Report of the Select Committee on Local Government and Administration on the Intervention in the Phumelela Local Municipality, dated 9 March 2005.

The Select Committee on Local Government and Administration conducted a fact-finding visit to the Phumelela Local Municipality between 15 -16 February 2004. The reason for the visit was to consider an application by the Free State Provincial Government to approve an intervention in terms of Section 139(1)(b). The provincial government had submitted an application to the NCOP for approval of the intervention in compliance with the requirements of Section 139(2)(b).

The Select Committee delegation comprised as follows:

The Hon S Shiceka (Gauteng) leader of the delegation

The Hon C Ntuli (KwaZulu Natal)

The Hon A Moseki (North West)

The Hon M Mzizi (Gauteng)

The Hon D Worth (Free State)

The Select Committee was accompanied by a delegation from the Portfolio Committee on Local Government.

The Select Committee met with the MEC for Local Government and Housing as well as SALGA’s provincial and national representatives during the previous week. During the visit the Committee met with the Thabo Mafutsanyane District Municipality, including the Executive Mayor, the Municipal Manager and other senior managers. At the Phumelela Municipality meetings were convened with Councillors, Ward Committees, Concerned Groups (Warden / Enzenzeleni), Ratepayers Association and members of the South African Police Services.

Mr Botha, the appointed Administrator, was absent from all meetings due to transport difficulties.

Summation

The Municipality comprises the towns of Vrede, Memel and Warden, including the townships of Enzenzeleni, Lindelani, Thembalihle and Zamani.

The Municipality comprises the former TLCs of Vrede, Warden and Memel, as well as parts of the former Riemland and Drakensberg TRCs.

It appears that the majority of the population (48%) is resident on the rural farm areas. The main form of income and business activity is therefore agriculture. In terms of industrial assets, Memel has a knitting factory as well as other activities such as a woodwork factory, transport and steel works, which in turn supply the local market. There are currently no industrial developments pending in Phumelela.

The Municipality uses a plenary executive system; the Mayor, Councillor Letawana, has no executive authority. There are 14 Councillors and there are seven wards in total.

Terms of reference of the intervention

With effect from 1 December 2004 the Provincial Executive Council intervened in the Municipality in terms of Section 139(1)(b), assuming responsibility for particular executive functions. The MEC appointed Mr Botha, a senior manager within the Department of Local Government and Housing, as Administrator, representing the Provincial Executive in Phumelela.

There are six areas of intervention:

• Correct critical staff shortages and incorrect placing of staff.
• Collect all monies due and payable to the Municipality.
• Restore Council’s affairs in an economical, effective, efficient and accountable manner as provided in Section 38(c) of the Municipal Systems Act, by:
• Restoring poor financial management, administration and record keeping.
• Restoring collapsed internal control.
• Restoring creditor management.
• Ensure that local communities have access to at least the minimum level of basic services.
• Provide municipal services to local communities, including water and refuse removal services.
• Promote a safe and healthy environment dealing with pollution caused by sewerage spillages in the municipal area.

Financial state of the Municipality

During the 2004 / 05 financial year, the Municipality had an operational budget of R 34 million, in addition to grants. During the 2003 / 04 financial year the Municipality recorded a total income of R 26 955 542 and total expenses of R 26 915 145, leaving a net surplus of R 40 397. As a percentage, personnel expenditure constituted 47,3% of the budget. Capital costs and expenses constituted 3,9% of the budget.

Financial resources appear to be a serious problem for the Municipality as it has a limited revenue base. Phumelela comprises more farming land than residential land. Therefore, with respect to levies, there is a big difference in income compared to other areas with more businesses.

The payment rate for services is very low. Council currently has arrear debtors of R 33 million, which shows poor credit control as well as loss of R 100 000, due to poor internal financial controls. This loss in income has not been explained or followed up. The service payment rate currently stands at 54%, whereas the operating budget was drawn up on the projected service payment rate of 70%. The need for better revenue collection is therefore critical.

Service delivery

There has been civic protest by the community of Phumelela, which has served to highlight dissatisfaction with service delivery by the Municipality as well as a lack of jobs for residents and a substantial housing backlog. Ward 4 is at the centre of where the dissatisfaction lies. Ward 4 recently had marches against Councillors who allegedly are not performing.

The Municipality faces a significant backlog in sanitation provision, with many households in Vrede / Thembalihle, Memel / Zamani and Warden / Enzenzeleni being serviced with pit latrines or buckets.

In general, the sanitation infrastructure is of poor standard. The Municipality is still using the bucket system and in other areas night soil removal is still in use. Night soil is not being collected at regular intervals and in addition, buckets are also not being collected. When sewers burst at residences, Council is slow to react and rectify the situation.

However, while alternative sewerage systems are needed, the ability of the Municipality to efficiently dispose of the effluent must also be addressed. The township of Enzenzeleni is growing and this is resulting in a shortage of buckets and greater pressure on infrastructure. Waste disposal sites require rehabilitation. Waste disposal sites in Vrede and Warden are in a poor condition. The waste disposal site will soon need to be relocated due to the environmental threat to the Seekoeivlei wetland. Illegal dumping along the streets of Phumelela and in the informal settlements and townships is prevalent.

Need was expressed for the filling of potholes on tarred roads, non-rehabilitation of gravel roads in townships, poor road markings and repairs to road signs. Most of the rural access routes are not tarred and require upgrading and maintenance. The poor state of roads is also exacerbated by poor stormwater drainage in Memel. Frequent maintenance of roads is necessary to ensure that the condition of roads does not deteriorate any further.

Electrical power dips and failure happen frequently, due in part to the age of the electricity network and infrastructure and partly to the theft of electricity cables. The cost of repairing and replacing electrical equipment, drains the budget further and reduces the chances of ensuring that the network can be upgraded and maintained. Eskom is the electricity service provider in the municipal area, except in Warden, where the Municipality provides electricity. The provision of electricity is therefore a potential source of income for the Municipality.

There are, however, residents without electricity connections to their houses. For instance, the Integrated Development Plan, notes that only an estimated 20-30% of households within the rural areas have electricity connections.

Lighting needs to be installed near the Lindelani informal settlement and other areas to curb rising crime in such poorly lit areas.

The Municipality has its own water treatment plant and therefore supplies water to residents. Vrede is supplied with raw water from two local dams; Warden has its main water supply from the Cornelis River and Memel is supplied from the Klip River. However, a number of households are without access to potable water. The growing townships places pressure on the Municipality to maintain and improve on service levels. Rural areas utilise boreholes and fountains as a water source while farm workers often utilise communal stands in nearby urban areas. Proper metering is needed and there are challenges around the provision of services to farms.

The District Municipality has committed funds for a project to install 150 water metres in the area. The Department of Water Affairs and Forestry (DWAF) and the District Municipality together with Phumelela are collectively addressing water issues.

Other complaints raised with the Committee included the fact that stray animals are left to wander in town.

Staffing and administration

The administration is inefficient and poorly skilled and is led by an inefficient Municipal Manager, Mr Thithi, who has been suspended. Managers and staff appear to be inappropriately qualified and skilled for the posts, which they hold. There are also critical staff shortages in the Technical Services, Infrastructure and Finance Departments.

Councillor Steyn has not attended more than three out of twelve Council meetings and should have been removed. However, he has never been suspended despite a Council motion on 2 June 2004 that Council policy on non-attendance of Council meetings by Councillors be invoked.

Council is divided. Having last met in October 2004, Councillors were of the opinion that the Mayor should have convened meetings since then.

Council operates without monthly financial reports or bank reconciliation. External capacity in the form of consultants is used to compile basic monthly reports and financial statements.

Council is therefore not informed on the financial state of the Municipality. Council also has no information on the projects, which are currently running. Audit reports and management letters issued by the Auditor General are not routinely tabled in Council.

Some Councillors have a good relationship with the administration and others do not. There are divisions between Councillors and the administration. As a result there is also poor communication between Councillors, the administration and the community. Many of the Ward Committees appear to have a good relationship with Council, but sometimes find it difficult to get hold of Councillors.

Council resolved to suspend the Municipal Manager at a meeting of Council on 11 February 2005. The following reasons were presented for the suspension of the Municipal Manager:

• Failure to carry out instructions from the Mayor.
• Failure to implement Council resolutions.
• Certain staff members were not performing their duties but the Municipal Manager failed to address this.

The Municipal Manager appeared not to have been co-operating with the intervention prior to his suspension. When requested, he failed, to provide reports to Council to be used to map a way forward for the intervention and also for the participation of the Municipality in Project Consolidate.

Council is divided into two groups; one of the groups disagrees with the suspension of the Municipal Manager. Councillors are from Vrede and Memel, opposing the Mayor, who is from Warden. There is a poor relationship between Councillors. Some Councillors are sidelined. Four Members of Council are hindering progress. The Mayor has also mobilised other people to counteract those opposing him, which has brought further divisions.

The administration failed to implement Council instructions to fix the grader in Memel, fix the tractors, and to purchase materials for resealing the potholes in Phumelela and so forth.

Staff placements were not done correctly. The Local Labour Forum officially approved the organisational structure at a meeting on 5 July 2003. On 2 October 2003 Council adopted the organisational structure for implementation. However, the structure has not yet been implemented.

In 2001 an organogram was adopted by Council but never implemented. Phumelela is still operating on the structure of the former TLC. The 2001 organogram was drafted by the Municipal Support Team and not by Council and is therefore disputed. It appears that Council does not receive regular reports from the MST.

Information has not been consolidated and integrated since 2000 and there is no administrative and management capacity within the administration.

There is a shortage of staff. Staff who retire, resign or who are medically unfit are not replaced. Although the Municipal Manager was instructed to employ people and undertook to do so, new staff was never employed. It appears that the Placement Committee was unable to meet due to the unavailability of Councillors.

Five workers of pensionable age in Warden have been brought back to work due to financial problems of the pension fund.

It appears that Councillors and Municipal staff were also in arrears on rates and service charges. In terms of Section 10 Schedule 2 of the Municipal Systems Act, staff may not be in arrears for a period of longer than three months.

Working conditions at the sewerage are appalling; people have no masks, implements and protective clothing. Unions brought these issues to the Management’s attention but there was no response or action taken.

The Municipal Manager and other Section 57 Managers have not signed contracts. The Municipal Manager was appointed on 2 February 2002 and the Finance Manager on 1 July 2003. There are no employment contracts with the Municipal Manager and Section 57 Managers. It appears that some Councillors are protecting Managers who are not performing.

Priorities for the Municipality as identified in the IDP

The first revised IDP was submitted to Council and thereafter to the MEC for Local Government and Housing in March 2003.

The IDP Steering Committee, which purports to be representative of all relevant stakeholders in the municipal area, ranked municipal wide as well as institutional issues according to their priority. The Steering Committee was assisted by a Representative Forum to identify areas for attention, which included the following broad categories: infrastructure and services (including water, sanitation and waste management), economic development (including skills development and agricultural development) and social development (including health and welfare and sports and recreation) and finally institutional development (including financial viability and accountability).

Specific institutional and municipal wide issues included:

• Shortage of service equipment

• Dependency on external funding for capital projects
• Proper credit control policy, system and implementation
• Development of skills amongst all post levels
• Lack of legal contracts, policies and structure
• Proper management of resources
• Effective communication with communities
• Lack of discipline amongst workers

Community priority issues include the following:

• Water
• Sanitation
• Waste Management
• Electricity and lights
• Streets and stormwater
• Housing and land
• Education and training
• Sport and Recreation.

Areas of weakness

The Committee views the following as the key areas of weakness:

• The Council approved credit control and debt collection policies that had not been implemented.

• Council adopted an indigent policy but people’s accounts are not being credited. People also experience problem with billing and this may be due to the poorly qualified staff in the Treasury Department.

• Since 2001 tractors have not been repaired although there is money available in the budget. Graders have been broken for a number of years and roads need repair.

• There are housing shortages in the municipal area. Many people are being evicted from farms on a daily basis. The Department of Land Affairs and Labour are unresponsive and should ensure that these issues are addressed.

• There is a clear lack of economic development in many of the Wards. It was noted that even the proximity of the municipal area to the N3 has not been used to create any economic opportunities.

• Council does not receive reports on the state of the budget; no monthly reports are submitted by the Finance Manager, as required by Section 71 of the Municipal Finance Management Act. Expenditure on staff benefits is not reported regularly. This may amount to financial misconduct requiring investigation in terms of Section 171(4) of the Municipal Finance Management Act.

• Council is consequently unsure of whether the Municipality is complying with its tax, levy, duty, pension, medical aid, audit fee and statutory commitments.

• Council noted that the resources of the Municipality are not used effectively, efficiently and economically and that there is overspending as well as unauthorised expenditure on travelling, overtime and maintenance. There are some instances of pure corruption and others of pure mismanagement.

• This is also partly attributed to the fact that full and proper records of financial affairs are not kept in terms of Section 62(1)(b) of the Municipal Finance Management Act.

• In its meeting on 2 June 2004, Council noted that the Accounting Officer was failing to comply with the provisions of Section 173(2)(a) of the Municipal Finance Management Act.

• Some Wards do not communicate well with their Councillor and receive no response to invitations to meetings. Not all Ward Committees are fulfilling their functions stipulated in the Municipal Structures Act.

• It is not clear what benefits the Municipality has derived from previous capacity building programmes. For instance, it appears that the Municipality received a financial management grant from National Treasury under the Division of Revenue Act in 2004 to improve its budgeting and financial management. Monthly reports was required to be submitted to Council and National Treasury on the manner in which funds were being spent. It appears that the Municipality drafted and submitted a funding proposal to the DBSA’s Capacity Building Grant for internal skills development as part of the execution of its internal workplace skills plan for 2003/04. It is not clear whether the Municipality has been successful in its application.

Role of the Thabo Mofutsanyane District Municipality

It appears that, although Phumelela has a representative in the District, there is no report back on projects, funding and other processes.

The primary role of the District Municipality appears to be ensuring that funding, both from itself and from other spheres of government to the Local Municipality, is allocated to what it was intended for, thereby ensuring accountability. On request of the Local Municipality, the District Municipality also provides support, for instance, on the spending of their budget.

The District Municipality also executed its own intervention in Phumelela, particularly on financial capacity. This has since been followed by interventions of the Province, also on financial capacity. The District Municipality also gave support on the Municipality’s infrastructural activities, even providing financial support on projects where resources were lacking. The District Municipality evaluated all Municipal Infrastructure Grant (MIG) projects to see whether they could comply with the methods of the Expanded Public Works Programme, that is, labour intensive. But these projects are all from the Consolidated Municipal Infrastructure Programme (CMIP) in the previous year and contracts are already fixed. All new MIG projects are going to be labour intensive.

The District Municipality has since joined forces to support the Project Consolidate initiative.

Phumelela does not participate fully in district fora. For instance, a Mayoral Forum, chaired by the Mayor of the District Municipality as well as a Municipal Managers’ Forum, chaired by the Municipal Manager of the District Municipality, where local municipalities in the district meet to share experiences and challenges. These forums help to detect problems facing local municipalities and allows for a proactive response.

A joint application is being made to the DBSA for ICTs for a shared service center for local municipality so that these Municipalities may communicate better with each other.

The Local Municipality is a stakeholder in the District Municipality process, making presentations on their needs and requesting assistance from the District Municipality. The DM then makes specific allocations. There is also an alignment phase during which Departments bring their strategic plans and the DM requests allocations for their priority areas.

Views on the intervention

The District Municipality supports the intervention and its continuation until Phumelela is on course.

The Mayor expressed the view that the intervention is long overdue.

All seven Ward Committees expressed support for the intervention.

It appears that the administration has not been fully co-opted to the intervention although Council has.

Observations of the Select Committee

The Administrator appointed by the Department of Local Government and Housing was absent from all the meetings. It is apparent that the Administrator has not met with and briefed all stakeholders as well as the administration of the Municipality, the community, organised labour and Ward Committees.

It is not ideal that the Administrator, Mr Botha, currently resides in Bloemfontein and commutes to Phumelela on a daily basis or when necessary.

The majority of development projects are focused on Memel and Vrede and Warden is neglected. Allocation therefore appears to be skewed. It is unclear whether Warden has other sources of funding to compensate.

There are concerns expressed about regionalism and the fact that officials and leaders who are not from Vrede are undermined and not respected.

Not all households have water metres, which implies that they are not being allocated free basic water.

There are no performance agreements and no employment contracts for the Municipal Manager and Section 57 Managers.

It appears that the suspension of the Municipal Manager was long overdue. However, the procedures followed in the suspension are now being called into question. The Municipality is awaiting a legal opinion on the validity of the suspension.

Council resolutions are not being implemented due to a lack of capacity, particularly in the Departments of Finance and Technical Services.

Progress since the intervention has not filtered down to the community. Dumping of buckets close to residential areas has already caused one death. It appears that the equipment needed for the removal of the buckets and other waste, are old and poorly maintained. There has been progress in other respects; Warden now has four tractors, which are road worthy and operational.

A number of the Wards noted that their proposals and ideas were not incorporated into the budget that was approved by Council. It appears that Council is not responsive to the concerns of the Ward Committees and the communities they represent. Council is not taking issues of concern to Ward Committees seriously.

In general, it appears that Council is not responsive to economic development projects and proposals emanating from the community.

A commonage was bought by the Municipality on behalf of the community. There is a farmer manipulating the community and enriching himself, whose son is also a Councillor. On amalgamation, the farmland of Council was put into a trust. A report of the Auditor General has recommended that the trust be dissolved. However, Councillors are also members of the trust and a resolution proposing the dissolution of the trust in 2001 was rejected. The Standing Committee on Public Accounts has taken this matter up. This resolution should be tabled in Council again.

Continuation of the intervention

The Committee resolves to recommend to the House as follows:

That the intervention be approved in the terms outlined by the Provincial Executive and that it continue until measures for the long-term sustainability of the intervention initiatives are in place.

Further Recommendations

The Committee also notes the duty vested in the NCOP in terms of Section 139(1)(c), to review the intervention regularly as well as to make appropriate recommendations to the Provincial Executive. The Committee therefore further resolves to recommend to the House as follows:

(1) The Administrator should be briefing the Council, the administration of the Municipality as well as all other stakeholders about the intervention to ensure the sustainability of the intervention measures.

(2) The use of the bucket system must be eradicated in the long-term. Although VIP toilets may be used as a temporary solution in the absence of water borne sewerage, an alternative waterless system is a better option. The District Municipality must investigate the best system, taking into account sanitation infrastructure limitations of the area. DWAF itself makes an allocation directly for VIP toilets; DWAF must be engaged by the District Municipality to change the manner of its allocation to accommodate alternative sanitation options.

(3) It was alleged that there is little co-operation with the District Municipality and the Local Municipality struggles to obtain information on payment of contractors. Co-operation between the District Municipality and the Local Municipality must be strengthened, ensuring a good information flow including information on the payment of contractors.

(4) A culture of non-payment continues to prevail, particularly in Vrede. Ward Committees and Councillors should embark on an awareness campaign to change this culture and raise payment levels. The Committee has noted the important principle that “rights go hand-in-hand with responsibilities”, and this should be communicated to the community.

(5) Councillors should brief Ward Committees at least once a month.

(6) Some Ward Committees appear to be functioning in spite of capacity constraints as well as poor co-operation with certain Councillors. All Ward Committees require further administrative support in order to function optimally.

(7) Service delivery must be accelerated; contractors must be monitored to finish projects timeously and work should conform to standards. For instance, it appears that service providers contracted to cut the grass showed poor performance.

(8) Council should gather information on, and collate, all economic development projects and act on them.

(9) The Provincial Department should audit the process of appointment of Municipal Managers and Section 57 Managers across the province.

(10) The Portfolio Committee on Local Government must return to Phumelela within two months to address the tensions between the Administration, Council and the community.

(11) It is unclear whether Phumelela has the resources to pay its full staff complement. However, the capacitating of its existing staff complement is urgent. Staff should declare their lack of skills and a skills and development programme for key staff should be developed in consultation with Union representatives, Management and staff. Where necessary, the SETA should assist the Municipality in developing programmes. Learnerships must be developed. In July 2003 Council approved the appointment of a skills development facilitator; the facilitator should be drawn into the training programmes.

(12) Existing sports facilities are inadequate and poorly maintained and the Municipality should develop proposals on the maintenance of such facilities.

(13) The Municipality must draft an equity plan, assisted by the District Municipality where necessary.

(14) Council must develop a procurement policy, assisted by the District Municipality where necessary.

(15) There are instances of non-compliance with conditions of service. Phumelela was summoned by the Department of Labour as the Municipality had no Health and Safety Committee and no proper inspections. Although Council gave instructions to Managers to deal with these problems, this has not happened. These areas of non-compliance must be addressed.

(16) Commercial farmers should assist emerging farmers and measures should be taken to encourage the entry of emerging farmers into the agricultural sector. The Municipality should facilitate meetings between these two groups. The MEC for Agriculture should be requested to meet with the farming community.

(17) The Mayor should not pander to divisions and opposition to him being in office. He should execute his responsibility and begin uniting Council.

(18) A turnaround strategy should be developed for all Municipalities in the Province, where the need is. The development of the strategy should be led by a structure composed of all spheres of government.

Report to be considered.