BUDGET REVIEW: MUNICIPAL DEMARCATION BOARD PORTFOLIO COMMITTEE ON PROVINCIAL AND LOCAL GOVERNMENT

1. BUDGET REVIEW: MUNICIPAL DEMARCATION BOARDPORTFOLIO COMMITTEE ON PROVINCIAL AND LOCAL GOVERNMENT 14 March 2006

2. REPRESENTATION AND DOCUMENTS • From the Board: • Dr V Mlokoti – Chairperson: Municipal Demarcation Board; • Mr R H Monare – Manager: Municipal Demarcation Board (Chief Executive & Accounting Officer) • Document Tabled: • Annual Report 2005 – 2006 (to end January 2006)

3. OVERVIEW • The Board. • Request from 2005: Concerns and Queries raised in 2004. • Report by the Auditor-General: 2004/05. • Receipts for the year 2005/06. • Allocation of Funding. • Expenditure 2005/06. • Outputs and Developments 2005/06. • Strategic Direction – Medium Term Strategy 2006/07 – 2009/10. • Budget Programmes. • Conclusion.

4. THE BOARD • 9 Members since 1 February 2004; • Chairperson the only full time member of the Board; • Manager (CEO and Accounting Officer) in charge of the Board’s Administration; • 4 Operational Clusters; • 27 Staff Positions in the Establishment: • 4 Vacant; • 2 to be filled in the new year; • 85,7% Black; • 38% Female; • 4,7% Disabled.

5. REQUEST FROM 2005: CONCERNS AND QUERIES RAISED IN 2004 • Acting Chairperson of the Portfolio Committee requested that we re-send to the Committee our memo dated 19 October 2004, initially sent to the Chairperson of the Portfolio Committee, explaining all concerns that were raised on 11 October 2004; • Memo re-sent on 29 April 2005; • The concerns and reservations raised included: • The Board’s expenditure being possibly excessive, and rising from year to year at too high a rate, with respect to: • Professional Fees; • Office Expenses; • Staff Remuneration; • Board Members Remuneration; • Travel and Accomodation • Consultants employed by the Board possibly taking too substantial a portion of the Board’s funding, whether the money being spent on consultants is justified, and that the money could be more appropriately spent on young emerging black graduates;

6. REQUEST FROM 2005: CONCERNS AND QUERIES RAISED IN 2004 • Salaries being paid to Staff possibly being totally inappropriate, and thus the request for the salaries to be broken down for the Portfolio Committee, to determine if the salaries are appropriate. • The possibility that the Board may be spending its money on things that are irrelevant in as far as its core mandate is concerned, and thus the financial difficulties it faced; • A former Member of the Board leaving the Board to set up a consultancy and get work from the Board, thus indicating that it is more lucrative to work for the Board as a consultant, than to stay as a Board Member; • Steps taken by the Manager: MDB to rectify issues raised under “emphasis of matter” in the 2003/04 year.

7. REQUEST FROM 2005:CONCERNS AND QUERIES RAISED IN 2004 • As requested by this Committee, our memo provided in detail: • A breakdown of all expenses incurred on professional fees and on Office Expenses; • A clear indication that expenditure on professional fees was fully justified, and that it was incurred in direct pursuance of the Board’s core mandate, and the fact that taking away the expenditure on professional fees would have seriously compromised the Board’s work; • An explanation of the fact that the vast majority of the consultants that have been employed at the Board are emerging Black graduates and professionals, who actually gain a major boost in their careers as a result of working for the Board; • The fact that no board member has ever left the Board to set up a consultancy, so as to get work from the Board.

8. REQUEST FROM 2005:CONCERNS AND QUERIES RAISED IN 2004 • Confirmation of the fact that in view of the Board’s mandate and projects, scaling down on consultants just for the sake of reducing numbers, would mean employing additional staff at the Board, and this would have a net effect of increasing costs rather than reducing them; • A clear demonstration that the annual escalations on office expenses and staff salaries were perfectly normal, and that there was nothing excessive about the escalations; • An explanation of how staff salaries at the Board are made up; • An explanation of the fact that Board Members’ remuneration are simply what has been determined by the Minister for them, as well as reimbursements of their out-of-pocket expenses while in the course of their duties as Board members. There is therefore nothing excessive about their remuneration;

9. REQUEST FROM 2005: CONCERNS AND QUERIES RAISED IN 2004 • With respect to travel and accomodation, an explanation of the fact that: • Board Members cannot be expected to be largely office-bound if they are going to be effective; • Board Members, who are all part time except the Chairperson, must travel to attend Board meetings; • The Board is well known for its frugality in its modes of travel, and their accomodation around the country. • An explanation of the effective steps taken by the Manager to rectify issues raised under “emphasis of matter” in 2003/04 Annual Report.

10. REPORT BY THE AUDITOR-GENERAL: 2004/05 • In his report to Parliament on the financial statements of the Municipal Demarcation Board for the year ended 31 March 2005, the Auditor General qualified his audit opinion as a result of the differences between the fixed assets register and the financial statements. • Property, plant and equipment were disclosed at a carrying value of R792 000 in the balance sheet. On the other hand, the carrying value per detailed fixed asset register of the Municipal Demarcation Board was R1 912 474. As result the Auditor-General could not determine through reasonable alternative procedures what the correct value in the financial statements should be. • We have now reconciled the assets register with the financial statements. During the reconciliation, the following issues surfaced: • Not all assets capitalised were recorded on the assets register. • Assets stolen were not removed from the asset register. • Depreciation was overprovided due to error of estimates.

11. REPORT BY THE AUDITOR-GENERAL: 2004/05 • We have submitted the report to the Board with a recommendation that those assets which should not be in the assets register, be written off. • The Board has accepted the recommendation, and the assets have been written off. • The asset register and the carrying value per balance sheet now balance. • Under emphasis of matter, the Auditor-General once again raised the going concern issue with respect to the Board, where he noted the deficits incurred by the Board in 2004/05, 2003/04, and 2002/03. • The Auditor-General’s concern that the MDB mighty have difficulty to continue as a going concern.

12. REPORT BY THE AUDITOR-GENERAL: 2004/05 • The deficit is purely as a result of the under-funding of the Board, a problem that we have raised with all relevant authorities to date. • At this stage, we have implemented a programme to limit our expenditure strictly to the budget, even if it means that we do not fully or satisfactorily fulfil our mandate. • The results of this programme, in terms of avoiding the recurrence of a deficit at all costs, will be evident at the end of the current year 2005/06.

13. RECEIPTS FOR THE YEAR 2005/06

14. ALLOCATION OF FUNDING

15. EXPENDITURE ON SELECTED ITEMS

16. EXPENDITURE 2005/06 GOING FORWARD • Expenditure on Municipal Capacity Assessments for 2005 was significantly cut. This was done by de-commissioning important work with respect to the 9 provincial reports and the national report. • Indications are that we will once again be forced to de-commission important work in 2006, given the MTEF allocation of R17,115,556 for 2006/07. • Proposals have been developed for consideration by the Board, to effect severe cuts with respect to the 2006/07 budget. These include: • Imposing a moratorium on the commissioning of all research at the Board. Only reports on municipal capacity assessments will be done, subject to availability of funds; • Minimising the costs of printing the Annual Reports by doing the printing internally with a Colour printer, instead of them being done by professional printers; • Using Tele-Conferencing and Video Conferencing for Board Meetings.

17. OUTPUTS AND DEVELOPMENTS 2005/06 • Outputs during the year in the following areas of work: • Determination and re-determination of municipal boundaries. • Delimitation of each municipality that qualified to have wards, into wards. • Assessments of Municipal Capacity and recommendation to MEC’s for local government on the allocation and re-allocation of powers and functions between local and district municipalities. • Report to assess the adjustment of district municipality functions to local municipalities. • Updating of the Document on Local Government Powers and Functions- Definitions, Norms and Standards. • Report to assess pollution legislation. • Strengthening of interaction with Key Stakeholders. • Strengthening the Board’s Administrative and Financial functions. • Improved management of Financial Assets and liabilities, through a Management Strategy for Financial Assets and Liabilities.

18. DETERMINATION AND RE-DETERMINATION OF MUNICIPAL BOUNDARIES. • All changes to outer boundaries were discontinued on 20 February 2004 for the ward delimitation process. • However as a result of Government’s announcement in August 2005 to phase out Cross-Boundary Municipalities the re-determination process had to be reopened. • The following changes were completed during the financial year: • Bohlabela District Municipality disestablished. Maruleng Local Municipality together with the northern portion of the Kruger National Park District Management Area added to Mopani District Municipality and Bushbuckridge Municipalities together with the Southern Part of Kruger National Park added to Ehlanzeni District Municipality.

19. DETERMINATION AND RE-DETERMINATION OF MUNICIPAL BOUNDARIES. • The whole of the Sekhukhune District Municipality added to Limpopo Province. A portion of Thembisile Local Municipality and Nkangala District Municipality added to Kungwini Local Municipality and Metsweding District Municipality. Metsweding District Municipality moved into Gauteng Province. Merafong Local Municipality excluded from the municipal area of West Rand District Municipality and included into Southern District Municipality in North West. • Umzimkhulu Local Municipality included into Sisonke District Municipality in Kwa-Zulu Natal and Matatiele Local Municipality included into Alfred Nzo District Municipality in the Eastern Cape. The boundaries between Umzimvubu Local Municipality and Matatiele Local Municipality reconfigured within Alfred Nzo District Municipality. Kgalagadi District Municipality and Francis Baard District Municipality included into the Northern Cape.

20. DETERMINATION AND RE-DETERMINATION OF MUNICIPAL BOUNDARIES. • Changes were effected through re-demarcations by the Board, the enactment of the Constitution 12th Amendment Bill and the Cross Boundary Laws Repeal and related matters Act. • The declaration of six District Management Areas were withdrawn and the District Management areas included into the following local municipalities: • DCDMA14 included into Gariep Local Municipality; • DCDMA44 included into Matatiele Local Municipality; • DCDMA31 included into Thembisile Local Municipality; • DCDMA32 portions included in Thaba Chweu Local Municipality, Umjindi Local Municipality, Umkomaas Local Municipality; • DCDMA37 included into Moses Kotane Local Municipality; • CBDCDMA3 included into Greater Marble Hall Local Municipality.

21. DETERMINATION AND RE-DETERMINATION OF MUNICIPAL BOUNDARIES. • All outstanding requests for re-determination and technical re-determinations identified and the necessary planning done to finalise all of them well in advance of the 2011 local elections. • Proposals submitted to the Minister for a review of the existing legislation pertaining to ward delimitation, as an attempt to create stability in Local Government. • Planning also in place to conduct a second round of boundary assessments to eliminate technical problems identified during the ward delimitation process and abolishment of Cross Boundary Municipalities.

22. WARD DELIMITATION • The ward delimitation process that commenced in 2004 completed during the 2005/06 financial year. • On 20 May 2005 all ward boundaries handed over to the IEC to commence with the electoral process, at that point in time 3 878 wards were delimited. • As a result of the abolishment of Cross Boundary Municipalities the wards for Kungwini, Thembisile and Umzimvubu had to be re-determined. • Matatiele Local Municipality which did not qualify to have wards, now qualified as the result of the changes of the boundaries between Umzimvubu and Matatiele Local Municipalities. • Some other technical changes also had to be affected to the ward boundaries in Buffalo City, Nkonkobe, Ga-Segonyana, Kgetlengriver and Bitou Local Municipalities.

23. WARD DELIMITATION • The end result of the ward delimitation process was as follows:

24. ASSESSMENT OF MUNICIPAL CAPACITY • As in the past this function has been outsourced. • Annual assessments start in June and end in December of each year. This makes it impractical to appoint full time staff for Capacity Assessments. • The Capacity Assessment process commenced with the training of field consultants. • In August all questionnaires collected from Municipalities. • The necessary data capturing and verification completed in September. • 47 District reports covering all 278 District and Local Municipalities drafted in October and November. • Reports together with a summary were sent to MEC’s on 20 December 2005 for consideration, after consideration by the Board.

25. ASSESSMENT OF MUNICIPAL CAPACITY • Due to lack of funds as a result of the reallocation of funds to deal with the re-determination of cross boundary municipalities it was not possible to draft and fund the nine Provincial reports, the National report and the reports on proposed amendments to legislation affecting the MDB. • Specialised reports also produced in this regard: • Report on pollution • Review of definitions of municipal functions, Municipal roads and transport and • The performance of district functions by local municipalities.

26. REPORT TO ASSESS THE ADJUSTMENT OF DISTRICT MUNICIPALITY FUNCTIONS TO LOCAL MUNICIPALITIES. • A decision taken by the Board to undertake an investigation into the extent to which the local municipalities are performing the adjusted district functions for the purpose of considering recommending to MECs the reversal of such functions. • Section 85 states that an MEC may allocate a power or function in terms as prescribed within the section only if the municipality in which the function or power is vested, lacks the capacity to perform that function or exercise that power. The MEC is also required to consult the MDB and consider its assessment of the municipality concerned. • The Board’s questionnaire as currently designed is not able to assess, once a district function has been adjusted, the extent to which the local municipality has the capacity for the local and district function or the local function only. • Furthermore, given the nature of many of the district municipality functions, it was questioned whether many local municipalities are indeed performing the district aspect of the function.

27. REPORT TO ASSESS THE ADJUSTMENT OF DISTRICT MUNICIPALITY FUNCTIONS TO LOCAL MUNICIPALITIES. • The report’s conclusion was that though district functions had been adjusted to local municipalities, they were only being performed by those local municipalities within their own local areas of jurisdiction. • Subsequently the Board decided that for the 2005/06 assessment, as many as possible of the adjustments to local municipalities should be recommended for reversal.

28. UPDATING OF THE DOCUMENT ON LOCAL GOVERNMENT POWERS AND FUNCTIONS- DEFINITIONS, NORMS AND STANDARDS. • This was an update to the Board’s initial document, which examines each of the fifteen Schedule 4 Part B functions and twenty three Schedule 5 Part B functions in terms of: • its definition • national, provincial and local government roles and responsibilities • minimum level of Service if the function is performed internally or externally • minimum municipal capacity requirements, specifically staff, budget and equipment for the delivery of the minimum level of service by external and internal mechanisms; and • what capacity aspects of service delivery the MDB will assess, where the function is performed externally or internally.

29. UPDATING OF THE DOCUMENT ON LOCAL GOVERNMENT POWERS AND FUNCTIONS- DEFINITIONS, NORMS AND STANDARDS • Information in the five fields checked and updated by referring to the current legislative framework governing each of the functions. • All references clearly recorded as footnotes.

30. REPORT TO ASSESS POLLUTION LEGISLATION. • Report commissioned to assess the implications of the pollution related legislation on local government generally and specifically for the rendering of the municipal health services function. • “Municipal health services” is a Schedule 4 Part B function which is allocated to the district municipal sphere in terms of section 84(1) of the Municipal Structures Act. • The National Health Act 61 of 2003 defines municipal health services as encompassing: • Water quality monitoring; • Food control; • Waste management;

31. REPORT TO ASSESS POLLUTION LEGISLATION. • health surveillance of premises; • surveillance and prevention of communicable disease, excluding immunisations; • vector control; • environmental pollution control; • disposal of the dead; and • chemical safety; • Excludes port health, malaria control and hazardous substances. • The above nine Components of municipal health are not further defined and this poses challenges in respect of the extent to which authority for each of the components must be exercised by the municipal health function. • The uncertainties are exacerbated when one observes that there are overlaps between the nine components and other Schedule 4 Part B and Schedule 5 Part B functions.

32. REPORT TO ASSESS POLLUTION LEGISLATION. • Thus the need to assess the implications for local government with specific reference to the role, responsibility and requirements of this sphere in meeting the legal obligations.

33. STRENGTHENING OF INTERACTION WITH KEY STAKEHOLDERS. • A number of meetings held with the Portfolio Committee on Provincial and Local Government and the Select Committee on Local Government and Administration. • Several issues identified with the Select Committee which called for workshops to improve working relations between the Board and these structures.Such workshops must still be convened. • A local election technical committee comprising of officials of the MDB, IEC and DPLG was activated in 2003 and managed the ward delimitation process 2005/06. • Consultation with other stakeholders such as provinces, SALGA and government departments continued through the Powers & Functions Committee and the Boundaries Committee. • However there has been a delay in developing a working relationship with SALGA further.

34. STRENGTHENING THE BOARD’S ADMINISTRATIVE AND FINANCIAL FUNCTIONS. • Terms of reference prepared and approved by the Board to carry out the Job Analysis at the Board. • Policies and procedures were revised, by adding further details and by having separate documents for each area. • An additional Senior Financial Officer appointed to improve the quality of financial reporting.

35. IMPROVED MANAGEMENT OF FINANCIAL ASSETS AND LIABILITIES, THROUGH A MANAGEMENT STRATEGY FOR FINANCIAL ASSETS AND LIABILITIES • Policies and procedures reviewed regarding the control and management of assets as well as procurement. • All management have been involved in the process to improve the Board’s budget management. • Quarterly reports submitted to the Board. • We have implemented a Risk Management Strategy and a Fraud Prevention Plan has been approved by the Board. • We have implemented a supplier database to improve compliance with Preferential Procurement Policy Framework Act.

36. STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2006/07 – 2009/10 • The Board has approved a strategic plan for the period 2006/07 to 2009/10; • The Plan becomes effective on 1 April 2006. • Strategic Plan builds on the experience that we have gathered over time; • Given our experience in Strategic Planning to date, and the need for us to step up our level of planning, we decided in the development of this Strategic Plan, to follow the Balanced Scorecard (BSC) Strategic System;

37. STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2006/07 – 2009/10 • The balanced scorecard methodology chosen because: • The model is much more widely used in South Africa and it is quite adaptable to the South African situation in both the Public and Private Sectors; • The Balanced Scorecard isa management system, that enables an organisation to clarify its vision and strategy and translate them into action. • It enables the planning of the strategy and its dissemination to all levels of the organisation; • It identifies the initiatives necessary to the execution of the strategy; • It generates the performance measures that will allow a quality driven information management of the organisation.

38. STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2006/07 – 2009/10 • For the first time the strategic plan has set into motion a development of values at the Board. • While our mission and objectives define what we are trying to achieve, our values shape the way we go about achieving them, and reflect the beliefs which underpin them. • The Plan also explicitly identifies primary stakeholders who have an interest in our organisation, what the organisation does, and how the organisation carries out its functions. • The people of South Africa. • National Sphere of Government. • Provincial Sphere of Government. • Local Sphere of Government.

39. STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2006/07 – 2009/10 • Organised Local Government • Houses of Traditional Leaders • National Assembly • National Council of Provinces • Magistrates • Board employees. • Plan identifies strategic themes to focus and guide the organisation over the next five financial years. • The Strategic Themes respond to the key areas that the organisation should continue to excel at, and those areas where the organisation needs to improve performance, and bring performance in such areas to expected levels, or even to exceed those expectations.

40. STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2006/07 – 2009/10 • The Municipal Demarcation Board has also identified a set of strategic objectives within each theme, informed by the SWOT Analysis, which will be pursued in the short, medium, and long term. • Strategic theme 1: determination and re-determination of municipal boundaries in accordance with relevant legal provisions. • Review all outstanding municipal boundaries with a view to complete all changes by 2008/2009 for the 2011 local elections. • Ensure that the role of the Board is carried out in order to allow the IEC to complete the delineation of voting districts, by 2008/2009.

41. STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2006/07 – 2009/10 • Strategic theme 2: delimitation of each municipality that qualifies to have wards, into wards. • Review all outstanding municipal boundaries with a view to complete all changes by 2008/2009 for the 2011 local elections. • Ensure that the role of the Board is carried out in order to allow the IEC to complete the delineation of voting districts, by 2008/2009. • Deliver fully re-delimited wards in time for the IEC local elections process for 2011.

42. STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2006/07 – 2009/10 • Strategic theme 3: collection of relevant information and maintenance and update data sets to render advisory services on capacity and the division of powers and functions. • Deliver Quality annual assessments of Municipal Capacity; • Advise and support provided to MEC’s for local government and other stakeholders, in dealing with the allocation and re-allocation of powers and functions between local and district municipalities, on an annual basis without fail; • Release the results of the assessments in time to allow them to feed into the IDP and budgeting processes of municipalities.

43. STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2006/07 – 2009/10 • Strategic theme 4: review of the declaration of district management areas. • Examine the feasibility to withdraw more declarations. • Strategic theme 5: assistance to departments in aligning service delivery boundaries with municipal boundaries. • Alignment of government’s service delivery boundaries. • Enhancement of service delivery, resource rationalisation and development. • Development of a comprehensive database of well aligned administrative and functional boundaries, providing a source framework in referencing almost all other data in the country.

44. STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2006/07 – 2009/10 • Strategic theme 6: strengthening of relations and interaction with key stakeholders. • To build relationships with our stakeholders that breed understanding and mutual respect. • To be actively engaged in community organisations and issues as far as resources and time allow. • To ensure a work environment that is safe, that encourages growth and development and inspires pride. • To develop and adopt a set of values for the organisation.

45. STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2006/07 – 2009/10 • Strategic theme 7: strengthening of the board’s organisational capacity and capability. • Develop and nurture capability at all levels within the Board. • Create an enabling environment at the Board that allow for the acquisition of competencies and skills among serving employees which are relevant and appropriate to ensure operational efficiencies, and thus more effective ways of achieving the Board’s mandate. • Build a culture of high performance in all employees, and provide training, mentoring and guidance to staff requiring such support; • Finalise a suitable and generally acceptable way in which the staff remuneration structure ensures fair remuneration to staff.

46. STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2006/07 – 2009/10 • Strategic theme 8: ensuring good governance • Complying with legal frameworks; • Improving the efficiency and effectiveness of administrative processes and systems; • Improving the quality and usage of management information; • Planning and executing activities within budget; • Managing risks effectively; • Effective leadership, management and decision-making.

47. BUDGET PROGRAMMES

48. Conclusion • We have therefore been overwhelmingly successfully with respect to achieving a number of our pre-determined objectives. • We have once again carried out our mandate without fail, despite budgetary constraints which forced us to cut on certain key projects. • All queries raised by the Auditor-General and by this Committee in the past have been decisively resolved. • There has been a number of significant outputs during the year under review. • Adequate funding from the fiscus remains a challenge that we have not been able to resolve. • A new Strategic Plan has been approved by the Board.

49. Thank you