L Msengana-Ndlela: Joint Select Committees on Finance and Local
Government

22 August 2006

Project Consolidate, financial management, municipal infrastructure spending
patterns and co-ordination with government

Honourable Co-Chairpersons, Mr T Ralane and Mr S Shiceka,
Honourable members of the Select Committee on Finance and Local
Government,
Representatives of organised local government, the South African Local
Government Association (SALGA),
Colleagues from national departments of Minerals and Energy, National Treasury
and Water Affairs and Forestry,
Colleagues from public entities, Development Bank of Southern Africa (DBSA) and
Eskom,
Colleagues from the Financial and Fiscal Commission (FFC),
Ladies and gentlemen:

Thank you for inviting our department to present this input on the subject
at hand. We look forward to fruitful deliberations with you this morning.

* Background on Project Consolidate

Honourable Chairperson, you will remember that Project Consolidate was
launched in October 2004 as a two-year initiative to principally identify the
nature of the problems that impede service delivery and development in the
local government sphere. Government recognised that there would be a need to
provide additional support from the other two spheres of government and most
importantly establish partnerships with the private sector, development
agencies and community organisations in order to address these challenges.

Through this initiative we have been able to heighten the level of
consciousness within government on the need to listen to the voices of local
communities, and increase the pace and quality of basic service delivery and
development. This requires both political and administrative will at local
level. The induction of more than 6 523 councillors in this year alone, the
publishing of new performance regulations for senior managers in August 2006,
the recent publication for comments on a Local Economic Development (LED)
framework and toolkits are some of the measures that are being undertaken
within the context of Project Consolidate.

Chairperson, the honourable members of the Select Committee will be aware
that the most important achievement of Project Consolidate thus far has been
the collective and unified action that is now being undertaken by all of these
partners with a focus on this second term of the new municipal councils
(2006/11).

* Financial management

By the end of July 2006, financial experts have been mobilised and deployed
to 70 local municipalities, two metropolitan and an additional 15 district
municipalities which are initiating a shared service model. Utilising our
approach to consolidation, the Department of Provincial and Local Government
(dplg) is working with a number of partners including:

* National Treasury
* Development Bank of Southern Africa
* Institute for Municipal Finance Officers (IMFO)
* South African Institute of Chartered Accountants (SAICA)
* The banking sector
* United States Agency for International Development (USAID)
* Department for International Development (DFID-UK)
* the German agency (GTZ)
* European Union (EU).

The support initiatives that are undertaken by the above entities are
directed at matters of financial management and financial viability. Specific
interventions relate to:

* financial planning
* treasury, debt management and billing systems
* cash flow management
* internal financial control
* financial accounting and matters raised by the Auditor-General.

It is important that we recognise that these interventions are not ad-hoc in
nature. The partners involved are emphasising the importance of establishing
local government systems that will be sustainable over the medium to the
long-term.

* Municipal infrastructure spending patterns

Related to financial management interventions are aspects of infrastructure
planning and the quality of spending at local level. The Municipal
Infrastructure Grant (MIG) is a new consolidated grant that the dplg started to
operate in 2004. The grant has integrated various funds that used to be managed
by different sector departments such as water affairs and forestry, transport,
sport and recreation as well as provincial and local government.

In the municipal financial year 2004/05, the level of spending by
municipalities as at June 2005 was 97,2 percent from a total allocation of R4,4
billion. This represented an under spending of 2,8 percent by
municipalities.

In the 2005/06 financial year, national government allocated and transferred
R5,4 billion to municipalities. By the end of the municipal financial year in
June 2006, municipalities reported an expenditure of 96,7 percent (R5,3
billion) from the allocation of R5,4 billion. A total of 255 municipalities
were able to spend their budgets.

However, 29 municipalities reported an under expenditure of 3,3 percent
(R184 million) of the allocated MIG funds in 2005/06. This means that with
regard to infrastructure spending we have seen an improvement from 284 (283
after re-demarcation) municipalities who previously experienced such spending
problems to only 29 municipalities with respect to MIG funding. We are,
however, determined to address these challenges even in this minority of
municipalities because our people deserve basic services and we cannot afford
under expenditure whatever the scale.

Since our two years of practice in the implementation of the MIG programme,
our interventions are directed towards capacity building, addressing
decision-making impediments and improving accountability measures. One such
intervention includes the establishment of Project Management Units (PMUs) in
almost all of the Project Consolidate municipalities.

These units, together with the recently deployed experts represent teams of
technical capacity with competencies in infrastructure planning, project
management and engineering. For example, in the case of the Gauteng Province,
such measures have facilitated the expenditure of projects to the total value
of R400 million with projects in Emfuleni and Kungwini increasing expenditure
from R4 million to R45 million and R2 million to R17 million respectively
within a period of seven months. This experience demonstrates that with more
effort directed at capacity building, these local institutions can register
improved performance.

* Co-ordination between departments within three spheres of government

I would like to address three areas of co-ordination as part of our efforts
to improve implementation of government policies at local level.

* First: The implementation of the Intergovernmental Relations (IGR) Act
(2005)
* Second: The overarching plan for local government (2006/11)
* Third: The impact of the Presidential Izimbizo.

Implementation of Intergovernmental Relations Framework Act (2005)

The Intergovernmental Relations Framework Act came into effect on the 15
August 2005. The Act also deals with the provision of services, monitoring
implementation of policy and legislation and the realisation of developmental
goals of government as a whole. Since promulgation of the Act, 15 national
sector departments with concurrent competencies have established
intergovernmental forums (MinMECs), all provincial governments have established
their Premier Co-ordinating Forums (PCFs) and 43 (out of 46) district
intergovernmental forums (IGR) have been established.

The dplg has also developed enabling guidelines which include the
following:

* practitioners manual
* small pocket size booklet on the evolution of the IGR system
* guidelines on intergovernmental dispute resolution
* guidelines on framework for managing joint programmes
* guidelines for implementation of section 100 and 139 of the
Constitution
* guidelines for assignment of powers and functions to local government
spheres
* DVD on best practices in IGR
* reporting template to assess conduct of IGR in the country.

Overarching plan: strategic agenda for local government

The January 2006 Lekgotla adopted a uniform plan which outlines key
strategic priorities for local government for the next five years (2006/11).
Government departments and public entities (such as the DBSA and Eskom) have
started to outline concrete support programmes to local government. Notably,
these departments are required to include their identified priority areas in
their organisational business plans and report periodically to Cabinet, in
consultation with the dplg.

The impact of the Presidential Izimbizo

Since 2005 and within the context of Project Consolidate government has
convened a total of 21 Presidential Izimbizo (President and Deputy President)
at district level, and thereby reaching a total of 150 municipalities as at 18
August 2006. In these Izimbizo, national ministers and departments engage with
local leadership, local stakeholders and community members. One of the defining
features of each imbizo has been the emphasis on introducing a performance
culture within municipalities that can be complemented with community
empowerment.

Conclusion

In all with the approval of Cabinet of the five-year implementation plan,
our spheres of government are pursuing three strategic priorities in this
current term of municipalities. I have dealt with some aspects of the first
priority in the discussion above as this relates to financial management,
municipal spending patterns and co-ordination of government departments. The
corresponding two strategies are also important because they deal with some of
the sustainability issues that require attention:

(i) mainstreaming hands-on support to local government to improve municipal
governance, performance and accountability
(ii) addressing the structure and governance arrangements of the state in order
to better strengthen, support and monitor local government
(iii) refining and strengthening the policy, regulatory and fiscal environment
for local government and giving greater attention to the enforcement
measures.

Honourable Chairperson, this approach to local governance is forward looking
in character, solution-orientated and should enable ordinary South Africans to
take part in the processes that determine their own development and ensure that
municipal councils are accountable to the communities they serve.

I thank you.

Issued by: Department of Provincial and Local Government
22 August 2006
Source: Department of Provincial and Local Government (http://www.dplg.gov.za/)