Parliament, Wednesday, 21 February 2024 – The Portfolio Committee on Cooperative Governance and Traditional Affairs received reports from the Auditor-General (AG), the Department of Cooperative Governance and Traditional Affairs, National Treasury, the Eastern Cape Provincial Department of Cooperative Governance and Traditional Affairs, the South African Local Government Association, and the Chris Hani District Municipality on the state of Enoch Mgijima Local Municipality yesterday.
The municipality has been operating under intervention from the Eastern Cape provincial government and national government for nearly two years. The intervention is in terms of Section 139(7) of the Constitution, after a previous provincial government intervention was unsuccessful.
The first stakeholder to brief the committee in the meeting was the Office of the Auditor-General (AG), which identified problems with the lack of compliance with laws and regulations governing financial matters, no reliable and credible performance information for predetermined objectives, and also that the municipality has received a qualified audit opinion for the past three years.
The AG found that the quality of financial statements is very poor and there is a high reliance on consultants.The AG’s conclusion was that repeat audit findings indicate that the municipality does not take the AG’s findings and recommendations seriously.Another identified weakness is the deficiency in record keeping, and a lack of systems to identify indigents, which means people who do not qualify might be benefiting erroneously. This has an impact on the municipality’s finances.
A huge Eskom debt is another contributing factor to the municipality’s financial distress, which is heavily reliant on grant funding. An excessive salary bill, poor revenue collection, high irregular expenditure, and material losses on electricity are other chronic problems that are not being attended to.
Briefing the committee on developments in the implementation of the municipality’s Financial Recovery Plan (FRP), National Treasury also said one of the key drivers of the municipality’s financial crisis is the Eskom debt. If debt relief is withdrawn, the municipality will be in a dire financial crisis, Treasury said.
National Treasury also identified as another problem the incorrect job grading that came with the amalgamation of Tsolwana, Inkwanca and Lukhanji municipalities to establish Enoch Mgijima.
National Treasury told the committee, “The performance review demonstrates a laissez faire approach to implementation of the FRP and further demonstrates stagnation and regression in the financial recovery processes.” Treasury also said there is no material progress in addressing the root causes that led to the invocation of the intervention and the imposed FRP. In addition, the progress that has been recorded is trivial and seems to be coincidental, with no material impact on the recovery processes. The municipality is, however, performing well on spending conditional grants.
SALGA, meanwhile, is convinced the municipality is on the correct recovery trajectory and called for the current leadership and management to be supported to continue implementing the FRP. SALGA also called on all other public entities and departments to commit resources to support the identified problem areas.
The committee Chairperson, Mr Fikile Xasa, thanked all the stakeholders for their presentations. “We are not in Enoch Mgijima and we hope the information provided by the presenters today is going to help the committee get a better understanding of what is going on in the municipality,” he said.
ISSUED BY THE PARLIAMENTARY COMMUNICATION SERVICES ON BEHALF OF THE CHAIRPERSON OF THE PORTFOLIO COMMITTEE ON COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS, MR FIKILE XASA.
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