Honourable Chairperson,
Deputy Ministers,
Honourable Members,
MECs,
Your Majesties and Royal Highnesses,
Leadership of the South African Local Government Association and all Executive Mayors and Mayors,
Chairperson of the National House of Traditional Leaders, Ikosi Sipho Mahlangu and all traditional leaders,
Religious leaders,
Chairperson of the Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities, Ms Mkhwanazi-Xaluva,
The leadership of Business Unity SA and the Black Business Council and all business leaders present,
The Leadership of SAMWU and all leaders of our labour movement present,
The Leadership of organisations representing black professionals and all professional associations,
Fellow South Africans,
Ladies and gentlemen,

I greet you all.

It is an honour to stand before you today and deliver my first Budget Vote Speech as the Minister of Cooperative Governance and Traditional Affairs.

In the State of the Nation Address in February this year President Cyril Ramaphosa invited each one of us to participate in the building of our country, with the clarion call Thuma Mina/Send Me, from our iconic musician Hugh Masekela.

The call is a reminder that whatever we do as public representatives and civil servants, in different spheres of government, we remain servants of the people. We have the responsibility to take forward the struggle for the improvement of the lives of our people.

We have to carry the baton as successors of the many South African people who led our struggle for freedom, justice, equality and democracy and vowed never to rest until poverty, inequality and unemployment has been defeated and the lives of our people change for the better.

This Budget Vote debate is also inspired by the spirit of the New Dawn that drives the current administration. We are also greatly moved by the legacy of our founding President, His Excellency Nelson Mandela, and our mother and leader Honourable Albertina Sisulu, whose centenary anniversaries we are celebrating this year.
 
In 2011 Tata Madiba warned that: “As long as many of our people still live in utter poverty, as long as children still live under plastic covers, as long as many of our people are still without jobs, no South African should rest and wallow in the joy of freedom.”

Their selflessness, commitment and unwavering dedication to making South Africa a better place for all her people, should drive us all to continue working hard together, to build the South Africa they fought so hard to achieve. Local government is an important sphere of government because it is closest to the people. 

Everything happens in a municipality and in a ward. It is where our people live, work and play.  The municipalities also have a key role to play in nation building and social cohesion. They must lead in the reversal of apartheid spatial planning and coordinate an integrated response of all stakeholders and give local communities a voice and respond to their service delivery needs.
 
Municipalities need to ensure good governance for effective use of public resources and create conditions for investment promotion, economic growth, job creation, the elimination of poverty and inequality and to achieve citizen satisfaction as well as to create attractive conditions for investment flows.
 
These investments will grow municipal revenue and individual income and create sustainable communities. We would like to mobilise community leaders, traditional leaders, religious leaders, business, labour, youth, women and civil society and create a harmonious existence of all South Africans, everyone contributing to the success of the municipality and its people.
 
COGTA advocates for inclusivity, integration and partnership involving all departments, municipalities and sectors of society as we build our municipalities.
 
Local government is everybody’s business!

Chairperson,

Substantial progress has been made in building our country’s local government system in the past 18 years. The results have been visible in terms of the expanded access to basic services such as water, electricity, health care, housing and others.
 
According to the 2016 Stats SA Community Survey, access to electricity had increased from 58, 1% in 1996 to 90,3% in 2016. The number of households with access to piped water increased from 13, 2 million in 2011 to 15, 2 million in 2016.
 
The number of households accessing water from taps within their yards increased significantly from 3, 9 million in 2011 to 5, 1 million in 2016. Of the 16, 9 million households in South Africa, about 10, 3 million have access to a flush toilet connected to a sewerage system.
 
The municipalities in the country have hard working councillors and municipal officials. We appreciate the good work done by many to ensure the provision of efficient municipal services. A lot of good work is being done. Paying attention to the weaknesses in the system is not an indication that there are no achievements. It is an effort aimed improving the system.
 
We launched the Back to Basics programme in 2014, with the aim of getting municipalities to do what they are supposed to do. Municipalities should be able to provide water, electricity, street lighting, cut the grass on the verges of the road, ensure refuse removals, repair potholes and ensure correct billing systems for both households and businesses. Such services are a barometer used by investors to choose potential municipalities in which to locate their businesses.

We also want to build stable, well-functioning municipalities, which have a strong political and administrative leadership. There should be functional council and oversight structures, a consistent spending of capital budgets, consistent unqualified audit outcomes and good financial management. That is what COGTA is striving to achieve nationwide.

Our municipalities must be able to provide these services in a professional and efficient manner, putting people first. To achieve these goals we need to have qualified and competent staff.  The municipal staff should treat our people with respect and dignity.  A visit to municipal offices must be such a positive experience and a pleasure that our people look forward to.
 
In terms of the Batho Pele principles, the attitude of both councillors and staff must demonstrate that we respect, love and care for our people that we serve. While great strides have been made, many challenges still remain in local government. Based on our assessments and reports, the performance of the majority of the municipalities is below expectations.
 
What we have found is as follows:

Seven percent of the country’s municipalities are classified as well-functioning,

About 31% of the municipalities are reasonably functional,

Thirty one percent are almost dysfunctional and

The remaining 31% is dysfunctional or distressed.
 

Our major concern right now are the municipalities which are becoming distressed or dysfunctional, including those that are regressing in audit outcomes. There are some that have been performing which had good revenue which are now eroding their revenue base and eating into their reserves, or diverting conditional grants for operational expenditure.

We are also mindful of the fact that the problems in many municipalities may be structural. The advent of wall to wall municipalities extended service delivery to previously neglected communities at the cost of the fiscus.
 
The services were extended beyond the previous boundaries of municipalities which were defined in terms of a concrete rates base that enabled them to raise their own revenue.  
 
Some of the current municipalities were created out of a collection of villages and largely rural or peri- urban communities and small towns with no industrial base or significant economic activity. The standards of service delivery that are expected in our Constitution have to be funded to the same extent to all by those that can raise alternative revenue by levying rates and other charges and those that are entirely dependent on transfers from national government.

Another challenging issue relates to the number of old towns which have aging infrastructure which is over 100 years old, which has become suddenly inadequate because of the influx  of new residents.
 
To find a permanent solution to non-viable municipalities, we need to recommend that the next administration should conduct a comprehensive review of the wall to wall municipalities, focusing on the size and structure, balanced with the levels of public representation, backlogs as well as the economic considerations to arrive at an effective and affordable model that will be sustainable into the future.

In addition to the above, to a varying degree, distress may be occasioned by mismanagement due to political instability or interference, corruption and incompetence.
 
As we seek solutions, therefore, we need to differentiate between the causes of the dysfunctionality that is a result of human weaknesses such as incompetence or corruption and situations where non-viable or distressed municipalities are occasioned by structural and systemic constraints. In an environment of low growth and growing demands, the fiscus is strained, meaning that there will always be more demands for services than what the fiscus can afford.

We want to champion an aggressive turnaround strategy to reverse the culture of impunity and inaction in our municipalities. National and provincial governments routinely support and strengthen the capacity of municipalities to manage their own affairs, to execute their powers and to perform their functions, in terms of Section 154(1) of the Constitution.
 
In dire situations where municipalities fail, provincial governments intervene through invoking section 139 of the Constitution. A number of municipalities are currently being administered by provincial governments under Section 139. These municipalities will be monitored with a view of ensuring that they improve and get out of Section 139 within 12 months.
 
The 11 municipalities wherein section 139 has been imposed by provincial governments is as follows:
 
1. Free State:  

Masilonyana Local Municipality S139 (1)(b)

Maluti –a- Phofong Local Municipality S139 (1)(b)

Mafube Local Municipality S139 (1)(b)

 
2. Eastern Cape

Walter Sisulu Local Municipality S139 (1)(b)
 
3. KwaZulu-Natal

Emadlangeni Local Municipality S139 (1)(b)

Emzinyathi District Municipality S139 (1)(b)

Mpofana Local Municipality S139 (1)(b)

Inkosi Langalibalele Local Municipality S139 (1)(b)

Dr Nkosazana Dlamini Zuma Local Municipality S139

Edumbe Local Municipality S136/137 MFMA

 
4. Western Cape

Kannaland Local Municipality S139 (1)(b)
 
To build functional municipalities nationwide, we have decided to initiate an intensive Recovery Programme, which encompasses a package of clustered support in three focus areas, namely governance, service delivery and financial management. This is in line with the on-going Back to Basics approach that was launched in 2014.
 
A major part of this approach revolves around ensuring good governance. Our people expect us to appoint competent managers to run their municipalities. Some municipalities have collapsed due to the appointment of managers who do not qualify for the jobs they are entrusted with.
 
We insist on having the best managers and staff being recruited for critical posts. During the 2017/2018 financial year, 423 appointments were concluded with competent and suitably qualified senior managers. The use of competency assessments for different positions has greatly built confidence in the recruitment systems.

A total of 95 corrective actions were taken to enforce compliance where appointments were made in contravention of the Municipal Systems Act and its Regulations.
 
Where waivers were granted to deviate from requirements, good cause has to be demonstrated in order to obtain Ministerial consent.
 
A total of 1 120 candidates were screened by the Department to advise as to whether the shortlisted candidates appear on the record of staff dismissed and staff members who resigned prior to the finalisation of disciplinary proceedings.  We have developed a database that will ensure the blacklisting of any manager who is dishonourably discharged from service in any municipality in the country.
 
It needs to be noted that most of the investigations and forensic audits are performed by the municipalities themselves and reports are sent to COGTA at the national level. We encourage municipalities to continue with this work.
 
Since the amendment of the Municipal Systems Act in 2011, a total of 1651 municipal employees were dismissed for misconduct, and 130 resigned prior to the finalisation of the disciplinary proceedings. The offences include financial misconduct, corruption or fraud, gross misconduct involving dishonesty or gross negligence, as well as the breach of the code of conduct for municipalities.
 
We briefed the Portfolio Committee on Cooperative Governance and Traditional Affairs recently on the work being done to fight corruption.
 
The Directorate for Priority Crimes Investigation or the Hawks, is investigating municipalities, through the Clean Audit project.  Out of the 311 cases, 98 are in court, 178 are under investigation, while 35 are considered finalised or withdrawn.  
 
We are concerned by the discovery that R1.6 billion of municipal funds were deposited at the VBS Mutual Bank against the advice of the National Treasury. We support the forensic investigation being conducted by the South African Reserve Bank into the deposits involving 15 municipalities.  

We are working closely with SA Reserve Bank and have formed a joint technical committee working on the matter following my meeting with the Governor of the SA Reserve Bank. I will convene a meeting of mayors, municipal managers and CFOs to discuss this crisis and determine a way forward.
 
Good financial management remains critical for our municipalities. Even though there is an improvement in the overall municipal audit outcomes, we are concerned that 27 municipalities have received disclaimers. As part of our turnaround strategy, a strong focus will be paid to reversing these negative outcomes.
 
No disclaimers will be tolerated. We give all municipalities with disclaimers one year to put their house in order. All interventions must show improvements and a reversal within 12 months. We are also piloting the insertion of a clause in the contracts of municipal managers for them to be removed in case of disclaimers.
 
We are determined to turn municipalities around. Achieving clean audits should not be seen as the duty of the chief financial officer and the treasury staff, nor even of the municipal manager alone. It is the responsibility of the Mayor, the Speaker, councillors and administrative staff combined.

No treasury staff can cure the impact of illegal political instructions, badly researched decisions of council and poor supervision by the executive or an accounting officer who abdicates responsibility.
 
We are setting very high standards for our municipalities because our people deserve the best.
 
I would like to table the list of municipalities which have received disclaimers from the Auditor General.

click here for the full speech: https://www.gov.za/speeches/honourable-chairperson-15-may-2018-0000