1. Introduction

This report comes at a time when SALGA Mpumalanga has just emerged from two weeks ago from its Provincial Conference whereby we were aligning our structure with that of SALGA national office. It is a period again whereby we were confronted by strike action from our unions, and s time indeed whereby we are preparing for the upcoming Local government elections. This report will cover the following areas :

1) Progress in terms of Project Consolidate.

2) Status of Municipal Audits

3) Implementation of Municipal Finance Management Act (MFMA)

4) Intergrated Development Plans (IDP) hearings

5) Municipal Interventions

6) Political Unrest

7) Local Government Elections

2. Project Consolidate

2.1 Refuse Removal

An amount of R12 106 416 has been awarded to six (6) municipalities, i.e Albert Luthuli, Nkomazi, Thembisile, Lekwa, Emalahleni and Create Tubatse. The procurement is at 90%. In all the identified municipalities the equipments have been delivered with the exception of Greate Tubatse who is still in the process of procuring which have not bee finalized as yet.

2.2 Early Deliverables Early deliverables have been rolled out in the eleven (11) municipalities identified in Mpumalanga Province. The early deliverables are:

In Lekwa, Albert Luthuli, Dipaleseng and Thembisile Municipalities some of the projects were launched. SALGA Mpumalanga is sitting in the Provincial Steering Committee and in those meetings, it was mentioned that it could be appreciated if SALGA Mpumalanga can assist in the issue of training of ward committees.

3. Status of Municipal Audits - Financial Year 2003/2004

For 2003 / 04 financial year only four municipalities so far have received unqualified audits, one is a qualification and the remaining fifteen municipalities audit reports are still outstanding. This report indeed is painting a gloomy picture regarding audits in our municipalities.

The challenges that continue to contribute to this situation in municipal finances are non-compliance with legislation, lack of internal audit units within municipalities, lack of capacity in the finance departments in municipalities.

The blame cannot only go to municipalities because there are challenges as well that relates to the capacity of the Office of the Auditor General, the large number of outstanding audits that were submitted to the Auditor General bears testimony to that. It has come to our attention that since the beginning of the PMFA audits in April 2005, the Auditor General is focusing now in the Provincial Government departments in order to meet PMFA deadlines, up until now nothing has been done in terms of municipal audits. Since the end of 2004 / 05 financial year that is 30 June 2005, only four municipalities have so far managed to submit financial statements to the Auditor Generals office before the 30 August 2005 as per the requirements of the Municipal Finance Management Act.

SALGA Mpumalanga has established District Area Financial Forums throughout the three districts in our province. These are the forums of municipal Chief Finance officers with a purpose of assisting municipalities to make better use of their existing financial skills and expertise available amongst practitioners in the sector through knowledge sharing and best practices. It is through these forums whereby SALGA is in a position to deal with all these issues raised above.

The programme initiated by DPLG and IMFO influenced by lessons leant through Project Consolidate we think will assist other municipalities that have not been identified in Project Consolidate in terms of financial statements. Yesterday (7 September 2005) a workshop have been conducted by DPLG and IMFO to discuss among other things the Memorandum of Understanding to be entered into by IMFO and municipalities, this programme will also deal with issues relating to skill transfer on finance officers of municipalities.

4. Implementation of the MFMA

This is still quiet a big challenge for our member municipalities in particular Low capacity municipalities. Mpumalanga Province is comprised of mostly rural municipalities which are classified as low capacity according to the MFMA. Statistics from a recent audit that was done by Provincial Treasury in terms of compliance with this legislation reflects that out of 20 municipalities that comprise our province 6 Municipalities are 80% complying with the legislation the other 6 Municipalities are 50 % complying and the last 8 Municipalities are still struggling and not complying with the legislation.

The findings from the report regarding the problems are that :

• Most Municipalities have not Appointed Chief Finance Officers, and those who have appointed performance contracts have not been concluded with their municipal managers, in some municipalities Chief Finance Officers academic qualifications are not relevant to their positions.

• As per the requirements of the legislation, Internal Audit units have not been established in some municipalities, if established there is lack of capacity in those units. This result to lack of Risk Management plans in most municipalities.

• Municipalities are struggling to establish Supply Chain Management Units.

Other issues that are challenges relate to Asset Management policy, Policy on Debt write - off and Revenue generation and Debt Recovery Policy.

5. IDP Hearings

IDP Hearings take a form of an inter-governmental dialogue around the issues in the Districts and are aimed at assessing how the whole of government is prioritizing development, allocating resources and implementing in the districts and also provincial and national input and support.

The Local Government *MINMEC meeting held on the 12^th November 2004 mandated government to hold nation-wide Hearings on Development and Planning. These Hearings were scheduled to take place between April and June 2005. Mpumalanga province held its IDP hearings on the 25 - 26 April 2005, Crocodile Inn, Nelspruit. The three District municipalities in our province were invited to make presentations in respect of their IDP's to a panel determined by dplg. SALGA Mpumalanga was one of the panelist members in a panel comprising of dplg, Dept. of Local Government & Housing Mpumalanga, *DBSA, Provincial Treasury and DEAT.

The main developmental challenges that emerged in the presentations of the three districts were as follows:

5.1 Nkangala District Municipality

a) The narrowing of the gap between the first and second economy and providing equitable access to economic opportunities and the supporting infrastructure and services to all who reside in its area of jurisdiction.

b) Eradication of spatial distortions, which pose many challenges to equitable and sustainable service delivery. The various settlements are functionally not linked. Residents from dislocated areas (such as former KwaNdebele) commute daily over vast distances to employment opportunities in Gauteng.

c) Addressing the high rates of poverty, especially in the former homeland areas located in the northern parts of the district (Dr. JS Moroka and Thembisile).

d) Contending with escalating backlogs and high absolute poverty figures in urban areas (Emalahleni and Steve Tshwete), due to significant rural - urban migration as a result of unemployment and poverty in the more remote areas of the district.

e) Increase the revenue of especially the newly established municipalities in the former homelands areas. Their ability to raise revenue is impeded by:

• Lack of sustainable economic activity in these areas.

• Lack of appropriate institutional capacity to be able to collect the revenue that should accrue to the municipalities.

f) Pro-actively preparing for abolition of RSC levies, which pose a clear threat to the fiscal capacity of the District to continue with the continued and sustained expansion of service delivery in the region.

g) The equitable distribution of water in the district. The former homeland areas struggle with acute water shortages. Commercial farms and agriculture have reasonably easy access to water whilst poor communities, which live in close proximity to the Loskop Dam, have limited of virtually no access to water.

h) Dealing with a wide range of environmental problems and concerns on various fronts. The mining and industrial character and heritage of large parts of the district, has left the District and local municipalities to contend with environmental issues including air, soil and water pollution, raging underground fires in some of the derelict mines during rainy seasons, children falling into illegal open sand harvesting digs, (e.g. along Siyabuswa Road to Groblersdal) as well as the management of hazardous waste.

5.2 Gert Sibande District Municipality

a) The ability of the district to play its co-ordination role with regard to :

• The unrests and uprisings that exist in some local municipalities,

• Poor financial management in some local municipalities.

• Over reliance on RSC levies especially by the Dipaleseng Local Municipality poses a major threat to the future development of the municipality.

b) There are serious capacity constraints in most local municipalities. The District interventions are short-term orientated in a sense that they are focused mainly on district staff deployment, e.g. CFO's deployed instead of working towards capacitating the respective local municipalities to be self-sufficient in the future.

c) Urban migration seems to be placing a major strain on the ability of the district to provide free basic services in certain urban settlements due to the 'mushrooming" of informal settlements.

a) The district is currently exporting raw material raw material and thus not gaining optimally from exporting processed goods.

b) The district is also focusing on micro projects that have very little impact on the economy of the district. There are no plans for big anchor projects with large socio - economic spin offs.

c) The district is still struggling with planning processes due to a system of over reliance on consultants.

d) The district is often not able to spend some of the funds it has available, due to its own implementation capacity constraints.

e) Access to land and land ownership remains a challenge in the district in relation to the labour Tenancy Programme.

f) Despite the participation of a few sectors, appropriate sector participation still remains a challenge for the district.

g) The poverty rate in the district is perceived to be at about 55 %.

h) Township establishments and development are based on the old system of planning and development.

5.3 Ehlanzeni District Municipality

a) The availability of land for development remains the biggest challenge in the district.

b) Water and sanitation services provision in a topographical landscape.

c) The declining revenue sources. There is a growing concern in the District regarding lack of alternative revenue sources.

d) The untapped potential of the N4 Maputo Corridor. Developments associated with this major transport corridor have not been realized.

e) Ongoing planning activities do not seem to be followed by an equal thrust of implementation because of lack of resources. The District has good plans in place, which need to be implemented to realize the benefits for the communities and to encourage development in general.

f) The topography of the region makes it extremely difficult to provide bulk services cost - effectively.

g) Previous homeland areas do not have access to good and reliable bulk services and the resultant backlogs have been steadily increasing. h) Disjointed communities, which are not easily accessible by road.

i) Serious institutional structural challenges are required in the administration of the district.

j) Serious institutional structural challenges are required in the administration of the District.

k) The declining mining sector, especially around Umjindi Municipality.

l) A lack of accommodation to be able to host major events. This is a challenge to the province as a whole.

m) Major land claims that have not yet been finalized in the Nkomazi and Thaba Chweu areas.

The panel having noted all these challenges proposed intergovernmental actions that need to be taken for the three district amongst others includes: Water & Sanitation infrastructure, Land Management, Economic Development, Resource streams, Environment, Natural Resource management & Energy, Governance & Institutional Capacity, intergovernmental Coordination, Community participation, Communication.

6. Section 139 Interventions

6.1 Thaba Chweu Municipality

An administrator was appointed on 26 January 2005 to assume responsibility for certain executive obligations on behalf of the Province. The following being the critical issues not being fulfilled as expected:

- Appointments of Senior Management (Section 57 employees)

- Compile and submit financial statements since 2002

- Institute and finalize disciplinary proceedings against officials and councilors.

- Operating thirteen banking accounts, contrary to legislation and failure to maintain cash book since 2002

• Implementation of Financial System

- Implement and address outstanding councilors' debt and staff loans.

An administrator was appointed and a Recovery Plan was put forward and the following is the progress done so far.

(i) APPOINTMENT OF SENIOR MANAGERS (SECTION 57)

All section 57 appointments have been finalized except the head of Finance, the reason being that there was no suitable candidate. Employment contracts and Performance contracts have been signed. Assistance is currently offered by Gert Sibande District Municipality for the secondment of a Financial Manager.

MUNICIPAL MANAGER

The performance management contract of the Municipal Manager is currently being dealt with.

(ii) FINANCIAL STATEMENTS

Financial statements for 2001/2002 and 2002/2003 have been finalized, and already sent to the Department of Local Government and Housing, Auditor General and the Department of National Treasury. Financial statements for 2003/2004 were completed in May 2005.

(iii) FINANCIAL SYSTEMS

Two systems were used and upon investigation, consultations and audit, one system is now used.

(iv) BANKING ACCOUNTS

Bank accounts have been currently brought down to five (5) and by the end of July 2005 there will be one (1) bank account.

(v) OUTSTANDING DEBTS BY COUNCILLORS

Councillors are paying their debts. Cellular phone control measures have been put in place. Councillors who are unable to return after the Local government elections will sign the acknowledgement of debts.

(vi) OUTSTANDING DISCIPLINARY CASES

These have been finalized. Current disciplinary matters are dealt with in compliance with SALGA guidelines and the LRA. The Acting CFO was called back by the Administrator and charged of 36 counts. He resigned after receiving the charge sheet. Further steps for criminal charges against him are being investigated.

In conclusion, the situation at Thaba Chweu is under control.

6.2 Other Government Interventions

The MEC invoked the provisions of section 106 of the Local Government Municipal Systems Act, 2000 (Act No.32 of 2000) and instituted forensic investigations at the following municipalities: Lekwa.Nkomazi, Delmas, Emalahleni, Msukaligwa, Greater Tubatse, Thaba Chweu, Govan Mbeki, Ehlanzeni District and Gert Sibande District.

7. Political Unrest Since March 2005

The only municipality affected was Govan Mbeki Local Municipality

The main reasons for the march were:

• Water restrictions in case of non-payment

• Cutting of and removing of meter box in case of illegal connections

The other issues were:

• Demand for housing

• Youth Empowerment

• Rats in the area

The Premier and the MEC visited Govan Mbeki to address the situation. The issue of housing, resignation of the Mayor and nepotism have been referred to the MEC for Local Government and Housing.

Govan Mbeki with its leadership together with community members engaged in certain programmes to address the situation

The following programmes were put forward:

• Open water for every community member, no restrictions.

• Members to pay R50 for the re-installation of the meter box and Municipality to give the Free Basic Electricity

• Calling people who are indigent to come and register with the municipality

• Identify people (youth) as per the wards to clean up the municipal areas, e.g. cemeteries

• Municipality to buy traps to trap the rats, this will be done as a pilot.

The progress made in terms of the above is as follows :

• The indigent campaign has been launched to identify people who can not afford to pay services and this was done by the Mayor through lkwekwezi FM

• Community members have started to pay the R50 and the municipality is already giving the FBE

• Workshops are taking place for community members and ward councilors to address community problems.

It should be noted that FBE was given to every community member, but due to the tempering of meters those who tempered forfeited the FBE.

Currently the situation is calm and community members are happy.

8. Local Government Elections

SALGA Mpumalanga is liaising with provincial departments to facilitate the establishment of the Provincial Steering Committees. SALGA Mpumalanga is in a process to convene technical teams to operate at provincial level.

SALGA Mpumalanga currently in the process to revive the Infrastructure Support programmes utilized in the 2004 elections with a view to resolving all outstanding infrastructure issues. Municipalities were informed and advised of the promulgation for objections in terms of demarcations.

SALGA Mpumalanga to revive the agreement concluded with regional offices of the department of Home Affairs in 2004 regarding:

• Inter alia the use of municipal facilities for ID campaigns

• The delivery of ID books by councillors.

SALGA Mpumalanga has called upon all municipalities to make necessary budgetary provisions for administrative support, voter education and infrastructure support. An agreement on the transfer of staff and establishment of electoral unit has been sent to all municipalities. Meetings with political parties, and NGOs, are still to take place in order to advance the 50/50 campaign.