institutional capacity, good governance, and delivering basic service. There was a request for Members of Executive Council (MECs), to submit proposals on Section 22.

Eight proposals were submitted between January and April and this was forwarded to the Municipal Demarcation Board. A specific request was made for the Board to optimise financial viability when it considers the amalgamation of the municipalities. The Minister made 34 requests which affected 90 municipalities. Between May and October of 2015 the Board considered these requests. By October 2015 the Board confirmed its final redetermination.

It is important to note there are seven months left to finalise redeterminations ahead of the local government elections, which are set for 18 May 2016. The Minister made 34 requests and of this, 21 were rejected, and 13 were confirmed.

A Municipal Demarcation Transitions Committee was established at a national level and provincial transition committees were also established.

Submissions were made to MINMEC about municipalities which were struggling. Some municipalities are in the Western Cape, and Free State. Provinces were told to identify the top five municipalities which should have its boundaries re-determined. The Board received 34 requests. Ten cases were put forward and three were varied by the Board. This means the initial publications by the Board were subsequently varied after public consultation.

At the municipal level, there was a technical committee for purposes of objectivity. Matters which needed political resolution were forwarded to the municipal change management committee. This Committee is chaired by the District Mayor and was referred to the provincial committee, chaired by the MEC at a political level. If issues could not be resolved at this level it was referred to municipal demarcation transition committee.

Five or six work streams were identified based on what KwaZulu-Natal (KZN) adopted at the time. In May 2016, it reported the Eastern Cape and Limpopo lagged behind and made an intervention for assistance. These provinces had the most number of redeterminations in comparison to other provinces at the time.

An assessment was done on redetermined municipalities and revealed eight municipalities had no issues. Dr Beyers Naude local municipality was used as a case study and mentioned often, because of the challenges it faces. The municipality will elaborate on this to the Committee.

The debt inherited by Dr Beyers Naude municipality was extracted. The debt came from Eskom and Auditor-General (AG) fees. It is questionable this debt could have been zero at the time of the new municipality being established, because it is debt which was carried by the original municipality. If the municipality remained as it were, the debt would still be there. The debt is not as a result of the transformation or amalgamation of the municipalities.  The municipality reported some issues to the National Council of Provinces (NCOP) meeting on 20 September 2020.

It is important to note human resources issues, harmonisation of human resources policies, Councillor allowances, and issues around tariffs. Pre-election, the municipality had 28 counsellors. Dr Beyers Naude now has 27 municipalities and the combined number of Section 56 managers is 13. After elections the 13 managers were reduced to five, and four portfolio committees are within the municipality. The number of staff prior to elections was 614, and is now at 553, which is 181 less than prior to elections. The salary bill increased, but the number of councillors increased by 21. Section 56 managers increased by eight and a move from a plenary type to an executive took place.

The municipal demarcation transition grant was premised on recommendations made by the Financial and Fiscal Commission (FFC). It recommended resources for rationalising policy, supporting change management, and facilitating change on demarcation, needed to be made available. The FFC said government should incur costs when there is vertical demarcation. Temporary grants should be available in the year before and after demarcation takes effect.

The framework used for the municipal demarcation grants clearly indicate which transitions can use the fund. Demarcation transition grants can be used for new organograms, bylaws, and rationalisation in alignment with municipalities.

An amount of R29 million was set aside for KZN and Gauteng, as these were the only provinces affected in 2016 and 2017. In 2017 and 2018, a total of R49 million was set aside for the redetermination process. After the Municipal Demarcation Transition Grant (MDTG) ended, R115 million was sought for Municipal System Improvement Grant (MSIG) for the year. When a rollover is made, it needs to be proved it was published, and proved the contractor or service provider was appointed. A phase out report must be submitted to Parliament for the MDTG on the period it was there.

On the lessons learnt from the entire process, Dr Naidoo said, if non-viable municipalities are placed together, there will not be a sustainable entity. There must be ample time to complete redeterminations. Seven months is not enough to ensure the readiness of a municipality. There needs to be a dedicated manager to support the transition at each sphere of government in the process. A defined road map or project plan must be put in place and this must be followed. There must be adequate resources. A well-defined communication strategy must be properly communicated so all stakeholders, especially communities, are kept abreast of what is happening around amalgamations.

Amendments proposed for the legislative programme are related to the Demarcation Bill, which is being developed at present. Major boundary changes will be defined as affecting more than one ward and should take place every ten years. For purposes of accountability, a Board term should be seven and not five years, so redeterminations can be seen through to its natural end. When there are requests for redeterminations, motivation should accompany such requests. The Minister can determine timeframes for redeterminations and such requests should not be made 36 months before the next local government elections. Once the Minister publishes the formula, no changes must be made. Challenges may be picked up around redeterminations and provincial boundaries and this will be addressed as a new chapter in the Demarcation Bill, which will allow the Demarcation Board to make recommendations on this to parliament.

DCoG asked the Committee to note these changes and said it will pay attention to the other presentations made.

The Chairperson thanked DCoG for the presentation.

Municipal Demarcation Board Briefing: Viability/Sustainability of Amalgamated Municipalities  

Mr Thabo Manyoni, Chairperson of the Municipal Demarcation Board, said the presentation is similar to the DCoG presentation.  He said the Committee should remember local government was trying to remake urban rural spaces to make it as liveable and sustainable as possible. This is to offer more transportation and work options. Municipalities are key to people’s livelihood.

Most municipalities are struggling with financial viability and struggling to provide services. Local government is central to assisting municipalities. The Committee might ask to which degree and level national government played a role in assisting municipalities, and if this was detailed in Section 154. National government also has a role to play in assisting municipalities.

A municipality must be self-sufficient. If dependent on grants it will be non-viable. A 1998 White Paper pointed out some municipalities would always be reliant on local government for transfers.

Given the COVID-19 pandemic, the stress on municipalities was amplified. In 2015, CoGTA strengthened district municipalities and government needs to zoom into this at present. There were not enough resources in certain municipalities, it needed to be integrated. Only 13 out of 34 proposals municipality proposals was approved, and 11 amalgamations were finalised.  Municipalities affected were Musina, Thulamela and Mothale, which became Collins Chabane, Modimolle, Polokwane, Blouberg, and Aganang were de-established.

MDB investigations and audit reports were done. The MDB requires Section 25 to be considered when redeterminations are made. Public consultations also need to be completed. When considering applications, the interdependence of communities and economies are considered. Spatial and development planning, governance and functionality, and financial and administrative factors, are also considered. Sub-programmes also impact municipalities, and salary bills will increase for new municipalities.

In some cases, it is difficult to deal with a lower grade municipality which becomes higher grade when amalgamated. A moratorium was recommended on further amalgamations, until all financial and inherent transitional challenges are addressed. Given municipalities are still struggling, there is a risk in doing this.

It is critical for adequate transition funding to be made available, given the situation where CoGTA asked for more than a billion but was only provided for R400 million. There is a need for a service delivery development dispensation for all underdeveloped municipalities. When the Committee considers the issues amalgamated municipalities were faced with regarding financial viability, it also needs to consider other municipalities which might not have been amalgamated. This should be done within the District Development Model to address all backlogs. Capable leadership and solid institutions are key to financial viability. Institutions must have proper legal frameworks and systems.

The Chairperson thanked the MDB for its presentation.

SALGA Perspective on Amalgamated Municipalities

Mr Lance Joel, Chief of Operations, South African Local Government Association (SALGA), made the presentation on behalf of SALGA National Executive Committee (NEC) Member, Councillor Bheki Stofile. He said much was said in previous presentations, so the presentation would only focus on what was promised, what happened in reality, and SALGAs own assessment on mergers, amalgamations, and the practical impact.

The MDB is responsible for demarcation and it should improve economic, social, administrative, and financial sustainability, and create financially viable municipalities. Reflecting on post-demarcation, varied degrees of urbanisation can be seen between municipalities which merged. Some rural municipalities are losing population to cities such as Dr Beyers Naude and Nelson Mandela Bay Metro.

To restore the promise of amalgamation leading to a better life for all, SALGA did introspection. It initiated research two years ago to establish the effects of redetermination of boundaries and transition of each municipality from where it was to where it was created to be. SALGA’s focus was on two municipalities affected by amalgamations and there are 18 mergers which were affected across provinces. SALGA intentionally chose three examples which depict three different stories.

Mangaung in the Free State is an example where Naledi Municipality merged with Mangaung. This resulted in a decrease in population density. This was the amalgamation of a functional municipality with a dysfunctional municipality. It impacted governance and democracy, which were both potentially compromised. The audit outcomes of Mangaung pre-amalgamation and post-amalgamation show the transition period, which was prior to the 2015 election, saw negative changes and then an improvement.  As early as 2017, Mangaung experienced financial challenges, given it merged with Naledi. The Municipality is now undergoing intervention according to Section 193 (5) of the Constitution.

Rand West Municipality in Gauteng merged with Randfontein and Westonaria municipalities to become Rand West City Local Municipality. At the time these municipalities were at the point of potential collapse, but as it merged there were equal opportunities to improve. Policies and human resources related matters were harmonised. Disparities were resolved, but this came at a huge expense to the Municipality which inherited the struggling finances of Randfontein and Westonaria. This impacted on the cash flow.

The audit outcomes present a fairly positive picture as things gradually improved overtime. After the first three years of the merger, the municipality received an unqualified audit outcome.

Dr Beyers Naude was a difficult merger. There was a low population density as small areas are merged with large areas and without a rates base. Public representatives have to cover larger areas. There is no improvement in the financial score of Dr Beyers Naude municipality. There are further challenges such as assets of the municipality are far less than the current liabilities of the municipality, which is at R280 million and its assets at R62 million. This is not a financially viable municipality and it inherited debt of R65 million. This debt only increased over the last three years. Three disclaimers were made in the first three years of this merger and the municipality has not been able to improve.

Based on research conducted, planning, costing, and chain management, was very limited and the provision of resources for the transition was not enough. Lessons should be drawn from this and a team needs to be established to deal with a merger prior to it and post the merger, so it considers the entire value chain as events unfold.

A due diligence study should be completed to assess the financial situation of affected municipalities. SALGA recommends the options to raise revenue levels must be investigated, particularly the transfer of municipalities. A three year, and not a single year budget, should be provided for planned and unplanned costs. An impact assessment must be done. Any further demarcations should be delayed and should only be dealt with when absolutely necessary. Demarcations should not be seen as a solution for sustainability and viability as this proved it does not work. The Rand West example shows this had a limited level of success. Intergovernmental Monitoring and Support interventions must be considered when finalising the new section of the MDB.

The Chairperson thanked SALGA for its presentation.

Councillor Stofile said as a government for the people by the people, it must embark on tasks collectively in a cooperative manner. Government is operating in silos and not a cooperative manner. Issues of amalgamation will not work without proper planning. Enoch Mgijima and Dr Beyers Naude municipalities are examples of this. These municipalities are struggling because those who make policies and laws decided to put it together without giving it the financial support needed.

National Treasury: Sustainability/Viability of amalgamated municipalities

Ms Wendy Fanoe, Chief Director, Intergovernmental Policy and Planning, National Treasury, made the presentation to the Committee.

Ms Fanoe said R139 million was made available and when further demarcations were announced, a further R300 million was made available. Before demarcations took place, National Treasury received a letter from the then Chairperson of the MDB. The Chairperson of the MDB asked National Treasury to answer questions on the definition of financial viability and asked for feedback on recommendations the Minister received at the time. Feedback was given to the MDB in June 2015.

Financial viability is defined as the budget being sustainable from an expenditure and revenue perspective. The fiscal system can provide transfers where there is a gap. There are many gaps in revenue collection in municipalities, for example where there is no complete property valuation. This means people who should be paying property rates are not paying because these people are not included on the roll. One must not focus on what municipalities are currently spending on budget, but instead consider what the expenditure should be if the municipality is run efficiently and effectively. For example, personnel expenditure commitments must be considered, the number of staff employed, and the salaries paid. Many municipalities are not operating at ideal levels. Expenditure is too high, while revenue collection levels are too low.

Broader viability definitions consider economic viability, such as attracting jobs, and how municipalities function from a governance and institutional perspective. Importantly, service delivery must be considered at the levels set out. An intermediate city’s revenue collection in national taxes is higher than what it receives. Small towns experience the same. Rural municipalities are referred to as B4 and less national taxes are collected here.  Prior to mergers being in place, National Treasury raised concerns which were noted in the previous presentations. If a municipality is re-demarcated, it is very disruptive and expensive. According to best practice, a municipality would take two to three years to restabilise.

The system is designed to give larger allocations to small municipalities. If a number of small municipalities are amalgamated, grants allocated could become smaller. If municipalities are amalgamated its grading will go up, which will increase staff salaries, which has an adverse impact. It is unlikely re-demarcated municipalities will be better off than it was prior to amalgamations, from a financially viable perspective.

Allocations could be less than what was previously received, based on the grant system.

The local government equitable share is designed to provide poor households with access to free basic services. Two old age pensions are used to define poor households and if less than this is received, the household is deemed to be poor. When municipalities merged, rich and poor were merged. This impacted the number of poor households in the municipality, for example, one finds the poverty rates in one municipality is 60%, and in another it is 90%. Formulas then run on amended poverty thresholds which are applicable to the entire area.

Special support and councillor remuneration is not given to all municipalities. Smaller and rural municipalities, which are unable to collect revenue, are also assisted to fund community-based services such as fire-fighting and road maintenance.  Subsidy support is given to smaller, rural municipalities, with a limited revenue base, and these will struggle to fund councillor remuneration. Subsidy support is given to grade one, two, and three municipalities. When amalgamation took place, such municipalities were graded as four, and therefore did not receive subsidy support.

In 2015, Dr Beyers Naude municipality received an allocation of R87.5 million. The allocations drop over three years with right-sizing. Allocations then grew from 2017, 2018, and 2019. The same applies to Enoch Mgijima.  Conditional grant allocations are determined based on formula, or the national departments responsible for administering grants. The amounts allocated for conditional grants are not the only thing to focus on, but also the capability of the Municipality to spend its allocation.

In Dr Beyers Naude municipality, the spending on grants is very low and is half of the allocations given. There is a consistent trend in this. Infrastructure conditions are important for service delivery. Conditional grants are used for infrastructure to service poor households.

Mr Mandla Gilimani, Director: Budget Analysis, National Treasury, said the 2018/2019 audit outcomes for amalgamated municipalities show the municipalities do not have sufficient cash. Cash coverage of one to three months is required. Most merged municipalities cannot pay fixed costs in a month if customers boycott payments. Municipalities are inefficient in collecting debt and creditors continue to grow, but municipalities are unable to pay creditors on time. Some municipalities have consistent disclaimers and are struggling with liquidity challenges. National Treasury is only able to provide technical input in the process and has done this. It is important for municipalities to receive support after it is merged. The National Treasury said financial viability should be prioritised.

CoGTA Free State: Sustainability/Viability of Amalgamated Municipalities: Mangaung Metro Municipality   

Mr Mokete Duma, Head of Department: Free State Department of COGTA, listed what the presentation would cover. For a municipality to be financially viable it must reflect on satisfaction amongst constituents, sound and stable management, consumer satisfaction with service delivery, and a democratic system of governance and public participation. The political stability must take centre stage.

The financial viability and sustainability of an institution considers its tax base, economic stability within its jurisdiction, limited dependence on grants. Factors such as poverty and unemployment highly constrain the tax base of some municipalities. If the situation does not change around unemployment, a municipality’s situation may not change.  The inventory of the Mangaung municipality in 2015/2016 was at R438 million. This increased in 2018 due to the amalgamation.

The liabilities of the municipalities were low in 2015/2016, and increased by R1.3 billion in 2017/2018.

In 2015/2016 the total net assets of the municipality was R13.4 billion, and this began to increase in 2019 to R15.7 billion, which registered as R2.2 billion as it increased the net assets.

In 2015/2016, Mangaung had a net surplus of a billion. Former homelands do not have an adequate revenue base. Bloemfontein carries this, creating a lot financial stress for the municipality.  The metros ability to raise revenue and grant allocation allows the Council to perform its obligations. The Council sustained a deficit of R268 million in comparison to the period prior to amalgamation, which impacts service delivery. Amalgamation negatively impacts the city. In the period of 2015/2016, the grants were at R918 million, and increased by R176 million. The municipality inherited issues from amalgamated municipalities. The usage of grants is not at a level consistent with the Division of Revenue Act. A R790 million grant was allocated in 2015/2016, and R774 million was allocated in the 2018/2019 financial year. The decline was due to non-performance which affected the allocation.

The Chairperson thanked the department for its presentation and handed over to the Acting Executive Mayor of Mangaung Metropolitan Municipality, Councillor Lebohang Masoetsa.

Mangaung Municipality briefing

Councillor Masoetsa said the amalgamation of the former Naledi and Soutpan had very negative effects on Mangaung given the high rate of unemployment, and also because it is a border metro with Lesotho. People from Lesotho come to settle in Wepenaar in particular, Thaba Nchu, and Bloemfontein. These people must be provided with services which burdened the municipality.

Mr Tankiso Mea, Municipal Manager (MM): Mangaung Metropolitan Municipality, speaking on governance challenges, said as a result of amalgamation, wards became bigger and encountered challenges given the distance between the three amalgamated towns.

No allocation was made for a restructuring grant which means the City had to use internal funds and resources to deal with service delivery and backlog issues in former towns. There were huge backlogs with water and sewage which was at an 80% loss. The metros budget had to be redirected to address the challenges of the former Naledi town. There was a huge increase in salary bills for the metro. There were outstanding creditors which amounted to over R9 million which the city had to service.

There was an inheritance of over R41 million of overspending on items not allocated for.

In December, Council decided to redirect funding to help deal with major issues such as sewage and water. Water pumps were not functioning and there was regular sewage spilling and overflow. There are now wider areas to service with the limited resources the metro has. This impacts the maintenance budget and aging workforce.

R8.5 million will be needed by the metro over the next ten years.

In former Naledi, there were 149 employees, and 23 from Soutpan, who came into the metro. Employee costs then arose as a result of incorporating new staff.

Discussion

Mr C Brink (DA) commented on the presentation by the MDB and the Department. He said changes made to boundaries must happen as a means to an end and not an ends in itself. To have a metro in a province is not a sufficient reason for amalgamation. To get better salaries for officials is not a good reason. Amalgamation is done to increase revenue base. He said an amalgamation is extremely costly and has long-term consequences. It is almost like surgery and the benefit of the amalgamation might not be experienced at all. Tshwane was short-changed by about a billion rand when it was amalgamated. One has to be cautious when making these decisions as the benefits might be wiped out entirely. Public participation is not done properly in these cases. There is some public participation, but there is a need for deep stakeholder engagement.

Mr G Mpumza (ANC) said the critical factor is redetermination which has huge costs. Here viable and non-viable municipalities were merged and it is clear the revenue was not expanded. This is because it was not informed by a diagnostic report. The municipalities which merged with Dr Beyers Naude had a negative effect. Assets were far less than liabilities. The demarcation transition grant was not adequate to address the debts incurred. Finances should be provided to distressed municipalities before it is merged or its debts need to be cleared.

Ms H Mkhaliphi (EFF) said she agreed with Mr Mpumza. There is a clear lack of resources and the conclusion of the MDB indicated there should be a moratorium on further amalgamations. Mergers started five years ago, and it is still being debated. She asked when there will be agreement. Capacity is also an issue. If the program is not resourced it will fail. The MEC in KZN said amongst all municipalities under Section 139 he wished Mooiriver would be merged. The Committee felt it could sustain itself. It seems there are divergent views on mergers and if there will be financial viability. According to MINMEC, concerns were raised about R1 billion which was not accounted for in Ugu in the KZN municipality. This means the municipality has good revenue, but accountability is a problem.

Ms M Tlou (ANC) asked if National Treasury considered grants to amalgamated municipalities.

Mr K Ceza (EFF) said the amalgamation process assumes the tax base will improve, but there is corruption. He asked what actions the Department took, given the litigation being done by creditors. Amalgamation reforms are done because it is believed more revenue can be generated, regardless of weak infrastructure and unemployment. He asked what action CoGTA took to ensure the status quo of rural municipalities is corrected.

According to CoGTA a third of municipalities are not viable, some are at risk and some are viable. He also asked if there is a common understanding on what is viable and how municipalities can be made viable; what measures are in place to correct this; if there a link between functionality and boundary change or if amalgamation resolved functionality challenges; if it is bigger, better, and cheaper; and who the winners and losers between the public and private sector are.

The Chairperson asked what the experience was with the merged staff in Mangaung; how long it took to conclude; if National Treasury diagnosed perennial spending on demarcation grants; and if CoGTA conducted a public satisfaction survey to determine how the communities are experiencing amalgamation to include the people in the debate. Staff matters should be dealt with instead of leaving it to different municipalities. Employees doing the same job should not have different pay scales. The money requested was over R1 billion and only R400 million was received, which was said to be an agreement between the multidisciplinary team, but the question was how this agreement was reached, and if it was based on the realities.

Responses

The MDB said it would attempt to answer the questions in general. There are perceptions of amalgamation bringing about improvement, but this is not the case to date. It is critical for adequate transition funding to be given on time. Many municipalities are still struggling with debt, but even if the municipalities remain in distress, it must be considered it was initially in distress. Amalgamation is not a solution to distressed municipalities, but it must be considered. Spatial development planning must also be considered. The number of people moving into cities is increasing on a daily basis, which is particularly the case in Johannesburg. To improve on this, outlying municipalities must be considered for amalgamation, such as the greater Johannesburg city region. The main point is challenges must first be considered before amalgamation is ruled out. Governance issues also need to be considered.

Dr Naidoo (COGTA) said a public survey was not conducted on demarcation matters, and it will be considered. In certain instances there was public outcry from certain areas. There was protest action where municipalities are located. Staff and human resources matters need careful consideration. The demarcation transition grant would not deal with debt. R400 million was given based on a decision from the multidisciplinary team and an urban development grant was also allocated to Mangaung, given the amalgamation.

Ms Fanoe (NT) said only demarcation costs were considered. This is an equity issue. There is a working group to deal with ballooning debts from Eskom and water bills. Some policy issues require attention. There is a comprehensive strategy on this. Municipalities receive a base allocation which considers the extent to which it can raise its own revenue. If there are three municipalities, there will be three allocations, but one municipality will receive one allocation. All municipalities are guaranteed to receive at least R5 million.

The Committee adjourned for lunch.

Mpumalanga COGTA: Progress report on the amalgamation of City of Mbombela local municipality

A representative from the municipality said there were 78 counsellors in Mbombela and when amalgamation took place, there were a total of 90 councillors in the city of Mbombela. After amalgamation, the population amounted to 685 000. There is stability in the municipality despite the way it was affected by COVID-19.

The merger between Mgidi and Mbombela poses a challenge, because there are two municipalities and two Municipal Managers (MMs). There is no need for a deputy MM.

Basic water provision in 2015/2016 was at 89% in Mgidi, and in Mbombela, this number was at 77%. Following amalgamation, 181 000 people had access to basic provisions, which is at 88%. 95% of households had access to sanitation in Mgidi and 96% had access in Mbombela. Prior to amalgamation, Mgidi had 81% access to electricity and 96% had access in Mbombela.

Mgidi and Mbombela initially had separate tribunals which have now been merged to deal with issues such as land and development. The Local Economic Development (LED) strategy of Mbombela was not approved and is still a draft. There are many mines in the area and people are complaining about this.

Tourists are being attacked by criminals, and this industry must be looked at to enhance revenue.

Mgidi and Mbombela received unqualified audit opinions in 2015/2016 and 2017/2018, but in 2018/2019, Mbombela received a qualified audit opinion.

The demarcation grant was granted to the municipality, but it is experiencing challenges with its billing system which challenges persist. There is a low consumer payment rate by townships and rural areas which account for 75%.

There are 45 wards, and only 35 wards are functional. Public participation structures are in place.

Traditional leaders are participating in processes, but some do not have the correct gadgets to participate. The Municipality does however use the media to communicate on its plans.

The people of Mgidi municipality shut down the area, because it did not see the fruit of the amalgamation and wanted to move out of it. The community was engaged and were told the issue would be looked at after the 2021 government elections. Mgidi had seven posts which were filled by males, and Mbombela had eight posts of which two were filled by females and eight by males. Here there is a challenge of municipalities appointing females.

Satellite centres improved service delivery.

3 246 posts are still vacant in the municipality and the municipality is male dominated. The Municipality is struggling with employment equity. Only two senior managers out of 15 are female.

Support is provided to municipalities for capacity and DCoG is working with National Treasury to provide this support.

Land invasion is an issue and municipalities are not doing the work it is meant to do on this. Emalahleni incurred debt of R4 million. This relates to water and electricity loss from illegal connections. The municipality tends to be quiet on this. The municipality cannot collect revenue from this and the municipality needs to do its work and remove people. In South Africa, there is no land called private or mega-land, there is only wall to wall governance. Each municipality has a number of wards and the land would belong to the wards. If billing plans are not approved, the municipality must demolish the structures.

Dams are low and the municipality does not have a dam, which a serious issue. The amalgamation process has not yielded the desired results. The community continues to protest against service delivery. This is the only municipality handled by National Treasury and it is not working. The municipality asked the Committee to intervene to allow this function to be handled by the province and not National Treasury.

The Chairperson asked if there are any other issues the Committee needs to consider.

A representative from the province said the municipality has a number of challenges, but has made a number of strides. Many resources were used towards amalgamation and money should be recovered. Over R400 million was used toward the 2010 programme which caused financial instability. SALGA and National Treasury will be engaged on this. There were a few people who disagreed with the amalgamation, but these people did not disengage. It has been almost five years, but some issues are still being worked on with the amalgamation.

Mr Wiseman Khumalo, Municipal Manager: Mbombela Municipality, said he wanted to highlight two issues. Immediately after the amalgamation, there was a loss of grants, such as the water services grant. There is budget discretion from National Treasury and there were engagements on the unfunded budget. The only challenge experienced is with creditors, and a creditor reduction plan is in place and is being implemented. The lockdown and COVID-19 affected engagements.

Discussion

Ms Tlou posed a question in another language [43:30 on audio 3]. She asked about the Mbombela merger, and ticking the correct boxes regarding governance, financial management, and public participation. She said the Municipality fell short on service delivery and wanted to know if the Mpumalanga provincial CoGTA agreed on the re-demarcation of Mgidi to its original boundaries. She asked if it would improve service delivery and prevent protests.

The MEC said there should be no de-establishment as it did well to be merged. There are new roads and the sanitation issues referred to occurred in Section 11 which was already addressed. The complaint is about the community wanting a grade 6CE contractor to construct a road. It was not indicated this was only for the people of Mgidi. The community improved since the amalgamation. The issues of ward 41 and 45 run across the board. These wards wrote to the municipality saying it does not get informed when there will be load shedding. The municipality said the community should listen to the radio, and since then there has been improvement. There is a communication strategy in place to speak to the communities. There is a Mgidi radio station which communicates service delivery interruptions.

There are political issues involved. Some individuals did not want the amalgamation for their own reasons, but did not disengage. If a matter arises, these individuals use this to mobilise the community, which is why when one issue occurs it is simply attributed to a merger. These are political issues which distorted the reality of the situation. The speaker is also uncooperative. A certain councillor in the province is selling stands for R100 000 or R150 000, which is known in the province, people write to the municipality about this. People attached proof of payment for this in communication to the municipality. The Speaker did not reply to this. The Public Protector called a meeting about it. The constitutional tenets on this should be applied since there was no response.

Ms Mkhaliphi asked her questions in combination with questions she asked on behalf of Mr Ceza, who was excused from the meeting as he was unwell. In Mpumalanga, people are suffering because of electricity cuts. People are also complaining there is no direct contact. She asked if the team can give clarity on these issues. The merger was supposed to improve the quality of life of the people but, if after the merger, the people are suffering more than before, then the question is why did the merger take place. Ward 41 and 45 complained about the spillage of sewerage and water leaks. People felt neglected under Mbombela.

The Chairperson asked the MM to expand on the reasons for not receiving grants. She asked for the MEC’s honest opinion on communities. There are instances where members of the public say merging should not happen based of poor service delivery. The presentation also confirms communities are unhappy with the City of Mbombela. She asked why there is such dissatisfaction. Treasury has control over certain municipalities and should explain why, as when this happens there is no point of contact or oversight. She asked what the basis is for the National Treasury having control over certain municipalities; and what public participation is like in the area. National CoGTA should be able to deal with issues on water and sanitation grants. The municipality should expand on the reasons for this to assist the Committee.

Mr Khumalo (Mbombela MM) said he agreed there would be engagement on the matters raised, and asked the Committee if time could be allowed for a report to be compiled on service delivery.

The Chairperson said this was the only municipality which did not submit this report.

Mr Khumalo said the report was submitted to CoGTA. There was a serious dispute with the Public Transport Network Grant (PTNG), which was lost. This grant was used to improve road infrastructure.

National Treasury said a pilot project should be done. The taxi and bus industry were fighting and there was no agreement, which is why municipality had to move Phase One to another phase as an intervention. By the time this decision was taken, it was decided the municipality should be removed from the problem.

The former Mbombela had a historic issue with grants. The placement process of staff between Mbombela and Mgidi was not easy as there were many disparities with placing staff. There were also salary disparities which the municipality needed to source funding for.

Mr Khumalo said a Committee was established which includes councillors from wards 41- 46. These councillors will be met with to consider service delivery issues and timeframes. The last meeting at the municipal offices in Mgidi took place last month. Other regions might question why Mgidi is given so much attention. A company was appointed to look into the spillage issues. When electricity supply will be interrupted, customers are communicated with on a number of platforms.

The Chairperson asked National Treasury to reply on the issues raised.

Ms Fanoe said certain municipalities are monitored by the National and Provincial Treasury because of the size of its budgets. These are non-delegated municipalities and its budgets are administered directly by National Treasury, while the remainder of municipalities’ budgets is administered directly by the Provincial Treasury.

Dr Naidoo said the District Model should be used to address the issues raised by Mpumalanga province and the municipality.

Eastern Cape COGTA: Amalgamation presentation

Ms Charity Sihunu, Acting General Manager: Municipal Governance and Support, Eastern Cape Department of COGTA, would be making the presentation to the Committee.

Ms Sihunu said Gariep was one of the municipalities struggling financially and was merged with Maletswai local municipality, which was also experiencing financial challenges and debt from Eskom. Gariep municipality has a low revenue base and was solely dependent on Maletswai.

Raymond Mhlaba was merged with Nkonkobe municipality. Prior to the merger, Nkonkobe did not have funds and was mainly farm area.

Tsolwana and Inkwanca municipalities were experiencing financial difficulty and the Council was dissolved. Ikwezi, which is under Dr Beyers Naude municipality, could not even pay salaries. Prior to the merger, legal provisions were put in place according to the Section14.5 notice. This allowed for a moratorium for disposal of assets, as some assets were sold by the municipality for a limited value. The new entity, Dr Beyers Naude, inherited the same issue. Dr Beyers Naude had to fight litigation and claims from Ikwezi municipality, because of contracts which were not honoured.

The implications of the merger had far reaching consequences, such as legal matters, human resource matters, finance matters, and technical matters. Various entities had its own contractual obligations to handle matters of amalgamation. The absence of a chain manager to handle the mergers made it difficult to get a real sense of what was happening in the municipalities. Some municipalities were absolving people so that others could be safe in its positions when the new entities came in.

Value of grants was split into a 40/60 percentage ratio, where 40% is given to erstwhile municipalities. The remaining 60% was given to new entities. Some municipalities had a slow pace of expenditure in transitional grants. When money is not used and cannot be accounted for the money is returned to the coffers. The inherited debt was from Eskom, which was a major problem. Prior to the merger, some municipalities did not owe much to Eskom, but post merger, this increased. Enoch Mgijima is in debt to the amount of R433 million.

The Enoch Mgijima municipality is currently under Section 139 (1) and Section 139 (5) intervention, as it is troubled financially, owing more than R400 000 to Eskom. There is a financial recovery plan and this is monitored regularly, but it has not yet yielded the desired results. Dr Beyers Naude and Enoch Mgijima reprioritised two projects from the Municipal Infrastructure Grant (MIG) allocation due to COVID-19.

The challenges experienced by all new entities are inherited debt from Eskom and creditors which shifted the focus from service delivery. Gariep municipality owed pension funds over R20 million which is a debt inherited by the municipalities it merged with. Salary bills could not be paid and there was inadequate funding for relocation costs. The funding model used does not speak to real service delivery issues on the ground.

It is recommended redetermination of the outer boundaries takes place, and proposals will be accepted after local government elections in 2021. This will be to correct distorted arrangements and errors made.

Discussion

Ms Mkhaliphi asked what happened when a merger took place since there was also a Mayor and a Speaker. She said it was sad to hear about the litigation. People are complaining in two wards from Dr Beyers Naude municipality, as people are confused between what constitutes ward eight and ward nine. Many racism cases are reported in the municipality. She asked if the leadership in the province can clarify if it knows about these cases. She said she witnessed a case in the municipality and experienced racism when she visited there. The municipality should work with South African Police Services (SAPS) around the issue.

Ms Sihunu said Ms Mkhaliphi was correct, as there was a new Council, a new Mayor, and a new Speaker after the 2016 elections. Some Councils were grade two and others were grade four. Councillors must be paid in the highest grade at the new entities. It is a different case with employees as it was human resources related. When mergers took place, the Mayor and Councillor had to form as one.

Mr B Hadebe (ANC) asked for clarity on litigation from companies who claimed to be owed money. He wanted to know how this matter was dealt with; and what the role of councillors and officials are since the municipality could not function. Councillors and officials execute plans and Integrated Development Plans (IDPs) of the municipality. He asked if councillors are up to the task of turning around the situation; what contribution councillors are making to change the situation; and asked in future what the role of councillors should be when municipalities are merged.

The Chairperson said audit outcomes of merged entities are very worrying. She asked if the administration achieved its intended purposes; and if it was a good political decision or not. She asked about the human resources issues in Dr Beyers Naude, Enoch Mgijima, Raymond Mhlaba, and Water Sisulu municipalities, and its experience with the placement of staff.

In relation to the R20 million granted for development dispensation, she asked if the funding is continuous or once off; what efforts are in place by National Treasury to ensure the municipalities are viable and supported; she asked how are the issues of litigation are being handled; and if the litigation still ongoing.

Ms Fanoe (NT) said allocations are not continual and municipalities have to live within its allocation. It must relook its budget and staff establishment, to use its available resources. Some provinces and rural municipalities do not have a speedy growth in equitable shares. CoGTA and the National Treasury should assist municipalities in right-sizing. One municipality receives one base allocation which is linked to an equitable share formula. A certain component is just allocated once. Each province has advisors for revenue management, implementation, and funded budgets.

Dr Naidoo said National Treasury and CoGTA should support the affected municipalities. In May 2016, when MINMAC identified the Eastern Cape and Limpopo as requiring support, many stakeholders made serious commitments to achieve things. This did not work out and engagement should take place with the provinces to provide targeted support.

Ms Nkhensani Makondo, CoGTA, said the province gave support through the Back to Basics programme, 16 financially distressed municipalities are considered. Support plans will be developed to help the struggling municipalities to stabilise.

Mr Andile Fani, Head of Department: Eastern Cape COGTA, said amalgamation did not work and a number of problems are encountered. Eskom is owed a lot and Cabinet was asked to allow help for municipalities. In most municipalities there are political problems which cannot be solved by administrative solutions. There are divisional issues which cannot always be dealt with. Sometimes administrators take sides. Racism issues will be followed up on in Dr Beyers Naude, but no cases were reported to CoGTA in the province as yet.

Ms Sihunu said monies are owed to municipalities from different households and the bulk of this money is from communities.  Some businesses also owe municipalities. The Department encourages Municipal Councils to collect the debt, but it is reluctant.  Litigation caused the municipality to become bankrupt, and this will be investigated. There is a general assumption administrators have to resolve political problems. CoGTA is working with the administration to effect change.

Ms Bulelwa Khweyiya, Mayor: Walter Sisulu Municipality, said amalgamation at Walter Sisulu cannot survive without assistance. The register at the time was based on an indigent register which means the municipality will not grow. Walter Sisulu faces issues such as Eskom debt and its inherited debt. Walter Sisulu municipality also has an unfunded budget which is derived from the amalgamated municipalities. Once the subsidised money which should be paid to Eskom is used it becomes irregular expenditure. 60 general workers were absolved and this left 37 workers. The Municipality is in the process of negotiations with a bargaining council. Some service providers cannot be paid within 30 days as Eskom needs to be paid. There were litigations on pensions which were not paid and compliance on service delivery was not completed. This caused communities to be unstable.  Councillors are also selling land sites. The funding issues should be looked at by Treasury and it should consider making payment to Eskom and not municipalities.

Mr Bandile Ketelo, Mayor: Raymond Mahlaba Municipality, said CoGTA’s presentation captured many things sufficiently. A number of strides were made on staff placement, but a number of issues were faced. Some appointments were made which led to bloating of staff and ultimately led to litigation. Some issues were solved through discussion and placement of staff was dealt with. Staff who felt aggrieved about placements can make appeals to the appeals committee. The municipality is unable to cope with the deterioration of electricity and infrastructure. The Municipality may not be able to pay off its debt to Eskom. The municipality should be assisted to settle its Eskom debt. It is disadvantaged by one of the bigger areas in the municipality, Fort Hare, which is serviced by Eskom, but the municipality does not benefit from this. Credit control cannot be enforced. Amalgamation has not worked for the municipality and its performance is poor, as it is experiencing far more issues now than prior to amalgamation.

[Ms Luleka Gubhula-Mqingwana, Mayor: Enoch Mgijima Municipality, did not attend the meeting as she said she did not receive an invitation]

Mr Deon de Vos, Mayor: Beyers Naude municipality, said staff placement must be finalised and the organogram currently used is not viable. Services deteriorated as debt and internal issues are a main focus. There were not protests, but when challenges of amalgamation were explained to communities, communities bluntly said it was not its problem. There are a number of outstanding litigations such as the famous case of Ikwezi, which is referred to as the kiss case. Someone wanted to claim R6 million for sexual harassment, as someone wanted to kiss her. The matter between the municipality and Eskom will appear in court on 14 December. The municipality is disputing the billing sent by Eskom as it cannot verify the charges. Wheeling is also being disputed on the tariffs. The municipality asked for a neutral facilitator to settle the case.

KZN Department of COGTA: Status of Merged Municipalities in KZN

Mr Tando Tubane, Head of Department, KZNCOGTA, said KZN had 61 municipalities and after amalgamation had 54. Quarterly visits are made to municipalities to produce a quarterly report.

An official from CoGTA KZN presented to the Committee, and said municipalities in the province are affected by integration. Six were affected by amalgamation, one was newly established, and one was disestablished.

A Municipal Political Change Management Committee (CMC) was established at a municipal level for major boundary adjustments. A Municipal Technical CMC was also established. CoGTA appointed a transformation manager. Non-viable municipalities are re-demarcated using broad spectrum criteria which expands existing service delivery networks, and the capacity, skills and expertise of larger municipalities, so it becomes available for non-viable municipalities.

On governance issues, all oversight structures are functional within the merged municipalities, but there is poor functionality in the Municipal Public Accounts Committee as reports are not properly processed according to legislation. Speakers were reluctant to implement consequence management in cases of misconduct by councillors.  The merger resulted in bloated organograms, which placed a strain on municipal financial viability. Job descriptions were finalised and approved at all municipalities and evaluation processes are taking place.

Inkosi Langalibalele received poor audit outcomes due to prior findings from uMtshezi Municipality which was not resolved. The CoGTA Financial Expert Project is assisting the municipality to improve the 2019/2020 audit outcome. The merged municipalities are also experiencing cash flow problems.

Umfolozi, EThekwini, Inkosi Langalibalele Municiplity (ILM), Ray Nkonyeni and Hlabisa were below the accepted norm, which indicates the current liability of the municipality exceeded its current assets.

The bench mark for grant dependency is 80% and over. None of the municipality’s illustrated over 80% in the 2018/2019 financial year. Four municipalities, Hlabisa Big Five, Nkosazana Dlamini Zuma, Mthonjaneni, and uMfolozi, indicate high levels of grant dependency. EThekwini has the highest debt of R10.9 billion, followed by Umhlathuze at R544 million, Ray Nkonyeni at R274 million, and ILM at R140.7 million.The total debt of the municipalities illustrated above, as at June 2019 was R12.5 billion.

The mayoral position at uMdoni municipality recently became vacant as the incumbent was recalled by his party. The Municipal Manager was placed on suspension during October 2020 and a disciplinary process was initiated by the municipality. Economies of scale were not realised as seven wards are rural and have no revenue base. An impact analysis must be undertaken before municipalities are merged. This is to allow municipalities to plan for the post merger process. All spheres of government must understand the implications of the merger according to resources needed in dealing with the increase in expectations of communities.

The deputy mayoral position at Inkosi Langalibalele municipality was not filled due to cost containment measures. Inkosi Langalibalele municipality was placed under intervention in terms of Section 139 of the constitution. The intervention was extended to 30 March 2021. Councillors demanded to be placed and remunerated at a grade four municipality, as determined by the circular on the Determination of Councillor Allowances. Eskom debt was reduced from R132m to R13m due to strict cost containment measures being implemented by the ministerial representative.

There are budget constraints with regard to servicing the erstwhile Ndaka area due to the non-payment of service fees for services provided by the community. Major community protests were experienced in the erstwhile Ndaka areas due to the lack of provision of water, sanitation, and electricity services. The important lessons to be learnt from the amalgamation process are consideration should be given to limited planning, change management, costing, and provision of resources, which appeared to happen during the transition processes. Government should bear the transitional costs of any amalgamation.  A formal due diligence study must be commissioned after boundary decisions were made to identify the financial situation of the affected municipalities, and what steps should be taken to prevent potential wasteful and duplicate expenditure. National Treasury should provide a budget for such restructuring based on a comprehensive costing exercise undertaken, and funding for at least a three year transition period should be provided.

Limpopo COGTA: Discussion on the sustainability/viability of amalgamated municipalities

Ms Marlene Van Staden, Mayor: Modimolle, presented to the Committee. Ms Van Staden said farm lines were extremely expensive and Eskom did not want to negotiate about this. When the municipalities were amalgamated, the Chairperson of the MBD was asked to do a case study.  A full delegation was sent to do this, but a case study on the effects of the amalgamation was never received.

The former Modimolle had two qualified audit opinions before amalgamation, and the former Mookghopong had one. Disclaimer opinions emerged as opening balances were incorrect and the balances could be proven. The budget started off with a deficit of R129 million for over ten months and an inherited debt of more than R200 million. There was a huge amount of contingent liabilities all amounting to a billion rand.

Employee costs show a lot of positions were double parked, meaning there were two of each and no retrenchments were allowed. Placement was only finalised in June 2020 which took four years. Employee costs sky rocketed. Salaries of divisional managers doubled.

The Eskom debt was R152 million in August 2016 and interest charged was almost R2 million.

There was a lot of political instability at the inception of the new Council, but this was dealt with.

The new municipality is faced with litigation and inherited creditor claims from the former municipalities. It is without funding to support its transition. The municipal demarcation grant was too small for the liabilities inherited. A R70 million grant was awarded as there was no other solution, but this was still not enough.

Thulamela Municipality report on sustainability and viability of amalgamated municipalities

Mr HE Maluleke, Municipal Manager: Thulamela Municipality, said Mutale was incorporated into the Thulamela municipality. After boundaries were relocated, Thulamela wards increased from 40 to 41, but the 13 wards which were initially part of Mutale, were divided between Thulamela and Musina.

Mutale had a population of 91 870 prior to amalgamation and Thulamela had 618 462. Following amalgamation, Thulamela’s population decreased, meaning the tax base was reduced.

Mutale Municipality advertised positions and appointed some people in higher positions, knowing it would be merging with Thulamela. This created a problem as someone who was appointed as a manager a month before also expected to be in the same position when the municipalities merged. Some staff had to be placed in lower positions without a salary change. This resulted in court cases. One hundred of the staff were sent to Thulamela, 13 to Musina and one was sent to Vembe. The placement Committee tried to add 198 staff in Collins Chabane, but this did not take place.

The two merged municipalities were not at the same level which meant resources were allocated to improving this, using the Special Development Framework. This was challenging as grants were reduced because of the population.

The municipality is stable and Mutale received unqualified audit opinions, while Thulamela received qualified opinions. When the municipalities merged it produced six unqualified audit opinions. The budget and collection rates dropped. Municipal rates cannot be collected from rural areas and Mutale municipality is refusing to pay rates.

The current challenges are poor revenue collection, increased litigation, land invasions, and salary norm issues due to placement issues with staff. There are salary disparities with senior managers and managers, as managers sometimes earn more than senior managers which discourages managers from performing duties.

Collins Chabane Municipality Presentation

Mr Risenga Shilenge, Acting Municipal Manager: Collins Chabane municipality, said the ward committees are functional and are able to provide monthly reports. Ward councillors experienced challenges in meeting with the general community. There was unrest in Malamulele on issues of poor service delivery such as sewer spillages, water shortages, high unemployment, and infrastructural related issues. The municipality was able to implement its IDP projects in areas which accepted it, and projects were completed in time. The municipality managed to get additional funding within two years after good performance. Revenue collection from townships is a challenge, as residents resist paying services and this was an issue prior to amalgamation. Some projects could not be completed due to COVID-19.  458 positions are on the organogram and 200 are filled. 250 eight positions still need to be filled as the process of finalising job evaluations is lengthy. There were salary disparity issues, but this was resolved. The challenges of amalgamation was the resistance from the Vhuwani villages which did not want to be a part of the Collins Chabane municipality. Councillors found it difficult to operate in this environment given the councillors were elected but could not report back to communities. This also posed challenges for councillors to do oversight.

The MEC will assign traditional leaders to be part of the Council, but there is only one traditional leader who participates as the rest do not want to be on board. There are meetings where a Minister is invited, but the community would not allow the mayor. Revenue collection is an issue in Vhuwani. There are high expectations from the community on service delivery, but the lack of revenue does not allow for this. There should be continuous political engagement to find harmony in the Vhuwani area.

Makhado Local Municipality: transfer of functions to Collins Chabane municipality

Councillor Gift Maguga, Makhado municipality, presented to the Committee on behalf of the MM who was unwell.

Mr Maguga said prior to 2016 the population was 530 000 with 38 wards. The population decreased and seven wards were moved under Collins Chabane municipality. Equitable share grants and other infrastructural grants were reduced as a result of a reduced population.  This did not affect grading of the municipality as it remained at level four.  The municipality was able to cover operational costs with the available resources after the elections. Short-term obligations were able to take place with the availability of current assets and the municipality maintained a favourable liquidity ratio. There was some protest action over the amalgamation. Immovable and movable assets were deferred to Collins Chabane to the value of R227 million. Road infrastructure amounted to R32.2 million. 62 employees were transferred to the new municipality and performance was not affected.

The Chairperson asked which new areas were acquired.

Councillor ND Davhana, Makhado municipality, said new areas were not received, and only seven wards were transferred to Collins Chabane. He said the municipality was not adversely affected by anything.

City of Polokwane: Incoporation of Aganang into Polokwane Municipality

Councillor Thembi Nkadimeng, Executive Mayor: Polokwane Municipality, presented to the Committee. She said Aganang municipality has five wards. Many wards which are far apart were clubbed together and this made servicing the wards difficult. The Aganang cluster of six wards was created and the traditional leaders from the area are cooperating with Polokwane. The cluster is purely rural and agricultural. It is without a township which means there is no potential for tourism.

There was a water supply challenge, but new regional water schemes were established called the Aganang Regional Water Scheme. The priority list of electricity from Aganang was not included in the Polokwane list, as the Polokwane list was too long, When this was attempted it caused community unrest.  New clusters were allocated to wards.

Challenges were encountered with job levels as Polokwane was graded at level five and Aganang was graded at level three. Unions did not want to wait for the three-year agreement which was signed.

The Aganang Water Scheme took almost three years to register with the Department of Water and Sanitation. Underground reservoirs are used to pump water into villages. 120 employees became 170 and all costs amounted to R104 million. The transfer of employees had a negative effect as there was a low morale amongst employees. Positions were duplicated and poor performance was also reported. The bargaining council contributed to instability in the first two years of amalgamation.

Molemole Local Municipality Presentation

Mr Lazarus Mosena, Municipal Manager: Molemole Local Municipality, said the municipality was amalgamated with Aganang and Polokwane which increased the Molemole municipality by 13 000 to just over 126 000. The inherited villages are rural with no economic potential. Only eight employees were absolved from Aganang. Salaries of secondary officials were aligned to the levels of the position after transfer, and there were no salary disparities. A mobile office was acquired to accommodate the increased staff.

Amalgamation resulted in two additional wards from the municipality. The Mayor and Executive Mayor conducted public participation in the two additional wards to understand the needs and challenges in October 2016. This was used to inform IDP planning.

An amount of R11 100 069 was received for the amalgamation grants. The municipality only used three percent of its grants and R2.1 million was returned. The municipality could not spend all its allocation. The condition of the grant did not fund furniture and office equipment.

Pre-amalgamation, Molemole municipality was well performing which is why it was not re-established. Since 2016, its performance was satisfactory, as it managed to attain unqualified audits for the past five years and is in fairly good financial health. Due to high unemployment rates, the municipality still has debt collection challenges.

The lack of funding led to delays in completing new offices for villages post-amalgamation. There are illegal electricity connections, there is vandalism and theft. There are also delays in energising completed projects and installation of smart meters. There is an overreliance on boreholes which are not sustainable and Molemole does not have a river flowing through the municipality which is why it relies on boreholes. There are also challenges with contractors.

Blouberg Municipality presentation

Mr MJ Machaba, Municipal Manager: Blouberg Local Municipality, said two wards, ward 21 and 22 were demarcated into Blouberg. These are 12 villages. In 2016, the IDP was revised to accommodate projects from Aganang Municipality for implementation and completion. Coopers Park had a project with a budget of over R2 million and this project was completed. A satellite office will be opened in the area. Assets transferred to Blouberg municipality include vehicles for traffic, corporate, and technical services. The municipal transition grant amounted to R8.125 million and the Municipal Systems Improvement Grant was R3 million. This assisted in improving the organogram, the completion of the valuation role, the regionalisation of policies, the improvement of information technology system, consolidation of the asset register, and alignment of asset management systems.

All affected staff transferred to the municipality received a relocation allowance except for the Chief Financial Officer (CFO). The municipality benefitted from amalgamation as it received an additional plant which augmented its municipal fleet. An additional 12 staff members remedied staff shortages and the municipality now has 22 wards. The population also increased.  

Continuous provision of support to the municipality is recommended.

The Chairperson said the Musina municipality should respond to the Committee’s demands and a letter will be written to the Mayor since the municipality did not attend the meeting. This was in contempt of the meeting.

The Chairperson said the remaining municipalities, Northern Cape, North West, and Gauteng, would be given an opportunity to make presentations at a later date.

The municipalities agreed.

Discussion

The Chairperson asked on what basis Collins Chabane Municipality rejected employees who were supposed to be transferred. She asked if the municipality was servicing the people who were refusing to pay. The people in Vhuwani are refusing to pay because a service is not being rendered to them. The same applies to non-payment in Mutale. She asked why municipalities took five years to place employees. She also asked if municipalities are not cooperating and if it is a classic sign of failed governance; and what provincial CoGTA did to assist and mediate with employees’ grievances and court cases.

CoGTA said it would follow up with National Treasury. The Musina matter which relates to service delivery is about communities from Musina being incorporated into Mutale which is now facing service delivery challenges. Mutale engaged the community several times and the inherited areas from Mutale are not always prioritised. The community of Musina will continue to be engaged and the Committee will be updated on this.

The Polokwane municipality said it follows a cluster strategy and its offices are utilised. Waste offices have staff at landfill sites and public participations are taking place. Matlala police station burnt down so SAPS is also housed at the municipality offices.

Blouberg municipality said it has a decentralisation strategy and satellite offices to cater for areas incorporated into its municipality. People can get proof of residence there. The Coopers Park hall will be upgraded into a service centre.

The Chairperson asked what the reasons were for rejecting the advice from National Treasury to the effect there was no evidence to suggest the overall viability of Mokgopong, Modimolle, Mgidi, and Mbombela local municipalities would not improve as a result of amalgamation.

The MDB said National Treasury wrote to the MDB and the MDB provides the role of National Treasury. The MDB raised financial viability, special issues, and governance as challenges. These issues are weighted the same and National Treasury only considers issues of viability so it may say an entity is not viable. In contrast, the MBD looks at the full criteria which would find an amalgamated municipality is viable in other contexts. It was questioned how to redistribute resources between those who have and those who do not have.

The Chairperson asked about an issue in Modimolle regarding the municipality being promised a report about the viability of the merger, but this was never received.

The MDB said the matter would be followed up on. Two dysfunctional municipalities cannot be merged and be expected to be functional.

The Chairperson asked for COGTA’s view on the matter.

COGTA said its role ended when the Minister made a request to the MDB. The MDB’s explanation was correct.

Molemole municipality said no facilities were acquired which is why facilities were built in the two acquired wards.

Thulamela municipality said infrastructure in Mutale was constructed by Vhembe district municipality and was never transferred to Mutale municipality. The municipality discovered when the established committees worked on how to share assets, it did not. A letter was written about this to the municipal manager in October 2020, but no response came. The reason the infrastructure is not being maintained is because the building is not in the municipality’s asset register. The Auditor-General will regard funds used for it as irregular expenditure.

Unions and workers in Thulamela were threatening to protest over the positions workers were given after amalgamation. Twenty workers did not accept placement and this was because the workers were appointed as managers, and wanted to remain in the same position when transferred to Thulamela. This was not possible. Many meetings were held with the workers, but it was not successful which is why a bargaining council was involved.

After amalgamation, consultations were held with communities and supplementary valuations were completed. The people appointed to do the consultations were refused by the community. Issues raised were about the community not paying for services in Mutale previously, but now being expected to do so.

The Chairperson asked for the Committee to be sent an update on the projects and services provided in Mutale; and where the employees transferred by Thulamela to Collins Chabane, who were refused, were placed.

Thulamela Municipality said these employees were not part of the 20 employees mentioned before. They fall under the Thumlamela.

Collins Chabane Municipality said the municipality refused some employees as the transfer agreement said employees received should be from Vhuwani and Malamulele, which is within the boundary of Collins Chabane. Thulamela also asked Collins Chabane to absolve some employees. Thulamela was told to keep all the employees on its payroll.

The Chairperson asked about development packages in Vhuwani.

The municipality said sometimes Vhuwani cannot be serviced and its office there is closed.

The Chairperson said Vhuwani was volatile and elections are coming up. She asked what the Municipality is doing about this.

The municipality said there was a meeting with the newly formed Vhuwani Service Delivery Task Team the previous day.

The Chairperson asked what COGTA was doing to ensure stability in Vhuwani.

COGTA said a decision was taken for sector departments to render services to the affected area. Some wards are still alleging no services were rendered, but Collins Chabane was able to service all communities. There will be a meeting with the community to address the issue of the pro Makhado task team.

Another challenge was, there was no funding for waste management in Vhuwani. All the matters are receiving attention. Economic Development initially assisted, but had to pull out as it was not within its jurisdiction.

Mr Hadebe asked about term tenders and three-year terms for waste removal. He wanted to know if Vhuwani does not have term tenders.

Collins Chabane municipality said it did not have this type of tender.

The Chairperson said municipalities which must respond to the Committee in writing must do so, and thanked all in attendance at the meeting.

The meeting was adjourned.