PRESENTATION ON THABA CHWEU MUNICIPALITY Presented by Mr. M.D. Mahlobo Head of Department 20 APRIL 2010

1. PRESENTATION ON THABA CHWEU MUNICIPALITY Presented by Mr. M.D. Mahlobo Head of Department 20 APRIL 2010

2. BACKGROUND • On 13 October 2009, the Mpumalanga Department of Co-operative Governance and Traditional Affairs reported to the Provincial Executive Council that in the past two (2) years, 2008-2009, Thaba Chweu Local Municipality received the following support- • The Department of Co-operative Governance and Traditional Affairs as well as Provincial Treasury assisted the municipality within the financial section. • Risk assessment exercise was conducted • Support was provided to improve financial systems. • Financial Systems Improvement Grant of R1 500 000 was allocated to the municipality over the last two years. • Assistance was provided with the implementation of the Municipal Property Rates Act • Through the GTZ programme support was provided through training on the Integrated Development Plan Methodology • Gave Technical advice through the GTZ programme on the development of 2008/09 Integrated Development Plan • An environmental Impact Assessment was done in the Sabie Landfill site • One person benefited on Change Management Programme MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 2

3. BACKGROUND Cont… • Councillors as well as the Chief Financial Officer benefited on a Municipal Leadership Development Programme • Councillors was introduced to the Municipal Finance Management Act • Councillors and officials were trained on Supply Chain Management • The Department of Co-Operative Governance and Traditional Affairs facilitated the establishment of the Moremela Thusong Service Centre. • However despite the aforesaid interventions, the Municipality seems not to have improved hence the violent protests against poor service delivery and efficient management of the affairs of the Municipality. • The vacancies in the council let to the inability to discharge council’s responsibilities. The report of the Section 106 investigation could therefore not be tabled and dealt with by Council. • An intervention in terms of section 139(1) (b) was previously instituted in Thaba Chweu Local Municipality during 2006. During the previous intervention Council improved with such an extent that the intervention was withdrawn. The latest events had negative impact which contributed to the collapse of financial systems and the non ability of council to discharge its responsibilities. MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 3

4. BACKGROUND Cont… • The deterioration of good relationship between the Council and its communities, mistrust on whether the Council shall be able to fairly handle the allegations as lodged against the municipality and attack on Counsellors and officials are some of the issues that were considered to be of extreme concern to Government. Considering such extreme situation it can therefore be concluded that a directive in terms of Section 139 (1) (b) would not be effective and that the Municipality is now in such a state that it would not be able to manage its own affairs in terms of the said Section. • The inaccuracy of the financial system contributes to the non submission of prescribed budget performance reports which led to non compliance by the municipality in accordance with Section 71 of the Municipal Finance Management Act.   • Non compliance of Chapter 4 of the Local Government Municipal Systems Act, 2000(Act no 32 of 2000) in relation to Public Participation, by the Municipality is contributing largely to the unrest situation as experienced in the municipality. MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 4

5. SUPPORT PROVIDED BY THE PROVINCE PRIOR TO THE UNREST • The Department of Co-operative Governance and Traditional Affairs as well as Provincial Treasury assisted the municipality within the financial section. • Risk assessment exercise was conducted • Support was provided to improve financial systems. • Financial Systems Improvement Grant of R1 500 000 was allocated to the municipality over the last two years. • Assistance was provided with the implementation of the Municipal Property Rates Act • Through the GTZ programme support was provided through training on the Integrated Development Plan Methodology • Gave Technical advice through the GTZ programme on the development of 2008/09 Integrated Development Plan • Councillors as well as the Chief Financial Officer benefited on a Municipal Leadership Development Programme • Councillors were introduced to the Municipal Finance Management Act • Councillors and officials were trained on Supply Chain Management MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 5

6. Numerous allegations were received in a form of a memorandum from the community on the following: Corruption Maladministration Nepotism Lack of Service Delivery Lack of Public Participation The Municipality failed to respond to the Memorandum that was received, this led to unrest The municipality through the Municipal Manager released a media statement refuting the allegations retained in the memorandum. There was violence, loss of life and destruction of municipal and councilors private properties PROTESTS LEADING TO UNREST MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 6

7. PROTESTS LEADING TO UNREST Cont… • The Section 106 report confirmed the allegations of theft of R3,2 million, corruption, maladministration and collapse of control systems, non existence of Public Participation etc. • Eskom cut the electricity of one of the towns (Sabie) due to non payment. • The Municipality failed to correctly issue consumer accounts (bills) and this affected their cash flow. • The cash flow problem effected service delivery severely, eg. Could not procure chemicals to purify water, material to fix pot holes, not able to perform normal maintenance functions, etc. • Unable to produce municipal financial management reports MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 7

8. SITUATION ANALYSIS MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 8

9. GOVERNANCE • Council consists of 23 councilors, • Ruling Party 17 • DA 4 • PAC 1 • FF 1 • 10 of the councilors from the ruling party were recalled, including the Executive Mayor and the Speaker. This resulted in council not forming quorum. • Since September 2009 council failed to sit due the above. MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 9

10. FINANCE • The inaccuracy of the financial system contributes to the non submission of prescribed budget performance reports which led to non compliance by the municipality in accordance with Section 71 of the Municipal Finance Management Act. • Incorrect consumer accounts due to inaccurate data base • No accounts were issued for the first seven months of the year and the payment rate for services dropped. • Poor cash flow management • Supply Chain Management defective and not properly implemented • No indigent register • No monthly reconciliation of financial reports • Incorrect rates and evaluation of properties MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 10

11. SERVICE DELIVERY • The stores were poorly managed and depleted • Road maintenance was neglected • Workers without protective clothes • Insufficient fleet to render services • 90% of functions in the finance department outsourced to private companies • 80% of technical services outsourced to private companies MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 11

12. PUBLIC PARTICIPATION • Ward Committees not functional • No Public Participation strategy • Lack of involvement of communities in the decision making processes of the municipality • No feedback to communities • Loss of confidence in the Leadership of the municipality MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 12

13. INTERVENTION • The Premier and the MEC CoGTA intervened and addressed the community. • An agreement was reached for a task team to investigate and to come up with a preliminary report. • The task team did not receive all the relevant information to conduct the investigation. • The MEC for CoGTA instituted an investigation in terms of Section 106(1)(b) of the Municipal Systems Act. • Intervention in terms of Section 139(1)(b) of the Constitution was approved by Exco on 26 October 2009 • Administrator appointed • Terms of reference developed and clearly defined MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 13

14. PROGRESS TO DATE • A recovery plan has been submitted to the Department on 20 November 2009. • Municipal Manager has been suspended and disciplinary charges constituted. • Disciplinary action has been instigated against all implicated officials. • In a process to implement all Section 106 recommendations. • The Department is in a process to assist the Administrator with investigations on additional allegations. • Ehlanzeni District seconded a Chief Financial Officer and the Development Bank of Southern Africa seconded 1 financial expert to assist the Municipality. • Various meetings held with community structures to re-establish the trust between the community and the municipality. • Working relationship has been established between the community and the Municipality for the Management of the Cemetery. • Ehlanzeni District Municipality have started processes to share business opportunities in relation to the 2010 World Cup with the community. MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 14

15. PROGRESS TO DATE Cont… • There is now political stability on the ground and the community is cooperative. • MTAS has been developed with the participation of the community • The outstanding Eskom account has been reduced from R 16million to about R 4 million. • Monthly reports are provided to the Department. • By-elections were conducted in Ward 2 and the ANC won the seat. • Two PR Councilors were nominated by the Ruling Party • Now that there is stability as mentioned above, council sitting will be convened soon. • Of the R3,2million lost, R2,3million has been recovered to date. MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 15

16. PROGRESS TO DATE Cont… • Financial situation • Proper controls have been put in place with the result that the consumer accounts are up to date, creditors and other accounts are reconciled, and day-end as well as month-end procedures are adhered to. The result of this is that for the first time in the 2009/2010 financial year is it possible to produce management accounts. This will also allow for the preparation of the 2010/2011 budget. • Creditors are reconciled and procurement of goods and services are done through the process of placing orders. The outstanding creditors are known and payment plans can be put in place. MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 16

17. WORK STILL TO BE DONE • Appointment of staff and mentoring. • Finalisation of policies and procedures. • Ensuring the new working procedures are institutionalised. • Drafting of the budget. • Converting the Annual Financial Statements to be GRAP compliant. • Address the issues raised by the Auditor General. • Completion of the Revenue Enhancement Project with the assistance of DBSA. • Establishment of the SCM Unit. • Establishment of an Audit Unit. • Finalise the loans from DBSA, pending on the outcome of the Revenue Enhancement Project. • Review the processes around the stores. MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 17

18. THANK YOU MAKING LOCAL GOVERNMENT EVERYBODY’S BUSINESS 18