COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS

BACK-TO-BASICSWalking the talk through Effective Governance

Presentation prepared for the

INSTITUTE OF MUNICIPAL FINANCE OFFICERS5 October 2015

PURPOSE

To present the Gauteng State of Local

Government: Back-to-Basics on Sound

Governance in Local Government

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RSA Constitution (1996) & White Paper on Developmental Local Government (1998)

Constitution (1996)

(S152) The objects of local government are:

a) to provide democratic and accountable government for local communities;

b) to ensure the provision of services to communities in a sustainable manner;

c) to promote social and economic development;d) to promote a safe and healthy environment;

ande) to encourage the involvement of communities

and community organizations in the matters of local government.

Outcomes Provision of household

infrastructure & services Creation of livable, integrated

cities, towns and rural areas LED Empowered communities

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“No political democracy can survive and flourish if the mass of our people remain in poverty, without land,

without tangible prospects for a better life. Attacking poverty and deprivation must therefore be the first

priority of a democratic government”.

This RDP assertion is still relevant today… and

“According to the 2012 NPC report, there is a need to tackle the triple challenges facing the country, namely:

poverty, unemployment & inequality”.

RECONSTRUCTION AND DEVELOPMENT PROGRAMME (RDP)

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THE FOLLOWING FINDINGS OF THE NPC’S DIAGNOSTIC REPORT REQUIRE PUBLIC SERVICE ATTENTION:

Few people work;

Public services are uneven and often of poor quality;

Corruption levels are high;

South Africa remains a divided society;

Infrastructure is poorly located, inadequate & under maintained;

The quality of school education for black people is poor;

The public health system cannot meet demand or sustain quality; and

Spatial divides hobble inclusive development.

NATIONAL PLANNING COMMISSION - DIAGNOSTIC REPORT RESULTS

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Debt level of the State has doubled from R 627billion to R 1.3

trillion.

The Public Sector wage bill has grown. It

is currently around 45% of the total

budget, thus compromising the delivery of basic

services (National Treasury).

The public service is not performing at optimal level. There is no value for money (PSC Report,

2011).

The administrative capacity of government at all levels is stretched (OECD economic survey,

2013).

There is a shortage of skilled personnel and high turnover rate in

the Public Service (NDP, 2012).

PROBLEM STATEMENT

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The triple challenges are very real: Poverty, Unemployment and Inequality (Just over 40% of the working age

population is employed compared to the OECDaverage of 65%) (OECD economic survey, 2013).

Weakening of the State and emergence of atender state. The use of consultants in the PublicService accounted for an amount of R 24, 6 billionfor the period 2008/09 – 2010/11 financial years(Source: AG report on use of consultants, January2013).

Applying same standards across the public servicerequires innovative approaches and fundamentalsocial changes in the culture and capabilities of thepublic service (PSC: State of the Public Service report2011).

Urban poverty

“No amount of political freedom will satisfy the hungry masses” Vladimir Lenin

PROBLEM STATEMENT cont.

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Corruption in all spheres of government has worsened. (OECD economic survey, 2013 rates RSA at 40 percentile).

Increased citizen expectation for improved servicedelivery, including innovative delivery tools.

Experience of violent service delivery protest actions;and

Bureaucratic nature of the state stifling growth. Theexisting systems do not give us speed, flexibility &control necessary to deliver set of processes toimprove efficiency and collaboration.

“For the bureaucrat, the world is a mere object to be manipulated by him” Karl Marx

PROBLEM STATEMENT cont.

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SOCIO-ECONOMIC PROFILE OF GAUTENG PROVINCE

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Gauteng Province is the smallest of the nine (9) in terms of land size.

It measures approximately 1,4% of South Africa’s land area (only 18 178 km2 of the total land mass of 1 221 037 km2).

The discovery of gold in the 19th century saw Johannesburg developing to become an economic focal point of South Africa.

Gauteng is the biggest contributor to the gross domestic product (GDP), nationally and continentally.

Gauteng is the most urbanised province (approx. 97% of its people living in urban areas).

Currently the only province with more than one metropolitan municipality in South Africa, i.e., Johannesburg, Tshwane and Ekurhuleni metros.

It is host to four major financial institutions and Africa’s largest stock market, the Johannesburg Stock Exchange (JSE).

SOCIO-ECONOMIC PROFILE OF GAUTENG PROVINCE

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High population numbers (12.72 million) and migration are key attributes of the province.

The provincial population growth rate was 2.7% and 3.6% for the periods 1996 2001 and 2001 2011, respectively ‑ ‑(2011 Stats SA census). The population has been growing rapidly due to in-migration and natural growth.

Gauteng currently accounts for 24% of the country's total population, the highest share followed by KZN province with 19.73% ( GHS, 2013).

Millions of migrants from neighbouring countries settle in Gauteng in pursuit of economic and employment opportunities, which ultimately puts pressure on infrastructure and service delivery in the province.

SOCIO-ECONOMIC PROFILE OF GAUTENG PROVINCE

This rapid population growth also leads to, among others, the proliferation of informal settlements, which pose a further challenge to the delivery of basic services by Gauteng

municipalities.

This illustrates how the exponential population growth rate presents a serious challenge to the municipalities in the province, more so noting the fact that the heightened population growth rate is not only due to a natural growth, but also to other factors such as migration (only 56%

of the population of Gauteng was born in Gauteng, according to GCRO QoL Survey).

Basic Service Delivery Performance in the province (GHS, 2013):Piped water (95.9%), Electricity (83.6%), Access to flush toilets

(90.2%); and Refuse removal by local

authorities (90.1%).

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SOCIO-ECONOMIC PROFILE OF GAUTENG PROVINCEThe Gauteng City Region is also the engine of the regional economy, and a gateway to the rest of the continent. Gauteng’s share of GDP increased to 36% in 2013. During the year 2011, the province’s GDP was R675 billion, depending mainly on the tertiary sector, finance and business services, including the services sector.

The official unemployment rate for Gauteng in 2011 was estimated at 26.3%, and has subsequently declined to 24.6% during the fourth quarter of 2014, according to Statistics South Africa’s Quarterly Labour Force Survey for Quarter 4 of 2014.

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NDP 2030… MARCHING ORDERSChapter 13 of the NDP on Building a Capable State: building of a professional public service a state capable of playing a transformative and developmental role

in realising the vision 2030.

This requires: a well run and effectively co-ordinated state institutions; staffed by skilled pubic servants who are committed to the public

good; and capable of delivering consistently high quality services for all South

Africans, while prioritising the nation’s developmental objectives.”

As articulated in the NDP, we need to:

Stabilise the political-administrative nexus; Make the public service and local government careers of choice. For

example, recruitment should be based on experience and expertise; and

Development of technical and professional skills for the state to fulfil its core function at all levels.

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GAUTENG’S TEN-PILLAR PROGRAMME - TMR According to the Back-to-Basics Diagnostic Exercise, Gauteng has 10 municipalities

that are “Doing Well” However, having ten (10) out of twelve (12) municipalities categorised as “doing well”

does not mean that Gauteng province and its constituent municipalities have over-achieved and therefore should not focus on the basics of local government.

Instead, it is rather important to note that as a city-region that benchmarks itself against some of the most competitive city-regions globally, the province and the Gauteng City Region (GCR) at large, has set itself very high standards in terms of governance, service delivery performance that is beyond simply the basics, as well as having initiated institutional and economic transformation platforms that will make the Gauteng City Region a destination and investment node of choice.

Through the provincial government’s programme of radical Transformation, Modernisation and Re-industrialisation (TMR), the viability, performance and sustainability of the different regions, municipalities and Development Corridors are highlighted as the cornerstone of a successful and globally competitive Gauteng City Region.

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GAUTENG’S CORRIDORS OF DEVELOPMENT

CENTRAL CORRIDOR: CITY OF JOHANNESBURG

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City of Johannesburg - Advancement of the metro’s position as the hub of finance, services, information communications technology (ICT) and pharmaceutical industries.

Other programmes include the revitalisation of the Joburg CBD and the establishment of New Development Bank (BRICS Development Bank) within the City of Johannesburg’s area of jurisdiction.

The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank operated by the BRICS states (Brazil, Russia, India, China and South Africa) as an alternative to the existing US-dominated World Bank and International Monetary Fund. The bank is set up to foster greater financial and development cooperation among the five emerging markets.

EASTERN CORRIDOR: CITY OF EKURHULENI

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Focus is entrenching City of Ekurhuleni’s position as the manufacturing hub, with multiple logistics and transport industries.

The Aerotropolis mega projects will include 29 initiatives to revitalise manufacturing, aviation, transport and logistics industries linked to OR Tambo - Aerotropolis footprint to Lanseria and Wonderboom.

ACSA, DENEL, and other major private sector companies are positioning themselves in line with Aerotropolis imperatives.

PRASA, a state-owned enterprises, will be rolling-out of 7 224 new rolling stock units and a R123 billion investment and 30 000 jobs over 20 years.

Transnet will also invest in the development of Tambo Springs and Sentrarand inland ports. The former involves a R7.5 billion investment over a 5-year period, and an estimated 110 000 jobs over 15 years.

NORTHERN CORRIDOR: CITY OF TSHWANE

Key developments in the Northern Corridor will include the following:

West Capital development project: development of a student village, sport incubatory centre, retail and commercial components, inner city housing and health facilities.

African Gateway in the heart of Centurion: biggest Convention Centre, massive hotel, residential, commercial and additional office space.

Business Process Outsourcing Park in Hammanskraal: Investment of R525 million, creating over 1 000 jobs during construction and over 1 000 indirect jobs, as well as on-site training, technical support and incubators for SMMEs.

Automotive Industry Development Centre (AIDC): Continued support for the automotive sector in the Rosslyn cluster. Establishment of freight and logistics hub to support automotive industry is being investigated.

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City of Tshwane - The administrative capital and hub of automotive sector.

The city is the main anchor for research, innovation and the knowledge-based economy in Gauteng.

WESTERN CORRIDOR: WEST RAND DISTRICT The Western Corridor - focus on the creation of new

industries, new economic nodes, and new cities. Transformation, modernisation and diversification of the

West Rand economy, including the revitalisation of the mining towns, will be the primary objective in this Corridor.

Focus will be placed on the green and blue economy initiatives, tourism, agro-processing and logistics. Lanseria Airport and Maropeng Heritage Site will serve as the main anchors.

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Key projects:o The Lanseria Airport logistics hub (R500 million in Capital

expenditure for airport development)o R10 billion investment expected in Lanseria over the next 15

years. o The Randfontein milling facility will transform the agricultural

sector and ensure food-security in the Western Corridor.

SOUTHERN CORRIDOR: SEDIBENG DISTRICT In the Southern Corridor, focus is on the creation of new

industries, economic nodes and cities, and a Hydropolis. There will be economic shift away from overreliance on

steel industry and diversify to include tourism and entertainment, agro-processing and logistics.

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The creation of New Vaal River City, which will unlock potential of the waterfront developments, with an investment of more than R4 billion.

The complete development is estimated to be worth between R7 and R11 billion. Approximately 7 500 jobs will be created in the construction phase alone. Sod-turning for this project was on 21 March 2015.

Key other projects are as follows:

Sedibeng (Agropolis): Aimed at unlocking the agricultural potential of Sedibeng as the food basket of the Gauteng City Region. An estimated 32 black farmers will be supported to plant barley and maize to be supplied to the nearby Heineken Brewery. About 1 000 permanent jobs will be created per annum over 3 years;Gauteng Highlands development: a mixed-use development comprising of industrial and residential space, with an investment value of R40 billion. About 25 000 direct and indirect jobs will be created; and Sedibeng Waste Water Treatment Works: creation of regional bulk sanitation infrastructure for the Southern Gauteng Region to address under-capacity of WWTT, to be completed August 2016.

BACK-TO-BASICS PROGRAMME OF THE 5th ADMINISTRATION

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BACK-TO-BASICS MODEL OF SERVICE DELIVERY

At the Presidential Local Government Summit hosted by the Minister for Cooperative Governance and Traditional Affairs (CoGTA), Mr Pravin Gordhan, on 18 September 2014, the Honourable President of the Republic of South Africa, Mr JG Zuma, launched the Local Government Back-to-Basics (B2B) Programme.

The Programme is aimed at strengthening the local sphere of government, improving service delivery and promoting economic growth and development at the local level. Key to the programme is the effective functioning of municipalities to better serve communities by getting the balance right in terms of the five pillars of B2B: putting people first, service delivery, good governance, financial accountability, and building capacity within robust institutions.

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CORNERSTONE OF BACK-TO-BASICSThe pillars of the programme are defined as follows:

Put people and their concerns first, and ensure constant contact with communities through effective public participation platforms.Create conditions for decent living by consistently delivering municipal services to the right quality and standard. This includes planning for, and delivery of infrastructure and amenities, maintenance and upkeep, including the budgeting to do this. Municipalities must ensure that there are no failures in services and where there are, restore them with urgency.Be well governed and demonstrate good governance and administration - cut wastage, spend public funds prudently, hire competent staff, ensure transparency and accountability.Ensure sound financial management and accounting, and prudently manage resources so as to sustainably deliver services and bring development to communities.Build and maintain sound institutional and administrative capabilities administered and managed by dedicated and skilled personnel at all levels.

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BACK-TO-BASICS ASSESSMENT IN GAUTENG

According to the Back-to-Basics assessment conducted by the National Department of CoGTA in 2014, Gauteng province does not have dysfunctional municipalities. However, Westonaria and Randfontein Local Municipalities were found to be municipalities “at risk”. These municipalities are situated in distressed mining towns in the West Rand District, where there are high unemployment levels, poverty and inequality levels due to eroding economic activity and plummeting performance of mining houses. The socio-economic plight of these municipalities is also receiving special attention from the Presidential project on the revitalisation of the mining towns.

According to the B2B Approach, municipalities that are considered to be “at risk” are those that demonstrate a fair amount of financial and records management, reasonable feedback through community meetings, reasonable access to basic services, and that their councils sit fairly regularly. This is in contrast with those that are regarded as “doing well” on one end, and those that are “dysfunctional” on the other.

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STATE OF MUNICIPALITIES IN SOUTH AFRICA

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Eastern Cape Free State Gauteng KZN Limpopo Mpumalanga Northern Cape

North West Western Cape

0

10

20

30

40

50

60

70

188 10

35

6 7 114

20

13

7 2

18

8 76

4

8

14

9

8

167

15

15

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Doing Well At Risk Dysfunctional

Gauteng province does not have dysfunctional municipalities, but two of the twelve (Westonaria and Randfontein LMs) are at risk.

Support interventions implemented in these two municipalities are geared towards improving the status of these municipalities.

OPERATION CLEAN AUDITIn Gauteng, a clean audit outcome is a prerequisite and non-negotiable. Therefore, those who achieve it cannot be over appreciated.

Why clap hands for fish, for swimming?

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AUDIT OUTCOME IN GAUTENG 2014/15 FINANCIAL YEAR

In Gauteng, we have seen significant improvement in audit outcomes of municipalities with more of them receiving clean audit in 2014/15 financial year.

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MUNICIPALITY 2013/14 2012/13 2011/12 2010/11 2009/10 Ekurhuleni Clean audit Unqualified Unqualified Unqualified Unqualified

City of Tshwane Unqualified Unqualified Unqualified Unqualified Unqualified

City of Johannesburg Unqualified Unqualified Qualified Qualified Qualified

Sedibeng Clean audit Clean audit Unqualified Unqualified Unqualified

Midvaal Clean audit Unqualified Unqualified Unqualified Unqualified

Lesedi Unqualified Unqualified Unqualified Unqualified Unqualified

Emfuleni Unqualified Unqualified Unqualified Qualified Qualified

West Rand Unqualified Unqualified Unqualified Unqualified Unqualified

Westonaria Adverse Qualified Qualified Unqualified Unqualified

Merafong City Unqualified Unqualified Unqualified Unqualified Unqualified

Randfontein Qualified Qualified Qualified Qualified Unqualified

Mogale City Clean audit Unqualified Unqualified Qualified Qualified

REQUIREMENTS FOR SOUND GOVERNANCE INTERMS OF BACK-TO-BASICS

SOUND FINANCIAL MANAGEMENT AND ACCOUNTING

Prudent financial management and sound accounting practices is critical for the efficient and effective management of local government institutions. It is through financial prudence and good accounting practices that community services can be delivered optimally and sustainably even with limited financial resources at the disposal of government. Reduction of the qualification audit outcomes, and possibly eliminating them, coupled with increased percentage of revenue collection, development of cash-backed budgets, servicing of municipal debts are among the most critical areas of focus under in B2B.

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The allocated budgets must be used for intended purposes – service delivery.

Cut wastage and focus on the core business.

LOCAL GOVERNMENT IS NOT A PLACE FOR BOSSES, BUT LEADERS

The infighting between politicians and administration tend to lead to leadership deficit and polarisation of the working environment.

The scandals in government are a symptom of amoral leadership. We are experiencing profound moral vacuum and in search of authentic leaders.

Stabilisation of political-administrative nexus, with clear demonstration of leadership in dealing with audit issues in municipalities is non-negotiable.

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REPORTING AND MONITORING

Sufficient in-year reporting and monitoring and ensuring that financial statements are of good quality.

The quality of reporting on predetermined objectives.

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BUILDING A CAPABLE GOVERNMENT

Ensure that critical and scarce skill positions are filled and/or persons with appropriate competencies are appointed in key positions.

Building the institutional capacity required to maintain adequate internal controls, systems and processes.

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CONSEQUENCE MANAGEMENT

Consequence management is instituted for poor performance and transgressions.

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Unacceptable standard of work

Poor quality of workLow productivity

Poor outputs

Under performance

STRINGENT SYSTEMS AND PROCESSES TO COMBAT FRAUD AND CORRUPTION

That municipalities undertake their business according to universally acceptable, rules and standards and not define their own rules.

Develop risk management policies and frameworks including risk appetite and tolerance to reduce possibilities of fraud and corruption.

The financial misconduct regulations, MFMA and the code of conduct of Councillors should also be used to report and manage cases of fraud and corruption.

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RELIABLE AND CREDIBLE PERFORMANCE INFORMATION

Our expectation is that there should be fair presentation of portfolio of evidence that support our performance information, e.g. how funds were spent? for what? when? and where?

If this is not done…

“A claim that evidence has been eaten by a rat and we need RATEX” will be the order of the day.

The result will be poor governance leading to the other undesirable behaviour.

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STRENGHENING OVERSIGHT FUNCTIONS

A demonstration of impeccable levels of discipline and oversight in financial management and operational activities.

To ensure that local government structures adhere to stringent fiscal discipline, there must be strong oversight committees that would enforce compliance with rules and regulations.

The Section 79 Committees and internal audit structures comprised of competent persons should be established. Regular reporting to these structures should be promoted to avoid unnecessary shocks during audit period.

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A CLEARLY-DEFINED SCM POLICIES

Our fiscal regime calls for development and implementation of SCM policies to prevent unwarranted processes during sourcing of goods and services. Municipalities should have such policies and comply with them.

The new normal of “hostile subcontracting” by unsuitable suppliers ought to be managed tightly within the confines of our regime. Our system should support Township economy within established rules and not toyi-toyi by those who want the slice of outside established rules.

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APPORVAL OF BUDGETS IN LINE WITH THE LAW

Municipalities should comply with Section 16 (2) of the MFMA, which requires the mayor of a municipality to table the annual budget at a council meeting at least 90 days before the start of the start of the new budget year.

This include submission of the tabled budget to both the National and Provincial Treasuries (Sec. 22 (b)), the publication of the tabled budget, and the tabling of the budget in a format prescribed in Regulation 14(a).

Publication of the approved annual budgets on the websites as per section 75 of the MFMA.

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ASSET MANAGEMENT SYSTEMS PROCESSES AND POLICIES

Municipalities should have credible management system processes and policies. They must know the location, value and lifespan of their assets.

Necessary funding should be set aside to maintain assets, especially the infrastructure assets in order to ensure that service delivery is not negatively impacted upon.

There must be an asset management register which is updated on a regular basis. This will ensure that all the assets are accounted for.

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OTHER SUGGESTED SOLUTIONS TO ACHIEVE SOUND FINANCIAL MANAGEMENT

Ensuring correctness and completeness of Data on Billing System and Receipting.Updated and accurate property valuation roll.Customer care and communication.Effective credit control and debt collections.Address water and electricity fraud and losses through partnerships with law enforcement agencies.Training and development of revenue management personnel.Government Debt Strategy implementation.Cost-reflective tariff models.Politically-driven initiatives to curb the growing culture of non-payment for services, and addressing the problem of “no-go areas”.Drive more effective Communications and Customer Relations.Income projections that are informed by realistic sources of revenue; andEstablish liquidity policy, borrowing funds and reserves policy.

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THANK YOU!

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“Good government only happens when the people working in it do

their jobs, and do them well.”By: Matthew Lesko