Free State Municipalities: Provincial Department and SALGA briefings

Meeting report

LOCAL GOVERNMENT AND ADMINISTRATION SELECT COMMITTEE
6 September 2005
FREE STATE MUNICIPALITIES: PROVINCIAL DEPARTMENT AND SALGA BRIEFINGS

Chairperson: Mr S Shiceka (ANC, Gauteng)

Documents handed out:
Department briefing on the state of local government in the Free State
SA Local Government Association briefing on the state of municipalities in the Free State

SUMMARY
The Free State Provincial Department briefed the Committee on financial and administrative challenges facing its municipalities. These included escalating consumer debt caused by the lack of an effective revenue collection system, and the failure of municipalities to implement the Municipal Finance Management Act (MFMA) due to strained relations between the council and administration. The Department had launched Project Consolidate in 12 municipalities to address these issues.

The SA Local Government Association (SALGA) then briefed the Committee on the financial state of each of the Free State municipalities. Many municipalities, like Dihlabeng and Xhariep, had recorded deficits for the past financial year and had failed to submit their audit reports. The Department had assigned Service Delivery Facilitators to assess the municipalities’ performance, and had not yet accredited the housing service of any of the Free State municipalities.

The Committee discussed the presentations according to the categories of finance, human resources, institutional structures, service delivery, and public participation. The Committee suggested that the Department intervene in the financial affairs of municipalities, and the Department requested a follow-up meeting on Dihlabeng, where it was conducting a forensic investigation into administrative malfunctions. Discussion of human resources (HR) focused on the issue of training, and the problems in Dihlabeng and Manguang, where the Municipal Managers had been suspended. The Committee requested a detailed HR report from the Department.

The Committee also requested statistics on the municipalities’ progress in providing water, sanitation and roads. The role of ward committees, and the relationship between the Integrated Development Plans (IDPs) and the formulation of a Provincial Special Development Plan, was also discussed.

MINUTES

Department briefing
Mr M Mafereica (Member of the Executive Council, Local Government and Housing) briefed the Committee on the financial and administrative challenges facing Free State municipalities. These included the problem of creating an effective revenue collection system in municipalities with limited revenue bases, and difficulties with implementing a new system of local government.

Many Free State municipalities were in financial difficulty. Manguang and Matjabeng had written off debt of R560 million as irrecoverable, while overall, consumer debt stood at R2.56 billion at the end of June 2005. Except in Nketoana where the municipality was collecting a tax, consumer debt was escalating in Free State municipalities as there was no effective revenue collection system. The Auditor-General had called for improved management of creditors and the establishment of internal audit sections in municipalities.

Strained relations between the council and administration had hampered the implementation of the Municipal Finance Management Act (MFMA) in municipalities such as Phumulela, Dihlabeng, and Matjabeng. The Department had launched Project Consolidate in 12 municipalities to address financial and human resources issues, as well as service delivery. The Department was succeeding in providing 92% of poor households with free basic water, and 17 (out of a total of 20) municipalities had entered into funding agreements with Eskom to provide free basic electricity. However, municipalities lacked the infrastructure and technology to provide free basic electricity, and there was no existing policy framework on alternative energy sources.

SA Local Government Association briefing
Mr H Pietersen (SALGA Free State: Deputy Chief Executive Officer) gave an overview of the financial state of each of the Free State municipalities. In Dihlabeng, for example, where 46 staff members were currently suspended, consumer debt levels had increased in the past financial year, audit reports had not been submitted for the past two years, and the municipality was running at a shortfall.

Many municipalities were experiencing similar financial difficulties to Dihlabeng; Xhariep had recorded a deficit for the past three years and its audit reports were also outstanding. In order to address some of these challenges, 12 municipalities were identified to be part of Project Consolidate. R7.6 million was allocated to these municipalities from the Provincial Infrastructure Fund for the upgrading of infrastructure; and R4.5 million was allocated to them from the Municipality Infrastructure Capacity Building Grant for the maintenance of water treatment plants and other equipment.

The Department had assigned Service Delivery Facilitators to assess the performance of each municipality. All municipalities were providing free basic electricity; but in areas where Eskom was supplying the electricity, there were communication problems between Eskom and the communities. A number of municipalities had not provided sanitation for all their communities, and the Department had not yet accredited the housing service of any of the Free State municipalities.

Discussion
The Chairperson declared that the Committee would discuss the presentations according to the categories of finance, human resources, institutional structures, service delivery, and public participation. With regard to finances, the Chairperson noted that not a single municipality had recorded a surplus. In situations of administrative instability, such as in Dihlabeng, the MEC should intervene or ‘offer support’, according to Section 154 of the Constitution. The MEC should also give support to municipalities in the area of finance, as many financial departments had no audit committees and had failed to submit their audit reports.

Mr J Le Roux (DA, Eastern Cape) commented that the only way to establish the financial situation in each municipality was through the audit report; yet these were outstanding in most municipalities. The gap between income and expenditure in many municipalities would widen in the future.

Mr Mafereica said that he was currently intervening in the affairs of municipalities, and was following the processes of the law in this. He was experiencing difficult relations with local councils, especially in cases where the municipal manager had been suspended. He was entering negotiations with councils on the role of the speaker, as the speaker had taken on the role of the mayor in some cases when the mayor had been suspended. The executive should advise him on the role of the speaker.

Mr M Mzizi (IFP, Gauteng) said that the finances of the municipalities would not improve if the MEC did not intervene. He enquired what the view of SALGA was on the matter of interventions in the financial affairs of municipalities. Mr Pietersen clarified that SALGA played an advisory role to municipalities and could only make limited interventions in their affairs. However, SALGA checked the finances of each municipality monthly, and it had produced a document explaining to officials their role in local government and the implications of recent legislation.

The Chairperson affirmed that SALGA was ‘loosely affiliated’ to the municipalities and did not have the authority to enforce legislation or to intervene in the affairs of municipalities. He reiterated that the financial situation of the municipalities showed that there was a need for the MEC to intervene.

Mr K Mokoena (ANC, Limpopo) felt that the situation in Free State municipalities was discouraging, and while councillors engaged in political manoeuvring, the Department was still responsible for providing services. The MEC should intervene in the finances of municipalities in the interests of voters. He suggested that many municipalities failed to submit their audit reports as they ‘outsourced their functions’, and asked whether the Department had mechanisms to assist the municipalities with revenue collection. He commented that the deficit recorded at Xhariep for three consecutive years was ‘alarming’, and asked what proportion of municipal budgets was used for salaries.

Mr Mzizi added that some sections of the Department’s report on the municipalities warranted intervention by the Minister according to Sections 100 and 139 of the Constitution. Members, as representatives of their constituencies, should assist the MEC in making interventions up to the local government elections. The Chairperson commented that the Department did not have the capacity to assist all municipalities with their financial difficulties, and it should therefore get external help to provide this assistance.

Mr K Ramiilotsanye (Free State Department of Local Government and Housing: Head of Department) responded that the Department was assisting municipalities to collect revenue as part of Project Consolidate. It was also helping municipalities to understand their financial position according to the Local Government Transition Act, which prescribed the dates for submission of financial statements. The Department would provide the Committee with the figures showing the proportion of municipal budgets used for salaries. In Xhariep, 76% of the budget was used for salaries, and this municipality had recorded a deficit for the past three years. The Department had put in place a mechanism to ‘dis-establish’ Xhariep as a municipality, due to its poor financial performance.

In response to the Auditor-General’s report on Dihlabeng, the Department had commissioned a forensic investigation. In co-operation with SALGA, the Department was investigating the power given to the speaker to run the municipality according to the Municipal Systems Act. Mr Mafereica confirmed that the investigation in Dihlabeng was an ‘urgent matter’ for the Department, and suggested a follow-up meeting on Dihlabeng between the Committee, the Department and SALGA.

The Chairperson clarified that the Municipal Demarcation Board that reviewed the capacity and performance of municipalities each year had determined that some municipalities (like Xhariep) should be dis-established. He added that the follow-up meeting between the Committee, the Department and SALGA should also address the issue of credit control policy in the municipalities.

The Chairperson noted that the Human Resources sections of municipalities such as Phumulela had a limited capacity in skilled areas, like engineering. He enquired whether the Department and SALGA had determined the needs of the Human Resources sections in municipalities, and whether the policies that guided Human Resources in the Free State had been reviewed.

Mr J Ramokhoase (SALGA Free State: Chairperson) replied that the Phumulela staff in key sections, such as finance, was very inexperienced; and the Department was looking for experienced staff through Project Consolidate. The Municipal Manager in Moqhaka was not implementing the Human Resources policies he had been given, even though policy workshops had been held there. The Minister had intervened in this situation a number of times, but the SALGA representatives had been rejected by the Moqhaka council.

Mr Pietersen added that the 46 staff members suspended in Dihlabeng included the Municipal Manager and the Chief Financial Officer (CFO). In Manguang, the Municipal Manager and the Chief Operations Officer (COO) would be suspended, as the Scorpions had issued a warrant for their arrest. SALGA should give a detailed report on Human Resources in Free State municipalities, as there was currently no stability in this area. The Chairperson said that SALGA should produce this report so that the Committee could monitor the situation.

Mr Mzizi asked whether the Municipal Manager and the COO in Manguang would be replaced during their trials. Mr Pietersen answered that Manguang had an Acting Municipal Manager and an Acting COO.

The Chairperson suggested that the Committee should review the law on the separation of the mayor’s powers from the powers of the speaker. Although the interrelation of government offices was clearly defined by law, the distinction between municipal offices was not as clear. Mr Ramiilotsanye said that the law clearly distinguished between the roles of mayor and speaker: the speaker was the chairperson of the council and facilitated public participation. The council could operate according to a plenary system, whereby decisions were taken in the council, or according to an executive system, whereby decisions were made in the executive committee.

The Chairperson suggested that in larger municipalities, councillors were not aware of their responsibilities and did not understand the structures of local government. Mr Ramiilotsanye responded that the Department had made presentations on the role of the mayor, speaker, and Municipal Manager to the municipalities. The councillors understood their responsibilities; but mayors were often motivated by political considerations to bypass the council and make illegal appointments.

Mr Ramokhoase added that SALGA had trained many councillors. However, since many councillors were suspended and facing litigation, untrained staff members had filled their positions. Mr Pietersen commented that SALGA was reviewing the new dispensation of local government from 2000 onwards, and this review should be completed by the next local government elections in 2005/2006.

Mr Mafereica claimed that some councillors were ignorant of the laws pertaining to local government, as well as of the structure of the Department of Local Government and Housing. In the Department, housing was one of the deliverables, while the structure of local government was fundamental. Many of the local government laws, such as the Western Cape Health Act, dated back to before 1994, and should be amended. The Chairperson responded that the review of local government laws was crucial for the alleviation of problems; this process had already begun in the National Assembly, and would include traditional leaders.

The Chairperson queried whether, in the area of service delivery, the Department could provide statistics on the municipalities’ progress in providing water and sanitation. Did the municipalities have a timeframe for infrastructure development, such as the levelling of roads? Mr Ramokhoase replied that SALGA could provide these statistics to Members. In the area of sanitation, the ‘bucket system’ had been used as a temporary measure, due to the scarcity of water in the Free State; but it was a Department priority to eradicate this system. All municipalities were able to provide water, but the provision of electricity to new areas had slowed down, and municipalities in some areas did not have a license to supply electricity.

Mr Mzizi observed that the municipalities had inherited a problem created by racial segregation, as the localities to which black people were moved were without adequate roads or sanitation. The Department should focus its efforts on these deprived areas. Mr Mafereica said that the Department would supply Members with all of its public works plans, including the plan for eradicating the bucket system. The Department had a backlog of 200 000 units in the area of housing, and 150 000 units in the area of sanitation.

The Chairperson requested that the Department provide statistics on the kilometres of road required in each municipality. As South Africa was a semi-arid country, it was impossible to provide water-borne sanitation to all communities. Therefore a national discussion should be held on the areas where water-borne sanitation would be possible, and on alternative sanitation systems to the bucket system to ensure dignity.

On the subject of public participation, the Chairperson asked whether community-based planning could be done using facilitators rather than Community Development Workers (CDWs). He also asked whether ward committees were functional, and whether members were compensated. He further enquired whether the municipalities had developed good quality Integrated Development Plans (IDPs), and whether local governments were implementing these IDPs.

Mr Mafereica replied that the Department had trained a first group of CDWs, and had identified a second group, although the latter were not budgeted for. The role of ward committees would be discussed at provincial imbizos. Ward committees required budgets as they needed office buildings. IDP documents were often irrelevant to municipalities, as they were produced by consultants. Consequently, most municipal budgets were not informed by IDPs.

Mr Ramiilotsanye commented that the Department was in its third cycle of IDPs, and was currently holding hearings to assess their impact, and national and provincial reports on IDPs would soon be available. The integration of a special development framework into the provincial budget was a challenge. A Provincial Special Development Plan was being developed from the Provincial Growth and Development Strategy (PGDS) as informed by IDPs. If the Land Use Management Bill were passed, it would guide the formulation of the Provincial Special Development Plan.

The Chairperson noted that the Land Use Management Bill was moving slowly as the Department of Land Affairs, the Department of Provincial and Local Government, and the Presidency were involved. He suggested that IDPs be used as a performance management system.

The meeting was adjourned.