Structure of Presentation

1
Structure of Presentation

• Why the need for the Indaba
• The Municipal Viability Indaba
• After the Indaba The Municipal Revenue
  Enhancement Programme

2
Why the Need for the Indaba

• Based on on-going monitoring, two issues of
  greatest concern are
• municipal finances and
• quality of leadership
• Both issues have direct correlation to ability to
  deliver services

3
Why the Need for the Indaba

• Continuous reports of municipalities in financial
  difficulties (default or near default)
  particularly with bulk suppliers of water and
  electricity
• Discovery of creative accounting as a means by
  which municipalities are making it through the
  financial year but receiving qualified audits
• Running overdrafts
• Use of cash set aside for other purposes
  capital expenditures, provisions for claims and
  reserves
• Deductions from employee salaries
• Non-payment of creditors including statutory
  obligations

4
Why the Need for the Indaba

• Minister commissioned an investigation whose
  mandate was
• To determine the true extent of the problem
• To gain a thorough understanding of the causes of
  the problem
• To recommend a realistic way forward
  highlighting the role that should be played by
  the National government

5
Trend AnalysisDebt by Province
Total Outstanding R24,348,987,796 As at
September 2002
6
Trend AnalysisAccumulated Debt vs. Revenue
Province Total Accumulated Municipal Services Debt Total Service-Related Revenue Fiscal Year 2001/2002 Accumulated Debt as of Total Service-generated Revenue
Eastern Cape R1,803,557,530 R3,097,965,875 58
Free State R1,800,984,418 R1,979,578,631 91
Gauteng R12,187,210,711 R20,390,800,751 60
KwaZulu-Natal R3,069,126,293 R10,077,210,122 30
Mpumalanga R798,787,101 R1,765,656,499 45
North West R927,800,185 R1,826,778,881 51
Northern Cape R553,947,442 R475,121,961 116
Limpopo R373,237,840 R1,373,313,613 27
Western Cape R2,534,336,277 R9,717,032,003 29
7
Trend AnalysisDebt Growth Rate

• 31 of municipalities service debt is growing
  at a rate of less than 5 per year
• 37 of municipalities services debt is growing
  at a rate of greater than 10 per year
• 32 of municipalities services debt is growing
  at a rate of greater than 20 per year

8
Trend AnalysisGrowth of Aging Debt
9
Trend AnalysisBreakout of the Problem
Category of Municipality Amount Owed As of National Total
Largest 16 R 18. 6 billion 77
Other R 5.7 billion 23
National R 24.3 billion 100
10
Trend AnalysisServices for which debt is owed
11
Trend AnalysisProfile of Debtors
12
Trend Analysis Other Factors of Concern

• Only 40 of Category B municipalities have audit
  committees that meet at least twice a year
• 60 of Category B and 40 of Category C
  municipalities do not have an internal audit
  function
• 2 metros can bring their financial records up to
  date in the following month

• Only 6 of Category B municipalities are able to
  bring their financial records up to date in the
  following month and 10 of Category C
• Alarming increase of use of overdraft facilities
  (or bridge financing) and equally alarming
  recalling of these facilities

13
Trend Analysis Other Factors of Concern

• Aggregate capital expenditure of budgeted
  amounts, by category of municipality
• Category A 9.1
• Category B 6.2
• Category C 9.9

14
Trend AnalysisCauses of the Problem

• Inappropriate taxes and tariffs
• Problems with the implementation of Free Basic
  Services
• Problems with the identification of indigent
  households
• Addressing existing high arrears
• Lack of credibility based on ongoing shortcomings

• Ineffective municipal revenue administration
• Reorganisations
• Under-resourcing
• Adopting to new circumstances
• Poor metering systems
• Unreliable data
• Inadequate billing systems
• Difficult accounts
• Unreliable postal service
• Inaccessible payment points

15
Trend AnalysisCauses of the Problem

• Political opportunism
• Charging of interest
• Lack of effective and creative incentives and
  sanctions
• Lack of clarity around responsibility for revenue
  administration
• High government arrears

• Uncertainty relating to the establishment of the
  Regional Electricity Distributors (REDs)

16
The Municipal Viability Indaba

• Reasons for the Indaba
• Municipal services debt fundamentally affects the
  overall viability of municipalities and therefore
  lays at the crux of governments efforts and
  ability to improve the quality of life for
  all
• The growth rate of municipal services debt
  reports on the condition of the compact between
  municipal governments and the communities that
  they serve
• The issue provides some important insight into
  the complexity and fragility of the local
  government transformation process
• The issue fundamentally relates to all the
  strategic objectives of the Presidential
  Coordinating Council (PCC)

17
The Municipal Viability Indaba

• Reasons for the Indaba
• All municipalities are experiencing the problem
  of service arrears
• Several municipalities are making concerted
  efforts to address the problem with varying
  degrees of success evidenced by the escalating
  growth rate
• The Indaba created a forum through which the
  issue can be discussed comprehensively and
  through which experiences can be shared and
  lessons learned
• The Indaba also created the opportunity to place
  the issue squarely before all those affected by
  it so as to achieve a common appreciation and
  understanding of its implications
• The Indaba created a platform to highlight
  National government policies, objectives and
  programmes that adversely impact municipal
  viability

18
The Municipal Viability Indaba

• Objectives of the Indaba
• To share the facts, panic and opportunities
  around the issue of municipal viability
• To adopt strategic targets that will guide
  municipal efforts to improve revenue management
• To develop and adopt collective resolutions on a
  way forward
• To agree on mechanisms through which to manage
  and monitor the implementation of the resolutions
• To inform delegates of the findings and
  implications of the commissioned investigation

19
The Municipal Viability Indaba

• Audience for the Indaba
• Mayors
• Speakers
• Chairs of Council Finance and/or Audit Committees
• Local Government MECs
• Local Government HODs
• Municipal Managers
• Municipal Chief Financial Officers
• Related entities
• DBSA
• Eskom
• Financial institutions

20
The Municipal Viability Indaba The Programme
Day One (AM) Day One (PM) Day Two (AM)
Presentation by Minister of Provincial and Local Government on Municipal Viability Presentation by National Treasury Presentation by the Department of Trade and Industry Presentation by the Department of Water Affairs and Forestry Presentation by the Department of Minerals and Energy Presentation by the Department of Housing Presentations of business solutions available and developable prepaid technologies (water, electricity etc.) innovative financial strategies to assist with revenue collection (municipal services debt securitisation) creative property management incentives to improve municipal revenue available and developable financing mechanisms to support local infrastructural initiatives that impact revenue collection staff development and training options that improve revenue administration (market knowledge and customer service training etc.) Presentation and launch of Municipal Revenue Enhancement Programme and implementation plan Adoption of the implementation and monitoring plan Announcement of the implementation programme management structure and the chairs and members of initiative steering committees
21
The Municipal Viability Indaba

• A total of 1,700 delegates were invited. 1,414
  attended
• Representatives from National government
  departments all gave presentations and delegates
  were given an opportunity to debate issues raised
  in their presentations
• 24 exhibitors participated in the Indaba
  ranging from financial institutions to government
  departments to technology vendors

22
The Municipal Viability Indaba

• Based on surveyed assessment of Indaba
• Implementation requirements for solutions
  presented included
• Partnerships
• Funding
• Technical know-how
• Project management capability
• Support from DPLG
• Training

23
The Municipal Viability Indaba

• Based on surveyed assessment of Indaba
• Positive aspects of the Indaba included
• Appreciation that all municipalities are
  experiencing the same issues
• Issues that matter the most were discussed
• Involving and assembling municipalities made them
  feel recognised
• Learning opportunity information sharing
• Involvement of National departments in single
  forum
• Innovative solutions presented

24
The Municipal Viability Indaba

• Based on surveyed assessment of Indaba
• Negative aspects of the Indaba included
• Time management and availability of time for
  further discussions
• Perceived focus on urban/large versus rural/small
  municipalities
• Focus on developed/established municipalities
• Suggestions
• 95 of surveyed delegates would like to annualise
  the Indaba mainly to gauge collective and
  individual progress
• Make Indabas Province-based

25
Outcome of the Indaba The Municipal Revenue
Enhancement Programme

• Intended Outcomes
• Improved and sustained revenue collection
• Alleviation of causes of services debt
• Extension of services particularly free basic
  services to the poor
• Strategically pool resources aimed to enhance
  service delivery and streamline access to these
  resources
• Clarify national policies pertaining to service
  delivery in order to make them implementable

26
The Municipal Revenue Enhancement Programme

• Approach
• Seeks to reinforce and accelerate the effective
  implementation of existing policies and ongoing
  support programmes
• Strategically involves affected parties
  provinces and municipalities to ensure more
  focused solution development and ease of
  implementation
• Seeks to provide just-in-time assistance and
  support to municipal efforts to ensure success
• Seeks to involve new partners particularly
  national sector departments and the business
  sector in order to broaden spectrum of solutions

27
The Municipal Revenue Enhancement Programme
Public Communication/ Education Initiatives
Revenue Enhancement Fund
Appropriate Technology Initiatives
Institutional Responsibility Initiatives
Sustainable Delivery Initiatives
28
The Municipal Revenue Enhancement Programme
Initiative Intended Outcome(s) Approach Key Deliverables
Public Communication/ Education Initiatives MEC Lechesa Tsenoli, Free State To achieve a greater public understanding of municipal service delivery systems and the impact of non-payment (or the lack of sense of responsibility) on service delivery and the local economy. It is hoped that this greater public understanding will begin to cultivate a new culture of responsibility that will ultimately impact municipal viability. Use the 5 PCC Strategic Objectives as the parameters or framework for overall programme Determine a clear, consistent and understandable message Determine key things that must be done to reinforce our message (e.g.. National and provincial governments must pay arrears to municipalities by certain date ease of payment, enforcement of credit control, conflict resolution mechanisms etc.) National and provincial government settlement of arrears by March 2003 Constantly identify good examples of progress and expose/highlight them Longer-term public communication/ education plan that accommodates communication needs of other initiatives and incorporates Letsema
29
The Municipal Revenue Enhancement Programme
Initiative Intended Outcome(s) Approach Key Deliverables
Appropriate Technology Intervention Initiatives MEC Trevor Fowler, Gauteng To create and/or facilitate access to technology interventions that will assist municipalities with revenue collection and by extension, sustainable service delivery Differentiate issues by type of municipality Determine appropriate technological interventions Assess availability of interventions Assess municipalities readiness for interventions Investigate and develop financing mechanisms to avail interventions Roll-out of interventions Improved billing and accounting systems Citizen education programme to ensure public buy-in and responsiveness to technological interventions Assess feasibility and implement alternative service delivery mechanisms (e.g.. Prepaid technology, shared service centres) Assess specific infrastructure deficiencies and develop plan to address them Reinforce message of responsibility vs. message of support
30
The Municipal Revenue Enhancement Programme
Initiative Intended Outcome(s) Approach Key Deliverables
Sustainable Delivery Initiatives Cllr. Duma Nkosi, Ekurhuleni To provide focused leadership and resolution to issues relating to the support of the poor Use compliance with local government legislation and related mechanisms (e.g.. IDPs, Ward Committees) as framework for initiative Reinforce and utilise Ward Committee structure (i.e.. Know your people and what they need understand their circumstances and expectations determine the appropriate level of support) Understand available resources for delivery, and address access issues Reframe the issue of indigent support (i.e.. What is the moral obligation what are the minimum standards and efficiency options to address this obligation how do we frame and communicate subsidisation what is the relationship between subsidisation and sustainability) Balanced national indigent policy (to include indigent identification, what support is available, where is it coming from, and how do we apply it) Public communication around appreciating subsidisation
31
The Municipal Revenue Enhancement Programme
Initiative Intended Outcome(s) Approach Key Deliverables
Institutional Responsibility Initiatives Cllr. Obed Mlaba Ethekweni To provide focused leadership and resolution to issues relating to institutional responsibility as it pertains to municipal viability Need to reverse public attitude that seeks to get from government without putting in Need to change work ethic in municipal organisations Need to focus on economic growth and development for the longer-term (i.e.. discover new opportunities for revenue generation) Need to regionalise resources to maximise effect (need to engage parastatals whose mandate impacts municipal viability) Identify and pilot new mechanisms for revenue generation (i.e.. excluding trading accounts, intergovernmental transfers and donor assistance) Identify and pilot customer-friendly and focused mechanisms of interaction Develop balanced mechanisms for debt write-offs Develop balanced sanctions and rewards Explore partnerships that use larger municipalities as implementing agents
32
The Municipal Revenue Enhancement Programme
Initiative Intended Outcome(s) Approach Key Deliverables
Municipal Revenue Enhancement Fund MEC Mohammed Bhabha, Mpumalanga To provide results-driven support to municipalities working toward improving revenue administration Assess and thematise issues that municipalities are trying to address Assess availability and procure specialised technical assistance Develop marketing plan for Municipal Revenue Enhancement Fund Develop streamlined application process Develop on-going monitoring and evaluation plan Needs and issue assessment report Prequalify technical assistance (with a results/performance based framework) Marketing Plan Communication plan for successful projects
33
Guiding Principles for the Programme

• Programme must be about delivery i.e. geared
  toward constant, visible and measurable
  movement/progress
• Programme should provide leadership to enable
  movement
• Programme should create and implement new and
  sustainable options
• Programme must frame a strong message that
  speaks to governments intentions, movement and
  impact
• Programme must continuously involve those whom it
  is created to benefit

34
Progress to Date

• Developing a Delivery Calendar comprising of
  projects/initiatives and anticipated roll-out
  dates
• Developing Programme Message
• Research and analysis have begun
• Trend analysis of Auditor General reports
• Trend analysis of Project Viability reports
• Will engage Provincial Departments, Provincial
  Organised Local Government, ILGM and IMFO
• Appointing a Reference Group
• Establishing programme management capability
  within DPLG