2. Those who appeared before the Committee included Deputy Minister N Botha; Director-General Ms L Msengana-Ndlela; Chief Financial Officer Mr C Clerihew; Deputy Directors-General Mr E Africa, Ms J Manche and Mr G Mokate; Chief Directors Mr L Buys, Ms G Gumbi-Masilela, Mr S Selesho, Ms T Mketi; Mr D Powell and Mr S Dzengwa; and Directors Mr R Kruger, Mr W Nkuna, Mr Y Patel, and Ms K Harrison.

1. Deputy Minister Ntombazana Botha explained that the budgetary allocations to the programmes of the Ministry and Department of Provincial and Local Government have to be located in the context of the Department’s commitment to ensuring greater integrated governance and planning. This is directed towards "pushing back the frontiers of poverty" – the theme of the President’s "State of the Nation" address and the Minister of Finance’s Budget speech.
2. The Deputy Minister said that a key focus of the Department is on partnerships as part of the process of consolidating integrated governance and development.
3. The Ministry and Department have recognised the need to focus more on provincial government and contribute to strengthening its role in IGR (Intergovernmental Relations). Provincial governments need to give more support to local government. Consideration needs to be given to provinces developing provincial growth and development plans that align with municipal IDPs (Integrated Development Plans).
4. The Ministry is aware of the need to expand the provision of free basic water services and ensure the successful roll-out of free basic electricity from 1 July this year.
5. The Ministry is aware that people are getting impatient, but the current pace of progress on the ISRDP (Integrated Sustainable Rural Development Programme) and URP (Urban Renewal Programme) has the advantage of ensuring the sustainability of these programmes and allows for a better measure of progress. Progress on ISRDP so far is greater than progress on URP. The Deputy Minister suggested that it would be useful for the Portfolio Committee to visit the nodes.
6. The Ministry is to contribute to ensuring that the capacity-building programmes of municipalities are improved, especially for women.
7. The Ministry recognises that issues of traditional leadership are sensitive and need to be managed appropriately. Progress is being made, but there is a lot of misunderstanding that needs to be addressed. The Ministry is aware of the concerns of traditional leaders and is addressing them. The Ministry welcomes the increasing involvement of traditional leaders in municipal issues. The Ministry intends to finalise the White Paper on Traditional Leadership and Institutions and introduce national framework legislation soon.
8. The Deputy Minister expressed the appreciation of the Ministry to the Portfolio Committee for the major study tour the Committee undertook of municipalities and the useful report it published.

6. The Department drew attention to the following:

• The LED (Local Economic Development) and Social Plan Grant is to be incorporated into CMIP (Consolidated Municipal Infrastructure Programme) in 2004/05. The MIG (Municipal Infrastructure Grant) will be a new grant from this year.
• Local government capacity-building is to be incorporated into the Municipal Systems Improvement Programme in 2005/06.
• The Local Government Transitional Fund will be incorporated into the local government "equitable share".
• There will be two new items in the budget: a Commission on Claims and Disputes relating to traditional leaders, and the SA Cities Network.

7. Overall, the majority in the Committee feels that the Department made reasonably good use of its budget in the past financial year. The Department must be complimented for its negligible under-spending.
8. The Committee welcomes the rationalisation of the different grants allocated to local government.
9. The Committee recognises that there is a significant increase in the "equitable share" allocated to local government over the MTEF period. It believes that municipalities have to be more productive and effective in raising revenue, managing their resources and spending money. But it is clear that for municipalities to effectively fulfil their constitutional mandate their equitable share has to be increased significantly. The review of the "equitable share" formula underway needs to be speeded up.
10. The Committee is aware that allocating more money does not necessarily mean better outcomes, and that departments have to have appropriate capacity to productively use increased funds. However, given the magnitude of the local government transformation, and the responsibilities of the Department, its budget has to be increased appropriately so that it can more effectively fulfil its role.

1. The new Director General of the Department, Ms L Msengana-Ndlela,

2. The Department has decided to create units on:

• Urban Renewal Programme (URP) and Integrated Sustainable Rural Development Programme (ISRDP).
• Targeted Provincial Support.
• Intergovernmental Fiscal Relations and Municipal Viability.
• Free Basic Services and Infrastructure.
• Corporate Governance.
• Public Participation and Empowerment.

1. Twenty posts have been created at senior management level and the Department is in the process of filling these posts in the 2003/04 financial year.
2. The Committee feels that with the introduction of new internal policies and systems, the overall administration and management of the Department has improved. The Committee also feels that the Department has done well in terms of the requirements of labour equity, particularly in terms of gender equity.

1. R5 570 000 has been allocated to the intergovernmental relations sub-programme for this financial year. This represents a decrease of about 13% from last year.
2. The Department acknowledged that it needs to focus more on the provincial government. Because of its primary focus on local government, this has not been possible until now. Stronger provincial government will also serve to strengthen local government. Among the support programmes for provincial government are the following:

• Supporting the Premiers’ Offices to coordinate Intergovernmental Relations (IGR).
• Aligning the Provincial Growth and Development Plans (PGDs) with local government Integrated Development Plans (IDPs).
• Working with National Treasury in supporting provinces to assist municipalities to implement the municipal finance management legislation.

0. The Committee pointed out that one of the main issues that emerged from a recent major study tour it had undertaken of municipalities is that there is need for much greater integrated governance if service delivery and development is to be advanced. The Committee stressed that municipalities generally complained that national and provincial departments ignored IDPs in their plans, programmes and projects. The Committee feels that the Department has to do more to ensure integrated governance, and is to pursue this further with the Department. The Committee welcomes the Department’s focus on the Premiers’ Offices being responsible for coordinating integrated planning.
1. The Committee expresses its concern about the capacity of municipalities to effectively implement the new division of powers and functions between local and district municipalities to come into effect from 1 July this year. The Committee refers the Department to its "Report on Study Tour of Municipalities" published in the ATC of 13 May 2003 regarding its concerns on this issue and other issues relating to the division of powers and functions between district and local municipalities.

3. Consolidated Municipal Infrastructure Programme (CMIP)

2. The allocation to CMIP has nominally increased by about 33% from

R1 730 853 000 last year to R2 246 253 000 this year. The Department is aiming to benefit 650 000 additional households through CMIP. R309 000 000 from CMIP will be allocated to new investment, the rehabilitation and upgrading of basic infrastructure for local municipalities with budgets of larger than R200 000 000, of which

R43 996 000 will be allocated to local municipalities in which there are nodes. R1 400 000 000 will be allocated to new investment and the rehabilitation as well as upgrading of basic infrastructure for district municipalities of which R385 659 000 will be allocated to district municipalities that have nodes. R549 000 000 will be allocated to metropolitan municipalities. This amount is for new investment, rehabilitation and upgrading of basic infrastructure.

3. The Portfolio Committee notes the progress made in terms of CMIP and will monitor further progress in this regard.

4. Local Economic Development and Social Plan Grant

1. The LED Fund will be allocated R120 000 000. It is expected that 3 000 temporary jobs will be created.

2. From the LED Fund, local municipalities will receive R94 100 000 in order to contribute to job creation and SMME development. Additionally, R26 700 000 of the LED Fund will be allocated to rural nodes in order to promote agriculture and tourism. The metropolitan municipalities will receive R9 200 000.

3. The Committee feels that the LED is vital and that the Department should assist municipalities more to put into effect LED programmes. Most municipalities attend to LED on an ad-hoc basis and do not locate it strategically. There needs to be a much more co-ordinated and focussed approach to LED.

5. Urban and Rural Nodes

1. R1 200 000 000 of chip funds will be allocated to rural projects. Of this R307 700 000 will be allocated to the 13 development nodes in 55 local municipalities.

2. Consideration is being given to introducing more nodes through

consultation with the President’s Office.

4. The UR and ISRD programmes have identified 227 anchor projects, with 60% currently in the design and implementation phase. Due to major backlogs that still characterise nodal areas, about 67% of anchor projects are infrastructure related. All nodal municipalities have completed their integrated development plans (IDPs).
5. According to the Department, key stakeholders such as the National Coalition for Municipal Service Delivery, the Umsobomvu Youth Fund and the World Bank are also collaborating with Government to support the programmes. The Department believes that the key challenges are getting the three spheres of government to co-operate around the budgeting and planning of this key government initiative and resourcing the management of the programmes in the various nodes.
6. The Committee is interested to pursue further with the Department

the criteria by which further nodes would be decided on and to get a better sense of the progress achieved so far. The Committee is to visit the nodes in the 2004/5 financial year. The Committee reiterates its request to the Minister to write to all the MPs living in the nodes or have constituency offices there to enlist their co-operation in monitoring progress and contributing to the more effective implementation of the programmes.

 

F. Institutional Reform and Support

1. Disaster management

1. R13 317 000 will be allocated to disaster management to enhance disaster preparedness and management capacity. The Department feels that this will improve human security and reduce the vulnerability of urban and rural communities to natural and human-made disasters.

2. The Department noted that the IDPs of a significant number of municipalities did not include disaster management plans and is to attend to this.

3. Given the magnitude of the challenges of disaster management in the country and the need to effectively implement the new model of disaster management, the committee feels that the budget allocated to disaster management is inadequate and needs to be increased appropriately next year. The Committee is also aware that many IDPs do not include disaster management plans and believes that the Ministry should draw this to the attention of the MEC’s for local government and SALGA to act upon.

 

2. Institutional Capacity Building and Support

7. R12 478 000 has been allocated to this sub-programme.

2. While recognising short-term needs, the Department feels that there has to be long-term perspectives on capacity-building within the Department and in the provincial and local spheres of government.

3. The Department feels that the offices of the Premiers have a crucial role to play in coordinating capacity-building in the provinces.

4. The Department is seeking to consolidate all the grants for local government capacity-building, including the grants offered by National Treasury.

5. The Department explained that the creation of a single public service for all three spheres of government would also contribute to ensuring that capacity is more evenly spread across the spheres.

6. The majority in the committee welcome the move towards a single public service. The Democratic Alliance expressed its reservation about this.

7. The committee welcomes the merger of the local government capacity-building grants and support the view that all these grants should be co-ordinated by the Department.

8. The Committee feels that effective capacity-building and training is indispensable to the successful implementation of the new system of local government and to significant advances in delivery, development and democracy. The current programmes need to be reviewed to establish how effective they are. The Committee feels that new and more innovative courses and programmes need to be developed whose outcomes are more easy to evaluate.

9. The Committee reiterates its concern that there needs to be greater and more effective co-ordination and co-operation, within a commonly accepted framework, of all local government capacity-building and training role-players. As a contribution to that, the Committee will host a workshop of all relevant stakeholders on 14 May 2003.

3. Local Government Capacity Building Grant

8. R232 339 000 has been allocated to this sub-programme. The allocation has decreased by about 3,8% compared to last year’s R241 244 000 allocation.
9. This grant is an amalgamation of the Local Government Support Grant and the Consolidated Municipal Infrastructure Programme Capacity Building Grant.

G. Auxiliary and Associated Services

1. Commission on Claims and Disputes Relating to Traditional Leadership

10. The Department explained that the above Commission is to be established after the national framework legislation on traditional leaders is passed. The Commission will address claims and disputes relating to issues of succession and legitimacy of traditional leaders.
11. The Committee welcomes the formation of such a Commission. It feels that for the Commission itself to be legitimate it must be established only after proper consultation with traditional leaders.

2. South African Cities Network

1. The South African Cities Network sub-programme has been allocated R1 500 000 for the 2003/04 financial year. The Department explained that networks, engagements and partnerships would become increasingly important in governance and matters of local service delivery.

2. From the study tour of municipalities undertaken by the Portfolio Committee it emerged clearly that the "secondary" cities see themselves as "emerging metros" and expect to be constituted as metros by the time of the next local government elections. The Committee feels that the Ministry and Department need to engage with the "secondary "cities to address this matter.

 

H. South African Local Government Association (SALGA)

12. The financial year for SALGA begin in July and ends in June. SALGA reported that its total income for the past financial year was R120 000 000. It received a grant of R22 000 000 from the Department of Local Government, of which R7 000 000 was earmarked for restructuring, and R98 000 000 from levies from its affiliates.
13. The budget expenditure estimate for the 2002/03 financial year is R96 800 000. Of this, R56 800 000 is budget expenditure for the national office. The provincial organised local government budget expenditure estimates are:

0. R20 250 000 has been allocated to SALGA for the 2003/04 financial year. There is about 8% decrease from the previous financial year.
1. SALGA feels that the allocation it gets from the national fiscus is far from adequate. It consulted the provincial associations on the need to increase levies. The provincial associations consulted with municipalities falling under them. SALGA recognises that some municipalities cannot afford the levies due from them, and is to consider exempting them.
2. SALGA reported that it has adopted a new administrative structure and has developed new internal systems and policies on human resources and finance, audit and procurement committees, performance management as well as draft governance charter.
3. SALGA also reported its achievements for the period July 2002 and April 2003 which include:

0. The Committee stressed the vital role that SALGA has to play. It pointed out that it had emerged from the study tour of municipalities undertaken by the Committee, that SALGA needs to play a more effective role, notwithstanding its limitations of funds, resources and personnel. The Committee would like to meet with SALGA at an appropriate stage to discuss the legislative and other implications of the restructuring that it was envisaging.

 

I. Municipal Infrastructure Investment Unit (MIIU)

1. The MIIU allocation has nominally increased by 43%, from

R7 000 000 last year to R10 000 000 this year. Although the primary concern of MIIU is to draw private sector investment to municipalities, it is also interested in facilitating public-public partnerships. The MIIU is also increasingly interested in appropriately assisting in the implementation of CMIP. It has extended its programme to provide municipalities with training to negotiate contracts on services. The MIIU also has an increasing number of projects in smaller municipalities. The MIIU explained however that its projects are largely determined by demand, and there are budget constraints on how much it can do.

2. The MIIU is also aware of the need for its work to advance government programmes on Black Economic Empowerment.
3. The MIIU raised the need for clarity on the applicability of section 94 I (c) of the Municipal Systems Act which allows the Minister to set a limit on tariff increases on services provided through public-private partnerships.
4. The Committee expressed its appreciation for the very competent reported presented by MIIU. Following consultations with the Minister and Department, the Committee would respond to MIIU’s concerns about section 94 1 (c) of the Municipal Systems Act. The Committee would like to pursue further issues with the MIIU and would seek an appropriate time to engage with it further.

J. Municipal Demarcation Board

1. The Municipal Demarcation Board budget allocation has increased by 23% from R11 670 000 in the past financial year to R14 311 000 in this financial year. The MDB feels however that its budget is inadequate. The Board feels that it cannot fulfil its mandate without a larger budget as it needs to review all the ward boundaries before the 2005 local government elections. The Board also explained that there are 64 requests for re-determinations of the outer boundaries of municipalities before it at present. The Board feels that it is untenable that it has to rely on donor funding to perform certain key functions.

2. The Board’s main activities have centred around boundary determinations, advice to MEC’s for Local Government on the capacity of municipalities to perform functions, advice to departments on the alignment of functional boundaries with municipal boundaries, and the development of an integrated database.

3. The Committee acknowledged the excellent work that the Board

has done, with very limited resources and budgets. However, the study tour of municipalities revealed that there are some municipalities that are not viable as they do not have the most minimal financial, economic, revenue or other base. There is a need for drastic measures to be taken, not just by the municipalities concerned, but by provincial and national government, the private sector, communities and other stakeholders to rescue these municipalities. The Committee recognises that fundamental changes to municipal boundaries should be approached very cautiously. Boundary issues, moreover, should not be conflated with the many other issues affecting the viability of municipalities. But the Board might well have to reconsider the boundaries of these municipalities.

4. The Committee also expressed its concern that there should be

alignment between the Ministers "authorisations" of the four "national" powers and functions and the MECs "adjustments" of the remaining powers and functions, in the division between district and local municipalities. As the Board conducted the capacity assessments of municipalities on which the MECs based their decisions, the Committee feels that the Board can play a role in this regard.

 

K. National House of Traditional Leaders

1. The National House of Traditional Leaders reported that the past financial year has not been a fruitful one because of the lack of progress on defining the powers and functions of traditional leaders. The House also feels strongly that it should be funded to establish a permanent chamber in Cape Town to be near parliament so that it can participate effectively in legislation and policies affecting traditional leaders. It also believes that all policies and legislation affecting traditional leaders should be referred to the House, and legislative amendments should be effected to ensure this.

2. The House repeated its call for greater autonomy and to have more control over its own budget. It also reiterated that it wants to be "de-linked" from the Department and relate instead to the Presidency, since its concerns and activities cut across all departments.

3. The House stressed the need for the finalisation of the White paper

and legislation on traditional leadership and institutions as soon as possible.

4. The Committee pointed out that all the issues raised by the House

in the previous year’s budget review were taken up with the Ministry and Department. The Minister had several discussions with the Chairperson on these issues and had written to him to explain how the issues are being addressed. The Committee indicated that it cannot prescribe to the President as to which Ministry the House should fall under and suggested that the House takes this matter up with the President. It also suggested that while the House is negotiating with the Minister and Department on establishing a chamber in Cape Town, it should consider appointing a Cape Town-based parliamentary liaison officer. In respect of legislation to make it compulsory for all policies and bills affecting traditional leadership and institutions to be referred to the House, the Committee suggested that this matter should be addressed through the White Paper process and the legislation to follow.

5. The Committee noted that the report of the House was much better this year than last year, but it needed to be improved to meet the norms set out in the PFMA (Public Finance Management Act) and those defined for a parliamentary committee in its oversight role.

 

L. Local Government, Water and Related Services Sector Training and Education Authority

6. The LGWSETA (Local Government and Water Sector Education and Training Authority) undertook a review of the current SSP (Sector Skills Plan) at a cost of R2 500 000. The review was undertaken because the existing SSP was inadequate to address the needs of the sector. It was also not researched in great depth and lacked a "strategic analysis of the sector needs in respect of sector labour market economics".
7. The LGWSETA stated that only 102 municipalities have submitted their WSPs ( Workshop Skills Plans).
8. The LGWSETA further stated that it has not disbursed the

R90 000 000 levy contributed by employers. This is because municipalities did not register or submit WSPs to LGWSETA or failed to implement their WSPs.

4. The Committee referred to its recent study tour of municipalities that revealed that the LGWSETA is not being effective. The Committee recognises that SETAs in general are not performing well, but stressed the vital role the LGWSETA has in the consolidation of the new system of local government. While acknowledging that the LGWSETA alone canoe be held solely responsible, the Committee expressed alarm about its failure to spend the R90 000 000 levy from employers. The Committee is also aware of the perennial crisis of leadership in the LGWSETA and hopes that the appointment of a new CEO and the election of a new leadership will mean that the LGWSETA finally begins to become effective. For the past three years, the Committee has stressed its dissatisfaction with LGWSETA’s performance. While recognising the independence of the LGWSETA, the Committee urges the Department to play a more active role in ensuring that the LGWSETA functions more effectively. The Committee will pursue its concerns about the LGWSETA at the workshop set for 14 May.

M. Conclusion

9. The Department’s presentations were much clearer and more directed and focused this year than previous years. The Committee welcomes this.
10. The reports from SALGA, the National House of Traditional Leaders and LGWSETA do not meet the norms of the PFMA and those of the oversight role of a parliamentary committee. The Committee needs to discuss this with the Budget Committee of parliament and further pursue with it the request it raised that they should provide statutory bodies guidelines on the preparation of reports for portfolio committee budget hearings.
11. The Committee also needs to improve its capacity to more effectively undertake its oversight role in respect of the budget. This matter should also be raised with the Budget Committee.
12. The Committee also needs to play a part in the processing of the Division of Revenue Act and needs to pursue this further with the Finance Portfolio Committee and the Budget Committee.
13. The Committee expresses its appreciation to the Ministry, Department and statutory bodies for their co-operation in the budget hearings.
14. The Committee acknowledges the contribution of Mr C. Sibanyoni from the parliamentary research unit in the preparation of this report.