JOINT PROGRESS REPORT BY DCOG AND PUBLIC WORKS ON PAYMENT OF INTERGOVERNMETAL DEBT

1. JOINT PROGRESS REPORT BY DCOG AND PUBLIC WORKS ON PAYMENT OF INTERGOVERNMETAL DEBT PRESENTATION TO PORTFOLIO COMMITTEE ON COGTA Tuesday, 22 May 2012

2. PURPOSE • To brief the portfolio Committee on progress made in by the task team terms of payment for intergovernmental debt

3. OVERVIEW OF PRESENTATION • Introduction • Background • Status of municipal debt • Progress on payment of intergovernmental debt • Challenges • Wayforward

4. Introduction • The presentation seeks to provide progress since 29 November 2011 • This is the summary of what was done by the task team of the steering Committee of the NT, COGTA, DPME and PW • The figures shown here are for quarter 1 and quarter 2 • Quarter 3 reports are expected to be released in the next two weeks • The figures that will be presented will give a breakdown per province

5. BACKGROUND • On the 3rd June 2011 the National Steering Committee was established to act on government debt. • The Steering Committee comprises CoGTA, DPME, National Treasury and National Public Works. • The Task Team piloted the first phase of the debt reduction project by analysing outstanding government debt due to eThekwini and Port St Johns municipalities. • The next phase targeted eighteen municipalities identified with the highest government debt balances according to the NT’s section 71 publications

6. GOVERNMENT DEBT BREAKDOWN PER PROVINCE PER QUARTER: SEPTEMBER & DECEMBER 2011

7. GRAPHICAL ILLUSTRATION OF GOVERNMENT DEBT COMPARISON PER PROVINCE: SEPTEMBER & DECEMBER 2011

8. PROGRESS ON PAYMENT OF INTERGOVERNMENTAL DEBT • The above table and bar charts shows the debt breakdown as at the end of the first and second quarter of the municipal financial year • The figures shows an improvement in government debt paid to municipalities • The positive movement is shown in seven of the nine provinces • FS and Limpopo has recorded an increase of debt by national and provinces to municipalities • This is in part due to the verification processes taking longer than expected

9. GOVERNMENT DEBT AGE ANALYSIS (SEPT-DEC 2011)

10. CHALLENGES • The splitting of accounts into rates and municipal services is delaying verification (This is so because municipalities uses a comprehensive billing systems). • High rate of management turnover in municipalities affecting the sustainability of government debt initiative.

11. Future Action • The task team will work on providing the committee with a break down per municipality and debt age analysis • That information will also provide information prior the devolution (a period up to the 31 March 2008). • The Task Team will continue to work with PW and municipalities in verifying the debt for payment • Work with Rural Development and Land Reform together with NDPW to facilitate the vesting of properties and vacant land. • Work with Human Settlement to facilitate endorsement of housing board properties and R293 townships. • Reconciliation of state immovable asset registers for all three spheres of government. • Encourage municipalities to enforce credit control action (disconnecting services

12. Future Action Task team will conduct municipal visits to assist municipalities with the debt collection process once the municipality has submitted the information verified COGTA has identified the 5 priorities to focus on in fastracking LGTAS and one of them is promoting sound financial management The amendment of the MPRA will further assist in proper categorization of PSI like school 12

13. PAYMENT OF NON RETURNING COUNCILLORS UPDATE • We have 3690 Councilors that had to be paid • 930 submission not yet received • 2398 have been paid out of the 2670 • 272 still awaiting tax directive from SARS • Not all of the 2398 received their monies • 305 have been declined by SARS and these have been advised to contact SARS directly