SUMMARY OF CHALLENGES IN FREE STATE, NORTH-WEST AND NORTHERN CAPE

1. SUMMARY OF CHALLENGES IN FREE STATE, NORTH-WEST AND NORTHERN CAPE

2. NORTHERN CAPE CONTEXT PRIORITY MUNICIPALITIES: • Magareng • Ga-Segonyane • Renosterberg • Ubuntu • Phokwane • Tsantsabane Characterised by: • Poor collection and unfunded budget • Disclaimer audit opinion • Vacant critical post • Political instability • Weak governance and political leadership • Untapped benefits of economic transformation • Weak relations with communities

3. NORTH WEST CONTEXT • Over the past 3 financial years to date, the Auditor General has raised the following issues regarding non-financial information, which are governance matters: • Non-compliance to legislation in particular municipal systems act regulations; • Poor quality of annual performance reports and annual financial statements; • Poor information technology controls – no improvement; • Excessive use of consultants with no skills transfer; • Lack of consequences for poor performance and transgressions, i.e. councils not taking action; • Key positions vacant or key officials lacking appropriate competencies; • Slow response by political leadership and management in addressing the root causes of poor audit outcomes; • Non-compliance with legal processes on determining powers and functions of water services authority and water provision;

4. NW Key Service Delivery Challenges • At Provincial Level • Weak monitoring, regulation and compliance enforcement – often only track expenditure by municipalities and not impact • Support to municipalities is ad-hoc and often not effective • Grant administration and management not optimal • Sectors views this as Cogta programme • Duplication of efforts and operating in silos • Existing structures not sufficiently effective – District Appraisal Committees, PMUs and the PMO • Inability to fully support the MIG programme due to resource constraints At Municipal Level • Neglect of maintenance and asset management resulting in the • collapse of vital infrastructure • frequent and lengthy disruptions in supply particularly for water and electricity services • Skills gaps in key technical areas • Non-compliance with SCM legislation and rules • Non-compliance with DORA conditions and MIG Framework • Grants diverted to other spending areas other than infrastructure • WSAs and municipalities responsible for electricity distribution performing poorly

5. NW Key Service Delivery Challenges At Municipal Level • Weak institutional arrangements between Water Service Authorities and Water Service Providers • Water contamination and spillages due to lack of Operations and Maintenance • High levels of infrastructure vandalism

6. NW MIG Trend Analysis There are Municipalities who have consistently underspent below 80%. Some of the Municipalities were able to spend above 80% by the end of the Municipal financial year due to the stopping of funds. Municipalities have experienced stoppages of funds in three consecutive financial years e.g (NgakaModiriMolema District Municipality). A number of Municipalities have regressed in the MTEF due to weak institutional capacity and financial viability. 60% of the Municipalities in the North West Province have reported less than 60% expenditure of what was transferred in the first quarter. Ditsobotla, Rustenburg and Mamusa local Municipalities have reported zero expenditure in the first Municipal quarter for 2017/18 financial year. An additional R64,7 million was allocated in the 2016/17 financial year from another province, however, some the funds were lost during the 2016/17 rollover process due to improper accounting processes.

7. FREE STATE PROVINCE: GENERIC CHALLENGES OF MUNICIPALITIES • As part of the B2B Phase 2 approach four (4) municipalities have been prioritised in Free State Province and were engaged during the Ministers’ visit held on 20 October 2017, namely: • Mafube LM • Masilonyana LM • Maluti-A-Phofung LM • Matjhabeng LM • Mafube and Masilonyana local municipalities were placed under section 139 (1)(b) of the Constitution. Financial Recovery Plans have been developed for both municipalities. • Generic challenges in the above-mentioned municipalities relates to vacancies of senior management positions, poor revenue collection, aging water, electricity and sewer infrastructure, high debt to ESKOM and Water Boards, utilisation of MIG for operational expenditure, bloated organograms.

8. FREE STATE PROVINCE: GENERIC CHALLENGES OF MUNICIPALITIES Generic Free State municipal challenges: Lack of reporting on the filling of section 57 and 56 appointments by municipalities and the province. Out of a total of 129 senior management positions in municipalities, 50 vacancies (39%) were reported to PCC; “Vulnerable” municipalities do not submit monthly B2B reports; FS Provincial Department procured a complaints / compliments management system for municipalities which has reflected that most complaints relates to firstly electricity, secondly water and lastly to sewerage challenges experienced; Department of Energy has indicated that challenges are experienced in some FS municipalities to effectively implement the INEP mainly due to the lack of technical skills and capacity in the electrical services departments; In Free State, 10 municipalities reported vacancy rates higher than 20% to the StatsSA non-financial census; Service delivery challenges relates to aging water and electricity infrastructure such as Waste Water Treatment Plants;

9. FREE STATE PROVINCE: GENERIC CHALLENGES OF MUNICIPALITIES The emerging aspects and trends from the B2B Bi-annual report: October 2014 – June 2016 specifically in relation to the performance of Free State municipalities • The lowest average Municipal Council meetings in 2015/16 were held in the Free State. In FS 8 (34,8%) reporting municipalities on average held 1 or more council meeting per month during 2014/15. In 2015/16, 7 (31,8%) of municipalities on average held 1 or more council meeting per month. • Free State municipalities’ average rates of revenue collection for the two years were between 60-70% which is the lowest of all provinces. • In FS, 14 reporting municipalities indicated that they had a complaints management system in place in 2014/15 and 13 municipalities during 2015/16. • According to the 2016 Community Survey Household level statistics Free State municipalities are performing well in terms of access to piped water and electricity with most municipalities having household access of 80% or higher. Challenges are however experienced with regard to household access to sanitation in some municipalities e.g. Tokologo, Maluti-A-Phofung, Phumelela, Setsoto, Metsimaholo

10. FREE STATE PROVINE: GENERIC CHALLENGES OF MUNICIPALITIES In FS 5 municipalities improved, 8 stayed the same and 11 municipalities got worse in terms of eight National Treasury indicators and the annual State of Local Government Report as at June 2016 focusing on the degree to which municipalities are performing their functions with respect to financial management. FS municipalities are increasingly becoming grant dependant however certain basic functions to ensue revenue collection are not being performed e.g. meter reading, functional billing systems, updating of indigent registers.