Government deploys team to intervene in crisis-ridden Enoch Mgijima municipality

A team from the National Treasury and the Department of Cooperative Governance and Traditional Affairs (Cogta), led by Dr Monde Tom, has been deployed to turn things around in the struggling Eastern Cape municipality of Enoch Mgijima.

Speaking at a special council meeting in the municipality on Friday, Finance Minister Enoch Godongwana said 60% of the municipality’s residents were not paying for their services.

“Everyone who is not paying for their services and is not on the indigent list should have their electricity switched off,” he said.

He said the national government had taken a decision to intervene in the municipality, and on Friday they brought to the municipality the officials, led by Tom, who will work there.

“We want to make sure that everything is done right and the municipality does not pass an unfunded budget. Political interference into administration work is common in many municipalities and we are doing our best to make sure that does not happen,” he said.

Matjatji Mashoeshoe, a National Treasury official, said the municipality was in a state of financial distress. 

“According to the assessment, the municipality has been in distress since the 2016/2017 financial year. One of the indicators is that this municipality achieved a qualified audit opinion in the 2019/2020 financial year,” she said. 

“The municipality has been adopting an unfunded budget for the past five years. It’s [been] under a mandatory intervention since 2018 and a financial recovery plan was established. We observed that the previous council failed to provide the oversight required and support the implementation of the financial recovery plan.” 

Mashoeshoe said that since the local government elections, only one financial recovery plan had been submitted, whereas the legislative requirement states that such a plan must be submitted monthly.

“The performance of this pillar of sustainability is very poor because of the negative audit outcomes in the past five years. The municipality has been receiving qualified audit opinions for the past two financial years, coming from an adverse audit in the 2018/19 financial year and disclaimers in 2017/18 and 2016/17. 

“The qualified audit opinion implies that their annual financial statements were submitted, but the concern is that there are major challenges that threaten the financial viability of this municipality. 

“The other issue is the level of unauthorised and wasteful expenditure. Council has not taken any steps against an official who led to the unauthorised and fruitless expenditure.” 

Mashoeshoe said the municipality had a municipal public accounts committee, which was not taken seriously.

“The sittings of the committee are not honoured by the members of the committee and council. The operational costs of the municipality are extremely high… compared to the size and the financial affairs of the municipality.” 

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Operating deficit

She said that for the past five years the municipality had shown an operating deficit.  

“In 2021, the municipality indicated a deficit of R162-million and I must emphasise that an operating deficit indicates that the budget of the municipality is not sufficient to cover its operating costs. The collection rate remains very low at 42% in the 2020/2021 financial years. 

“We’ve also learnt that this municipality has an agreement with a service provider which collects old debts and current debts. The proposed percentage for sharing is 50%. This, according to us and our assessment, is not viable and we are saying that agreement should be reviewed.” 

Mashoeshoe said the municipality was at serious risk of defaulting on finances and service delivery challenges. 

“The municipality is in a financial crisis because of its consistent failure to meet financial commitments due to the cash flow challenges.  The issue is the high level of outstanding debtors, which is a challenge as there is an outstanding debt of more than R806-million. This is an indication that there is a poor level of debt collection.” 

Mashoeshoe said the municipality had failed to implement a debt collection and credit control policy to collect the money that was owed to it. 

“Total creditors have grown over the years from R486-million to R637-million. From June to December 2021, creditors moved from R637-million to R734-million and the main matter is the Eskom debt of R718-million as reported in December 2021. And the municipality has been adopting an unfunded budget for the past five years.” 

She said service delivery had been poor for the past five years.

“It improved in the 2020/2021 financial year. The electricity infrastructure is ageing, but the municipality is not responding to infrastructure requirements. We have observed the issue of municipal roads that are dilapidated as we were driving around. They need more serious maintenance.” 

Mashoeshoe said for the past five years the municipality had returned a total of R84.5-million in conditional grants to the National Treasury

The National Treasury deputy director-general, Malijeng Ngqaleni, said the sooner they implemented the financial recovery plan, the sooner they would leave Enoch Mgijima. 

https://www.dailymaverick.co.za/article/2022-02-21-enoch-mgijima-municipality-takes-eastern-cape-government-to-court-over-botched-administration/

“We need to make sure that the cash problem is addressed. Council must oversee the implementation of all the council-approved policies, including the credit control policy. We are aware that the municipality for the past five years has been unable to account for the resources that it has.” 

Debt write-off

She said the Treasury was not happy with the municipality writing off its debt.

“There has been no proper investigation and proper consequence management. Council must oversee the implementation of the budget. The underperformance on conditional grants is not right and we need to get more from those that are underperforming.”

Ngqaleni said the Enoch Mgijima municipality was one of 43 municipalities that had been identified as being in a financial and service delivery crisis.  

“What has triggered this process is the high court decision that mandated the national government and ordered it to intervene in the financial and service delivery crisis that prevailed in the municipality called Lekwa in Mpumalanga. The president then said, how many of those municipalities are in this situation? What he was saying was that we cannot be instructed by courts to implement our laws and do what we are supposed to do. Therefore, let’s be proactive so that whenever we find this problem then we can take the right measures that will lead us to address this problem.”  

Ngqaleni said that with Cogta they had developed a matrix that would objectively assess the performance of the crisis-ridden municipalities according to the four pillars of sustainability: governance, institutional health, financial health and the state of service delivery. 

“That was before the elections. Looking at the terms of the political cycle, in the third term we ended up with 66 municipalities in financial distress. In the fourth term, the number increased to 97. What we noticed is that things got worse in the fifth term. In the last assessment, we have noticed that 175 municipalities were in crisis in the fifth term, from 66 in the first term.”  

Lindile Zincume, a National Treasury official, said the role of the council was to provide oversight.

“Council must improve oversight and monitoring. The role of the national department is to be the coach, and [it] will report to the minister and Cabinet on a monthly basis,” he said.

The municipality’s executive mayor, Thembeka Bunu, and the entire Enoch Mgijima council welcomed the intervention. 

Independent councillor Ken Clark called on Godongwana to order a forensic investigation into the affairs of the municipality; however, Godongwana said they can’t just carry out a forensic investigation without identifying the problem.

“If Dr Tom notices something that needs a forensic investigation, I will allow him to do so,” he said. DM

 

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