Deputy Chairperson, the Select Committee on Finance undertook an oversight visit to Free State municipalities from 16 to 19 August 2011. The objective was to engage with identified municipalities, along with national and provincial departments, on the following issues.
They are: the development and implementation of municipalities' budgets; compliance with the Local Government: Municipal Finance Management Act, MFMA; spending and performance of municipalities with regard to conditional grants; relations and collaboration between municipalities and various national and provincial departments, including parastatals; service delivery and capacity constraints of municipalities; alignment of municipalities' integrated development plans, IDPs, with the Provincial Growth and Development Strategy; and support that national and provincial departments render to municipalities in terms of section 154 of the Constitution and section 34 of the MFMA.
The following municipalities appeared before the committee: Mangaung, Masilonyana, Mohokare, Matjhabeng, Moqhaka, Naledi, Metsimaholo, Ngwathe, Mafube and Nala.
The following stakeholders participated: the national Department of Co- operative Governance and Traditional Affairs, Cogta, and related provincial departments; National and Provincial Treasuries; SA Local Government Association, Salga; Department of Energy; Eskom; Financial and Fiscal Commission, FFC; Department of Water and Environmental Affairs; Auditor- General; and the Development Bank of Southern Africa, DBSA. The Auditor-General reported on the audit outcomes and that the following municipalities received disclaimers: Mafube, Matjhabeng, Metsimaholo, Mohokare, Ngwathe, Mangaung, Masilonyana, Moqhaka and Naledi, while Nala did not submit any financial statements for audit.
The Auditor-General reported the following issues within all municipalities:
There was a lack of competent staff and a high vacancy rate, specifically in the municipal budget and treasury offices. This resulted in poor financial statements being submitted for audit, poor service delivery, and a great reliance on consultants. It was reported that, of the 25 municipalities in the province, only three municipalities, namely Mantsopa, Setsoto and Dihlabeng, were not reliant on consultants.
Another common challenge in the municipalities in the province was inadequate record-keeping, resulting in the limitation of the scope of audits and the lack of business continuity.
Noncompliance with laws and regulations was also a major concern. This related especially to supply chain management policies, resulting in irregular expenditure being incurred.
There was a lack of proper information technology, IT, frameworks, as well as poor IT controls.
In the majority of the municipalities governance structures such as risk management, audit committees and internal audits either did not exist, or were not functioning properly.
We also received presentations from the provincial department of co- operative governance. At the time of the meeting with the municipalities, it was reported that the following municipalities were under section 106 of the Local Government: Municipal Systems Act: Setsoto, Matjhabeng, Naledi and Letsimeng municipalities, as well as the Mangaung metro.
The following municipalities were under section 139 of the Constitution: Nala, Masilonyana, Mohokare and Phumelela municipalities, as well as Thabo Mofutsanyana and Xhariep district municipalities.
The Free State municipalities had spent R638 million of the total municipal infrastructure grant, MIG, allocation of R793 million.
The provincial department of co-operative governance provided financial assistance to municipalities to the amount of R76 million as at 31 March 2011. Between that date and 18 August 2011, a further amount of R18 million was spent on assistance. In light of the findings, the committee's recommendations are as follows:
The provincial department of co-operative governance and traditional affairs should appear before a joint meeting of the Select Committees on Finance, on Appropriations and on Co-Operative Governance and Traditional Affairs to report on their support to municipalities, including all investigations. This delegation must be led by the MEC for co-operative governance and traditional affairs. The national Minister responsible for Co-operative Governance and Traditional Affairs will also be asked to attend the meeting.
The national Department of Co-operative Governance and Traditional Affairs and the National Treasury should, within 14 days after the adoption of this report by the NCOP, submit a provincial action plan for intervening in the Free State municipalities in line with all provisions of the Local Government: Municipal Finance Management Act.
The Public Protector should investigate allegations of mismanagement at the Nala local municipality.
The provincial department of co-operative governance and traditional affairs should consult the National and Provincial Treasuries, as well as all relevant departments, before implementing any section 139 interventions.
The Moqhaka local municipality should address the issue of open toilets as a matter of urgency, as this matter impacts on the dignity of the community.
The provincial treasury and provincial department of co-operative governance and traditional affairs should take appropriate action with regard to the report that the Matjhabeng local municipality was responsible for 50% of all fruitless and irregular expenditure in the province of the Free State during the 2009-10 financial year.
Salga should provide Parliament with a plan on how they are going to assist municipalities in the Free State with their turnaround strategies.
The provincial department of co-operative governance and traditional affairs, the provincial treasury and Salga should co-ordinate and establish a task team that will include all sector departments and assist the municipalities to deal with all challenges identified in this report. They should submit a progress report to the NCOP within three months of the adoption of this report.
Municipalities should take cognisance of the fact that tariff structures should account for repairs and maintenance other than provision costs only, particularly in light of the fact that municipalities are charging electricity tariffs that are below the cost of provision.
Salga should ensure that the leadership of municipalities is capacitated to sufficiently monitor the management's compliance with laws, regulations and internally designed policies and procedures.
The Office of the Premier in the Free State should address the unavailability of reports of municipal investigations in the province.
Municipalities should refrain from investing grant funds and use them for their intended purpose, which is service delivery.
Mangaung metro must provide the NCOP with a written report on the progress of the implementation of the resolutions of the provincial standing committee on public accounts regarding Centlec within seven days of the adoption of this report.
The Office of the Premier in the Free State should provide a detailed report on the finances and auditing of the Hlasela Fund. This report should reach the NCOP within 30 days after the adoption of this report.
The outcomes of the investigations against the former Mayor of Ngwathe, completed by the SAPS and based on the audit report, which are not dealt with by the council, should, where possible, be made public.
All municipalities should make their relevant senior officials available to attend training and skills transfer programmes offered by national and provincial treasuries.
The Mangaung Metro should comply with the grant framework conditions as stated in the Division of Revenue Act.
All municipalities should immediately implement an action plan to address matters raised by the Auditor-General in the audit reports and by the provincial standing committee on public accounts in its resolution.
The National Treasury should interact with the provincial department of co- operative governance with regard to the legality of the financial assistance that the latter department gave to municipalities.
Cogta, National Treasury and other affected stakeholders should improve intergovernmental relations in a co-ordinated way when interventions are made in municipalities.
The Select Committee on Finance proposes that the report be adopted by the House. I thank you, Chair.
Debate concluded.
Question put: That the Report be adopted.
Order! [Interjections.]
Cope is a province!
Hon Bloem, to which province do you belong? I ask this because right now the question is dealing with the provinces.
I apologise, Madam. I thought that Cope was a province. [Interjections.]
We shall now proceed to the voting on the question.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report accordingly adopted in accordance with section 65 of the Constitution.