APP 2015/16 Presentation to the Portfolio Committee on COGTA

1. APP 2015/16Presentation to the Portfolio Committee on COGTA 10 March 2015 1

2. BACKGROUND TO SALGA’S 2015/16 APP

3. SALGA MANDATE The Voice of Local Government Lobby, Advocate & Represent Knowledge & Information Sharing SALGA Mandate Support & Advice Employer Body Strategic Profiling Capacity Building Transform local government to enable it to fulfil its developmental mandate. Act as an employer body representing all municipal members and, by agreement, associate members. Lobby, advocate, protect and represent the interest of local government at relevant structures and platforms. Support and advise our members on a range of issues to assist effective execution of their mandate. Build the capacity of the municipality as an institution as well as leadership and technical capacity of both Councillors and Officials. Serve as the main hub of local government knowledge and intelligence and to facilitate peer learning within the sector Build the profile and image of local government within South Africa as well as outside the country. The Voice of Local Government

4. Challenges requiring urgent redress

5. Challenges that continue to bedevil LG progress Source: CoGTA

6. SALGA APP (2015/16)

7. SALGA MANDATES Representation Employer Body Capacity Building Support and Advisory Role Profiling Role LG Knowledge Hub SALGA 5 YEAR STRATEGIC PLAN 2012-2017 INTER / NATIONAL CONTEXT 1. MDGs & Global Commitments 2. National Dev Plan & other national plans/policies 3. MTSF 4. B2B Approach 5. Electoral Mandate (2011) … … Org Capacity Risk APP 4 APEX PRIORITIES: Review of legislative & policy framework impacting negatively on LG. Review of LG fiscal & financial management framework. Improved municipal capacity. Reposition SALGA as a centre for LG excellence, knowledge & intelligence • 7 STRATEGIC GOALS • Accessible, equitable, sustainable services • Safe and healthy environment and communities • Coherent local planning & economic development • Effective, responsive and accountable local governance for communities • Human capital development in LG • Financially and organizationally capacitated municipalities • Effective and efficient SALGA administration. SALGA National SALGA Provinces Differentiated Approach to Managing / Supporting Local Government

8. 2015/16 Year 1 2012/13 Year 4 2015/16 Year 2 2013/14 Year 3 2014/15 Year 5 2016/17 ANNUAL PERFORMANCE PLAN 2015/16 SALGA STRATEGIC PLAN 2012-2017

9. The SALGA APP (2015/16) seeks to bring greater focus to SALGA’s programme of action, by having fewer and more impactful and outcomes based indicators, as well as institutionalising the multi-disciplinary planning and delivery approach within SALGA and its partners Introduction and Background to APP 2015/16approach 5 KPIs PER GOAL

10. SALGA PERFORMANCE PLANNING AND REPORTING FRAMEWORK • TheSALGA APP 2015/16 which represents year four (4) of the SALGA Strategic Plan: 2012-17 now consists of: • 4 Apex Priorities • 7 Strategic Goals, • 36Targets/Deliverables • Organisational performance reporting shall be based on the 36 targets and similarly for auditing by AG   • There is a direct correlation between the SALGA APP and the Back to Basic Approach • Current planning up to 2017/18 financial year although new strategy will be developed in 2016/17 post LG elections Continuous efforts to streamline the plan towards greater performance and reporting efficiencies

11. SALGA’S APEX PRIORITIES FOR 2015/16

12. APEX 1: REVIEW OF THE LEGISLATIVE AND POLICY FRAMEWORK IMPACTING NEGATIVELY ON LG As highlighted in the Back to Basics Approach, the creation of an enabling environment for local government is a critical factor if we are to realise improved service delivery. It speaks to issues of good and transparent governance, spatial transformation, decentralisation with coordinated and coherent support from all stakeholders. Overview of Challenges • The legislative environment remains highly problematic. It is often characterised by over-regulation, under-regulation or policies and legislation that are misguided. It is particularly problematic where it relates to powers and functions, reporting, finance and fiscal management. Overview of Interventions • To decisively address the declining confidence in Local Government. The outcome here is to stabilise the sector & achieve institutional consolidation reflected in a strong anti-corruption, accountability and consequence management regime in the sector • SALGA’s influence in legislative and policy review processes is a key priority. The outcome is to reduce over-regulation, inappropriate regulation, unblock bottlenecks in the current legislative dispensation • The policy and legislative regime must consolidate decentralisation, strengthen LG and place it at the forefront of leading spatial transformation and economic development at a macro and local level in South Africa

13. APEX 1: REVIEW OF THE LEGISLATIVE AND POLICY FRAMEWORK IMPACTING NEGATIVELY ON LG Expected Outcome By end 2015/16: • Policy and Legislation that was targeted, reviewed and influenced by SALGA was supported by all stakeholders and passed by Cabinet and Parliament respectively Expected Impact By end of 2015/16 • The functioning of municipalities was improved by revised or new policy and legislative frameworks that were influenced by SALGA and has resulted in spatial transformation, improved and sustained service delivery and accountability by municipalities and key role players in the municipal space

14. APEX 2: SOUND FINANCIAL MANAGEMENT AND FISCAL FRAMEWORK FOR LG Apex 2 resonates with the underlying ethos of the Back to Basics approach – ensuring that the internal and external financial environment/fiscal frameworks are promoting sustainable and informed service delivery processes. Effective growth and development should be enabled in both rural and urban settings. Overview of Challenges • The fiscal regime compromises most municipalities to deliver on their mandates. Challenges here include municipalities that have limited economic bases and by extension limited rates bases. This is exacerbated in most rural municipalities and declining urban economies having huge indigence’s and by extension huge populations that must receive basic services from municipalities while not being able to pay for them. Big urban economies are often recipients of large scale migration (urbanisation) which puts pressure on their ability to deliver on everyone’s expectations. Fiscal and budget planning processes are currently unable to address these challenges. This is made worse in some municipalities that do not have the necessary capacity and systems to administer even the finance that they are currently able to solicit. • Fragmented infrastructure grant system (plethora of sector grants) Overview of Interventions • Strengthen relations with national & provincial spheres of government in building an enabling fiscal framework for developmental LG and ensure sound financial management within the sector, improve inter-governmental fiscal integration, equity and achieve financial sustainability of LG

15. APEX 2: SOUND FINANCIAL MANAGEMENT AND FISCAL FRAMEWORK FOR LG Expected Outcome By end 2015/16: • Through SALGA’s influence, municipal boundary redetermination, municipal funding, unfunded mandates, cost of compliance with new regulations (SCOA, SPLUMA) and the need for regulatory impact assessment framework was recognised by CoGTA and NT, accepted by Cabinet and corresponding equitable budgets appropriated by Parliament • No municipality remains in the red zone regarding audit outcomes Expected Impact By end of 2015/16 • There was equitable allocation to LG in the national division of revenue which empowered municipalities to fulfil their constitutional mandates resulting in improved delivery of municipal services in the country • Accountability and public confidence in municipalities use of public resources is restored through better audit outcomes

16. APEX 3: IMPROVE MUNICIPAL CAPACITY Apex 3 is the driving force behind the Back to Basics approach, as it is apparent that the sector can only flourish when both the management and institutional practices are of sufficient standards to deliver much needed services in a sustainable and transparent manner. There is movement towards the provision of long term capacity building processes with active and ongoing support to ensure transfer of learning into the institutional system as a whole. Overview of Challenges • Capacity in municipalities has remained a stubborn challenge despite huge efforts and funds that have been dedicated to it. On the one hand municipalities are poorly structured and supported while on the other hand the human resources are often ill-equipped to lead or to implement policies. Skills development programmes have been unable to build the critical mass of skilled councillors or Local Government professionals. The high turnover of staff has also made a difficult situation even worse. Rural municipalities find themselves in the most vulnerable positions as they struggle to attract even the limited pool of skilled human resources. Overview of Interventions • Build strategic capability of municipalities to fulfil their mandates in delivering basic services, facilitating inclusive growing local economies that create vibrant livelihoods for residents to live, work and play governed by sustainable, transparent and accountable municipal authorities

17. APEX 3: IMPROVE MUNICIPAL CAPACITY Expected Outcome By the end of 2015/16: • The capacity of municipalities to effectively and efficiently lead, plan, manage themselves and their resources and account to their residents was significantly enhanced compared to 2014/15 baseline and confirmed by good audit outcomes and service delivery. Expected Impact By the end of 2015/16 • Local communities enjoyed visibly improved delivery of basic services, qualitative growth of local economies and employment was recorded and improvements in the quality of life of local residents was confirmed through objective evaluations.

18. APEX 4: REPOSITION SALGA AS A CENTRE FOR LG EXCELLENCE, KNOWLEDGE AND INTELLIGENCE Underlying the Back to Basics Approach is the need to tackle problem areas before they have escalated to the point that communities take action into their own hands and resort to protest and violence. Information and knowledge are fundamental ingredients in proactive redress of challenges. Accurate and accessible data management is key to informed planning processes, and enables prioritisation of processes and concomitant financial outlays. Overview of Challenges • A centralised and integrated Local Government Knowledge and Intelligence Resource remains a challenge and therefore makes it difficult for Local Government authorities to access information in a timely manner in order to make informed and reliable decisions. Overview • Reposition SALGA as a centre of excellence, knowledge, intelligence and innovation to heighten its influence in the IGR space, improved support and advice to municipalities by building high performance strategic capability, brand identity for SALGA and the sector, improved thought leadership to drive the BIG IDEAS agenda in the sector and internal change management to facilitate a shift towards outcome and impact orientation.

19. APEX 4: REPOSITION SALGA AS A CENTRE FOR LG EXCELLENCE, KNOWLEDGE AND INTELLIGENCE Expected Outcome By the end of 2015/16: • SALGA had repositioned itself as a high performing organisation that drove thought leadership, provided a platform for sector specific governance and leadership discourse and established functional knowledge and business intelligence systems and sharing of best practice that improved its mandate as an effective Voice of Local Government. Expected Impact By the end of 2015/16 • SALGA had become a reliable, self-sufficient and effective centre of excellence and source of sector intelligence, governance and leadership that improved the ability of local government to fulfil its mandate.

20. DELIVERABLES PER STRATEGIC GOAL 2015/16

28. SALGA FLAGSHIP PROJECTS FOR 2015/16

29. 2015/16 FLAGSHIP PROJECTS • Development of the model for decentralisation for LG • Research into the state of by-laws in municipalities in order to determine how it facilitate developmental LG or not • Implementation of the Municipal Audit Support Programme • Cost of Free Basic Services Study • Service Authority Role for Infrastructure Services • Response Referral Results • Implementation of the SALGA Centre for Leadership Academy • Implementation of the Small Town Regeneration • Municipal Barometer Rollout

30. SALGA INTERVENTIONS IN SUPPORT OF “BACK-TO-BASICS”

31. SALGA MANDATES Representation Employer Body Capacity Building Support and Advisory Role Profiling Role LG Knowledge Hub SALGA 5 YEAR STRATEGIC PLAN 2012-2017 INTER / NATIONAL CONTEXT 1. MDGs & Global Commitments 2. National Dev Plan & other national plans/policies 3. MTSF 4. LGTAS 5. Electoral Mandate (2011) … … Org Capacity Risk APP MINISTRY FOCUS: Back to Basics: Taking LG Forward Putting people first and engaging with communities Delivering basic services Good governance Sound financial management Building capabilities • 7 SALGA GOALS • Accessible, equitable, sustainable services • Safe and healthy environment and communities • Coherent local planning & economic development • Effective, responsive and accountable local governance for communities • Human capital development in LG • Financially and organizationally capacitated municipalities • Effective and efficient SALGA administration. SALGA National SALGA Provinces APEX PRIORITIES Review of the legislative and policy framework Sound financial management and fiscal framework for LG Improve municipal capacity. Reposition SALGA as a centre for LG excellence, knowledge & intelligence .

32. SALGA’s support and advice to municipalities for the next 5years i.t.o. Back to Basics Approach Basic services: creating decent living conditions • Will develop and establish baselines for municipalities to ensure that they fulfil their role as service authorities w.r.t water, sanitation, electricity and then supported to fulfil the functions • Develop and implement a strategy for service delivery support to municipalities • Facilitate knowledge sharing on alternative energy, energy efficiency and greener service delivery mechanisms • Assist municipalities to implement the SALGA DEA strategy on environment and support them to integrate issues of climate change and vulnerable groups

33. SALGA’s support and advice to municipalities for the next 5years i.t.o. Back to Basics Approach Good governance and public participation • Develop a regulatory impact assessment tool to determine the impact of policy and legislative amendments on municipalities • Promote good practices and knowledge sharing among municipalities on innovative public participations approaches, through partnerships, such as with civil society • Municipalities to be assisted with improving oversight and accountability, in particular strengthening MPACs in their functionality • Municipalities to be assisted to monitor the implementation of anti-corruption measures • Facilitating ethics training in municipalities • On-going governance hands-on support and legal advice

34. SALGA’s support and advice to municipalities for the next 5years i.t.o. Back to Basics Approach Institutional capacity • Implement capacity development programme for LED and Planning Practitioners • Advise municipalities on labour relations processes and policies, including dispute management, conciliation , arbitration and litigation • Prioritised areas of the Professionalization framework implemented in selected municipalities • Leadership development and minoring through the SALGA Centre for Leadership and Governance • Portfolio based training and leadership development for councillors and officials

35. SALGA’s support and advice to municipalities for the next 5years i.t.o. Back to Basics Approach Financial Management • Support municipalities to implement financial reforms such as SCOA • Assist municipalities to define the costs for water, electricity, waste management and transport services • Develop a model on billing and alternative revenue sources for municipalities and assist them to implement it • Further implementation of the Municipal Audit Support Programme • Finding a resolution to the issue of unfunded and underfunded mandates • Costing of re-demarcations and the securing of transitional funding support for the affected municipalities • Inputs into the Budget Forum on the consolidation of the infrastructure grants and the review of the equitable share formula

36. BUDGET 2015/16

37. Background Legislative Background • SALGA as a schedule 3A public entity in terms of the Public Finance Management Act (PFMA) is required to prepare its “Annual Budget” and “Corporate Plan”. The Annual Budget which is an annexure to the organizational Corporate Plan shall include a projection of revenue, expenditure and borrowings for that financial year in the prescribed format (section 52(a) of the PFMA). • The Annual Plan shall constitute a basis for the evaluation of the organizational financial performance as envisaged by the PFMA Treasury Regulation no. 29.3. The financial Key Performance Indicators (KPI’s) derived from the annual budget shall facilitate an effective performance monitoring, evaluation and corrective action. • The PFMA Treasury Regulation 29.1.1(g) stipulates that an annual budget must include: • projections of revenue, expenditure and borrowings; • asset and liability management; • cash flow projections; • capital expenditure programmes; and • dividend policies (if applicable).

38. The Budget Process Planning and costing phase Submit indicative Budget to Executive Authority (At least six months before start of financial year) 1st draft Budget for 2015/16 MTEF 28 July 2014 EMT Lekgotla 14-15 August 2014 Receive allocation letter from Executive Authority (October 2014) 2nd draft Budget for 2015/16 MTEF 3 October 2014 Prepare and submit Estimates of National Expenditure (November 2014 to January 2015) Consultation with PEC’s October 2014 to January 2015 Equitable allocation Budget Panel 12 November 2014 Budget and APP Approved NEC meeting November 2014 - January 2015 Adoption by PMA’s Provincial Members Assembly September - October 2015 Methodology to develop the Organisational Budget

39. Budgeting Parameters • Discounts for the MTEF to be taken up by members are projected as follows: • 5% for April - 30% of members; • 3.5% for May - 30% of members; • 2.5% for June - 30% of members; NB: National Treasury (NT) has reduced the Grant for 2015/16 and completely taken away the allocation for 2016/17. It must be noted that we have budgeted without the grant allocation from the budget for 2017/18 although still part of NT allocation.

40. Proposed new formula from 2016/17 Districts and Local Municipality membership levy increases will be calculated CPI+1 percentage point using 2015/16 as the base year. Budgeting Parameters Growth rate • The projected CPI for 2015/16 is estimated at 5.6%; for employee related costs the escalation is CPI + 1 percentage point i.e. 6.6%. • CPI for the 2016/17 and 2017/18 periods is estimated at 5.5% and 5% respectively. The principle of CPI + 1 percentage point has been applied for employee related costs. Membership levies (assumptions at 90% collections) The membership levies are derived from the following formula: Metros • A flat rate of R 11 000 000 (being R 11 000 000 X 6.6% and rounded downwards) for the 2014/15 financial year; as it is subject to an annual inflationary increase (CPI). Districts & Locals (New Rate) • 1% of the annual salary budget, with a minimum of R500 000.

41. REVENUE MIX FOR 2015/16

42. EXPENDITURE DISTRIBUTION FOR 2015/16

43. DRAFT REVENUE PROJECTIONS

44. DRAFT 2015/16 to 2017/18 MTREFStatement of Financial Performance

45. DRAFT 2015/16 BUDGETProgramme Cost(Excl. related salary costs)

46. DRAFT 2015/16 CAPEX BUDGET

47. SALGA IS MATURING • Strong winds set deep roots … • We have taken our time to establish our roots in order to anchor a mighty tree • Collective effort towards Building SALGA as a centre of Corporate Excellence are beginning to yield the necessary fruits. ”Day by day nothing changes … but one day when you look back everything is different” 47

48. Maturing Phase Sustainability Phase 2013/14Unqualified Audit Opinion with no findings (Clean) 2010/11UnqualifiedAudit Opinion 2012/13Unqualified Audit Opinion with no findings (Clean) 2011/12 Unqualified Audit Opinion 2009/10 Unqualified Audit Opinion

49. Thank you