Northern Cape progress on Covid-19 Expenditure Audit

Meeting report

The Chairperson opened the meeting and informed Members that the meeting was for the Northern Cape province to address challenges raised in the Auditor-General’s (AG's) special report on the financial management of government's Covid-19 initiatives.

Dr Zamani Saul, Premier of the Northern Cape, introduced his team and repeated the purpose of the meeting. He asked if his office had submitted an apology to the Committee because he had to take his child to the hospital.

The Chairperson said that he was the person in charge of the province and if he wanted, he would have to delegate his duties to someone.

Mr K Ceza (EFF) asked if Members could start with the questions since some of the questions were specifically for the Premier.

The Chairperson said the Premier’s appointment was at 9:00am, and there was not enough time. He asked on what basis the questions would be asked since the presentations had not yet been done. The province's Executive Council was a collective and could therefore answer the questions.

Engagement with the Premier: alleged abuse of Covid-19 funds

Mr Ceza said that it was important for Members to acclimatise themselves by asking the Premier questions because if they did not, it would hamper accountability in the Committee. There were allegations that the Premier had been collecting money from Phokwane. He asked for an explanation of the allegations and action taken since councillors in the municipalities seemed "captured" by the Premier. The Committee had to go to the province; it should have been under administration, like North West province. The Premier had to account for the Covid funds.

The Chairperson said Members should raise issues instead of scolding the Premier.

Mr Ceza said that it was concerning that a municipality could not account for simple things such as Covid-19 funds. The Provincial Treasury seemed to have had difficulties monitoring personal protective equipment (PPE) procurement by the municipalities because they transacted on a fragmented management system. The last time the Committee met with the municipalities, the province promised to submit the necessary reports through the Premier, but the Committee had not received the reports. The province was ill-prepared, and such a situation was a haven for corruption. The Committee had to call the municipalities to account for the money spent on the programmes. The province had a situation similar to other dysfunctional municipalities. The Committee had not yet received the Special Investigating Unit (SIU) report either. He asked who was liable for the irregular expenditures. What was the turnaround period in terms of the people that had been investigated in terms of section 106 of the Municipal Systems Act?

The Committee had to visit the municipalities in the Northern Cape where irregularities were experienced to find the people liable for the irregularities. It also had to ensure that the section 106 report was shared with the public. It was unacceptable that the province had a situation where municipalities were suppressing information required by auditors unless there were senior political leaders involved. Law enforcement institutions had to give the Committee updates on the status of the investigation, and people had to go to jail for the wrongdoing. It was the same municipality heading for section 139(1c) of the Constitution. Such interventions were not to be used to misdirect the Committee from implementing the AG's findings. In terms of the provincial Department of Cooperative Governance, Human Settlements and Traditional Affairs (COGHSTA), the auditors had reported to the municipal manager of Ga-Segonyana Municipality their observation of fraud risk. The municipal manager (MM) had not responded on whether they agreed with the findings. What was the action that the Department of COGHSTA did in addressing the matter?

Ms D Direko (ANC) said that this was noted, and in future, when the provincial government came before the Committee, it would also invite the affected municipalities.

Mr C Brink (DA) said that in April 2021, the Premier had a press conference at which he allegedly stated that the R500 million support granted to the Sol Plaatje Municipality had come from the Covid relief fund. If that really did happen, the R500 million fell within the purview of the meeting. He asked for clarity on the matter.

Mr G Mpumza (ANC) raised a point of order. He wanted the Committee to follow the agenda and raise questions about the items on the agenda.

Mr A Matumba (EFF) said that if there were court proceedings for failure to do oversight, no one would be arrested on behalf of the Premier. That was why the Members had questions directly for him as the political head. The AG had reported that it did not receive any information on how the province spent the Covid 19-related resource. What had the province done to correct the non-compliance? As the political head of the Northern Cape, what did the Premier do to ensure compliance and consequence management for those who did not comply? What was his oversight role in Phokwane municipality? There were allegations that he was getting something from the municipality, so it was no surprise that he was running away from accounting for why nothing was being done in the province.

Ms Direko said it was not warranted to say the Premier was “running away” from the meeting. The Premier had managed to come to the meeting, and therefore it showed that he was not afraid of accountability. There were three spheres of government, and each sphere had a responsibility to play. Among participants was the Member of the Executive Council (MEC) of COGSHTA, who was working directly with the municipality and would be able to answer some of their questions. She asked if the Premier would be able to respond to the questions.

Premier's response

Dr Saul said that he had not known that he would be insulted by attending the meeting and by asking to be excused to go to the hospital with his child. He expected that he should be treated with respect when attending a meeting. He had been asked difficult questions before but respectfully and he also treated all the committees with respect. As a province, they were not delinquent when it came to accountability issues. He asked for the minimum level of respect and said he was not running away from anything. As a province, they had a fiduciary responsibility, and they had to account, and they were always going to come to give full accountability.

He said that the allegations made were very serious. Regarding the allegation that he was receiving money from the chief financial officer (CFO) of Phokwane, the Premier said that he did not even know who the CFO of Phokwane was, so there was no way that he was collecting money. Regarding the R500 million, the province had issued a statement informing the public -- no one had said that the province took Covid money to invest in social infrastructure. He had never said that, and it was the first time he had heard that. The province issued a statement on where the money was coming from and for which specific projects the money would be used. No Covid money was used for a social infrastructure intervention.

Ms Direko said that the Premier's apology was accepted, and any follow-up questions should be in writing to the Premier. She advised the Premier always to write a letter of apology and delegate if unable to attend a meeting.

Presentation by Northern Cape Province: Implementation of AG recommendations

Adv Justice Bekebeke, Director-General, Northern Cape Provincial Government, said that since most of the AG's findings had been directed to the SIU, the province had decided to direct the findings to the SIU. The province had moved from the reports and would present its work in response to the AG's findings. The AG had selected 43 municipalities in the special audit nationally, including the metros. In the Northern Cape, it was Hantam in Namakwa, Ga-Segonyana in John Taolo Gaetsewe (JTG) district, and Siyancuma in Pixley. The presentation would focus on the three and what the province had done.

In the presentation, the province provided information addressing the challenges raised by the Auditor-General. It highlighted the background, road map, time frames, and internal process and focused on the Northern Cape Provincial Treasury (NCPT) internal report and the challenges.

They reported that in terms of challenges, municipalities utilise different/fragmented financial management systems to transact on, which made it difficult to monitor procurement from a provincial level. Reliance had to be placed on information supplied by municipalities themselves. There was no pre-determined PPE classification for municipalities - this only came after July 2020.

A report detailing and highlighting variable areas of Covid-19 procurement spend was developed and submitted to the Premier and Portfolio Committee of Finance.

NCPT is currently implementing a revised and approved organisational structure to accommodate MFMA as a standalone program to support municipalities more effectively. The structure further intends to, by design, operate more agile to detect and respond to challenges in municipalities in a proactive manner. 

NCPT assisted municipalities in establishing essential governance structures such as Disciplinary Boards, MPAC, and SCM Bid Committees.

Capacity building initiatives are performed continuously to eradicate Supply Chain Management (SCM) non-compliance.

Budget processes are monitored and oversight is exercised through mid-year and final budget review sessions, facilitating tabling of credible budgets.

Municipalities assisted in developing credible audit action plans to address current findings and prevent recurrence.

(Please refer to the Northern Cape presentation for more details.)

Discussion

After connectivity had been restored, Mr Matumba commented that the rules of Parliament still applied in the Committee; therefore, the Premier had to send his apology before the meeting. The Committee had questions that required the presence of the Premier because he was implicated in the allegations, and they wanted to clear his name. He asked if the province had given a tender to a company under scrutiny by the Companies and Intellectual Property Commission (CIPC) for not paying tax returns since 2017. Regarding Phokwane municipality, what was the consequence management regarding the municipality after it failed to provide information during the audit? Was anything done to correct the non-compliance?

Mr Brink asked about the cases of irregularity that had been referred to the SIU and the internal audit. Which specific instances had been referred to the SIU, and could sufficient details be provided to help the Committee identify the cases in future meetings?

Ms E Spies (DA) asked what had happened to the 5 000 body bags since there had been fewer than 100 Covid-related deaths. What did the province plan to do with the rest of the bags? How many shuttles operated in the Hantam district in the pandemic, and how much had been spent in total? How much of the Covid-19 money had been spent in the municipality? What were the total amounts spent per town in the district?

Mr Ceza said the situation indicated that the Public Finance Management Act (PFMA) procurement processes had not been thoroughly followed. It raised questions about whether the oversight systems were strong enough in the Constitution and whether the audit committees had the necessary capacity to conduct their functions. The AG was time and again complaining about the same things, and the Committee was asking about consequence management repeatedly. The Committee wanted to see professionalised local government and recovery plans for misallocated expenditure. It was not a palatable excuse for the provincial treasury to say it was a big area since it was their area of jurisdiction.

Mr Mpumza asked the Department of Health why it had procured PPE at a higher price than the actual price. What did the provincial treasury do to overcome the difficulty of monitoring transactions of the municipalities in the Northern Cape?

Ms Direko said that the report had been ill-prepared and done just for malicious compliance. She had expected detailed compliance that would give the Committee an indication of what the Committee had requested. It was really disturbing because it was not the first time that the province had been told to improve its presentation. The province had agreed to submit the report on the Covid-19 funds and the list of beneficiaries and the amounts distributed because the Committee was not comfortable with some of the issues. The Committee needed to check if what had been provided had value for money. The Committee had not yet received the information, though the province had committed to providing it. It was important for the province to show that it could handle the funds for the people. Accountability needed to be the order of the day. The province also needed to show the deviation issues so that the Committee could see how the issues could be resolved.

Ms P Xaba-Ntshaba (ANC) referred to the Department of COGHSTA and asked why the municipal manager of Ga-Segonyana local municipality had not responded to the letter by the auditors after knowing that the municipality was prone to fraudulent risk?

Responses

Mr Bentley Vass, MEC of COGHSTA, also asked that the Committee invite the municipalities so that they could answer some of the questions.

Dr Moses Gasela, Chief Financial Officer, Northern Cape Office of the Premier, said the province was still waiting for the outcomes of the referrals. The Covid-19 expenditure on Hantam had amounted to R147 297. Regarding the different municipalities' systems, after the first report, National Treasury took over collecting data from the municipalities. National Treasury had a way to access the fragmented systems and collect the data, which was the mechanism that the province was using. In the long term, there was a plan to standardise the systems in the municipalities.

The province would provide the reports it had compiled to the Committee as soon as possible. The reports were readily available and were the same reports sent to the SIU, which had sufficient details. The province would supply the information about the deviations later not to mislead the Committee. Information would be compiled from the municipalities, and it was on the website so the public could see how the Covid-19 expenditure had taken place.

An official commented on the fragmented nature of the systems in the various municipalities and said the municipalities had discretion in sourcing financial systems on the market. The systems just had to meet a certain criterion, and the province did not have a part to play. National Treasury had a consolidated database -- the municipal standard charter accounts. The provincial treasury still assisted departments in terms of utilising the systems.

A department official responded to the question about what was being done by the province concerning the audit findings. The information had been sent to a disciplinary board. The board would look at the veracity of the irregularities that would be referred to the council to ensure that any person involved was dealt with. The municipal public accounts committees (MPACs) and the municipal council were the other structures that helped deal with the matter. The MPACs were officially placed in the Municipal Government Structures Act to the extent that they had specific functions and responsibilities. On 1 November, a list of municipal political party representatives had undergone several sessions, had been inducted as members, and were now established in the council and committees. The system for oversight was in place whenever there was a need.

Follow-up questions

The Chairperson commented that the province had not responded to the question on the matters identified by the SIU.

Mr Matumba asked for timeframes to make it easier to follow up. There was always a need for the reports before the presentations because the presentations were not as detailed. He highlighted the province had not responded to the question on the company that had not paid tax since 2017 -- what action was taken against the company? The allegations were that the Premier was close to the company.

Mr Brink asked about the Covid expenditure-related issues raised with the SIU and the progress on those issues.

Responses

Dr Dion Theys, Head of the Northern Cape Department of Health, said the Department had procured 5 000 body bags because it was a project of the World Health Organisation (WHO) and the National Department of Health. They had indicated that the death toll would be in excess of 20 000. The province had procured the 5 000 because it was unsure how the pandemic would pan out. The 5 000 bags were to make provision for 1 700 deaths because the policy was to triple bag anyone that had died of Covid. The province had done so to ensure that their health workers also came out alive. The province had achieved that by lowering the number of those affected by Covid compared to other provinces. Regarding the issue of gloves, the province procured the gloves at R2 higher than the normal price. There was a huge shortage of gloves in the country and those were the only gloves at that price.

Regarding the issue of the company that had not paid tax, the issue was still under investigation, and the province had not received anything from the SIU. The province did not know if the Public Protector had conducted its own investigation and whether it was linked to any political leadership. The SIU had only requested documentation from the province, and the province was also waiting for outcomes.

The province had conducted some changes in its supply chain processes. It had called internal audit to audit the supply chain units to give recommendations based on the findings. It had also made changes to the leadership of the organisation of the supply chain and had updated its policies across the Department. The province awaited a report from the SIU, which would trace the internal staff and based on that, it was going to lead to suspensions. Two issues had been identified with the SIU. One was where the previous HOD was suspended and was in court with CFO, and the internal disciplinary cases were still ongoing.

Adv Bekebeke said that the province had sent reports to the SIU, but no engagement had taken place. The province would forward anything it got from the SIU to the Committee to indicate how far the investigations had gone. He committed that as a province, he would ensure that a detailed report was sent to the Committee so it could make its own analysis.

The Chairperson suggested a two-week timeframe for all the reports to be submitted.

MEC Vass asked if the reports could be handed in in 30 days. He assured the Committee that it was serious about clean governance as a province. It was its priority, and it would ensure that it worked with all stakeholders to ensure consequence management. He also corrected the notion that the Premier had not sent in a letter of apology.

The Chairperson granted the 30 days so that the province could not have excuses. The Committee planned to visit the Northern Cape, but he was not too sure of the time to interact with the municipalities directly. He said that the way the meeting had started had not been the right way to start. Both parties were going to have to follow up on the apology letter from the Premier. There was a need to ask questions properly.

He thanked all those in attendance. He hoped all the gaps would be closed within 30 days. The AG and SIU findings would indicate if criminal actions would be taken. However, the focus was on the issues related to public servants' conduct, and it seemed no actions were being taken. They had to show they were serious about dealing with misconduct, and they needed to show collective efforts in dealing with such matters.

The meeting was adjourned.