MEMORANDUM

TO: DIRECTOR- GENERAL: EASTERN CAPE PROVINCE

FROM: SUPERINTENDENT-GENERAL: LOCAL GOVERNMENT AND TRADITIONAL AFFAIRS

SUBJECT: GOVERNANCE & ADMINISTRATION CROSS BOUNDARY UPDATE

DATE: 17 AUGUST 2007

1. PURPOSE

This memorandum seeks to present to the Director - General the latest developments regarding the current status of the cross boundary municipalities.

2. BACKGROUND

Alfred Nzo is a district municipality under which both Matatiele and Umzimvubu local municipalities fall. In the previous arrangement Matatiele local municipality was under KZN in Sisonke District Municipality and Umzimkhulu local municipality was in the Eastern Cape under the Alfred Nzo District Municipality. With the cross boundary set up, Matatiele now falls under the Eastern Cape with changed boundaries which incorporate Maluti and 15 surrounding villages that were previously under Umzimvubu.

3. CONTENT

The excision of Urnzimkhulu into KwaZulu Natal (KZN), an area which boasted of a population of +- 150 000 has led to Alfred Nzo receiving a reduced equitable share of R46m instead of R135m. On the other hand Matatiele had a population of 20 000 with an equitable share of R12m. This municipality initially had 5 councillors and 2 wards and has now grown in size after the inclusion of Maluti and surrounding villages. The number of councillors is now 48 with 24 wards. By implication the boundaries have changed, and the number of the population has dramatically increased by this inclusion. It goes without saying that Matatiele has inherited backlogs in terms of roads, electricity water and sanitation, and as a newly created municipality, it has numerous requirements including office space, furniture, equipment.

It was on this spirit that Matatiele local municipality submitted its establishment plan of R21 m for approval in the 2006/07, an amount which has not been made available to date. The escalation costs now reflect +-R30m. This amount was discussed with the Provincial Treasury who requested that the municipality must sub-divide the application into realisable phases. It must be up front mentioned that Matatiele has further submitted a request amounting to R97m for addressing backlogs. This R97m application will be submitted to National Treasury since National Treasury is in the process of accessing R1bn to beef up MIG allocation to former cross boundary municipalities only.

Premiers of affected provinces were required to drive the cross boundary process. In this instant both Premiers from KZN and EC appointed a Joint Political Coordinating Committee (PCC) to oversee the process. A joint technical task team to support the political team was appointed and specifically for the EC there was also an Operational Task Team that was required to facilitate a smooth transitional process to give effect to the broader personnel, legal, practical, proprietary and other consequences of the implementation of the Constitution Twelfth Amendment Act, 2005, and the Cross Boundary Municipalities Laws Repeal and Related Matters Act, 2005.

3.1 Achievements

As a result of the above the following matters were achieved:

· all Service Level Agreements were signed by departments;

· departments concluded the verification of assets, staff and liabilities;

· staff transfers were completed by most departments on 01 April 2007 except those with problems that will be listed below;

· National Treasury transferred the provincial equitable share directly to the recipient departments on 01 April 2007

· the close out report was completed by coordinating departments of local government of both provinces and circulated on time to departments

· a joint technical meeting to table this close out report was convened in Durban on the 23 July 2007. The meeting identified certain omissions from the Price Water House Coopers report since the verification process showed something else which was after being confirmed by both provinces incorporated into the MOD. Certain departments went to an extent of head counting the warm bodies in relation to the actual numbers of staff to be transferred

· an amended version of the close out report has been circulated to the departments and is awaiting signatures by HODs

· the political meeting wherein this close out report will1?e tabled is scheduled for the 31^st of August 2007 in Durban and all HODs are expected to attend as this would be the last meeting before a presentation to a joint EXCO meeting.

3.2 Provincial interaction with affected municipalities

A meeting of all provincial departments in the Eastern Cape to assess progress took place in the department of local government on the 11 July 2007. It was in this meeting where a decision was taken to meet in Alfred Nzo on the 18 July 2007 and further meet with the full council on 01 August 2007 in Matatiele wherein a 5yr business plan would be presented. This was as a result of a complaint that there was service delivery stagnation in the area of Matatiele. The council wanted the visibility of the departments in action to be felt by the residents of Matatiele. The departments in this regard were required to map out programmes, challenges which they are faced with and mechanisms to overcome such challenges. It was on the 18th of August 2007, where AI:tred Nzo D.M. made a presentation on expectations from each department and a proposal on integration of sector plans. On the 15^th of August 2007, all departments converged in Matatiele and presented their 5yr delivery business plan subsequent to the meeting in Alfred Nzo. There were lessons learnt through this interaction both from the council and from the district managers of sector departments

3.2.1 Lessons learnt

It was learnt that in the main the releasing provincial departments of KZN had deliberately pulled out their commissioned service providers without informing the receiving departments in the Eastern Cape. The following are the examples:

· The Department of Education from KZN withdrew its service providers from the supply of school nutrition programme and bussing of learners to school without notification to the counterpart

· In terms of Social Development, social grants were terminated by KZN without agreeing on the cut off date with the receiving department as a result the EC department is struggling to get the necessary data for putting the recipients back on the system.

· The department of Roads and Transport transferred employees to KZN on 01 April 2007 whilst the KZN counterpart will only transfer its employees on the 24th of August 2007. Eastern Cape transferred +- 51 employees and will receive 24 employees from KZN. The employees to be transferred by KZN in the middle of the financial year are not accompanied by funding for the compensation of employees. This means that there are no funds for salaries from September to the end of the financial year provided by KZN counterpart.

· Roads have been handed over in deplorable conditions and estimated costs to improve such conditions is R14,592 000

3.3 Establishment of sub-committee to the IMC

Further to this matter a meeting was convened on the 7^th of August 2007 by the Department of Provincial and Local Government (dplg) in Pretoria that aimed at forming a sub-committee which would act on an advisory capacity to the Inter Ministerial Committee. The main objective of the sub-committee would be to assess all outstanding issues on former Cross Boundary Municipalities. The following stakeholders participated in the above mentioned meeting; DPLG (chair), National Departments, National Treasury, SALGA and Local Government departments from the provinces. Stakeholders were to engage directly around all outstanding issues pertaining to former Cross-Boundary Municipalities. There were objectives and a number of resolutions taken by the participants in trying to take process forward. These are then listed below:

· Resource mobilization for the former cross - boundary municipalities. Participants were informed about a policy view from the cabinet which stipulates' that people need to be better off than they were in former cross boundary municipalities.

· The need for adjustment of the existing instruments that determine the existing formula for the equitable share was highlighted. DPLG and National Treasury to have a re-Iook in the existing formula since the 2001 population or household numbers submitted by Statistic SA have changed dramatically. This has a bearing to the Municipal Infrastructure Grant (MIG) backlog. The affected municipalities must be assisted by provinces in determining the backlogs as National Treasury intends to beef up the MIG allocations for these areas.

· There was a view that National Treasury should also assist in the process of the transfers by looking at how the transferring departments managed the question of the transfers.

The meeting further noted that the releasing provinces simply stopped services on certain projects without informing the receiving provincial departments. This seemed to be a hue and cry from all provinces besides the EC.

Provinces were then tasked to convene meetings of all departments wherein costing will be done for all projects including all those projects whereby the releasing provincial departments had suddenly pulled out, thus withdrawing their service providers. This information is urgently needed to be submitted by 31^st August 2007 to allow National Treasury to effect changes within provincial budgets.

It must also be stressed that local government departments were tasked to separately assess funding for the municipalities themselves including service delivery backlogs. This means that the MIG allocation for the Cross-Boundary Municipalities will be reviewed. With regards to Matatiele, it was resolved that the R21m requested for the establishment plan for the financial year 2006/07 be made available, however, the department of local government should re-evaluate and re-prioritise as prices might have escalated since then, and re-submit on 31^st August 2007 to Provincial Treasury and the Office of the Premier.

It was on this basis that this department has scheduled a meeting for August 15^th 2007 so that departments present costs required for them to meet their constitutional obligations and discuss the above mentioned issues. DPLG promised to circulate a checklist indicating problematic areas (projects that have stalled! not funded) to provinces so as to assist them in their submissions in terms of funds they require by the 13th of August 2007. However, the template was only received after this important meeting with all departments and Provincial Treasury. This department had already developed its own template which was accepted by Provincial Treasury. Departments were expected to make their submission to this department by the 17 August 2007. These submissions will be consolidated by Provincial Treasury.

The departments should also note that whilst there is this exercise of resource mobilisation for Cross-Boundary Municipalities, there is also a Political Coordinating Committee meeting on 31^st August 2007 in Durban where the Close out Report will be tabled.

RECOMMENDATIONS

· Departmental HODs are urgently requested to assist in the process of resource mobilisation more especially in the projects that were suddenly terminated by the counter parts such that adjustments are done for continuity of services and payment of salaries where applicable within this financial year;

· It is a legal imperative that all departments should prioritise Matatiele in their budgets for the next financial year and outer years since it is the government's policy to ensure that all former cross boundary municipalities are better off than they were previously. This, the departments should take it seriously;

· The non payment of rural allowance by KZN impacts negatively to the coffers of the Eastern Cape as +-311 staff nurses are still being paid salaries by the Department of Health EC whilst their service is enjoyed by KZN since Umzimkhulu is in KZN. A reasonable proposal would be to discontinue this payment of salaries and redeploy this cadre of nurses to other hospitals within the Eastern Cape;

· Departments are requested to continue with their bilateral meetings with their counter parts so as to finalise all outstanding issues

COMPILED BY: M. W.MAMA

DATE:

SUBJECT: GOVERNANCE & ADMINISTRATION CROSS BOUNDARY UPDATE

SUPERINTEDENT GENERAL: HOUSING LOCAL GOVERNMENT AND TRADITINAL AFFAIRS

DATE:

SUBJECT: GOVERNANCE & ADMINISTRATION CROSS BOUNDARY UPDATE

Comments:

DIRECTOR-GENERAL: EASTERN CAPE PROVINCE

DATE: