Progress Report on Mafube Local Municipality's Implementation of Financial Recovery Plan

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Mafube Local Municipality has faced challenges leading to a court judgement due to service delivery failures. The municipality invoked Section 139 to implement a Financial Recovery Plan (FRP). Progress report includes delays in FRP development, focus on financial management, infrastructure projects, and steps towards addressing service delivery issues like sewer spillages.

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SELECT COMMITTEE ON SELECT COMMITTEE ON COOPERATIVE GOVERNANCE, COOPERATIVE GOVERNANCE, TRADITIONAL AFFAIRS, WATER TRADITIONAL AFFAIRS, WATER AFFAIRS AND SANITATION AND AFFAIRS AND SANITATION AND HUMAN SETTLEMENTS HUMAN SETTLEMENTS FREE STATE PRESENTATION FREE STATE PRESENTATION 28 NOVEMBER 2023 28 NOVEMBER 2023

OUTLINE Section 139 in Mafube Local Municipality Section 139 in Tokologo Local Municipality Section 139 in Mangaung Metro Section 139 in Kopanong Local Municipality

Mafube Local Municipality Backgound The municipality was for sometime under section 139, due to its failure to settle its financial commitments. This came to an end in June 2021 due to satisfactory progress and the stability in the municipality. However, the challenge remain financial viability of the municipality as a going concern On the 28 April 2022, Mafube Business Forum obtained a court judgement against the municipality, due to its failure to carry out its service delivery mandates, in particular sewer spillage. The judgement instructed the Premier to invoke section 139. As a results of the court judgement EXCO, invoked section 139 (5)(a) and ( c) with effect from June 2022. Section 139 (5) (a) and ( c) meant that the municipality must implement mandatory Financial Recovery Plan (FRP)The EXCO representatives were appointed, and their mandate was to ensure the implementation of FRP by the municipality. Terms of reference were gazetted in September 2022.

PROGRESS: MAFUBE LM Implementation of FRP The development of the FRP is the responsibility of National Treasury. There was a delay from National Treasury in finalizing the FRP. The FRP was only finalized and submitted to Council in September 2023. All the work streams are in place and progress will be monitored of monthly basis. On the 11 October 2023 a workshop was conducted with Senior Management Team on the Implementation of the FRP. All the work streams has identified the quick wins. No improvement that can be reported at this stage as the FRP was only approved in September Although the FRP was only in September 2023, the EXCO reps continue to function as per the terms of reference and also address the concerns emanating from the judgement. The team focused on the following areas: -- Creditors management - Debtors management - Cash flow management - Conditional Grants service delivery - Revenue Collection - Annual Financial Statements and Audit process - Unauthorised, Irregular, Fruitless and Wasteful Expenditure

PROGRESS: MAFUBE LM Service delivery In addressing the sewer spillages due to non functionality of the Pump stations, the department availed R5m for construction of emergency storage pond in Namahadi. Municipality only appointed Contractor on the 28 August 2023 for Construction of emergency storage pond, due to delay with the SCM processes. Infrastructure and Service Delivery work stream established and continuously meeting monthly to monitor all Service delivery related matters The DWS embarked on upgrade projects of the Wastewater Treatment Works in Namahadi, and Qhalabotjha amounting to R106 million.

PROGRESS: MAFUBE LM Improvement of revenue collection The municipality embarked on the following campaigns to increase revenue collection: - Public meetings to encourage residents to pay their accounts - Breakfast with the mayor and business owners - Meetings with small medium enterprises. - Meetings with the Heads of schools - Meeting with representatives of South African Police services - Meeting with nurses and doctors - Issuing of warning notices to top 100 businesses - Appointment of a debt collector - One-on-one visits to businesses The constant tension between the municipality with Mafube Business Forum does not help the situation

PROGRESS: MAFUBE LM Governance matters All Assurance Committees are in place Audit Committee, Risk Management Committee Council has approved an organisational structure All positions of the Executive Management Team (Municipal Manager and Directors) are vacant. The MM appointment was finalized but the MEC did not give concurrence. The Council meet as expected The Intervention Team held a workshop with the Unions and Management to bring stability in the municipality The Local Labour Forum has been meeting regularly There is a serious challenge with regards to management of contracts The Intervention Team facilitated the commencement of the review process of the Contract between Rural Maintenance (Pty) Ltd and Mafube Local Municipality The Intervention has also engaged Mafube Business Forum on numerous occasions on matters relating to payment for municipal services and their concern regarding service delivery.

CONCLUSION: MAFUBE LM The effectiveness of the implementation of section 139(5)(a) and (c ) cannot be determined at this stage as the FRP is only being implemented from Septemeber 2023. Currently progress made by the EXCO team deployed by COGTA is satisfactory as assessed against the terms of reference. However, the challenge remains the financial viability of the municipality as a going concern.

PROGRESS: TOKOLOGO LM Background EXCO with the recommendation of the Minister of Finance, invoked section 139 (5)(a) and ( c) with effect from June 2022, due to the municipality s failure in settling its financial obligation when they are due. Implementation of FRP The development of the FRP is the responsibility of National Treasury. There was a delay from National Treasury in finalizing the FRP. The FRP was finalized in September 2023. However, the FRP was only presented to Council during October 2023. There was a meeting arranged with the municipality where the work streams progress was going to be tabled, however only the Finance stream attended the meeting, the Acting MM did not attend together with other streams, as results the meeting did not proceed. No improvement that can be reported at this stage as the FRP was only approved in September

PROGRESS: TOKOLOGO LM Implementation of FRP Reporting requirements had not been met, the municipality had not reported for the past 2 months, November will be the 3rd month of not reporting. There's a delay in the launching or formalizing of workstreams, finalization of the proposed workstreams, i.e Finance, Governance, Institutional and Service delivery could not be discussed as the meeting could not proceed due to none attendance of the municipality. Lack of oversight from the municipal council. FRP implementation plan not institutionalized, and FRP implementation plan is not part of the agenda standing items of both executive management and Council meetings. Champions from different sections not appointed. The Provincial Treasury MFP representative withdrawn from the municipality and no replacement made. The Exco representative has resigned, and the department is in the process of finalizing the appointment.

TOKOLOGO LM Governance matters The following section 78 council committees were established (Finance and HR, Technical Services) The following section 79 committees established (Municipal Public Accounts Committee (MPAC)) Council always meets its statutory target of one ordinary council meeting per quarter and one ordinary Exco meeting per quarter The section 78 (portfolio) committees meet regularly MPAC received induction training and meets quarterly

PROGRESS: TOKOLOGO LM Governance matters Local Labour Forum was reconstituted as per the guidelines after the 2021 Local Government Election. It meets regularly to consider issues of mutual interest. There is relative labour peace in the municipality. Municipality has reviewed its rules and orders in line with the new collective executive system. Ensured that the municipality comply with the IDP process. Link, coordinate and integrate all available plans. Developed an SDBIP with the municipality. Align resources and capacity. Form the policy and budgeting framework for the municipality. Comply with the national and provincial development plans.

CONCLUSION: TOKOLOGO LM The effectiveness of the implementation of section 139(5)(a) and (c ) cannot be determined at this stage as the FRP is only being implemented from October 2023. Currently progress made by the EXCO team deployed by COGTA is satisfactory as assessed against the terms of reference. However, the challenge remains the financial viability of the municipality as a going concern. The CFO tasked to escalate the issues of none attendance of meetings and reporting with both MM and the Mayor. The municipality to report on the progress made to date. CFO tasked to hold meetings with other sections urgently and report accordingly. Champions from different sections should be appointed with immediate effect. Provincial Treasury to follow-up on the replacement of the MFP representative. The support packages from different departments should be aligned to the FRP and COGTA must fast-track the replacement of the EXCO representative.

MANGAUNG METRO S139(7) Background: Provincial Executive Council resolved on 19 December 2019 to place Mangaung Metropolitan Municipality under intervention in terms of section 139 (5)(a) and (c) of the Constitution of the Republic of South Africa, 1996 (As amended) An intervention team was assembled comprising of persons with expert knowledge of local government The Provincial intervention was brought to an abrupt end in April 2022 as the Cabinet placed the municipality under mandatory intervention in terms of section 139(7) of the Constitution (supra) due to political instability in the metro.

MANGAUNG METRO S139(7) Background: National government took over intervention at MMM on the 6th of March 2022 by imposing financial recovery plan and assuming responsibilities for implementation of such FRP. The invocation was executed jointly between NT & DCOG resulting in former Minister for COGTA requesting sectors Departments to second officials from national government as Interim Executive Management due to contracts of senior managers coming to an end and City Manager resigned 2021.

MANGAUNG METRO S139(7) National Treasury has submitted correspondence to the Minister of CoGTA, Mayor of Mangaung and the Acting City Manager dated 15 August 2023 indicating that since the appointment of the NCR and support team, little progress has been made in turning around the performance of the metro. The slow progress in achieving the set milestones has been partly attributed to the poor relationship between the NCR and the current acting executive management team. The letter from NT also highlighted the following issues: That given that the municipality has not yet appointed a municipal manager and executive managers, the National Treasury has decided to withdraw the services of the NCR and support team with effect from 31 August 2023 when the contract of the team ends The National Treasury will facilitate all close-out sessions between the NCR and support team and the municipal administration to ensure that progress to date is registered and that priorities going forward are articulated. The Municipal Finance Recovery Services (MFRS) unit will also provide guidance to the municipality during the transition and will continue to monitor progress in implementing the financial recovery plan. War Room meetings will be held quarterly in order for our departments to determine progress and any support that may be required. The acting Chief Financial Officer who was deployed by the National Treasury will be recalled on 31 August 2023. The recall is at the behest of the acting CFO himself who indicated that the stressful working conditions in the municipality are affecting his health.

PROGRESS: MANGAUNG METRO S139(7) Appointment of Executive Management The following appointment has been made: City Manager HOD Cooperate Services Chief Financial Officerpending legal service HOD Technical Services HOD Community Services

PROGRESS: MANGAUNG METRO S139(7) Service delivery Mangaung Metro was able to complete and open two of their major road project which were outstanding for a long time (Moshoeshoe road and Vereeniging Road)

CONCLUSION: MANGAUNG METRO S139(7) The main challenge that hinders progress with the implementation of the intervention is the political environment.

Kopanong Local Municipality Background The Free State Provincial Executive Council has invoked section 139 (1) (b) of the Constitution, 1996 read with section 63 of the Water Services Act, 1997 at Kopanong Local Municipality. The introduction of the intervention was primarily necessitated by the breach of Sections 152 and 153 of the Constitution, 1996 dealing with the provision of services to communities in a sustainable manner and giving priority to basic needs of communities. The Member of the Executive Council (MEC) responsible for local government in the Province has on 15 September 2023 put a notice in the Provincial Government Gazette regarding the intervention in Kopanong Local Municipality. The conditionalities/deliverable which, upon satisfactory achievement, the intervention shall be withdrawn. Provincial Executive Council s conditionalities/deliverables the

Kopanong Local Municipality Background The adverse conditions which triggered the intervention was the inability of the Municipality, as water services authority, carry out the water services mandate as contemplated in terms of the Water Services Act, 1997. In this respect, the Minister of Water & Sanitation had submitted a request for the intervention to the Minister of Cooperative Governance & Traditional Affairs. The failure to deliver water services was exacerbated by the fact that the Kopanong Local Municipality owes the Vaal Central Water Board the amount of R690 million, and the latter has since implemented the 30% water restriction. As a the result all the households in the high lying areas do not have water supply in Kopanong Local Municipality. Additionally, the intervention was prompted by severe financial distress of the Municipality which was occassioned by the inadequate/ non existing revenue collection which further resulted in the Municipality s inability to meet its financial obligations which included delayed payment of salaries to employees.

Progress: Kopanong Local Municipality Basic Infrastructure & Service Delivery Deliverable: Ensure that Bloem Water (now VCWB), fasts-track the construction of a 3 MI reservoir, 3km DN 250mm PVC gravity supply pipeline to the new 3 ML reservoir and installation of zonal bulk water meters. The Project is for bulk water supply in Trompsburg. Progress: The Project has reached practical completion stage as the major construction work has been completed. To close the Project, the Municipality has paid the amount of R800 000 to Vaal Central Water Board for completion of outstanding work Deliverable: Fast track the upgrade of Wastewater Treatment Works (WWTW) in Phillipolis to ensure proper sanitation facilities and reduce water resource pollution. Progress: The Project is at 69 % completion. The main Contractor had ceded work to a Sub-contractor who is currently carrying out the upgrade on site.

Progress: Kopanong Local Municipality Basic Infrastructure & Service Delivery Deliverable: Perform Operational monitoring of water quality at distribution network and, end user point to ensure that communities are receiving drinking water which is compliant to the South African National Standard (SANS) 241: Drinking Water Specification states the minimum requirements for potable water to be considered safe for human consumption. Progress: Currently, the Municipality is relying on Vaal Central Water Board to ensure that water quality of good standards, as required by the SANS 241, The Xhariep District Municipality is also assisting with water quality monitoring. However, the Municipality is intending to appoint laboratory that will conduct the testing of drinking water in all towns of Kopanong as a permanent measure.

Progress: Kopanong Local Municipality Basic Infrastructure & Service Delivery Deliverable: Ensure that Kopanong LM uses 10% of MIG allocation for operation and Maintenance through following proper procedures in line with MIG framework Progress: The Municipality has advertised a tender for the appointment of a suitable Service Provider. In the meant time the Vaal Central Water Board is carrying out maintenance.

Progress: Kopanong Local Municipality Financial Management Deliverable: Ensure that there is a consistency on payments to each of the Municipality s main Creditors, where payment arrangements/agreements exist, further ensure strict adherence; Also ensure payment arrangements concluded are realistic and aligned to the Municipality revenue collection profile and should also be reflective in the Municipal Council s approved MTREF budget and subsequent budgets Progress: Confidence of the Municipality s main Creditors has improved owing to the support of COGTA through the invocation of Section 154 of the Constitution. Payment plans with the Municipality s major Creditors, namely, Vaal Central Water Board, Pension Fund and SARS are monitored on an ongoing basis and, where necessary, engagements happen between the Municipality and main Creditors

Progress: Kopanong Local Municipality Financial Management Deliverable: Development of proper internal controls to contain and prevent non- compliance with key legislation. Support the Municipal the development of a probity audit policy or framework to support SCM controls to mitigate risk of irregular expenditure. Progress: The Provincial Treasury is to commence with training of the Supply Chain Management officials on matters including the SCM Standard Operating Procedures towards improving internal controls; Deliverable: Develop systems to ensure that grant funding from national or provincial government are spend fully and timeously to prevent it being returned to the national focus. Progress: The Finance Department and specifically the Chief Financial Officer (CFO), Supply Chain Manager as well as the Technical Department which include the Project Management Unit have commenced the monthly meetings. The main objective include alignment of the procurement plan to the implementation plan for the projects to ensure that the projects are administered in line with the implementation plan and cash flows.

Progress: Kopanong Local Municipality Governance & Institutional Capacity Deliverable: Ensure the facilitation of the appointment of the Municipal Manager and filling of other vacant senior manager posts be consistent with the applicable legislation and regulations on appointment and conditions of employment of senior managers; Progress: The timelines for the filling of the vacant Senior Managers positions are as follows: Municipal Manager and Chief Financial Officer appointment by 31 December 2023, - Directors Technical Services and Community Services appointments by 15 December 2023. Advertisement and interview processes have since been completed. Deliverable: Ensure the review of Kopanong Local Municipality's organogram to address any potential unlawful appointments and promotions which resulted in a huge salary bill and the utilisation of conditional grants for operational expenditure. This is work in progress; Progress: Work has commenced.

Kopanong Local Municipality Conclusion The Administrator/EXCO Representative will submiting monthly reports on progress of the intervention to the MEC: Cooperative Governance & Traditional Affairs The Municipal Council of Kopanong Local Municipality is supportive of the intervention.