The process of conversion is a joint decision between the department of Cooperative Governance and National Treasury
The Ministry for Cooperative Governance and Traditional Affairs (CoGTA) noted with concern the article published in Sowetan newspaper dated 14 March 2016. The article suggest that two Cabinet Ministers (Minister van Rooyen and Minister Gordhan) are disagreeing over funds allocated to Municipalities through the Municipal Infrastructure Grant (MIG).
It is important to note that the two Ministers as members of Cabinet have ample time to discuss any issues within the parameters of the rules and they both agree on stopping and converting of MIG funds aimed at ensuring the intended communities are not punished for poor performance of their municipalities.
The MIG programme is aimed at providing South Africans with sustainable access to a basic level of service through grant finance targeted primarily at covering capital costs of providing new basic infrastructure for the poor and renewing the existing one.
The challenge has been that some municipalities are unable to spend their grants or sometimes using it for things other than what it was allocated. In terms of Section 19 and 21 of the Division of Revenue Act (DoRA) 2016, all or a portion of the total MIG allocation to a municipality can be Stopped and Converted to Schedule 6B as outlined in DoRA and MIG Framework, in cases:-
- where municipalities have perpetually under performed on MIG;
- and/or have failed to maintain sound financial management; and/ or
- not complying with DoRA conditions and MIG Framework.
This implies that MIG funding is retained by the Department of Cooperative Governance (DCoG) to appoint an Implementing Agent - (Municipal Infrastructure Support Agent (MISA) in this case):-
- to implement infrastructural projects as intended by MIG Framework; and
- transfer monies (make payments) to service providers directly.
The DCoG, National Treasury (NT) and Provinces agreed on stopping and conversion in the following 3 municipalities and this was Gazetted in October 2016:
- Mafube LM – R21.4 million was converted from Schedule 5B to 6B
- Mopani DM – R150 million was converted from Schedule 5B to 6B
- Ngaka Modiri Molema DM – R290.2 million was from Schedule 5B to 6B
These conversions were important as they are expected to ensure that the communities who are intended beneficiaries will still receive services, implying that we are not punishing communities for the poor performance of these municipalities.
In addition, efficiencies created as appropriate contracting procedures are to be followed and service providers’ payment for services rendered would be secured. It is worth mentioning that these Municipalities had perpetually underperformed on MIG and even failed to maintain sound financial management and also failed to comply with DoRA conditions and MIG framework.
However, both DCoG and NT experienced implementation difficulties with the conversion. Other challenges included the process of accounting for infrastructure built on behalf of the municipalities and the difficulty in relinquishing rights of existing contracts that were contracted to these municipalities in both Ngaka Modiri Molema DM and Mafube LM.
As such, in an effort to avoid continuously punishing communities on non-performance of these municipalities and to ensure optimum compliance, it was decided by both departments to convert the funding back to a schedule 5B again.
These (challenges) led to a series of meetings between the NT and DCoG in trying to come up with remedial actions to the above challenges. The two departments jointly evaluated the trend of expenditure performance of these municipalities and decided on stopping and reallocation of the stopped funds to the high performing municipalities to safeguard loosing funds from the programme.
It must be noted that these municipalities won’t lose this money forever. The stopped funds will be reallocated to these municipalities during the next stopping and reallocation process upon their improved performance.
Dedicated technical teams (DCoG, MISA, NT and Provinces) have been put in place to support these municipalities to improve their expenditure performance to circumvent stopping in future. In addition, processes are being put in place to ensure that outstanding invoices for work completed are paid to service providers.
It is important to note that there are no frustrations from either NT or CoGTA as it is alleged by the article. The process of conversion was a joint decision and the engagements between technical teams are continuing, exploring various options to ensure positive implementation in 2018/19 financial year.
Enquiries:
Legadima Leso
083 378 9495
