Close-out Report of s139(1)(b) Intervention in Emfuleni Local Municipality

1. GAUTENG DEPARTMENT OF CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS “PRESENTATION TO THE NCOP SELECT COMMITTEE ON COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS” CLOSE OUT REPORT OF THE s139(1)(b) INTERVENTION IN EMFULENI LM 21 NOVEMBER 2023

2. Table of Contents 1. Purpose 2. Background and Context 3. Reasons on the termination of Section 139 4. Close-out Report 5. Administrator`s TORs and key achievements 6. Persistent challenges & areas for further Intervention 7. Refocused intervening support by province 8. Key observations & recommendations 9. Current status of post the termination of Section 139 10.Recommendations 2

3. Purpose To provide reasons on the termination of section 139 and; • To further outline a detailed analytical and comprehensive assessment on the Performance of Emfuleni Administration in terms of Sections 154, 139(1)(b) and 139(5) of the Constitution (2018 - 2022). • 3

4. Background and Context On 11 June 2018, the Gauteng provincial government announced a detailed and comprehensive plan to rescue the embattled Emfuleni municipality. The municipality was placed under administration following a string of poor performance in a number of critical areas, to name a few: Inability to provide adequate service delivery. Allegations of maladministration. Court threats from Eskom and Rand Water as the municipality owed these entities over R3 billion. Poor infrastructure maintenance. Irregular appointment of service providers. Poor revenue collection. Challenges with regards to collection of waste.        4

5. REASONS FOR TERMINATION OF SECTION 139

6. Reasons for termination of Section 139 – Overview • On 30 March 2022, the Executive Council resolved that the intervention in terms of Section 139 (1)(b)(i) of the Constitution will terminate on 31 August 2022. • The Administrators appointed to give effect to the intervention in question seized to hold office as from 01 September 2022. said termination was accordingly effected and the • It follows that with effect from 01 September 2022, the Municipality assumed full responsibility for all the obligations that was subjected to the section 139 (1)(b)(i) intervention. 6

7. Reasons for termination of Section 139 Provincial EXCO noted some challenges and achievements made in the first intervention. • Despite the progress made there were still persistent challenges, the Department recommended that EXCO consider, the extension of the intervention by six (6) months which was granted. • The six-month extension of intervention focused on these persistent challenges in areas such as Finance, Supply Chain Management and Infrastructure. • As approved by EXCO, the intervention focused only on key areas alluded to above (Finance, Supply Chain Management and Infrastructure/Service Delivery. • A Financial Recovery Plan (FRP) was developed, however progress on the implementation of FRP remains a challenge. The Municipality has not been reporting on the FRP progress as legislatively required, this further makes monitoring for GPT challenging There were a number of achievements that the intervention recorded in various critical areas of the refocus intervention, to note a few (details in the report): • • FINANCE A Revenue Enhancement was developed for the Municipality; • ELM has a funded budget plan for MTREF period approved by Council; • The list of Reviewed policies and those approved by Council (SCM Policies approved by Council) (Audit Plan and Strategy approved by Audit Committee). • 7

8. Reasons for termination of Section 139 (Cont..) SUPPLY CHAIN MANAGEMENT • Committees were established with the District Municipality & Province providing support. (BSC, BEC and BAC Committees). • For 2021/22 FY, only 17 out of 163 Projects have been advertised on the Annual Procurement Plan, which represent 12.5%; • SCM Turn Around Compliance Framework Strategy and Action Plan was developed and currently being implemented. INFRASTRUCTURE/SERVICE DELIVERY SOLID WASTE • Waste Management fleet were purchased by GDARD and delivered to ELM: 2 skip bins and 9 tipper trucks, 9 payload refuse trucks, 6 payload hook lift trucks, 3 4X4 TLBs, 3 front end loaders. • The ELM Waste Management service improved with the intervention of the province from the 36 % to 54% overall. 8

9. Reasons for termination of Section 139 (Cont..) DISTRIBUTION LOSSES • The total number of pre-paid meters for water installed and operated are 5000 • Online metering and pre-paid for residential and business. 12 500 electricity meters installed and operational. COGTA have appointed a service provider for three years to assist municipality. MIG & ROADS AND TRANSPORT • MIG R23,368,163.98 (40%). • Rehabilitation of 21 roads undertaken (49.58 km) and these have been completed. Phase 2 is under discussion depending on budget availability. • Tarred Municipal roads and streets resealed: 14.02 km resealed in ELM. Allocated adjustment budget = R50,953,000.00; Expenditure = – EXCO having analysed achievements realised in critical areas of the refocused intervention recommended that the intervention be terminated to allow employed officials to perform their functions. 9

10. CLOSE OUT REPORT

11. Background and Context  The Gauteng Provincial Government (“GPG”) provided support to Emfuleni in terms of section 154 of the Constitution as a mechanism to help improve the financial viability and service delivery situation in the municipality.  The support, however, proved to be inadequate as the Municipality continued to perform poorly, and a number of systemic failures (financial, service delivery and governance) persisted regardless.  Mr. Nkoane commenced his appointment on or about 9 October 2017 to 30 September 2018 and his employment contract was subsequently extended for a period of 6 months from 1 October 2018 to 31 March 2019.  This extension of Mr. Nkoane’ s contract of employment additional to the establishment fall foul of Regulation 57(2)(b) as it went beyond the statutory limit of 12 months, without the Minister’s directive being sought in terms of Regulation 57(4). The Minister’s approval for the extension was then sought, after the fact. The Minister declined to grant approval.  After a long period of to and fro, the EXCO resolved on 05 February 2019 that Mr. Oupa Nkoane, in his capacity as acting MM, be appointed as an Administrator to implement the section 139(1)(b)(i) intervention on behalf of the Provincial Government. The Premier duly notified Mr. Nkoane in a letter dated 05 March 2019.  The Municipal Council of Emfuleni appointed Mr. Nkoane in terms of section 82(1)(b) of the Local Government: Municipal Structures Act, 1998, as the acting Municipal Manager with effect from 1 October 2019 until the new municipal manager was appointed. 11

12. Background and Context (Cont..)  The Minister of COGTA and the NCOP were duly notified of the said intervention for approval.  Both the Minister and the NCOP approved the intervention on condition that, amongst others, an “Administrator” should be appointed with clear Terms of Reference.  This condition led to a difference of interpretation between the Province on the one hand and the Minister and the NCOP on the other hand. The Province held the view that the municipal council of Emfuleni was not dissolved under section 139(1)(c), which provides that an administrator must be appointed and whereas an intervention under section 139(1)(b)(i) is silent on the appointment of an Administrator. In other words, the Province can make a determination on how and what mechanism it may employ to give effect to section 139(1)(b)(i).  Various workstreams were established to support the intervention and to focus on the following key areas Financial Management and Viability Municipal Governance and Institutional Administration Municipal Basic Services Public Participation 12

13. Establishment of the Work streams WORKSTREAM 01 WORKSTREAM 02 WORKSTREAM 03 WORKSTREAM 04 WORKSTREAM 05 Financial Management and Viability Basic Service and Urban Management Governance & Institutional Management Communications & Stakeholder Engagements Implementing Mega Projects and Infrastructure projects in Emfuleni Resourcing the recovery plan; Water and storm water infrastructure; Critical vacancies; Internal Emfuleni communication (unions, employees, management); Speed up the implementation of the Interchange, Roads and Transports; Technical resources (HR, legal labour; Revenue; Sanitation; Expenditure; Energy and electricity; Review of organisational structure and institutional review; External stakeholder communication (Ward Committees, residents, organized business, community based organisations, academic institutions) Intergovernmental relations and communication , including SALGA Proposed SEZ, Aerotropolis and the Logistics Hub; Indigents; and LED Cleaning and Waste Management; Legal – including specific consideration whether to utilize any of the Chapter 13, Part 3 measures of the MFMA; Vaal River City Roads, maintenance , resurfacing and fleet managements; Infrastructure; ICT, Training, Policy review, Clean governance. Human Settlements 13

14. ADMINISTRATORS TORS AND KEY ACHIEVEMENTS 2018 TO 2020

15. Administrator`s Tors and Key Achievements KEY FOCUS AREAS PROGRESS TO DATE A Municipal Financial Recovery Plan (MFRP) was developed by the National Treasury and approved by the MEC for Finance on 27 February 2019. Coordination of the Implementation of the FRP – Financial Recovery Plan ToR (B) • Since the date the approved Financial Recovery Plan was submitted to the municipality on 15 February 2019 to date (June 2020), the municipality was expected to have submitted fifteen (15) monthly reports, however, only six were submitted to the MEC for Finance. • Out of those submitted, only one was submitted within the required time. Several no-compliance letters were written by the MEC Finance to the Mayor of the municipality, with little improvement from the municipality. • On 21 June 2020, the MEC Finance wrote a letter to the Premier to escalate this non-compliance of the municipality. • In terms of Section 147 of the MFMA, the MEC for Finance must at least every three months review the implementation of the intervention at the municipality. Since the approval of the Financial Recovery Plan, the MEC for Finance has provided three quarterly reviews on the Emfuleni Local Municipality’s intervention • 15

16. Administrator`s Tors and Key Achievements (Cont..) KEY FOCUS AREAS PROGRESS TO DATE The municipality decided to appoint a service provider to conduct a in depth tariff review that will be applicable in the 2020/21Budget; Review and Implementation of sound Financial systems, policies, procedures, cost cutting measures, Increase Revenue collection ToR (C) • The Integrated Revenue Management Forum was established and is chaired by the Head of Revenue; • The review and implementation of revenue, credit control, tariff, free basic policy and indigent policies was approved with the adoption of the budget. One of the significant milestones is the change from allocation of 30kl of free water to 6kl as per the national indigent policy; • As from 01 October 2019 the municipality appointed a panel that deals with Meter Reading, separate panel that deals with disconnection of water and electricity and a separate panel that deals with reconnection. A separate service provider that conducts monitoring and evaluation. This has brought a positive impact revenue collection as there was a competition among contractors; • The process of appointing a municipal valuer for the 2020/21 GV is in process. Organisational Development is assisting with the process of establishing an in-house MV. • Development and implementation of internal Controls was intended to lead to the reduction of the UIF&W expenditure. • 16

17. Administrator`s Tors and Key Achievements (Cont..) KEY FOCUS AREAS PROGRESS TO DATE Review and Implementation of sound Financial systems, policies, procedures, cost cutting measures, Increase Revenue collection ToR (C) Establishment of the Integrated Revenue Forum (IRF) • Addressing current electricity tariff leakages • Identification of 15 000 prepaid electricity meters that have been by-passed since 2015 – On 10th June 2019 starting with audit with the objective to replace meters. • Electricity By-Law – 36 months back -bill was approved by March 2019 council • Installation of 190 Metering On Line Electricity infrastructure since November 2018. • An amount of R 30 million was budgeted for the roll out of water meters to 80 000 unmetered households. • Filling of senior Management position including Municipal Manager`s position ToR (D) The appointment of the section 56 managers has brought stability in the institution • All section 56 mangers have signed performance management agreements and the municipality is now cascading it to levels 2 & 3. On a quarterly basis reports are considered from departments on the Service Delivery Budget Implementation Plans which are a result of a thoroughly canvassed IDP, both documents are FRP aligned. It is anticipated that this will improve performance in the municipality. • 17

18. Administrator`s Tors and Key Achievements (Cont..) KEY FOCUS AREAS PROGRESS TO DATE Dealing with Disciplinary matters, Including criminal, maladministration, disciplinary and civil action executed ToR (E) Gauteng CoGTA appointed a Firm of Attorneys to assist the municipality with the assessment of current labour matters including but not limited to suspensions and awards against the municipality. This company has commenced with its work, which includes the implementation of a structured skills transfer program • In dealing with corruption in the institution the ELM had to institute forensic investigations from an independent forensic company of forensic investigators. The matter is lying with MPAC and the report with remedial actions is still to be tabled in council sitting. • Extensive investigations of the irregular expenditure (from 2014 to 2018) conducted a report was completed by MPAC tabled at Council of October for condonement, activating consequences management, recouping of the funds lost and opening of the criminal case with the law enforcement agencies • Negotiate and enter into payment agreements with the third parties currently owed by Emfuleni Local Municipality. As at the 31 May 2019 – an amount of R 159 million was paid to date against the contracts that could not be cancelled; • Eskom Debt- CoGTA, Eskom, Gauteng Provincial Treasury and the Municipality have initiated an IGR Dispute resolution exercise as directed by the court judgement on the Large Power users case. • ToR (F) Rand Water Debt- Discussion agreement on payment terms between the two parties given the breached agreement in December 2019 led by CoGTA with Rand Water are underway to reach an • 18

19. Administrator`s Tors and Key Achievements (Cont..) KEY FOCUS AREAS PROGRESS TO DATE Designed and Reviewed Organisational Structure in line with Modern Design Principles.The Macro Structure and a Service Delivery Model are in place. • Review the organizational structure of the municipality, focusing particularly on curbing ballooning salary costs, whilst improving performance ToR (G) The committee on Budget monitoring and Controls consisting of political principals is doing great work in ensuring that the expenditure is juxtaposed to the revenue collected so that we don’t end up spending what we don’t have as the municipality. Oversee the all budgetary and expenditure process in the Municipality ToR (H) • In the 2018/19 financial year, for the first time in the history of ELM, the municipality did not utilize conditional grant to fund operational expenditure. This control is continuing in 2019/20. The 2018/19 Medium Term Revenue and Expenditure Framework (MTREF) was re-based in line with the principles of an affordable expenditure envelope and realistic revenue projection. The 2018/19 MTREF was radically reduced by R 400 million with realistic revenue projections. The same principles are utilized in the 2019/20 MTRF. • • In January 2019 introduced the purchase order payment system to enhance the control environment. • Suppliers are now being registered on the Central Supplier Database. • Introduced a process to validate payments : valid contract, registered with CSD, valid PO- before any payment is made • 19

20. Key achievements against the TOR’s KEY FOCUS AREAS PROGRESS TO DATE Governance Structures (LLF, MPAC, etc.) are in place and are functional. Council, consisting of multi-parties, is able to sit on a monthly basis to pass resolutions and provide oversight over the administration. Ensure the Local Labour Forum is functional, and the resolutions are implemented by the Administration ToR (J) • The municipality received positive audit outcomes (Unqualified Audit with findings) for the past 2 years (16/17 and 17/18 FY, The remedial action plans were developed to address Auditor General findings and in relation to the 17/18 FY 66% of the issues were fully addressed, 12% in progress and 22% not addressed. Gauteng CoGTA and Treasury supported the municipality to address findings through the review of Financial Statements before submission to AG and advisory support through the OPCA PCC workshops. • Ensure the implementation of remedial action plans dealing with the Auditor General ToR (K) • • 20

21. Key achievements against the TOR’s (Cont..) KEY FOCUS AREAS PROGRESS TO DATE An amount of R 873 million was declared irregular in the 2017/18 AFS. Review all contractual obligations of the municipality and negotiate contractual payments, scope and agreed schedule with service providers ToR (L) As at the 31 May 2019 – an amount of R 159 million was paid to date against the contracts that could not be cancelled. A report on centralisation of SCM was approved by council meeting of March 2019. Resolution was taken regarding future payments of contracts declared irregular. The following contacts were terminated: • The MBD debt collection reviewed and finally terminated (in court to claim over 30 Million); • Security tender reviewed and subsequently terminated; • BXC smart metering contract terminated (in court to claim over R60 Million rand); • Municipal fleet service provider contract terminated; • Printing and office automation contract terminated; • Landfill site management contract terminated; • Surveillance and CCTV cameras; and • Payments to lawyers in lieu of employee disputes for settlements 21

22. Administrator`s Tors and Key Achievements (Cont..) KEY FOCUS AREAS PROGRESS TO DATE No dispute occurred In the event of dispute pertaining to the implementation of the intervention between the Acting Municipal Manager, the Executive Mayor, or the municipal Council, then the Acting Municipal Manager ,must take appropriate steps to resolve the dispute within three days, and in the event that remains unresolved, the Acting Municipal Manager must immediately refer the matter to the MEC for Cooperative Governance and Traditional Affairs who will make a final and binding determination on matter. ToR (N) Submit monthly reports on the progress of the Intervention to the MEC responsible for CoGTA, the Minister of COGTA and the Executive Mayor of the Municipality ToR (O) Monthly reports were submitted to the HOD CoGTA and quarterly reports submitted to the EXCO. • 22

23. PERSISTENT LACK OF PROGRESS ON KEY AREAS OF INTERVENTION

24. Persisting Challenges KEY FOCUS AREAS Areas For Further Intervention • Despite the struggles of the municipality to report on performance on the FRP in line with the conditions set, the FRP was not implemented successfully mainly due to financial constraints and the inability to rally the necessary support towards realizing the intended outcomes. • Ineffectiveness of the work streams Coordination of the Implementation of the FRP – Financial Recovery Plan ToR (B) • Cancellation of the 1987 Agreement which resulted in revenue losses from the Large Power Users and other businesses with Emfuleni – February 2019 council sitting. Cost reflective tariffs were introduced which resulted in litigation against the Municipality by large power users and loss of revenue as Large Power Users were granted permission by the court to pay directly to Eskom. • Low revenue generation capability remains a challenge and impacts on the ability to sustain service delivery. Review and Implementation of sound Financial systems, policies, procedures, cost cutting measures, Increase Revenue collection ToR (c) • Executive Director: Infrastructure Services remains and vacant, with all processes concluded except competency assessments and screening outcomes awaited; and • Chief Audit Executive: Shortlisting completed for the position, awaiting finalization of interview dates Filling of senior Management position including Municipal Manager`s position ToR (D) • Investigations of the irregular expenditure (from 2014 to 2018) conducted and to Council in October 2019, but recommendations not implemented; • Forensic Investigations instituted on Fraud & Corruption by an independent company of forensic investigators, but has not been tabled to council; Dealing with Disciplinary matters, Including criminal, maladministration, disciplinary and civil action executed ToR (E) 24

25. Persisting Challenges (Cont..) KEY FOCUS AREAS Areas For Further Intervention The Municipality`s debt to Eskom is estimated at above R 2 billion, and the parties can`t reach an agreement due to its constrained financial state. All three (3) agreements entered into from 2017 have been breached by the municipality; Negotiate and enter into payment agreements with the third parties currently owed by Emfuleni Local Municipality. • Rand Water Debt- The Municipality had previously entered into four (4) payment arrangements with Rand Water since December 2017, the debt to Rand Water Stands at above R 600 million and is growing. unfortunately breached all the payment arrangements. The Municipality breached the last agreement in December 2019; • ToR (F) This led to A reduction of water pressure as a credit control mechanism by Randwater. The action had unintended consequences as a few areas were then left without water supply. • The organizational structure has bee review and redesign but not implemented yet. The staff morale remains low and the mandate of the organization remains difficult to achieve measures; The municipality`s compensation of employees costs remain high, as the recommended Organisation structure has not come into effect. Review the organizational structure of the municipality, focusing particularly on curbing ballooning salary costs, whilst improving performance ToR (G) Oversee the all budgetary and expenditure process in the Municipality ToR (H) • including cost curtailing • Despite all the efforts the budget of the municipality remains unfunded, this can be attributed to low levels of revenue generation. • 25

26. Persisting Challenges (Cont..) KEY FOCUS AREAS Areas For Further Intervention No records available on resolutions implemented Ensure the implementation Municipal Council Resolution by the Administration within the current budgetary position of the Municipality ToR (I) • The delay in investigation and implementation of consequence management contributes towards governance failures, inefficiencies, lack of accountability, high costs of service delivery and non-compliance with Supply Chain Management policy, legislation and regulations. • Ensure the Local Labour Forum is functional, and the resolutions are implemented by the Administration ToR (J) The municipality has remained stagnant with an unqualified opinion, with the increase in the number of audit findings in the 2017/18 financial year due to a number of control deficiencies and a lack of effective and timeous implementation of action plans and this has resulted in repeat adverse findings Unauthorized Irregular, Fruitless and Wasteful Expenditure totaling to R2.2 billion during 2017/18 Financial Year Ensure the implementation of remedial action plans dealing with the Auditor General ToR (K) • • 26

27. Persisting Challenges (Cont..) KEY FOCUS AREAS Areas For Further Intervention Despite efforts made to review the contracts, the recommendations of the have not bee implemented; The municipality continues to default on its repayment arrangements in particular with the bulk services providers. Review all contractual obligations of the municipality and negotiate contractual payments, scope and agreed schedule with service providers ToR (L) • • The cases remain unattended Review all litigation by and against the municipality and finalization of such ToR (M) • Submit monthly reports on the progress of the Intervention to the MEC responsible for CoGTA, the Minister of COGTA and the Executive Mayor of the Municipality ToR (O) The lack of performance on this area has prevented adequate assessment of the intervention and timeous decision by Minister and NCOP. • 27

28. Key observations from the Initial Intervention Despite the achievements with the initial intervention, Council still could not fulfil its executive obligations. The areas below glaringly required more effort for any improvement to be realised. • Electricity provision interruptions due to aging infrastructure • Lack of meters in most of the former black townships (85 000 homes), some are damaged; • Sewer spillages increased, causing pollution into the Vaal River has a negative environmental and health impact. • Aging Infrastructure is resulting in high maintenance; • Significant backlog in refuse removal remains a challenge; • Landfill air space is diminishing; • Various Municipal Grants withheld due to low expenditure and non-submission of new projects; and • Failure of the Municipality to implement the tools for effective Public Participation. After this realization the Department recommended to Provincial EXCO to refocus the intervention, which was granted. 28

29. REFOCUSED INTERVENING SUPPORT BY PROVINCE IN JULY 2020

30. Motivation for the Refocused Intervention The request to the Provincial EXCO for the refocused intervening support was motivated largely by persistent challenges that could not be resolved, also considering legislative imperatives. This took into account that the dissolution of a municipal council is a drastic step and should not be taken lightly. However, given the period and areas of the previous intervention and the subsequent dismal regression of the Municipality to fulfill its executive obligations in terms of the Constitution and legislation, the Executive Council may, after review be left with no other option but to seriously consider the invocation of section 139(1)(c) of the Constitution. Having considered these factors, the Department recommended a refocused intervention to be structured as follows:  Appoint the new Administrator and the team of experts to implement the said intervention in respect of the three executive functions embedded in the ToRs (Captured in the slides below).  Approve that the Administrator’s performance be subjected to a six (6) months performance review by the MECs of CoGTA and Finance, after which EXCO may decide which functions may incrementally (based on progress) be taken back to the Municipal Council with monitoring mechanisms.  Approve the resuscitation of the work streams that was established in June 2018 following the initial decision of EXCO to intervene in Emfuleni Local Municipality; 30

31. TOR’s – REFOCUSED INTERVENING SUPPORT

32. Terms of Reference: New Administrator The Administrator must exercise and perform the following powers and functions: • Undertake executive obligations and exercise exclusive full-decision making powers in the following specific key areas– (a) (b) (c) Supply chain management; Finance; and Infrastructure/Service delivery • Execute the above three executive functions and related obligations of the municipal council; • Ensure the implementation of council resolutions by the administration; • Ensure that the Financial Recovery Plan is implemented in toto without fail; • Undertake all supply chain, fiscal and financial management functions at the Municipality, including being signatory on the municipal primary banking account or any other municipal bank account; • Ensure implementation of financial systems, policies, and procedures in respect of the above three executive functions. 32

33. Terms of Reference: New Administrator (Cont..)  Undertake the functions referred to in section 67(1)(h) and Schedule 2 of the Local Government: Municipal Systems Act, 2000, read with any other relevant legislative provisions dealing with disciplinary matters, including criminal and civil action are executed expeditiously;  Ensure implementation of all governance systems and procedures including oversight over the administration in respect of the above three executive functions;  Approve all decisions taken by the Municipal Manager or Acting Municipal Manager, as the case may be, and section 56 Managers in terms of delegated or original authority in respect of the above three executive functions ;  Develop a turn-around strategy for the Municipality with respect to the above three key areas of intervention;  Implement a system to control and approve all expenditure in respect of the above three executive functions;  Ensure implementation of the Local Government: Municipal Property Rates Act, 2004 (Act No. 6 of 2004), including preparing the municipal valuation roll in terms of section 32(3) of the said Act where applicable;  Review the organisational structure of the Municipality to deliver on the specified areas of intervention. 33

34. Terms of Reference: New Administrator (Cont..)  Set out a specific strategy for addressing the financial problems experienced by the Municipality, including a strategy for reducing unnecessary expenditure and increasing the collection of revenue in respect of the above three executive functions ;  Co-ordinate a programme of visits by all Gauteng Members of the Executive Council and Provincial Government Departments at the Municipality in order to fast-track service delivery;  Ensure that the Local Labour Forum(LLF) is functional; and that the resolutions are implemented by the Administration which are not to the disadvantage of the Municipality;  Ensure implementation of remedial action plans dealing with negative findings from the Auditor-General in respect of the above three executive functions ;  Assess contractual obligations of the Municipality and negotiate contractual payments, scope and agreed schedule with service providers in respect of the above three executive functions;  Review all court cases against or by the Municipality and finalization of such cases in respect of the above three executive functions; and  Finalise reported Fraud and Corruption Cases in respect of the above three executive functions;  Submit monthly reports on the progress of the intervention to the MEC responsible for COGTA in respect of the above three executive functions. 34

35. IMPLEMENTATION OF REFOCUSED INTERVENTION COMMENCING JULY 2020

36. Background • On 13 June 2018, the Gauteng Executive Council (EXCO) took a decision to invoke the provisions of section 139(1)(b)(i) and 5(a) of the Constitution of the Republic of South Africa, Act No. 108 of 1996, regarding Emfuleni Local Municipality. • Whilst this intervention made some progress, it did not produce the desired outcomes. The situation imposed that EXCO review its intervention and subsequently appoint a new Administrator with effect from the 1st July 2020 to focus specifically on the three areas below. Supply chain management; Finance, and Infrastructure / Service Delivery. • The situation has dictated that EXCO review its intervention and subsequently resolved to appoint the new Administrator with immediate effect to focus specifically on the three aforementioned areas. • The refocused intervention came into effect on the 1 July 2020. The Administrator prepared a Programme of Action identifying all areas of intervention in the twelve (12) months period, further to the POA, the Administrator jointly with the Municipality developed a weekly workplan with deliverables that are monitored and tracked by the Office of the MEC on a weekly basis. 36

37. Administrator’s Team For (Refocused Intervention) • The original Administrator Team of Emfuleni Local Municipality was later strengthened and focused with some additional administrators who were initially deployed in the City of Tshwane Section 139 (1) (c) intervention. • A Lead Administrator Mr Willy Bila was appointed to implement the TORs as approved by EXCO. The lead Administrator was supported by the below team Administrators deployed in Emfuleni Local Municipality are as follows: Mr. Gilberto Martins who is an experienced professional Architecture; Mr. Silas Zimu who is an experienced Engineer; Ms. Tilly Hlongwane an experienced charteredAccount ; Kgaogelo Mahlaba an experienced charteredAccount; Ms. Rianda Kruger who is an experienced CharteredAccountant; Mr. Lesedi Mere who is an experienced Change Management Strategist; and • As approved by EXCO, the current intervention is only focused on key areas namely: SCM, Finance and Infrastructure/Service Delivery. • The Team of administrators have experienced some challenges to enforce disciplining, accountability, and authority over employees who are not necessarily working in these areas of intervention, whose functions have a direct impact on the success of the intervention and who continue to transgress and falter rules in the presence of administrator. 37

38. Key Focus Areas for (Refocused Intervention) • Having considered the progress made and persistent challenges in the twelve (12) months including the level of non-compliance, transgression and insubordination of the administration, the Department recommended that EXCO consider, the extension of the intervention by six (6) months which was been granted. • The extended intervention focused on the following areas that have proved to be stubborn: Supply Chain: Finalize the procurement plan of the Municipality and submit it to council for approval including implementation of the plan; Deviation of contracts; Functionality of Bid Committees, Infrastructure/ Service Delivery: Performance of MIG programme for increased spending, Online metering and pre-paid for residential and business. Stabilise waste management services, Distribution losses Water & Electricity and fleet services across the respective services to optimal status. Finance: Management of Debtors and Expenditure control. Implementation funded budget plan, Payment of creditors, AG report findings, Corporate Services: Implementation of recommendations on critical issues identified in the Comperio, Fivaz and Opulantia Reports; Follow through with consequence management; and Outstanding litigation cases against Emfuleni. 38

39. Key Focus Areas for (Extension 1- Refocused Intervention) • Significant progress was achieved through the refocused intervention of the s139(1)(b) and 139(5) for a period of twelve (12) months at Emfuleni Local Municipality which came into effect in July 2020. Extension was requested and approved by EXCO. • The six (6) months extension of the intervention focused on the following areas: o Supply Chain: Finalize the procurement plan of the Municipality and submit it to council for approval including implementation of the plan; Deviation of contracts; Functionality of Bid Committees, o Infrastructure/ Service Delivery: Performance of MIG programme for increased spending, Online metering and pre-paid for residential and business. Stabilise waste management services, Distribution losses Water & Electricity and fleet services across the respective services to optimal status. o Finance: Implementation funded budget plan, Payment of creditors, AG report findings, Management of Debtors and Expenditure control. EXCO note that in addition to the above, special attention be given to the following: • Corporate Services: Implementation of recommendations on critical issues identified in the Comperio, Fivaz and Opulantia Reports; Follow through with consequence management; and Outstanding litigation cases against Emfuleni including recommendations of the Committee of Inquiry. 39

40. Key Focus Areas for (Extension 2- Refocused Intervention) • The department acknowledged that the six months extension has made significant inroads in concretising measures put in place to correct deficiencies and stabilize municipality’s operations in particular the financial situation. • However, the progress captured herein clearly demonstrates a negative financial outlook for the municipality, thus further work still needs to be undertaken focusing on following areas: o Supply Chain o Infrastructure/ Service Delivery o Finance • EXCO note that in addition to the above, special attention be given to the following challenges that fell outside the Administrators areas of focus: o Corporate Services: Implementation of recommendations on critical issues identified in the Comperio, Fivaz and Opulantia Reports; Follow through with consequence management; and Outstanding litigation cases against Emfuleni including recommendations of the Committee of Inquiry. • Given the transition from the old to the new leadership it is to extend the intervention in order to afford the new Municipal Council and the administrators the opportunity to align to efficiently execute executive and legislative obligations undisturbed. Thus the Department request a further extension of six (6) months to see through the intervention initiative with a more robust and better coordinated section 154 provincial support. 40

41. Motivation for Refocused Intervention Extension The new Council needs to be supported for the period whilst preparing the two plans ( Sustainability & Hand Over). The newly elected Emfuleni Administration requires support to fully comprehend the section 139(1)(b) and 139(5) intervention, and its implications, prepare for the exit with a solid sustainability plan linked to the section 154 support. At the center of the exit plan, extensive ownership by municipality is critical to ensure sustainability of service delivery beyond the intervention. The handover report and sustainability plan was on the critical areas identified, key among them are the following: Finance • Implementation of Financial Recovery Plan  Municipality to finalise the outstanding FRP report and the corresponding Portfolio of Evidence  Facilitate the process for the review and amendment of the FRP • Improving the municipal revenue generation capability  Initiate comprehensive drive for payment of services supported by relevant by-laws and incentives for consumers.  Give focus to prepaid and smart meters programmes in areas with high potential for increased revenue. • Eskom and Rand Water Debt repayment agreements  Lead the debt repayment negotiations with Eskom and Rand Water including other creditors.  Supply Chain: The effectiveness of supply chain processes to avert delays in procurement of goods services is central and needs immediate attention. There is a need for Council working with the Administrators to develop a compact plan to improve the current state coupled with the sustainability plan.  41

42. Motivation for Refocused Intervention Extension (Cont..) Infrastructure & Services:  Section 63 Intervention (Sustainability Plan Focused)  Whilst s63 of the Water Service Act was invoked and intended to run for the next three years, it is imperative to build a solid foundation for the sustainability of this critical service.  Capacitation of Metsi a Lekoa - Requisite skills, stores and systems including fleet should be secured.  • Focused approach to reduction of distribution losses (Water and Electricity losses)  Municipality to ring fence funding for implementation of losses reduction programmes.  Municipality to take advantage of DBSA’s offer • Infrastructure Planning and Delivery  As part of the sustainability plan, a five year infrastructure roll out plan should be concluded aligned to the Capital Expenditure Framework developed through Gauteng COGTA. Corporate Services • Fraud and Corruption cases  Implement the recommendations of Comperio, Fivaz and Opulantia and other related reports, and finalise cases already underway.  42

43. Motivation for Intervention Extension – Validity Of Intervention • The termination, or continuation, of provincial interventions is governed by section 148 of the MFMA. Section 148(2), in particular, of the MFMA deals with the termination, or continuation, of a mandatory intervention referred to in section 139 of the MFMA and provides that the intervention must end when:  The crisis in the municipality’s financial affairs was resolved; and  The municipality’s ability to meet its obligations to provide basic services or its financial commitments is secured. • The section 139(1)(b)(i) (executive obligation) intervention is, however, for all intents and purposes, closely linked and tied to the section 139(5)(a)(financial obligation) intervention in the sense that Emfuleni is still required to adopt a support package, as captured in the Provincial Support Programme, which in turn required the Municipality to develop and align its developed detailed plans and budgets to the Financial Recovery Plan prepared by the National Treasury and considered and approved by the MEC in line with section 143(2)(a) of the MFMA for implementation by Emfuleni. • Clearly, the current performance by the municipality is not at a stage were the executive and financial obligations are satisfactorily fulfilled, thus the need for the continuation of the intervention. 43

44. SUMMARY & DETAILED PROGRESS ON EXTENDED INTERVENTION

45. Key achievements on focus areas - s139(1)(b) FINANCE • Turn around plan on credit control; debtors' collection and payment of creditors was developed; • A Revenue Enhancement was developed for the Municipality; • ELM has a funded budget plan for MTREF period approved by Council; • Attempts to meet obligations of Eskom and Rand Water payment agreements is affected by inadequate revenue generation capacity by the municipality- No agreements exist at this stage and the debts are at R4,874,527,763 and R R789,632,383 respectively; • Total Owed to Creditors– R5,988,640,552. • The list of Reviewed policies and those approved by Council (SCM Policies approved by Council) (Audit Plan and Strategy approved by Audit Committee) SUPPLY CHAIN MANAGEMENT • Committees were established some difficulty in the previous FY with the District Municipality & Province providing support. (BSC, BEC and BAC Committees established and functional without the District Municipality & Province providing support); • For 2021/22 FY, only 17 out of 163 Projects have been advertised on the Annual Procurement Plan, which represent 12.5%; • Despite these Interventions the Infrastructure Grant expenditure remains the lowest in the District- MISA to invoke further Interventions; • SCM Turn Around Compliance Framework Strategy and Action Plan was developed and currently being implemented. 45

46. Key achievements on focus areas - s139(1)(b) (Cont..) INFRASTRUCTURE/SERVICE DELIVERY SOLID WASTE • Soldi Waste Management Plan Developed • Waste Management fleet were purchased by GDARD and delivered to ELM: 2 skip bins and 9 tipper trucks, 9 payload refuse trucks, 6 payload hook lift trucks, 3 4X4 TLBs, 3 front end loaders. • The ELM Waste Management service has improved with the intervention of the province from the 36 % to 54% overall. DISTRIBUTION LOSSES • The total number of pre-paid meters for water installed and operated are 5000 • Whilst several interventions to reduce losses are underway – Cost of Supply studies for Electricity losses and Water Conservation Demand Management, electricity losses are at 22% equivalent to (R368 332 737) and water losses at 41% equivalent to (R385 076 940) • Online metering and pre-paid for residential and business. 12 500 electricity meters installed and operational. COGTA have appointed a service provider for three years to assist municipality. MIG & ROADS AND TRANSPORT • MIG – Allocated adjustment budget = R50,953,000.00; Expenditure = R23,368,163.98 (40%). • Rehabilitation of 21 roads undertaken (49.58 km) and these have been completed. Phase 2 is under discussion depending on budget availability. • Tarred Municipal roads and streets resealed: 14.02 km resealed in ELM. • Municipal gravel roads re-graveled. ELM used hired plant to achieve of 200km. • ELM acquired 3 new gravel roads grading yellow plants. 46

47. Key achievements on focus areas - s139(1)(b) (Cont..) GOVERNANCE AUDIT FINDINGS • 43 audit findings issued to date and 5 not responded to. Most related to revenue CAATs. 14 matters affecting the Audit Report and 29 non-compliance with legislation. • 31 audit findings resolved • The municipality is dealing with the compliance of the Asset Register and other recurring findings. • The ICT Strategy was approved by Council on the ICT Strategy • Chief Audit Executive position advertised. Recruitment process underway LITIGATION and DISCIPLINARY MATTERS • 14 legal cases have been reviewed and 9 are due for settlement whilst 5 are to follow prescribed labour laws. • 10 disciplinary matters concluded, 11 are awaiting new dates from parties and 15 Charge sheets have been served. Disciplinary hearings are ongoing in various platforms. 47

48. Key achievements on Focus Areas - s63 intervention water services act (Cont..) • Rand Water was appointed as the implementing agent for the intervention project. An implementing Agent Agreement was signed on 5 October 2021 and took over the site on 7 October 2021. • A project implementation plan to the value of R397 million was developed for funding in 2021/22 financial year. Budget Requirements for project scope are as follows: o O&M allocated R 600 million o Refurbish & Repairs R 2,2 billion o Capacity Upgrade R 4,8 billion • 15 Stakeholder engagements have taken place so far. • Full analysis of all pump stations done with staff and a detailed report submitted. The pump stations are being repaired under section 63 intervention. • R100m approved by Treasury for RW to improve bulk waste supply for new developments including Lethabong and Vaal River City. UNBLOCKING • Contractors appointed by DWS currently on site – Ongoing to May 2023) • 10 – Unblocking contractors appointed • Deployed 16 Leased vehicles • Deployed Honey suckers tender ongoing • Training of staff 48

49. Key achievements on Focus Areas - s63 intervention water services act (Cont..) WASTE WATER TREATMENT PLANTS - 4 (RIETSPRUIT, LEEUKUIL, SEBOKENG, MEYERTON) Bio-solids contractors at the 3 waste water treatment plants (Operations and Maintenance- DWS) – Ongoing 3 - Bio solids contractors; Refurbishment and upgrades of the 3 wastewater treatment plants Contractors replaced electrical cables at Rietspruit & Leeukuil Mechanical and Electrical tender to close 08/08/2022; Sebokeng work is ongoing 40% work is completed at Rietspruit, with all drying beds cleaned • • • • • • • Major work is continuing at Sebokeng WWTW (Clean Attenuation Dams) Meyerton WWTW • Mechanical: 81% • Mechanical: 100% • Civil & Str: 94% • Civil & Str: 100% • Elec & Instr.: 88% • Electrical & Str: 100% • Pumpstation: 100% • Bulk elect.: 100% • Rising main: 97% • Perimeter fencing: 90% 49

50. Key achievements on Focus Areas - s63 intervention water services act (Cont..) 44 PUMP STATIONS • Refurbishment of Ps 2,8, 9,10 (Scope of work and quantities available); • Electrical and Mechanical tender and submission being routed for signature • The rest of the non-functional pump stations • 08/08/2022: Mechanical and Electrical close of the tender and contractors to be on the ground BULK LINE • 1,3 km line to pump station 2 • DWS- Advanced procurement stage to appoint one of the 7 framework contractors • The rest of the bulk lines in Emfuleni RETICULATION LINES (FROM HOUSEHOLDS TO THE BULK LINE) • 7 civil Contractors (Framework Contractors) have implemented 7 sites • 19 Additional sites have been designed and to be implemented • Contractors on site (Sebokeng and Evaton) OPERATIONS AND MAINTENANCE • Capacity and capability assessment • Monitor and control the O&M activities - Ongoing • Capacity and capability assessment 50