2016/17 STOPPING & REALLOCATION CONSIDERATIONS: OR Tambo District Municipality 06 June 2017

BACKGROUND On the 13th January 2017, the Province (EC) was invited by national department of Co-operative Governance (DCoG) to the session scheduled for 19th & 20th January 2017 in Pretoria with thirteen (13) underspending municipalities on Municipal Infrastructure Grant (MIG) during 2016/17 FY based on their performance report as at 31st December 2016. An amount of R119 114 million was potentially going to be stopped in EC municipalities, of which R90 000 million was from O.R.Tambo district municipality.   Subsequent to the invitation, PT & COGTA met on 16th January 2017 and agreed to facilitate a joint session with all affected municipalities on the 17th January 2017 in East London. O.R. Tambo was amongst municipalities which were invited by Province to the joint session held on 17th January 2017 in preparation for 19th and 20th January 2017 session with DCoG in Pretoria, however O.R. Tambo District Municipality did not attend the provincial session.

STOPPING & REALLOCATION 2016/17 MIG ALLOCATIONS In terms of MIG Framework 2016, Municipalities must: spend at least 60% of the first transfer (by October 2016) spend at least 40% of their total MIG allocation by December 2016 must comply with reporting provisions before the transfers are made. If not, the Transferring Officer (TO) may evoke stopping and reallocation procedures (in terms of Sec. 19 & 20 of the DoRA 2016) The MIG transferring officer’s (DCOG) report confirmed that O.R. Tambo’s cumulative expenditure was R132 090 million or 22% as at end December 2016 of total allocation of R609 099 million, resulting in the municipality falling below the 40% bracket of stopping, hence R90 000 million was intended to be stopped. Two Senior officials from the Province (PT & COGTA) accompanied the identified municipalities with potential stoppage of the MIG in Pretoria on the 19th and 20th January 2017. O.R.Tambo delegation (CFO & PMU Manager) did not prepare any formal presentation on 19th January 2017 sighting that, they were unaware of what was expected from them. It was resolved that O R Tambo be given a second chance the following day (20th ) and be assisted by MISA assistant as they did not have any information on what to be presented  

STOPPING & REALLOCATION 2016/17 MIG ALLOCATIONS CONT… O.R. Tambo was given a second chance on the 20th January 2017, however the municipality did not have sufficient or adequate information like proof of payments and projects implementation plan to convince the panel that they had spent more than 40% in December 2016 for the intended purposes. All municipalities were expected to submit a file with the following documents: Proof of payment for projects on signed project implementation plan (DCOG further confirmed that O.R.Tambo implemented projects that were not in the project implementation plans submitted to DCOG) Letters of appointment of service providers to commit funds as allocated and Realistic cash flow projections. Out of the 13 affected municipalities 5 have been eliminated from stopping due to their cooperation as from 17th January 2017 to 20th January 2017. DCOG had further scrutinized all supporting documents and share with the Province the final outcomes of stopping, then submit to National Treasury for implementation.

PROVINCIAL OVERVIEW OF STOPPING & REALLOCATION 2016/17 MIG Out of the R2 956 billion MIG allocation for 2016/17 to EC, R119 114 million was stopped from 8 underperforming municipalities and R124 735 million was reallocated to 11 municipalities in the province  Municipality Allocation 2016/17 (R'000) Transferred (R'000) Spent by December 2017 Spent as % of total available Spent as % of total transfers Stopped (NT) 2016/17 (R'000) 1. Sundays River V. 24,446 21,711 3,273 13% 15% 2,735 2. Kou-Kamma 14,694 5,320 2,774 19% 52% 3,000 3. Amahlathi 30,147 20,465 5,444 18% 27% 7,000 4. Ngqushwa 21,854 17,889 5,022 23% 28% 2,379 5. Emalahleni 31,758 13,754 4,042 29% 6. Engcobo 50,431 27,229 2,921 6% 11% 4,000 7. Sakhisizwe 17,539 9,993 3,186 32% 3000 8. O.R. Tambo DM 609,099 375,457 132,090 22% 35% 90,000 TOTAL EC STOPPED 799,968 491,818 158,752 20% 119,114

NATIONAL OVERVIEW OF STOPPING & REALLOCATION 2016/17 MIG Out of the R14,9 billion MIG allocation for 2016/17 in the country, R943 million was stopped from 42 poor performing municipalities and reallocated to 58 municipalities across the country. PROVINCE ALLOCATION STOPPING REALLOCATION GAIN/LOSS REVISED ALLOCATION EC 2 956 279 -119 114 124 735 5 621 2 961 900 FS 713 423 -33 168 47 500 14 332 727 755 GP 456 601 -7 800 - KZN 3 273 827 -52 470 74 100 21 630 3 295 457 LP 3 126 953 -394 175 222 000 (172 175) 2 954 778 MP 1 768 055 -67 845 97 200 29 355 1 797 410 NC 463 379 -24 544 68 500 43 956 507 335 NW 1 654 349 -237 664 302 370 64 706 1 719 055 WC 501 162 -6 054 6 429 375 501 537 Total 14 914 028 -942 834 942 834

STOPPING & REALLOCATION 2016/17 MIG ALLOCATIONS CONT… After the exercise from the province in January 2017, National Treasury further informed O.R. Tambo of intention to stop MIG funds on 16 February 2017 and request the municipality to respond to the letter. Municipality still did not convince National Treasury in order not to stop MIG funds, hence R90 000 million was ultimately stopped, Gazette No. 40707 Vol. 621 dated 22 March 2017 was then issued for stopping and reallocation of MIG A follow-up session was done by ECPT, COGTA, NT and DCOG 16th May 2017 to assess progress on MIG spending as the indication of underspending. An engagement by the stakeholders mention above was held on the on 25th May 2017, to discuss a wayforward and readiness assessment for 2017/18 Implementation Plans seeing that still munis are grossly underspending  on MIG

RECOMMENDATIONS To avoid discrepancies in reporting the following should be adhered to; Improvement of reporting within the three government spheres. Municipality must comply with MIG framework (reporting). The critical technical post must be filled Planning & procurement must done in advanced (plan a year before implementation year) Provision of adequate financial resources is necessary to enhance monitoring and support to municipalities.  

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