VOTE 5: BUDGET OF THE MINISTRY AND DEPARTMENT AND PROVINCIAL AND LOCAL GOVERNMENT

ADDRESS TO THE PARLIAMENTARY PORTFOLIO COMMITTEE FOR PROVINCIAL AND LOCAL GOVERNMENT ON THE OCCASION OF THE BUDGET REVIEW BY THE ACTING DIRECTOR-GENERAL, MR ELROY AFRICA, ON THE 13TH OF MARCH 2007

Honorable Chairperson Lechesa Tsenoli

Honorable Members of the Portfolio Committee

Introduction

In his Budget Speech to the National Assembly on the 18th of May 2005, the Minister for Provincial and Local Government, Mr Mufamadi, indicated that,

"Through Project Consolidate we seek to erect the scaffolding for bridging the gap between intentions and outcomes. This is a two-year programme of intervention in support of municipalities. Through it, we seek to harness the additional resources from other spheres of government as well as from the private domain, to the task of improving municipal performance. The professionals and specialists we are deploying, as Service Delivery Facilitators will focus on the short-term goal of helping to remove service delivery blockages. This initiative will also give them the possibility to have a forensic feel of the situation at local level. This might also lead to policy refinement and to the refinement of our nationally co-ordinated programme of support for this sphere of government. "

Today the Department of Provincial and Local Government (DPLG) will provide a progress report to the Portfolio Committee on the scaffolding that we continue to erect and of the significant work undertaken over the last 2,5 years. Over this period we have focused on strengthening and consolidating our system of local government and have coordinated key initiatives of national government that were aimed at improving the lives of our people.

Overview of Progress Since 2004

Since 2004, four key events have decisively shaped and sharpened the work programme of the Department. In October 2004, Project Consolidate was launched as a two-year hands-on support initiative directed at a targeted number of 136 municipalities in all provinces. Secondly, in 2005 this Parliament enacted the Intergovernmental Framework Act, which contributed significantly to creating a predictable system of cooperative government aimed at promoting seamless planning and service delivery across government. Then on the 1 March 2006, the second democratic municipal elections were held where over 9300 councilors were elected in 283 municipalities across the country. Lastly, at the Extended Cabinet Lekgotla of January 2006, a 5-Year Local Government Strategic Plan (2006 -2011) was adopted to further focus the work of all three spheres of government in establishing a viable and sustainable local government system.

The synergy of these four milestones directly contributed to the progress we have made in all key areas of local government performance. These include basic service delivery, financial viability and financial management, local economic development, good governance and public participation and municipal transformation and institutional development.

In general we have made good progress in broadening access to basic services to local communities. The number of households with access to water has increased by 540 660 households between 2004 and June 2006. 85% of poor households in 2006, compared with the 55% in 2004, are now receiving free basic water. Similarly 58% of the poor are now receiving free basic electricity compared to 52% in 2004. On the use of bucket sanitation systems in established formal residential areas, the backlog was 252 254 as at February 2005. By November 2006 a total number of 110, 648 sanitation bucket systems were eradicated. In close partnership with the Department of Water Affairs and Forestry (DW AF) and the Department of Minerals and Energy (DME), this Department working in a coordinated manner to extend basic services to greater number of communities.

The Department is also working with a number of stakeholders to improve the financial viability and the resident financial management capability of municipalities. Firstly, we are progressively implementing the Property Rates Act with the first set of regulations already issued in 2006. The number of municipalities ready to implement this legislation and benefit from additional revenue streams is steadily increasing. Through Project Consolidate over 75 municipalities were supported on improving their financial management systems, policies and procedures and submitting their annual financial statements through the assistance of, amongst others, the National Treasury, Institute of Municipal Finance Officers (IMFO), South Institute of Chartered Accountants (SAICA), First National Bank (FNB) and Public Services Utility (PSU) International and Siyenza Manje. We are also aware that all provinces have embarked on various initiatives to support municipal revenue generation and debt reduction. In addition to the above, the deployment by the Department of 12 Chief Directors to targeted municipalities has yielded tangible positive results in the affected municipalities.

Municipalities are required to play an important role in promoting and creating an enabling environment for local economic development (LED). In August 2005 the Department launched a national framework and toolkit on LED. This was complemented by the deployment of LED experts to key provinces and municipalities. By the end of 2006, 37 (out of the 46) District municipalities and all Metropolitan municipalities had drafted LED Plans and Strategies. By the end of December 2006, 50% of all District and Metropolitan Growth and Development Summits were held, with the remaining scheduled for completion by end of March 2007.

During 2006, with the invaluable support from the Business Trust, we undertook detailed economic profiles in the 21 rural and urban development nodes. This exercise will assist in refining the LED Plans in those affected municipalities and the building of municipal economic development partnerships with key stakeholders and investors.

Strengthening good governance and deepening community participation also received dedicated attention over the recent period. In this period we launched national Guidelines for Ward Committees and gazetted for public comment, through SAQA, a Ward Committee governance qualification at NQF level 2. Our focus on deepening community participation in matters of governance received a further boost with the deliberate alignment of the Presidential Izimbizo during 2005 and 2006 with our interventions of Project Consolidate. Over this period 27 Presidential Imbizo were held which covered 58% of all municipalities in this country.

In October 2006, a national Local Government Anti-Corruption Strategy was launched which was preceded by a national piloting exercise in a number of municipalities across the country. The institution of traditional leadership has a unique role to play in our system of governance and programmes of development. In addition to the ongoing support provided to provinces in this area, the Department together with the National House of Traditional Leadership, by December 2006, developed a draft national Support Plan for the Institution of Traditional Leadership.

Honourable Members

The success of the above interventions is premised on a strong, capable and robust political and administrative leadership in our 283 municipalities. In this regard we have pursued a number of interventions aimed at positive municipal transformation and institutional development. Under the leadership of Project Consolidate, in April 2006 a total of 112 experts were deployed to 69 municipalities. By December 2006, an increased number of 281 professionals were deployed to 85 Project Consolidate municipalities. A number of benefits are associated with these deployments, including,

a) The augmenting of technical, financial, planning, project management and other specialist skills in municipalities.

b) Service delivery has been accelerated through the unblocking of blocked projects.

c) Support was provided to the development of Local Economic Development strategies.

d) Financial systems have been established, audit queries addressed and in a number of municipalities revenue income generation was substantially improved.

e) Key stakeholders are involved in supporting local government in a much better organized manner, e.g. DBSA, Institute of Municipal Finance Officers, Old Mutual Group etc.
In 2006, Municipal Performance Management Regulations were issued. The primary intention was to assist in accelerating and standardizing the process of recruitment and appointment of critical management posts in municipalities. A simultaneous process was undertaken to assess the level of management vacancies and also the extent to which performance management systems were in place in various Project Consolidate municipalities. By the end of December 2006, the Department developed a good understanding of the spread of municipal management vacancies and compliance with Performance Management Regulations. We ended off 2006 on a high note with the Municipal Performance Excellence (Vuna) Awards, by recognising municipalities that displayed outstanding performance in key areas of service delivery, good governance and development.

Our training, induction and capacity building programmes aimed at councilors and officials, received a further boost following the 2006 municipal elections. These programmes, in many instances coordinated with SALGA and other key partners, remains a critical area of ongoing attention.

A number of core municipal systems and crosscutting initiatives constitute the bedrock for supporting ongoing municipal transformation, improving good governance and accelerating service delivery at a local level. In the area of development planning, by November 2006, 98% of all municipalities had adopted Integrated Development Plans (IDPs). This is a significant improvement on the figure of 69% for the 2005/6 financial year. The "high quality IDPs" also improved from 1 0% in 2003, to 27% in 2006.

Important resolutions were taken at the conference on Local Government

Communication and the conference on Women in Local Government in 2006. The implementation of the Disaster Management Act is proceeding, with an increasing number of municipalities prioritising the development of Disaster Management Plans and building their local disaster management capability.

Project Consolidate and the 5 Year Local Government Strategic Plan have provided national government, provinces and municipalities, together with SALGA, the opportunity to take the initial steps in establishing a nation-wide Monitoring, Reporting and Evaluation Framework for Local Government with measurable indicators. This will enable a clearer and more accurate monitoring and assessment of progress and challenges over the medium term.

Strategic Priorities for 2007 and the Medium Term Period

Honorable Chairperson

Informed by the progress and challenges in local government since 2004, the strategic focus and priorities of the Department over the medium term period are embedded in the lessons of Project Consolidate and the 5 Year Local Government Strategic Plan. In the first instance the Department will continue to discharge its leadership role across government in respect of the three strategic priorities of the 5 Year Local Government Strategic Plan:

a) Mainstreaming hands-on support to Local Government to improve municipal governance, performance and accountability;

b) Addressing the structure and governance arrangements of the State in order to better strengthen, support and monitor Local Government; and

c) Refining and strengthening the policy, regulatory and fiscal environment for Local Government and giving greater attention to the enforcement measures.

Secondly there will be a renewed focus on ensuring the mobilising and coordination of government to meet its service delivery targets and objectives:

a) Bucket Eradication: 2007

b) Water and sanitation at clinics: 2007

c) Water Supply: 2008

d) Sanitation: 2010

e) Electricity: 2012

f) Solid Waste: 2013

g) Roads infrastructure: 2013

h) Sport and Recreation: 2013

i) Public Facilities: 2013

j) Informal settlements through the housing programme: 2014

At the Extended Cabinet Lekgotla meeting in January 2007, it was agreed that the Department should focus on three critical areas of work in 2007. Firstly it was decided that we should ensure that municipalities have the fiscal resources and powers to recruit, absorb and retain appropriate managerial, professional and technical skills into their establishments. Secondly, informed by the lessons on providing hands-on support to municipalities, spatial-based planning and inter-sphere integration, our work in the rural and urban nodes, there is a need to bring policy in line with emerging good practice. A process will therefore be embarked upon in 2007 to review the 1998 White Paper on Local Government to be completed by 2008.

Thirdly, given some of the same lessons from local government and also the more recent capacity assessments of provincial Departments of Local Government and the Offices of the Premier it was agreed that a comprehensive review of provincial government functions should be undertaken and that a White Paper on Provincial Government will be developed by 2008.

Honorable Members

In the 2007 Budget Speech the Minister of Finance, Minister Manuel indicated that,

”Transfers to local government grow by 19 per cent a year. In addition, municipalities receive the bulk of the allocations for stadiums and related infrastructure for the 2010 FIFA World Cup. The local government equitable share receives a further R5 billion for the delivery of free basic services, which now reach an average of about 80 per cent of households. The Municipal Infrastructure Grant receives a R400 million more for a final push to eradicate the bucket system. A further R600 million for the electrification programme, R1,4 billion for bulk water and sanitation infrastructure and R950 million to deliver water and electricity to schools and clinics. Total infrastructure transfers to municipalities now total R52 billion over the next three years. "

Over the next 3 years, the share of nationally raised revenue that will go to local government will be R121.7bn.

Of this amount, a total of R68.2bn will go through the Local Government Equitable Share (LGES) in the form of an unconditional grant and R600m through the Municipal Systems Improvement Grant (MSIG). These monies are principally aimed at municipal institutional strengthening and building core systems of local government. Challenges will be addressed in the areas of implementing the Municipal Performance Regulations, filling of key vacancies, extending the pool of deployees to municipalities, improving the quality and credibility of IDPs, building municipal financial management systems and establishing an effective monitoring, reporting and evaluation system for local government.

Over the MTEF period R24.7bn will be allocated to the Municipal Infrastructure Grant (MIG), which will focus on broadening access to basic services in the areas of water, sanitation, roads and community facilities. Specific attention will be given to those municipalities who have not performed well with their expenditure on the 2006/7 allocations. At the end of January 2006, municipalities spent 54.4% of the R6.265 billion allocated to MIG for the 2006/7 financial year. Through the relevant provisions of the Division of Revenue Act (2006) the Department developed and is presently implementing a MIG Re-allocation Strategy. This Strategy is aimed at ensuring compliance with DORA, whilst at the same time further incentivising those municipalities who have demonstrated the capacity to spend, whilst providing additional support to those that are under-spending on MIG.

A total of R8.4bn has been set aside for stadium development for the 2010 FIFA Soccer World Cup. In this regard the Department is also strengthening its own internal capability to support and monitor the obligations of host cities. It should also be remembered that Minister for Provincial and Local Government convenes the Host Cities Forum.

Honorable Chairperson

The Department is responsible for the transfer of funds to six public entities and associated institutions. Over the MTEF period R265.5m will be transferred to South African Local Government Association (SALGA), the Municipal Demarcation Board (MDB), the South African Cities Network (SACN), the Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities, the Commission on Traditional Leadership Disputes and Claims, and the National House of Traditional Leaders. In 2007, a total of R79.2m will be transferred to these bodies.

In terms of the Estimate of National Expenditure for Vote 5, the Department of Provincial and Local Government has been voted an amount of R100.5bn over the next 3 years. This amount comprises of seven budget programmes:

1. Administration

2. Governance, Policy and Research

3. Urban and Rural Development

4. Systems and Capacity Building

5. Free Basic Services and Infrastructure

6. Provincial and Local Government Transfers 7. Fiscal Transfers

Subsequent presentations by my colleagues will provide a more detailed account of progress and the priorities of the Department for 2007.

In the collective view of the top management of the Department, we believe that we have made irreversible progress in constructing a solid scaffolding and bridging the gap between the intentions and outcomes that will improve the lives of our communities through the various programmes under our management.

We would finally like to thank the Portfolio Committee for the robust engagements we have had in 2006 and the valuable insights received. This has assisted us to keep our sights on creating a better life for our people.

We thank you. 13th March 2007