Adjustments Appropriation Bill: COGTA & National Disaster Management Centre briefing; with Deputy Minister

Meeting report

Adjustment Appropriation Bill

Deputy Minister's opening remarks.

Ms Thembi Nkadimeng, Deputy Minister of Cooperative Governance and Traditional Affairs (COGTA), said that the presentation on the Adjustment Appropriations Bill, as tabled by the Minister of Finance, was particularly important as the Minister had allocated R3.6 billion in the spending adjustment towards disaster relief, especially for the April flooding which had affected several parts of the country, but mainly KwaZulu-Natal (KZN), the Eastern Cape and the North West. She welcomed the opportunity to present to the Committee on the work that the Department had done in response to the recent floods that had happened.

Following the devastating rains, a state of national disaster was declared which considered the magnitude and severity of the damage caused and the need for government to augment existing measures that had to be undertaken by organs of state that dealt with disaster. The declaration also made it possible to mobilise support and resources through various interventions and mechanisms. The government had activated the disaster management response through government's National Disaster Management Centre (NDMC) across all spheres of government. The private sector was also involved -- and welcome. Civil society, in the same spirit, had complemented the provincial disaster teams at the face of the affected areas.

As part of the presentation, the Department would try to bring the Committee into its confidence about the funding requirements for the reconstruction and rehabilitation of both the public and private infrastructure damaged by the floods. It would also look into how severe the impact was on the lives of the people and their livelihoods, and disastrous results which resulted in drownings, landslides, power outages, water shortages and, in some instances, roads being cut off, flooding and the various forms of infrastructure.

The Department had managed to respond to the flood by implementing three overlapping phases, which were humanitarian assistance, stabilisation and recovery, and rehabilitation, reconstruction and recovery, focusing on building better. The same was done in the context of the District Development Model (DDM), which was the inter-governmental relations (IGR) framework as government.

COGTA & NDMC Presentation

Ms Avril Williamson, Director-General, COGTA, said the 2022 Adjustment Appropriation Bill provided a net addition of R3.65 billion to the Department's allocated budget. It had therefore increased from R111.4 billion to R115 billion. The majority of the allocation was dedicated towards the flood disaster and recovery rehabilitation, and it was notable that over R3 billion had been allocated to the NDMC for the reconstruction and rehabilitation of damage caused by the floods in KZN and the Eastern Cape. R345 million was allocated to replenish the new municipal and provincial disaster response grants, and R289 million was also allocated to reconstruction and rehabilitation of municipal infrastructure in the Western Cape.

She said that programmes originally earmarked for the Department had received a rollover of R5.835 million from National Treasury. The Department had projected to spend 95% by the end of the second quarter, but had spent only 43.1%, with the greatest spending being in institutional development and also in the administration area. The funds were earmarked in relation to all the transfers they were required to do. The Department had projected an 89.3% performance for expenditure and transfers, but had achieved 36.6%.

The Department had received 5 671 invoices from suppliers for payment, and had settled all within 30 days, except for one that was paid on the 31st day.

Dr Elias Sithole, Head: Disaster Management Centre, said that the nine provinces had spent only 14.23% of the Municipal Infrastructure Grant (MIG), with Gauteng and the North West having the lowest expenditure of 5.12% and 6.81% respectively. Of the 218 municipalities, 88 had failed to spend at least 10% of their allocated funds by the end of the second quarter, and 22 of those 88 had spent none of their allocated funds as at the end of September.

Dr Sithole said that several reasons had been identified as the reasons for the under-expenditure/non-expenditure, such as supply chain management (SCM) delays, late registration of projects, and community protests resulting in the stopping of projects. The Department had made efforts to improve the grant’s performance, and municipal interventions were carried out regularly. These interventions included visiting projects with implementation challenges and agreeing on actions to improve performance. Where there were issues with planning, the Municipal Infrastructure Support Agent (MISA) was able to assist municipalities. Where there were SCM delays, municipalities were requested to develop and share their SCM plans.

The Integrated Urban Development grant (IUDG) was an application and performance-based infrastructure grant, meaning that municipalities that wanted to participate in the grant needed to submit an application and meet certain minimum requirements. To date, eight intermediate city municipalities have been participating in the IUDG. Overall, 32% of the allocated funds from the grant had been spent by the nine municipalities by the end of the second quarter.

As a result of the floods, the Department suffered unforeseen and unavoidable expenditure, which resulted in funds being used to help municipalities that had been affected. The Department had also requested the replenishment of the municipal disaster grant, which had already been exhausted.

Dr Sithole said that National Treasury had approved an amount of R3.6 billion for reconstruction and rehabilitation and for replenishment of the Disaster Recovery Rehabilitation Fund. All of the money that had been allocated by the grant had been spent in KZN and the Eastern Cape in five phases. The first two phases were allocated to KZN, the third to the Eastern Cape, while the fourth and fifth were dedicated to KZN.

He said that MISA in KZN had been offering technical support to the province's municipalities by providing seven engineers before, during and after the floods. On 18 April, an additional nine professionally registered MISA engineers, with two drones, joined the MISA technical support team. The MISA team of 16 engineers and other engineers from KZN COGTA, the Development Bank of Southern Africa (DBSA), and the Free State and Western Cape provinces had completed assessments for flood-damaged municipal infrastructure in all KZN district municipalities.

Only 11% of the total Disaster Response Fund had been spent. However, there had been engagement with the chief financial officers (CFOs) to ensure that expenditure speeded up. The Department had identified several challenges that were causing the lack of proper expenditure, such as capacity and capability constraints within the disaster management fraternity across the three spheres, unavailability of some provinces for onsite visits, and non-invoking of the emergency procurement system, resulting in delays in the implementation of projects and expenditure.

Some of the activities being undertaken by the Department to address the identified challenges included the activation of project steering teams constituted by relevant stakeholders for monitoring, reporting and interventions. The Department had also scheduled onsite visits through provincial project steering committees for monitoring and support for the implementation of projects, while the NDMC continued to undertake onsite visits to the provinces.

Discussion

Mr Z Mlenzana (ANC) said that the transparency detailed in the report was the kind of transparency that the Committee had been looking for. There was no appetite by the South African people to service its own community. It could not be that there was a situation where there had been no expenditure at all, meaning that there had been no movement at all, and one could not even begin to talk of under-expenditure. It was literally non-expenditure.

He said a modus operandi that the former Minister introduced had directed municipalities that once they had adopted their budget, informed by their integrated development plan (IDP), to develop the service delivery and budget implementation plan. Such a plan would then begin to put in all the facts and challenges that the Department was raising. All the municipalities identified as non-spending or under-spending had packages called performance bonuses, and it was questionable why and how performance bonuses were being issued to non-performing individuals or departments.

Mr Mlenzana said that the reason would be that there were no checkups - the council would only endorse, but it did not receive or approve the quarterly expenditure trends.

Mr A Shaik Emam (NFP) commented that the Department had taken a year before they could come back to him on the information he had requested in October of 2021. They were a "reactive Department, not a proactive one." A lot of what was being attended to currently were in fact issues that they should have picked up prior to the collapse of the infrastructure.

He was certain that many members of the Department would have been driving around all the local government municipalities watching people living on river banks, knowing that South Africa was prone to flooding, particularly in KZN and the Eastern Cape, but did not deal with the situation despite seeing it as important. The Department did very little to hold accountable those responsible, to ensure a proactive approach to dealing with such disasters and ensure that they had been spending money, particularly on infrastructure. This has resulted in the current situation where government was forced to rehabilitate things that may be beyond the point of rehabilitation.

He asked what the Department was doing to ensure that there were high governance standards in all structures of government, which he said was very little. Perhaps the Department should be telling the Committee about the successes they have achieved over the years. The Committee was tired of listening to the promises being made while very little effectively was being done to change anything. Corruption was rife, there was no value for money, and people were getting away with murder -- all in full view of organisations like the South African Local Government Association (SALGA) , COGTA, and many others.

 

He admitted that there might only be so much that the Department could do, but it could also talk to other stakeholders to improve and put more measures in place to deal with the issues arising.

Mr Shaik Emam asked the Department to provide all the names of the companies that had been awarded contracts in the whole of KZN, the value of the contracts, whether the contracts had been finished on time, and a breakdown of the items. One of his major concerns was the quotation system, where a project under R500 000 did not need to be put out to tender. He wanted to know who the companies getting such contracts were, and whether they were finishing the jobs timeously. Were the companies getting these contracts the same ones that were being awarded government tenders?

He asked the Department what measures they were putting in place to ensure there was greater coordinated contact with the people on the ground owning the strategic plan, and if they would be able to talk to the municipalities in a language that all of them understood. When would the measures be put in place? Could the Department do something to ensure that there was greater compliance?

Ms D Peters (ANC) said the Committee was grateful for the detailed but depressing and frustrating presentation -- depressing and frustrating in the sense that there seemed to be no appetite in local government leadership, especially from the side of mayors and their mayoral committees to monitor and ensure that the outcomes from the resources they were being given were positive, in particular those affecting the lives of those who lived in the area that was under their care.

It did not seem that the historic issues Mr Mlenzana had raised were being attended to. In her view, MISA had always been there, but the municipalities seemed to be struggling and getting worse. She wanted to know from the Department if they did not want to be associated with success. Why did they seem to be accepting the unexpected and unforeseen lack of expenditure, and did they feel proud to see municipalities that were failing increasing under their care?

She wondered whether there was any engagement at the political level between the deputy minister and Minister with the Members of Executive Councils (MECs) concerning the financial issues and the performance of municipalities. She asked what the relationship between COGTA and the other departments was. There was an article recently that the South African National Roads Agency SOC Ltd (SANRAL) had bungled 23 contracts intended to rehabilitate flood-damaged infrastructure in KZN. What was the Department doing, and was the ministry and particularly the Department of Transport involved in some of the discussions related to the disaster in KZN? She failed to understand how it could take an agency of state three attempts to get contracts out for such important infrastructure. The infrastructure would have allowed for growth in KZN, because the roads affected by the floods were still closed as they were not safe. It had a bearing on the transportation of goods and services and people, but it did not look like there was any urgency on the part of SANRAL. She understood that if COGTA was involved, they would be able to resolve the particular issues.

Another issue was the bickering between the national and provincial departments about the quality of the submissions and the non-submissions when the provinces were saying that they did not receive the money, and the national department responded that they had not received the requests. Ms Peters wondered what request National Treasury needed when the damage was evident and they needed to be proactive. She shared the frustrations of Mr Mlenzana and Mr Shaik Emam, in that value for money from local government and COGTA was rare. She was wondering what they were doing to ensure that local government was able to deliver to the citizens. There needed to be an agency within the Department to ensure services were being delivered.

Mr N Kwankwa (UDM) wished the presentation could have been made before Parliament for debating instead of the Committee, where there would be ample opportunity to do political posturing, particularly on matters such as the ones being raised. Where the municipalities were unable to spend funding that had been allocated to them, one wonders what the mayors and mayoral committees were doing if they were not grappling with the issues on a daily basis. Looking at the level of expenditure of the municipal infrastructure grant and looking at the reasons for poor spending, there was a need to identify the challenges. This would make it easier to manage and track the challenges certain municipalities face in certain regions, and the interventions required. The explanation given by the Department on the under-spending should extend to stating how many municipalities had SCM delays, delayed projects, and poor performance of contractors and what kind of interventions had been made to address those issues.

He was also concerned at the erratic disaster response grant spending, which varied between 0% and 100%. The issue was whether the spending was quality spending, in line with the concern raised as to whether there was value for money. Would the Department be able to indicate whether the projects were completed on time, and whether the output was in line with what was expected after one had spent taxpayers’ money. He was concerned that there did not seem to be a consequence management approach in instances where people did not spend money.

Mr Kwankwa said wherever one went, especially when it came to the emergency response grant, there were complaints about red tape and the stringent conditions imposed on the release of the grants. He asked whether the Department discussed such issues when interacting with the various municipalities. Did they try to lighten the load or reduce the red tape?

Mr O Mathafa (ANC) asked how close COGTA was to the particular strategy highlighted by the National Treasury regarding municipalities under financial and service delivery distress.

He asked COGTA whether its mandate of monitoring and evaluation was proactive or reactive -- were they able to detect challenges, or did they wait and report after the fact? If the Department of Monitoring and Evaluation found challenges, what could COGTA do to assist these municipalities? When it picks up slow spending before the year concludes, he wondered whether there were measures which could be put in place to ensure that they were implemented.

Was there a view within COGTA, or the municipalities and provinces, that each and every municipality or province should have a budget committee whose main duty would be to monitor its budget allocations against the spending and the assets that were supposed to be developed through the spending?

Mr X Qayiso (ANC) agreed that the presentation was one of the most depressing performances they had come across as a Committee this year. He wondered whether COGTA was happy with the performance they had presented. He wanted to know from the DG how many senior officials had received performance bonuses as far as the report was concerned, and if the Department was satisfied -- after having rewarded them with performance bonuses -- with what was being presented as non-performance. It would be terrible if someone was awarded a bonus without doing anything.

It was now up to the Committee to identify all the "zero" local government municipalities. Those performing between 0 and 25% definitely needed to be prioritised for oversight visits, so that the Committee itself had a practical sense of what was happening. This was in addition to the detailed report from the Department. Issues of under-spending seem to be recurring, but this time the Committee needed to be practical by going to these municipalities and doing oversight themselves, and then deciding what should be done. The presentation revealed a very bad state of COGTA.

He also wanted to know whether there were services which had been outsourced which could have been handled by government departments. If so, to what extent had the outsourcing overtaken the work of the Department?

Mr Shaik Emam said that the Deputy Minister had indicated last year that she was going to give the Committee a report on all the defaulters, repeat offenders in the different municipalities, and a list of particular service providers that had been failing to deliver on time. He asked for an update on that report.

Mr Qayiso said it would only be proper for the Committee to get a breakdown of the specific towns or local municipalities where non-spending had occurred, to avoid generalisation.

The Chairperson congratulated the Department on the prompt payment of service providers within 30 days. He referred to slide 10 of the presentation, which depicted the reasons for under-spending or non-spending. It was important to note that it was not COGTA responsible for some of the reasons, but that it was painting a picture of what was happening in local government. However, this did not mean that COGTA did not have a role in local government, because the cited reasons were the same ones being mentioned each year. The Committee was not hearing the interventions of COGTA to improve the situation, because they were going to meet again next year and would be looking at the same reasons. It seemed like they were good at identifying the reasons but not providing solutions.

Most of the things being talked about as reasons were issues that were controllable variables. The reasons for poor spending were basic management responsibilities. He wondered what the Department was doing to try and correct the issues being cited as the reasons for under-spending, and when the Committee could expect to see the results of the intervention.

He urged Deputy Minister Nkadimeng to agree that the problems of local government was not money, because, despite being given more allocations, the money was not being spent. Where the money was not being spent, there was no value for money, which was evident from the audit outcomes of local governments through qualifications or complete disclaimers, and showed a lack of accountability to implement corrective measures. What was being done when people were found doing wrong things? What was more concerning was the under-spending of the emergency grants that were supposed to be used to help the people affected by disasters, but due to bureaucracy or red tape citizens were unable to receive certain services. He asked what was difficult for the Deputy Minister, the Minister or the responsible Deputy Director-General (DDG) to call the mayor or whoever was responsible, and sit down and discuss measures that would ensure that municipalities were complying with what the national government wanted.

 He was concerned that most under-spending was related to infrastructure input for both the government and the private sector. Infrastructure had been identified as something that would help government ignite the economy so that there could be more resources that went into creating more opportunities for the people. There seemed to be a lack of understanding of the impact of infrastructure on the economy.

He asked how many of the municipalities that reflected zero spending by the end of the second quarter were persistent under-spenders, and what had been happening with their infrastructure. How prevalent was the delayed registration of the projection by municipalities allocated funding by the Municipal Infrastructure Grant (MIG)?

COGTA's response

Deputy Minister Nkadimeng said that she understood and acknowledged the frustrations of the Members of the Committee. They were hitting home, but they needed to understand that the constitution vests the legislative and executive authority of municipalities to councils. The Director-General would elaborate how often they meet with the municipalities on all issues, not only disaster management, to resolve some of the issues being highlighted. The fact of the matter was that the law did not allow COGTA to implement on behalf of municipalities. They were stretching the MISA beyond their legal mandate because the Department wanted to assist municipalities beyond the development of infrastructure. A municipal discussion was needed to take a totally different look at a revamp of the system, because no one had anticipated that municipalities could actually be so low in terms of capacity building.

She said that none of the Members had spoken about instability, where COGTA officials were chucked out of municipalities when they went there to offer support. Before a disaster within a municipality, the Department tried to assist, together with National Treasury, to develop the plans, approve them, and disburse the money. The Department was assisting in records and asset management for municipalities, and was involved in training together with SALGA to capacitate their personnel.

The turnaround time for a municipal manager in the municipalities at most was 31 months, while in metros, it was 15 months. There was a lack of control when one had to capacitate and recapacitate, but the Department had no control over what could be done about that. COGTA oversees, capacitates and empowers.

She admitted that a different approach was needed regarding how municipalities were managed. In response to Mr Mlenzana, she said that COGTA monitored -- from the IDP to those plans which were attached to the performance agreements of municipalities which the councils must oversee. They had currently enacted and made it mandatory for performance agreements to be cascaded down to middle management, and this had been enacted into law. The municipal manager was supposed to oversee, and council was supposed to oversee the municipal manager.

Deputy Minister Nkadimeng, in response to Mr Shaik Emam, said the Department did not receive section 71 reports which provide a breakdown. Nonetheless, she had written back and provided the answers on the issues and what they could do, to the Chairperson on 2 November.

She confirmed that those who had underperformed were formally undergoing disciplinary processes. They monitored the performance of the various departments, and if they failed to improve, they would go through the entire consequence management process if necessary. She was not promising they would improve,  but rather that COGTA would take the necessary steps.

Deputy Minister Nkadimeng said that they did not have skill problems in the Department. The vacancy rate was not excessive, and they had highly skilled people in their ranks. The issue was whether they were all clear that the failure to perform impacted the lives of ordinary South Africans. If that was the issue, the Department would take necessary steps to improve its performance.

As consequence management, National Treasury agreed with terms developed recently and the Department issued a memo to all Mayors on how to make budget adjustments, what it was going to assist them with, and the timelines within which the budget adjustments needed to be done so that they did not lose money for projects that they were committed to. Ordinarily, some councils would inform the Department that they were overreaching, as the budget was the responsibility of council.

On MISA, the Department was ready to give the Committee a breakdown that went beyond the municipalities on the three areas of floods, but currently, MISA even deployed engineers who were hired to assist municipalities in dealing with the assessment plans. Some municipalities had taken the Department to court for overreaching.

She highlighted the state of the provincial disaster committees concerning disaster management. She said that some of the municipalities did not have the infrastructure to make them ready to respond to the issues.

In response to Mr Kwankwa, she said that they were able to detail the finances and low spending because the Department aligned with Section 52 in every quarter. They assess and meet with municipalities. COGTA had the Department of Public Service and Administration (DPSA) to further assist municipalities in this regard, but it depended on whether the municipality had the staff, among other factors. Her take on capacity building was that one could take the horse to the water but not make it drink. There was a need for laws to be made to at least give the Department some control. It was trying to enforce the DDM, which was a framework that assisted in line with the IGR. However, some municipalities had written back to them stating that they would not be doing development plans -- it was overreach and they would plan the way they wanted. There were two municipalities which had refused. while others had said they did not have capacity.

National Treasury could be brought on board when it came to oversight, but there was need for a paper trail that detailed the money that had been disbursed to a city, and why. This was why the Department had brought MISA to all the municipalities that were getting stuck, to assist them with their assessments. The flood disaster had been declared in the middle of April, and COGTA's first response had been in June, which information was contained in the report. This was too long, but they were looking into mechanisms to shorten the process -- and it was not like they took a year. They provided the details of the amounts paid to the municipalities and when.

In response to Mr Mathafa, she said there were 64 dysfunctional municipalities, but they had made a great impact in concretising medium to low risk municipalities and ensuring they did not become dysfunctional. National Treasury had picked 43 out of the 64 municipalities with dysfunctional plans. This had been done jointly with COGTA to ensure that they monitor and share the report with the Ministry which they were mandated by law to get as custodians of finances. COGTA's structure was not designed in a way that it could deploy people to all the municipalities.

She said that, as a Department, they were not happy with the presentation, which was why senior management members stayed in the municipalities, not because the President was there.

The Department had, through MISA, educated municipalities on how to collect waste, and had created a community recycling and buy-back system. The Department of Environment had been providing machinery to some of the municipalities. They could not collect everywhere, however, and had to be selective.

She told Mr Shaik Emam that the Department was able to give a breakdown of all the defaulters, repeat offenders in the different municipalities and the list of particular service providers that had been failing to deliver on time.

Deputy Minister Nkadimeng said that overall they ensured that the plans of COGTA and the municipalities were in one room to cascade them and ensure there was a fast-tracking of implementation and support. This was beyond the support provided by a Section 154 or 139 normal intervention, where the COGTA would walk into municipalities and assist them in recovering.

She would also love to present something that looked better than what had been presented to the Committee, but they were currently facing challenges. COGTA was working on what they were able to do, but they needed collective efforts to change the municipalities.

Mr Pieter Pretorius, DDG: Corporate Services, COGTA, said that in the previous financial year, the Department had paid bonuses to 29 officials, which was 6% of the Department's total establishment. Eight were senior managers, while the remaining 21 were from levels 1 to 12. In the current financial year, there would be no bonuses payable.

Chairperson's concluding remarks

The Chairperson said that he could hear the pain of the Deputy Minister at the situation in local government and the municipalities. It was quite clear that between local government and the Department, there were still provincial governments that had their own COGTAs. As Members had noted, things were not happening at the local government level. He assured the Deputy Minister that when it came to being constrained by the law at the local level of government, everyone across political lines was frustrated. There was no need to politicise the issues being raised because different political parties were governing municipalities across the board, but when they met, they shared the same frustrations. Parliament was always willing to review the laws to ease the executive's work in service delivery.

The Chairperson said the challenge at local government level seemed not to be issues of money, because money was appropriated but then either not spent or not accounted for.

The meeting was adjourned.