Chairperson, I will speed this one up. The Select Committee on Finance undertook a follow-up visit to municipalities in the North West province from 12 to 14 October 2011. The purpose of the visit was to engage the identified municipalities on the progress made since the previous committee visit during 2010.
The main focus of these meetings was governance matters and issues identified by the committee on its previous visit. The follow-up visit was also meant to assess the extent to which relevant stakeholders co-operate with municipalities in order to accelerate service delivery.
The visit forms part of the committee's ongoing interaction with municipalities to monitor co-operation and co-ordination pertaining to the provision of municipal services and support given to municipalities by provincial and national departments.
Ten municipalities in the North West were identified to the committee for the revisit. The following stakeholders were invited to participate: The national Department for Co-operative Governance and Traditional Affairs, the North West Provincial Treasury, Salga, the Department of Energy, the Financial and Fiscal Commission, FFC, the provincial department of co- operative governance and traditional affairs, Water Affairs, National Treasury, the Auditor-General, the Development Bank of Southern Africa, DBSA, and Eskom.
The Auditor-General reported that there was a regression in the performance of the 10 municipalities. Regarding unauthorised, irregular, fruitless expenditure, the highest expenditure in these categories was unauthorised expenditure by the City of Matlosana Local Municipality, which spent R324 million. Irregular expenditure at Moses Kotane Local Municipality amounted to R128,8 million. The highest amount of fruitless and wasteful expenditure was at Tswaing Local Municipality at R1 million. National Treasury also submitted a report of what they are doing to assist municipalities.
On this visit, the Select Committee on Finance observed that there has been little progress made by municipalities and sector departments on issues raised by the committee since its last visit in 2010, except for Kgetlengrivier Local Municipality.
Expenditure at municipal level does not always correspond with service delivery outputs. Most of the municipalities have a problem with revenue collection and the amount billed for electricity costs is less than what municipalities are paying to Eskom.
Municipalities are not spending conditional grants in terms of the intended purpose. Some municipalities have just invested conditional grants, which delays service delivery.
Municipalities are outsourcing services, whereas there are officials employed to carry out those functions. Most municipal budgets are not credible.
The committee observed that in Tswaing Local Municipality the revenue collection rate was low, while the municipality had the potential to collect more than the current rate of 65%. The committee also observed that Tswaing Local Municipality had not spent its conditional grant funds, while the funds had been transferred to the municipality. Some government departments are in arrears with their municipal accounts and, in some instances, the debt is more than 90 days in arrears.
Maquassi Hills Local Municipality is currently incurring fruitless expenditure with regard to the suspended municipal manager. This included a legal cost and the salary of the municipal manager. This municipality's wage bill was also very high.
The delay in payment of municipal creditors is in noncompliance with the announcement by the President and the Minister of Finance that all invoices must be paid within 30 day of receipt, in order to avoid unnecessary penalties. Maquassi Hills municipality has an outstanding debt of R56 million with the DBSA and there are no arrangements for this repayment. Maquassi Hills Local Municipality had not responded to issues and findings raised by the Auditor-General.
This same municipality had not acted on the forensic report which was conducted by the Auditor-General and the investigation that was instituted by the suspended municipal manager. Instead, it suspended the municipal manager on the basis of unauthorised expenditure incurred in this process.
The majority of the municipalities were incurring unauthorised irregular, fruitless and wasteful expenditure. In most municipalities the usage of allocated funds is not always accounted for.
Ventersdorp and Mafikeng Local Municipalities should investigate with reference to the findings in the Auditor-General's report.
The Select Committee on Finance recommends the following: All the municipalities that were under section 139 of the Constitution should be provided with the reports of the administrators. Municipalities should do away with the outsourcing of services when there are officials that are getting paid to do the job.
In terms of section 154(1) of the Constitution and section 35 of the Local Government: Municipal Finance Management Act, MFMA, national government and provincial departments, by legislative and other measures, must support and strengthen the capacity of municipalities to manage their own affairs, to exercise their powers and to perform their functions. Therefore, all sector departments should provide full support to the City of Matlosana Local Municipality as it has serious challenges.
National Treasury should conduct a workshop on the MFMA with all municipalities whose budgets were not credible.
All municipalities should verify the correctness of disclosure of companies of councillors and municipal officials through the Department of Trade and Industry.
The committee noted investigations by the Special Investigating Unit in all 23 North West municipalities, but urges the unit to provide the public with a progress report.
The Ditsobotla Local Municipality should provide the Select Committee on Finance with names of officials who are doing business with the municipality. National and provincial Treasury should look at the leases that Ventersdorp Local Municipality entered into and determine the legality thereof. The MEC for co-operative governance and traditional affairs should investigate the matter of a service provider that collects debts on behalf of Ventersdorp Local Municipality and receives 80% of the collected amount and reimburses the municipality with 20% of the collected amount, as well as the possibilities of nullifying those contracts and the municipality taking action against those defaulted. The Ventersdorp Local Municipality should minimise the use of consultants when preparing annual financial statements.
Kgetlengrivier Local Municipality should consider taking the matter between themselves and the ratepayers' associations to court, in order to receive municipal rate funds that are being kept in a trust fund. This municipality should ensure the establishment of a supply chain management committee which should include the bid committee and the adjudication committee.
A progress report on the establishment of these committees and structures should be forwarded to the Select Committee on Finance within three months of the adoption of this report by the NCOP. The provincial department of co- operative governance and traditional affairs should develop a clear programme for the intervention in Mafikeng Local Municipality.
The Department of Water Affairs should facilitate a meeting between Moretele Local Municipality and all the effective stakeholders to deal with the debt of Moretele Local Municipality to the City of Tshwane and provide the Select Committee on Finance with a progress report within three months of the adoption of this report by the NCOP.
Moretele Local Municipality should also review the internal audit unit as it is reported to be understaffed and provide the required capacity so that it can improve its audit outcomes. It should also be ensured that the agreement signed with the City of Tshwane and the work done is within their budget to avoid defaulting on its liabilities.
Moses Kotane Local Municipality should improve its filing system, which has led to a qualified audit opinion by the Auditor-General.
Mamusa Local Municipality should review the whole system of their staff members being located at the Dr Ruth Mompati district offices, as this arrangement might have legal implications which will adversely affect the municipality. This municipality should also establish government structures that were being run from the district office, which include an audit committee and a bid committee, to assist in improving its financial management. They must also ensure the appointment of qualified staff and further interact with the Provincial Treasury and the Department of Co- operative Governance and Traditional Affairs.
With regard to Maquassi Hills, there are a couple of recommendations. This municipality should review and take a decision on the issue of the suspended municipal manager as his contract ends on 31 October 2012, which amounts to R750 000 of wasteful expenditure. Actions should be taken to avoid further engagements in legal battles that have already cost the municipality R700 000. This municipality must also work towards reducing the wage bill so that it is within the acceptable rate. It must also endeavour to pay all outstanding debts within 30 days and ensure that the necessary arrangements are made and honoured with regard to the major creditors.
This municipality should, within three months, organise a meeting with the DBSA, in order to make the necessary arrangement to pay the R56 million owed to the bank. The acting municipal manager of this municipality should ensure that all outstanding annual reports are tabled before March 2012. They should also forward an action plan on how they will address the findings of the Auditor-General.
Hon member, I don't know whether or not that is a point of order.
House Chair, we would just like to know if the hon De Beer will take a question.
Are you prepared to take a question?
No.
Okay, that's fine. He's not prepared to take a question.
Maquassi Hills Local Municipality should act on the forensic investigation by the Auditor-General and the one instituted by the suspended municipal manager as these two reports address similar issues. The council should deal with the issue of irregular expenditure separately, instead of using this as the basis for rejecting the report.
The oversight committee of the Maquassi Hills council should be established to deal with the audit report and fast-track each process in dealing with the reports on the forensic investigations and implement the recommendations of the Auditor-General. The council of Maquassi Hills Local Municipality should deal with its political instability in order for the municipality to be able to provide services to its communities.
The Select Committee on Finance will do a third follow-up visit to the municipalities in the North West before the end of term in 2014. I put this report before the NCOP. Thank you. [Applause.]
Debate concluded.
Question put: That the Report be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.