KZN progress on Covid-19 Expenditure Audit

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Cooperative Governance and Traditional Affairs

11 May 2022
Chairperson: Mr F Xasa (ANC)
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Meeting Summary

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COVID-19 Audit Report 1

The Portfolio Committee met with the delegation from KwaZulu-Natal (KZN) Provincial Government lead by the Premier, Mr Sihle Zikalala, to receive reports from the different departments in the province on the expenditure of Covid-19 funds and the province’s response to the Special Report from the Auditor- General (AG). The Committee scheduled this follow-up meeting after it resolved it would meet with all nine provinces regarding consequence management of those officials implicated in unlawful self-enrichment through the misuse and abuse of Covid-19 funds, as detailed in the Auditor-General’s (AG) and Special Investigative Unit’s (SIU) reports

Present in the meeting were the departments of Health, Education, Provincial Treasury, Human Settlements, Social Development and Cooperative Governance and Traditional Affairs.

The main concerns raised by Members of the Committee were the mismanagement of Covid-19 funds, the tendering system used by municipalities for procurement and delivery of services which has resulted in the departments being overcharged. There were also concerns of a lack of internal processes to deal with corruption and Unauthorised, Irregular, Fruitless and Wasteful (UIFW) expenditure and poor consequence management in terms of disciplining implicated officials.

Members of the Committee were also interested in the plans to upgrade informal settlements in KZN as well as how departments plan on recovering money that has been lost to UIFW expenditure.

The Committee said the fear is that lessons learnt from Covid-19 should not repeat themselves. KZN is the third province to see the Committee and Premier Zikalala is the first Premier to interact with the Committee, on this matter. 

Meeting report

Opening Remarks
The Chairperson welcomed Members of the Committee and asked that they introduce themselves. He indicated that the meeting was a follow-up to the meeting from September 2020. The meeting was prompted by issues relating to Covid-19 expenditure that was subsequently followed by an audit report by the Auditor-General (AG) and the Special Investigating Unit (SIU) which also investigated Covid-19 expenditure and produced a report. There was a need to follow up with all the provinces and do oversight. Some provinces had been met and there were coordinated reports. The Chairperson told the Committee that the reports would be delivered following the agenda. He however alerted the Committee to not spend too much time on the reports because the main mandate of the Committee was to do oversight.

KZN Premier, Mr Sihle Zikalala, stated that the province is happy to be meeting the Committee and reassured that the province takes opportunities to account seriously. He indicated that the meeting takes place while the province is busy with Budget Votes, hence some MECs are unable to attend.

Premier Zikalala told the Committee that different delegates would deliver the presentations that the different Departments had prepared.

Auditor-General’s Special Report-Premier’s Overview

Ms Nonhlanhla Mkhize, Director-General, KZN Office of the Premier, presented the Premier’s overview. The Provincial Government established the Provincial Command Council to monitor the coordinated response to the pandemic and ensure adequate preparedness by the province. Realising that emergency procurement was associated with risks, the Provincial Executive Council took precautionary measures to prevent any abuse of the funds. Preventative measures that were put in place included pre-audits and regular reporting on procurement by departments, municipalities and entities. The province set up structures led by the Provincial Treasury to daily monitor procurement of Covid-19 requirements by departments.

The Provincial Government of KwaZulu-Natal was unwavering that any allegation of state resource looting in the name of Covid-19, will be scrutinised, and investigated accordingly, with no compromise when it comes to consequence management. In the interest of more transparency and accountability, it decided to be one of the first provinces to publish “KZN Covid 19 Procurement Disclosure Report”.  In this report Covid-19 procurement by each department, municipality and entity and the prices were disclosed. This report was followed by the “Ownership Disclosure Report”. This contained directors of companies and their contact details.  All these were published for the public to make their own assessment and accountability

See attached for further details

KZN Provincial Treasury COVID19 Expenditure Report
Ms Nomusa Dube-Ncube, KZN MEC for Economic Development, Tourism and Environmental Affairs, introduced to the Committee Ms Carol Coetzee, Head of Department, KZN Provincial Treasury, who delivered the presentation on the Covid-19 expenditure report. She said certain departments have submitted incorrect information to National Treasury which needs to be rectified and certain departments amend order details after the reports have been submitted to National Treasury and not all municipalities have submitted information in the required format to National Treasury to enable them to analyse the spend per item. Numerous investigating units are probing various contracts that KZN has procured.

See attached for detailed expenditure

Third Auditor-General’s Special Report on the Financial Management of Government’s Covid-19 Initiatives – Municipalities (MFMA)

Ms Joey Krishnan, Chief Director: Municipal Finance, KZN COGTA, provided a report on the Auditor-General’s third special report on the financial management of government’s Covid-19 initiatives specifically relating to municipalities. The presentation presented an analysis of the AGS findings and the KZN COGTA response.

The presentation showed an AGSA sample audit for municipalities where the following audit findings were found:

- Excessive prices paid for covid-19 goods and services as PPE items procured at prices above National Treasury market-related prices

-Provision of poor-quality covid-19 infrastructure-related goods and services

- Delays in completion due to inadequate contract management of contractors

 -Municipality paid for supply of water projects without any proof of delivery or distribution

-Inadequate controls and stock management systems to account for the management of PPE stock.

-Extended lead times to deliver PPE

-Poor storage practices at main PPE stores and user departments

-PPE not procured at prices regarded by National Treasury as market-related

-Inadequate PPE needs analysis and demand planning

-COVID-19 related goods and services were incorrectly classified

See presentation for further information
 

AGSA Special Report: KZN Department of Education
Mr Kwazikwenkosi Mshengu, KZN MEC for Education, introduced Mr Nkosinathi Ngcobo, Head of Department, KZN Department of Education, to the Committee, who delivered the presentation on the budget and expenditure for COVID, major audit findings, remedial measures implemented and progress on consequence management. The presentation detailed budget vs expenditure, comments made by the AGSA and deficiencies identified on PPE supply to schools. Some deficiencies included:

- non-compliance with National Treasury disaster management instruction notes

-the department procured some PPE items at higher prices than those recommended in National Treasury instruction note 8 of 2019-20,

- Quantity of delivered goods does not agree to quotation and invoice: the department ordered, invoiced and paid for R61 813 worth of PPE more than the supplier delivered, and there was no evidence that the supplier delivered the shortfall to the department later.

-Procurement without obtaining three written price quotation

-Quotations obtained from suppliers who were not registered on the Central Supplier Database (CSD)

- Awards made to suppliers who were not tax compliant

-Possible cover quoting during the procurement process: the department received quotations totaling  R491 625 from two related suppliers, one of which was awarded the contract. These suppliers have the same addresses and are owned by the same person, which shows possible cover quoting and goes against paragraph 16A8.3(d) of Treasury regulations.

-B-BBEE certification not submitted to confirm the status level but tenderer was allocated a score

- Local production and content requirements on the procurement not applied

See presentation for further details and consequence management

KZN Informal Settlements presentation

Mr Mduduzi Zungu, Head of Department, KZN Department of Human Settlement, was meant to give the presentation on KZN Informal Settlements but lost connection.

KZN DSD presentation

Ms Nelisiwe Vilakazi, Head of Department, KZN Department of Social Development (DSD0, gave a presentation on the recommendations made on irregular procurement of blankets and PPE in the KZN DSD. The forensic report for blankets was received on 15 June 2020 and for PPE on 10 July 2020. The forensic report had recommended that 12 be charged with misconduct. Before the report was received some officials named in the report had exited employment. See attached for details of consequence management.
 

KZN Department of Health presentation on AGSA special report on COVID19 expenditure
Ms Nomagugu Simelane, KZN MEC for Health, introduced to the Committee Dr Sandile Tshabalala, Head of Department, who gave the presentation on behalf of the Department of Health in KZN. The presentation detailed the management of COVID expenditure and implementation of AGSA recommendations. Findings related to:

- procurement of the sanitiser detergents at prices higher than that which was prescribed by National Treasury

- procurement of non-sterile examination gloves above prices quoted

(Refer to presentations for more information)

Discussion

Ms H Mkhaliphi (EFF) said the Committee last met the KZN delegation in 2020 and unfortunately it is meeting the KZN delegation after another disaster in terms of the floods. It is concerning that each time the KZN delegation is met there is a disaster. It is unfortunate that the Department of Human Settlements could not make its presentation. That Department is not directly involved in the AG’s report of Covid 19 financial statements. However, that presentation was a very interesting one as it speaks about development. One of the main issues the country is facing is lack of development. According to the presentation, there are about 903 informal settlements in KZN. It specifically characterises the problem of development and specifically when there is a pandemic taking place. People from informal settlements are most affected by pandemics and disasters. She said that she was looking forward to engaging the Department in terms of upgrading the informal settlements. The presentation has budgets and timelines but there is a lack of progress plans in terms of upgrading that will allow the Committee to follow-up.

The last time the Committee met, the matter of Brooks Farm was raised and the MEC promised to attend to the matter together with the Head of Ministry. She followed up with the MEC of Housing and Human Settlement in KZN to check how far the matter had been raised at a Committee level.

With COGTA, municipalities were meant to be guided by the Department. There were many things raised by the AG. For instance, the presentation stated that some of the municipalities did not apply for the Covid-19 grant but the AG’s report raised that eThekwini Metro and some municipalities were listed as having paid excessive prices for surgical face masks. It is said that the metro ordered 100 000 surgical face masks for R22 each which was 76% more than Treasury’s market relative price of R12.48 per mask resulting in excess payment of R952 000. Has anyone in eThekwini Metro been held accountable for that excessive price paid for these face masks? Another worrying factor that needs to be clarified, under Zululand District Municipality, has there been any action taken in the audit findings of underused goods and services, there are only 1000 employees in that municipality but the money spent on face masks was R17.5 million on 500 000 surgical masks and a further R2.5 million on disposable surgical gloves which translates to 500 surgical masks and 500 pairs of surgical gloves per employee? We are talking about 1000 employees. She asked Ms Krishnan to explain because it does not add up. This is plain corruption. Was there anyone held accountable for this plain corruption that took place while the country was in a pandemic?

Also, the presentation says that there was a decline of revenue. Ms Mkhaliphi told the Committee that she remembers that when it was engaging with municipalities, while the Committee wanted municipalities to ensure that there is revenue collected, many people lost their jobs during Covid-19. Since the Department was meant to give guidance to municipalities, what guidance or support was given to those people who lost their jobs during Covid-19? As a result, the municipality was affected and could not collect revenue but the fact of the matter is that most of the people that were meant to pay for services at a municipal level were affected by losing their jobs and the lockdown. What support was given to those vulnerable people because even now, people are still saying that things are bad since 2020? She does not hear COGTA saying what they have done. The Department even stated that R20 billion was allocated to KZN and further infrastructure was provided for people that wanted to be housed. She asked for a list of that infrastructure because the Committee needs to do oversight. That infrastructure could have also been used now during the floods.

With the Department of Education, she noted that the Head of Department was zooming in on the investigations that the Department was going to embark on. The Department is not specific in terms of the timeframe. The Department of Social Development also has investigations and measures that it has taken against those that have been identified. How long will it be going on? The matter dates back to 2020 and it is 2022 now. The Department mentioned that there are new dates for pushing forward the HR processes of ensuring that those who committed crimes are punished. Two years for 12 officials are too long, some have resigned and some have passed away during this time. The process is taking too long and if government does not send a clear signal to people who committed crime, especially during the pandemic anyone can just say that it is nothing more than a threat. So, a strong message needs to be sent by Departments. To the Department of Education, it is well and good that the Department intends on doing investigations but if there is no time frame attached. The likelihood is that the Committee will be meeting the Department again after two years and at that time there will be so many more issues that need engagement.

Mr G Mpumza (ANC) observed the Head of Department of Social Development, when presenting on consequence management, indicated that one official resigned on 29 June 2021. What has happened with that official that resigned, were they allowed to go scot-free or has a criminal case been opened against that official who resigned without disciplinary processes? The second question related to what the Head of Department had said that the National Prosecuting Authority (NPA) had refused to prosecute with the reason Nolle Prosecute, could Ms Vilakazi please clarify that? Was it that perhaps the case was not up to scratch that the NPA decided not to prosecute?

In the second special report of the AG, there was a recommendation to the Head of Department in the Department of Health that the procurement of 100 000 face masks to the value of R4 million, needs to be investigated to see whether they were suitable for the use they were procured for. Was there an investigation undertaken and if so, what were the results? The AG had also requested that the accounting officer investigate a contract entered into with the service provider to the value of R10.36 million, but of which R24.28 million was paid without justification resulting in irregular expenditure. Was this investigated and if so, what were the results? In the same breath, nine PPE orders that had totalled R29.3 million were awarded to suppliers who had non-compliant tax accedes, this rendered the expenditure irregular. Was this irregular expenditure disclosed and investigated?

Mr A Matumba (EFF) stated that with the last presentation, an official was found guilty and moved to another Department. A person who is found guilty is being moved to another Department and the justification is that the person is not going to work with finances but a thief is a thief. They will find something to steal and make money out of it. So there is a need for proper justification. Why is a person that has been found guilty being moved to another Department instead of proper consequence management running its course? With respect to Human Settlement, the Committee is told that there are 937 informal settlements in KZN. What definition is being used to define informal settlement? Is the colonial and apartheid definition being used? If so, then there will be 937. There is this thing of justifying a lack of services in villages and rural areas by saying they are informal settlements as long as there are no flushing toilets, sewerage systems and running water connections into the houses, clinics, halls and facilities that need to be informal settlements. This is what punished people in KZN because most of them rely on mobile clinics. When Covid-19 came, it hit them hard because they did not even have a clinic to rely on. Even those in informal settlements because it is not a formal settlement based on society standards. Mr Matumba said that that needs to be dealt with. If there are no services it is an informal settlement until there is water, clinics, proper roads and basic services. There are government projects where water pipes are at the corner of streets for people to fetch water with wheelbarrows. That is extremely wrong. Also, where there is an illegal connection, it is because there is no legal connection. So, when the Committee is being given a report on illegal connections, it must also be told when it will be connected legally. As long as there is no legal connection, connections will be made illegally and the Department will suffer from electricity loss.

With municipalities and the reporting of UIFW expenditure, the Committee is told that the Department is offering training around UIFW expenditure. One thing that the Department is doing correctly is putting mechanisms in place to deal with corruption. However, there are no measures in place to deal with the UIFW. There will be plain corruption if the Office of the AG collapses. Was any UIFW reported in terms of s32(4) of the Municipal Financial Management Act (MFMA)? Was there anyone reported to the police in terms of ss6 of the same act? Did Council ensure that the matter was dealt with properly in terms of s6(7)? What the Committee gets all the time are allegations that were reported and then dealt with. What about municipal mechanisms that must deal with these things? Did management report UIFW expenditure to the Executive Committee? Did the Executive Committee report to the Council? Did the Council report to the Municipal Public Accounts Committee (MPAC)? What are the findings of MPAC? What did the Council do after getting the findings from MPAC? The Committee is not getting any of this from the report.

A perfect example would be eThekwini Metro with the prices of the masks as raised by Ms Mkhaliphi. When management reported their spending of the budget, did the oversight committee not pick up that masks were being bought for R19 each? That should have happened. So when consequence management is being talked about, that is why it only goes to management and not politicians who failed to do their oversight. Even the Department itself is failing to do its work in terms of s34 of the MFMA which is to provide monitoring functions. Because the Department is not giving a report on what is done when monitoring, what is picked up and what was done to assist the municipalities as it is in the act to assist municipalities? It is clear that in the absence of whistleblowers who report allegations and in the absence of the AG, there are no mechanisms to deal with corruption and UIFW expenditure. The municipalities do not have capacity. What was the role of the South African Local Government Association (SALGA) in terms of capacitating municipalities? What did SALGA do?

Ms D Direko (ANC) noted that Premier Zikalala is one of the few Premiers that are consistent in attending meetings of the Committee and passed appreciation. She asked COGTA, what lessons it learnt from the pandemic in terms of service provision during the disaster and the procurement system to combat corruption in future? Covid-19 has affected many Municipalities especially in terms of the local economy which resulted in loss of employment and lack of revenue collection. Is there any economic recovery scheme in place for the municipalities, if yes, what support is the Department providing to the municipalities? In municipalities where the AG has raised concern regarding the use of Covid-19 funds, is there any consequence management in place in those municipalities and what is the role of COGTA in ensuring that the findings of the AG are being addressed?

On the Provincial Treasury, the report indicated that certain departments submitted incorrect information to National Treasury. What was the reason behind this and how has the matter been resolved? With the Department of Social Development, has the Department followed the matter of the person who resigned before the forensic report was received, what was the nature of the offence and how is the Department going to recoup if there are financial implications?

Mr B Hadebe (ANC) agreed that the dedication to accountability by Premier Zikalala was appreciated. He stated that in some of the presentations, there had been mentions of pre-audits undertaken to avoid irregularities and working closely with the office of the Auditor-General in all transactions in the beginning of the pandemic. The matter of pre-audits was also mentioned when talking about measures of strengthening internal controls yet certain irregularities have occurred. Money was lost, misappropriated and mismanaged. What difference will pre-audits do this time around if it could not achieve what it was intended to achieve previously? What lessons were learnt when conducting pre-audits yet still incurred irregularities in transactions in relation to the Covid-19 funds? There was mention of civil litigation in order to recover money that was lost. How much was the financial loss and are the recoveries equivalent to the financial losses? Who are the officials or parties concerned in the civil litigation? Is it officials or service providers? If it is service providers, are they still doing business with the state or have they been blacklisted or prohibited from conducting business with the State?

Mr C Brink (DA) agreed with some of the colleagues that the main concern now is not so much Covid-19, although the meeting is an important follow-up meeting on issues of procurement related to Covid-19. It is currently that KZN is under a different National State of Disaster and there is national money that has been granted to the province and municipalities to deal with the situation and there is a concern with how that money is spent not only among Parliament but also the public. So it is important at this point to stress that the Committee would like to have an engagement with the province with respect to the current National State of Disaster in that province. Regarding the officials in the Departments concerned that were charged with misconduct, misappropriation of funds or breaching procurement regulation, did any of them in their disciplinary hearings, point a finger to a Politician, a Member of the Executive Committee, a Mayor or Member of the Mayoral Committee, to say it is the politician or political principle that instructed them to do this?

Mr K Ceza (EFF) said the municipalities' dependence on tenders to deliver most services is inevitably leading to corrupt processes and inflated prices that is being witnessed in the presentations. Once capacity is not built internally in municipalities to discharge functions, the problem with that is that certain officials get connected to those external service providers with the results that the Committee is seeing of amounts that should have been recovered with Zain Brothers and Rosette Investments to the total of R718 550 and R864 000, respectively. Is there information on the envisaged period that the SIU would pay the monies that are owed to the Department?

Slide four of the COGTA & PT presentation to the Committee speaks of 43 municipalities audited nationwide and the top contributors to the irregular expenditure incurred for the 2018/2019 financial year, were eThekwini, Ulembe, Umkhanyakude, Thukela and Zululand. In terms of s32(1)(c) and s32(2) of the MFMA, a municipality must recover unauthorised irregular expenditure. What action has been taken in line with this legislation in order to ensure that the contributors to irregular expenditure return what is due to municipalities and departments? How much financial loss did the Department of Social Development incur in the irregular procurement of blankets and PPE? Are the reported recoveries equal to the amount lost, if so, how so?

There is a general situation that is caused by the outsourcing of services. The paradox is that the services are not delivered to the people. On slide six the concern is the recycling of corruption, which is not consequence management. Consequence management is not removing an official from a position where there are finances and ordering a sanction of demoting their pay level. The Department cannot come before the Committee and say that it saved money by doing that. Is this not the case of officials being connected to suppliers and if not, how does the forensic report connect these suppliers?


Responses
Premier Zikalala noted questions and concerns on the commitment and practical expression of the fight against corruption. The Office of the Premier is working on ensuring that all recommendations from the AG are implemented but it is not true that the Departments are only dependent on reports from the AG. There are a number of areas and investigations that the departments conduct and take disciplinary action against. So it is not that departments only depend on whistleblowers and the AG, there are other mechanisms. There are people who report and take issues to the forensic investigation unit. There are cases that are subjected to investigation when there is suspicion that something did not go well. In all cases, value for money is emphasised, that whenever money is spent, there should be tangible results that confirm that the money is spent on an intended project or prices were incurred accordingly. He added that people are not allowed to do anyhow. The province remains open, transparent and committed to ensure that there is consequence management and ensure that corruption is rid.

Ms Coetzee (Provincial Treasury) stated that in terms of the issue of incorrect information, some departments captured information incorrectly, and some issued orders that were subsequently cancelled. So in terms of the commitments reported and submitted they would need to be amended. There were a number of different issues and the Provincial Treasury tried as much as possible to assist departments in correcting reports but National Treasury had taken over this process a few months ago and is busy validating information. That process is underway. There was also a code created that allowed departments to allocate their expenditure correctly. National Treasury will finalise the report and submit accordingly.

In terms of lessons learnt from pre-audit, the Provincial Treasury was not involved from the onset of the departments incurring expenditure later in 2020. So that was a challenge on the issues that would predate the work done by the Provincial Treasury. The key objective of the pre-audit is to ensure that before any awards are made, a proper due process was followed and that is what is currently being done now as far as a lesson is learnt. The Provincial Treasury would like to be up front immediately when a disaster is declared. It steps in and plays a role. That was the decision by the Executive Council and that is currently what is being done in terms of the current expenditure being incurred on the disasters of April 2020. In terms of the internal audit that was undertaken, it is noted that there are some shortcomings in the departments in terms of SIU processes. Intervention and resources have been provided to those departments. Training has also been provided but the Provincial Treasury is aware that this is an ongoing matter. In terms of the current disaster, regular practice notes are being given to departments to guide procurement processes. There is also 24-hour standby to give guidance to the departments to prevent irregular expenditure from taking place.

Mr Sipho Hlomuka, KZN MEC for Cooperative Governance and Traditional Affairs, noted the comments and questions raised by Members of the Committee. On the question of what COGTA is doing to assist people who have lost their work because of Covid-19, slide 21 indicates that together with municipalities there has been an agreement to temporarily suspend credit control and interest on arrears for people who have lost their jobs also encouraging the affected people to apply to municipalities for the indigency programme as municipalities have indigency policies. Municipalities approve those that qualify so that they do not pay rates and be given free services as other people who are not working. Besides that, encouraging them to work with the Department of Labour to get what is due to them to sustain themselves.

On the matter of officials that have been pointed out in the AG’s report, the President has signed a proclamation to investigate a number of municipalities including that of Zululand and eThekwini. The SIU has begun that process of investigating for PPE, even though within COGTA, investigations have started internally. There was a thought that it would not be correct to duplicate the Presidency and have parallel investigations running. The Department is waiting for the full report from the SIU then the report will be tabled in the Council with all municipalities, and thereafter enforce the implementation of the investigation recommendations. In terms of s106 of the Municipal Systems Act, powers are given to the MEC of Local Government in the province to investigate any allegations of fraud or maladministration in Municipalities and there are specific special powers of appointing the investigating body in subsection b. It must be raised in the Forum that the Department investigated a member of Zululand Municipality using s106 then the Council of municipalities that is co-governed because of the coalition decided to challenge the forensic report from the COGTA investigation and take it to court. The court order stated that the Department was not supposed to investigate the way that it did as the SIU/Hawks do, instead, the Department must use the Commission Act. It is a matter that is being taken back to court. The view of the Department is that the judge did not understand how local government systems dictate how matters of local government must be investigated.

In response to the question of how far the Department is in recovering the money that was spent on irregular and fruitless expenditure, it is correct that s32 of the MFMA states that municipalities must recover irregular expenditure but there is a process that is defined in the MFMA that states that an accounting officer will be held liable for any UIFW expenditure in a case where there is no consequence management or recovery process. The Council must appoint a committee to investigate the matter then present the recommendations to the Council. The Department is monitoring the process. In a case where any official says that they were acting in accordance with the instruction of a Mayor or councillor, the Amended Structures Act also gives powers to the Speaker of the Council, in terms of the code of conduct, to discipline the councillor and establish a committee that will deal with the wrongdoings. If the Speaker fails then the MEC is given power to discipline the councillor. The sanctions will depend on the merits of the case.

There are a number of municipalities being investigated. The Municipal Systems Act states that if the MEC has decided to investigate a matter, the MEC needs to write to the National Council of Provinces (NCOP) within 14 days. There are a number of letters that have been sent to the Chairperson of the NCOP to report and make it aware that the Department has started processes of investigating a number of municipalities as directed by the Act. On the issue of the Covid-19 affected grants, there has been a national directive to work with municipalities to reprioritise the project on the basis of Covid-19 to ensure that Municipalities reprioritise their budgets. The Provincial COGTA, National COGTA and National Treasury have established a team to assist municipalities and approve the reprioritisation grants.

Mr Thando Tubane, Head of Department: KZN COGTA, speaking on the reprioritisation and monitoring of grants, stated that there have been circulars from National Treasury directing that municipalities can apply for infrastructure grants and to the Department of Water and Sanitation (DWS) with respect to water authorities. Municipalities were required to report on the existing frameworks. Even if municipalities reprioritise, it is done after receiving approval from the Departments of Cooperative Governance and Water and Sanitation then report accordingly. The reprioritisation reports are available and can be extracted from the systems of COGTA or DWS to give a clear idea of the reprioritisation efforts that have been conducted. On the issue of the position that the Department has taken not to duplicate investigations, the only two municipalities that the Department and SIU have engaged with are uMgungundlovu and uMgeni. The hope is that similar engagements are undertaken by the SIU as it investigates.

Mr Ncgobo (KZN Education) responded to the question about timeframes for completing disciplinary processes by stating that some cases have been completed but in some cases that have not been completed, the deadline that has been given to the Presiding Officer is 30 June 2022. This is barring cases that would have been postponed by the Presiding Officers to protect the integrity of the processes. The independence of the Presiding Officers needs to be respected. With the question of the implication of politicians, in as far as the process of the Department and the officials that have appeared, none have implicated any politicians. Even in the findings or recommendations.

Ms Vilakazi (KZN DSD) responded to the question of the official who resigned. She stated that there is no law that prevents people from resigning and the Department could not stop the official. The Department has relied on the fact that criminal charges have been opened so in an instance where the official is implicated in a matter with respect to the criminal charges, recovery can be looked into. Nothing has been found yet. On the question of Nolle Prosecute, when a case is opened, the police and the Hawks do the investigations then the documents are sent to the NPA for consideration. There was nothing that the Department could do as the NPA decided not to pursue the matter and no further reasons were given. With regard to the question of why an official was moved to a different Department, it was a part of the sanction that was given. Sometimes a person is demoted and the sanction says that the person must not work in an environment where there are finances. She recalls a case where a person was moved to Records Management and not near financial issues as part of a sanction that was imposed. When there are disciplinary processes, the Presiding Officer and employer representative deal with the matter independently of management in line with the Labour Relations Act.  The matters are almost concluded.

With regard to the question of civil recoveries, it was broken down as R22 million with regard to the procurement of blankets and R19 million with regard to PPE. At this point in time, based on the AG and forensic reports, there was irregular procurement of the items which means that processes were not followed even though the goods were delivered. This meant that the Department had to ensure recovery in terms of the proclamation that made SIU be on board. The two companies that have come forward to repay the money, Zain and Brothers and Rosette Investments, overcharged the Department when procuring those goods. There are two other companies as well that SIU is pursuing. This means that there has not yet been agreement on the exact amount that the Department was meant to be charged or the normal price. Overall, the Department will then be able to say if there has been value for money in terms of the recoveries. The other companies have not yet responded positively to declaring that they will pay back the money.

Mr Jomo Sibiya, KZN MEC for Human Settlements, stated that the matters are external issues of consequence management and issues raised by the AG. It was just a report that Human Settlements was going to present for the indulgence of the Portfolio Committee. On the Brooks Farm Informal Settlement upgrade, the Department of Human Settlement in KZN has already built and completed about 406 houses and 59 bigger structures that do not pass the Department’s means test. People have been asking for help with material supply, the Department in KZN is still waiting for the National Department to approve as it would be a deviation from the normal purchases. The Department is working on it and will be reporting and continuously engaging members of the Committee, even Ms Mkhaliphi as she has been part of the matter since its inception. She will continuously receive feedback and progress on the matter.
 
Follow-up discussion
Mr Matumba said the Committee did not receive an answer on the role that is played by SALGA. This is because each time SALGA comes to the Portfolio Committee, it says that it is faced with a problem of poor political leadership. So what is the story on the other side? What is SALGA doing to capacitate municipalities?

The Premier responded that there are people who report and there are cases where investigations are done based on suspicion and based on s46(3) and s55(2)(b) to do oversight but also scrutinise the work done by the Executive. The Committee does this based on the reports given. Next time, a detailed report must be given and a summary can be made for presentation purposes because the Committee always receives summaries and through that, the Committee is not able to do the oversight. Lastly, many questions based on the MFMA were asked then the Committee was told about s106. Under s32(4) of the MFMA, it is clear in the wording that the accounting officer must report UIFW expenditure to the MEC and as part of that, it must report if anyone is responsible and what steps were taken. This is how politicians are involved in corruption: management will be involved in corruption then report to the Executive Committee and the Executive Committee will not do any oversight or say anything about that corruption. It will go to Council and be defended at that level. There are Committees in place that Council must appoint and there is also MPAC. Politicians sit on the matters and sometimes scrap the UIFW expenditure. It is only when there are whistleblowers that the Committee is made aware of the corruption but it is politicians that made it possible by not doing their oversight. So there is a relationship between service providers, management and politicians. That is what the Committee wants to know from the reports. Next time the Committee must be told why municipalities did not report matters of UIFW expenditure and why it was not picked up by mechanisms that were meant to pick it up. Why was there no consequence management for those who did not do their oversight?

Mr Ceza said a corrupt-free government will never be achieved outside the tendering system because the municipalities’ dependence on external service providers is based on the pretext that says that municipalities should not have capacity to deliver on their services. Quality is compromised as a result of tenders. Inflated prices also come as a result of tenders. The undertaking of a corrupt-free and transparent government will not be found in the tender system. Chapter 11 of the MFMA, s10(1)(c) promotes the selection of contractors to provide municipal services. Otherwise, Chapter 8 of the Municipal Systems Act applies. Supply chain management is under ss112,111, 113,114. The Committee does not encourage s41 which speaks about capacity building and s34 says that the national and provincial government, by agreement, must assist municipalities in capacity building for efficient and transparent financial management. Under s2, national and provincial government must support the efforts of municipalities to resolve the financial problems. As a result of the tender system, corruption is perpetuated and people are recycled even though the legislature promotes capacity building. S57(1)(a) of the Municipal Systems Act, speaks to how a person implicated in misconduct will have a period that is set out to be employed in another municipality. Some of these things will really not see a corrupt-free government.

Ms Mkhaliphi noted the response of MEC Sibiya and said that the matter will be taken up when the Department is ready. She proposed that since KZN is returning on the matter of the floods, maybe the Committee can be furnished with the outstanding reports on the investigations that all departments say they are embarking on.

Closing Remarks
 
Premier Zikhalala said the KZN province welcomes all inputs. Some of the things are out of the province's control and everyone will have to work together to improve the systems. If one person who is being investigated jumps ship, and in the next period the person is found in a different sphere of government, there should be a system that will allow for action to be taken. The current systems do not allow for action to be taken if someone is out of the provincial office. If it is still in the same department, discipline can happen and it has been happening. The responsibility lies with everyone. The department will ensure that reports are brought to subsequent engagements. He thanked the Committee for following up on issues.

The Chairperson thanked the delegation on behalf of the Committee. Everyone is keen on getting closer to KZN because of the disaster and engaging the Minister of COGTA. The fear is that lessons learnt from Covid-19 should not repeat themselves. KZN is the third province to see the Committee and Premier Zikalala is the first Premier to interact with the Committee. He told the Premier to keep up the good work because Premiers are the face of government at the lower level and the Committee needs to ask the questions. He noted that as input is being received, the gaps from laws that have been passed by Parliament as to what needs to be done if a people jump ship will be closed without necessarily amending the laws. There are institutions such as the NPA, SIU and the Hawks and the Committee is monitoring the impact of their work in dealing with issues of corruption. So when questions are raised in terms of consequence management, it has been identified as a weakness in terms of execution. As engagements happen, everyone must note where there need to be improvements. He thanked everyone and the information given that assists in the understanding of governance and oversight. The beneficiaries are the people the Committee represents.

Meeting adjourned.
 

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