STATE OF MUNICIPALITIES DEPARTMENT OF LOCAL GOVERNMENT WESTERN CAPE

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STATE OF MUNICIPALITIESDEPARTMENT OF LOCAL
GOVERNMENTWESTERN CAPE

• SELECT NATIONAL COMMITTEE ON LOCAL GOVERNMENT AND
  ADMINISTRATION
• NCOP
• 7 SEPTEMBER 2005

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Overview of the presentation

• High level financial state of municipalities
• Results of provincial capacity audit
• Readiness to implement the MFMA
• Project Consolidate Municipalities and focus
  areas
• Levels of service delivery, backlogs and
  implementation of free basic services
• Housing accreditation
• Achievements
• Challenges

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High level financial state of municipalities

• General strengths of Western Cape municipalities
• All 30 municipalities submitted financial
  statements for the 2003/04 financial year
• 11 out of 30 reports of the Auditor-General were
  unqualified
• Analysis of financial statements indicated
  positive solvency ratio in most municipalities
• 27 Municipalities are in in favorable position to
  meet all its current commitments and recovery
  plans are currently being implemented at the
  remaining 3 with very positive results
• In general sound financial management systems are
  in place but there will always be room for
  improvement

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High level financial state of municipalities

• Staff costs of all municipalities expressed as a
  percentage of operating expenditure generally
  falls within national treasury guidelines
• All municipalities have council approved credit
  control policies that include provision for
  indigent households
• Credit control policy and its implementation is
  compulsory in terms of MFMA
• Implementation is currently monitored on
  quarterly basis with indication of debt recovery
  rates
• Survey was done to determine support needed with
  credit control and various best practices were
  shared between municipalities

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High level financial state of municipalities

• General weaknesses
• 18 Qualified Audit reports for the financial year
  ending 30 June 2004
• Qualifications mainly focusing on
• the increasing level of outstanding debtors and
  insufficient provision for bad debts due to
  budget constraints
• More provision in current budgets due to
  implementation of MFMA
• Best practice credit control policies are being
  shared between municipalities
• Internal audit deficiencies
• Challenge for rural municipalities due to
  unavailability of sufficiently skilled members of
  the public to serve on these committees
  department encourages municipalities to establish
  a committee on a district municipal level and to
  then share the committee
• Accumulated funds and reserves in general not
  fully cash backed

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High level financial state of municipalities

• Debt levels and revenue collection
• Total amount of outstanding debt of
  municipalities in the Western Cape is 5 billion
  of which 4 billion is owed to the Metro
• All 30 municipalities have council approved
  credit control policies that provide for indigent
  households (see previous slide for monitoring and
  support by department)
• The average debt recovery rate of municipalities
  is currently under 100 and they need to improve
  their credit control systems by assigning
  sufficiently dedicated skilled personnel to
  implement their policies

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High level financial state of municipalities

• Debt levels and revenue collection
• Although good progress is made, the level of
  outstanding debtors over 120 days is rising from
  year to year and poses a threat to the financial
  ability of municipalities to deliver services at
  optimum levels. This is mainly due to
• Lack of sufficiently dedicated staff
• More aggressive measures of municipalities to
  apply effective credit control are being
  influenced by increasing levels of unemployment
  and poverty
• New infrastructure for services with static
  revenue base, equitable share not flexible over
  medium term to cater for this.

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High level financial state of municipalities

• Debt levels and revenue collection
• Municipalities are being supported with the
  installation of pre-paid meters, credit control
  policy guidelines and the sharing of best
  practice credit control measures
• Department also developed indigent policy
  guideline that was submitted to the national
  Department as input into the development of a
  national guideline on an indigent policy that
  they are currently working on

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High level financial state of municipalities

• General expenditure patterns
• Municipalities are becoming more and more reliant
  on external grants to finance their capital
  expenditure on municipal infrastructure
  development
• Demands for new infrastructure have increased,
  while revenue bases have remained static
• Operational expenditure also take up bigger
  portions of budgets due to increased staff costs
  and more responsibilities in terms of national
  and provincial programmes being
  delegated/assigned to municipalities
• MIG do not provide for the maintenance of
  municipal infrastructure
• Department is supporting municipalities to
  develop and implement LED strategies
• Also support to compile better quality IDPs with
  long term vision to cater for this challenges

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High level financial state of municipalities

• General expenditure patterns
• Analysis of financial statements for the 2003/04
  financial year indicated that on average a budget
  performance of only 63 for the Metro and 75 on
  average for non-metro municipalities could be
  achieved on capital expenditure, mainly due to
  capacity constraints in their technical
  departments .
• Department is currently finalising a capacity
  audit of all municipalities to determine the gaps
  and to develop a strategy to address this

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High level financial state of municipalities

• Key preliminary findings of capacity audit
• Growing need for skills, expertise and experience
  in local government (Governance, Integrated
  Planning, LED)
• Lack of financial skills
• Quality of IDPs - sector alignment and
  integration
• Access to additional funding for infrastructure
  development
• Institutional Management of Ward committees and
  CDWs
• Housing Mandate and the role of municipalities
• Interpretation and understanding of national and
  provincial policies and programmes
• Participation of local government in national and
  provincial policy making

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High level financial state of municipalities

• Departmental interventions to address capacity
  challenges
• Draft strategy will be completed by September
  2005
• A mentoring/coaching programme will be developed
  and in implementation by December 2005
• Technical support programme will be developed and
  in place by December 2005

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Readiness to implement the MFMA

• Implementation of the MFMA is being monitored by
  the Provincial Treasuries
• Western Cape municipalities were categorized as
  follow for MFMA implementation
• High 8, Medium 18, Low 4
• Provincial wide workshops were held with
  municipalities to capacitate them on
  implementation
• Training was provided by the National Treasury on
  the budget processes

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Readiness to implement the MFMA

• Extensive training and support are provided by
  the provincial treasury on the compilation of
  financial statements and supply chain management
• A provincial implementation unit was established
  to monitor implementation and to determine
  support initiatives by provincial Treasury
• Municipal finances are monitored on a monthly
  basis by provincial treasury

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Readiness to implement the MFMA

• A provincial Municipal CFO forum was established
  by the provincial treasury and will be launched
  on 9 September. The main objective of this forum
  will be to build the capacity of municipal
  financial personnel with best practice sharing,
  etc
• The challenge will however remain for
  municipalities to attract and appoint
  sufficiently skilled financial personnel to
  perform these functions

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Project Consolidate municipalities and focus
areas

• Project Consolidate municipalities
• City of Cape Town ( Khayalitsha and Mitchells
  Plain)
• Matzikama
• Cederberg
• Witzenberg
• Kannaland
• Theewaterskloof
• Beaufort west
• Laingsburg
• Prince Albert
• Central Karoo (Murraysburg)

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Project Consolidate municipalities and focus
areas

• Focus areas that are being addressed in Project
  consolidate
• Initial service delivery hot spots that were
  identified are being addressed with capital
  projects
• Capacity building action plans are currently
  being finalised to support identified
  municipalities with the 5 national KPIs of
  Project Consolidate (Transformation and
  institutional development, financial viability
  and management, basic service delivery
  infrastructure, LED, good governance)
• Service Delivery Audit was conducted to confirm
  data and to align the hot spots within Project
  Consolidate areas
• Training of 400 CDWs is currently taking place
  with the aim to place a CDW in each of the
  Project Consolidate municipal wards

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Project Consolidate municipalities and focus
areas

• Focus areas that are being addressed in Project
  consolidate
• A Public participation conference was held to
  build the capacity of municipalities and
  everybody who attended committed themselves to
  roll out effective public participation in their
  areas
• A provincial capacity building strategy is
  currently being finalised and a
  mentoring/coaching programme will be in
  implementation by December 2005
• Departmental IDP unit with the support of the
  PIMS are providing dedicated support to these
  municipalities to improve the quality of their
  IDPs
• National Dplg was supported to develop a national
  action plan to support identified municipalities
  to implement anti-corruption strategies with the
  assistance of a national appointed service
  provider

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Levels of service delivery, backlogs

• Service delivery Audit was conducted by the
  Department during June and July.
• The audit revealed that there are a number of
  communities where basic services are not being
  delivered. These have been classified as red
  flags and usually relate to the lack of water
  and sanitation services.

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Levels of service delivery, backlogs

• The following interventions were approved by
  Cabinet
• Implementation of basic services projects in
  Project Consolidate municipalities (already in
  progress)
• In-depth investigation of all red flag issues in
  non-Project Consolidate municipalities, with
  implementation of action plans commencing on
  selected projects
• Visit by MEC for Local Government Housing to
  three municipalities , announcing specific action
  plans in those municipalities
• Implementation of all action plans to be
  completed by end of November
• Establishment of a City-Province task team to
  facilitate development processes
• Engagement with municipalities over development
  of communication strategies
• On-going monitoring of red-flag issues.

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Implementation of free basic services

• All municipalities in the Provinces that have the
  specific function provide free basic water,
  electricity, sanitation and refuse removal to
  their indigent households that are linked to the
  grid/ infrastructure
• The challenge however will remain to expedite
  these services once the necessary infrastructure
  is developed, Department is influencing the MIG
  funding at municipalities to enhance this
• Department will also embark on project in
  partnership with Department of Water Affairs and
  Forestry to facilitate agreements between
  municipalities and farmers to ensure that free
  basic services are provided to farm workers

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Housing accreditation

• At a Heads of Housing Departments meeting on
  14-15 October 2004, it was agreed that each
  provincial Housing Department would enter into
  negotiations with relevant metros or large
  municipalities around accreditation.
• City of Cape town was identified as a pilot and
  indicated their interest in accreditation in
  writing
• A task team was established by the City and the
  Department. Was agreed that further work should
  be done, with the City assessing its capacity to
  carry out various functions arising from
  accreditation and the Province assessing the
  budgetary and staffing implications.

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Housing accreditation

• The process has slowed down considerably, due to
  the framework for accreditation not yet been
  finalised
• Difficult to engage in detailed discussions in
  the absence of such a framework.
• The Department has been actively participating in
  the process of developing a national
  accreditation framework and has asked that a
  number of its concerns be taken into account in
  the framework.

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Housing accreditation

• The most significant of these is the need to
  ensure that Province and national government are
  able to prioritise investment in human
  settlements according to the NSDP and PSDF.
• Apart from the City, there are no other
  municipalities in the Province that have
  indicated an interest in being accredited, but
  the Department will engage with these
  municipalities once the accreditation framework
  is finalised.

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Departmental achievements

• A guideline indigent policy document was
  developed and submitted into the national policy
  development process
• Very effective specialized support is being
  provided to municipalities that are experiencing
  financial difficulties with very positive results
• 100 of the total MIG allocation to the Province
  is spend annually
• A very successful public participation
  conference was held to enhance public
  participation on a municipal level

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Departmental achievements

• Training of 400 CDWs is currently taking place
  with the aim to place a CDW in each of the
  Project Consolidate municipal wards
• Very successful provincial Treasury/Local
  Government and Housing engagement with all
  municipalities on IDP/Budget alignment
• Relationship established between Provincial
  Treasury and Local Government and Housing on IDP
  engagement and support to be provided to
  municipality.
• Successful IDP hearings started a dialogue
  between provincial government and municipalities

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Departmental achievements

• Successfully managed the following incidents
  Drought, informal settlement fires, Swine fever,
  April floods in Overberg and Asian flu
• A disaster management Satellite communication
  system was installed at all municipalities
• Completed a draft provincial disaster management
  framework
• Established a Provincial disaster management
  Centre at Tygerberg Launch 15 December 2005

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Departmental achievements

• All three spheres working together on first
  breaking new Ground housing policy pilot N2
  Gateway
• Working with Umsobomvu Youth Fund in Drakenstein
  municipality to create jobs with housing projects

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Departmental challenges

• Establishing of a effective monitoring and
  evaluation system to establish pro-active
  supporting initiatives
• Effective and ongoing refocusing of department as
  new challenges arise
• Alignment of national, provincial and local
  priorities
• Lack of skilled and sound political and
  administrative leadership at municipalities
• Lack of long term visions at municipal level
  quality of IDPs

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Departmental challenges

• Not to neglect smaller municipalities and smaller
  housing projects while managing the big N2 pilot
  project
• Balancing of allocation of units in N2 project

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Thank you!Questions