Tuesday, 27 September 2011

Reportback on the meeting between the JBRA and the Kouga Municipality

On 21st September 2011 a much postponed meeting between the Jeffreys Bay Residents Association (JBRA) committee and the senior management of the Kouga Municipality (KM) was held at the municipal offices in Jeffreys Bay. Kouga municipality was represented by the mayor, Councillor Booi Koerat, the acting municipal manager, Sydney Fadi, and the Service Centre Coordinator, Japie Jansen.

The JBRA chairman compared the meeting to a shareholders meeting, where residents, as investors and shareholders in the Kouga Municipality corporation, grill the management on their performance to date and plans for the future. At stake is the decision for the stakeholders to continue investing into the future, or to cut their losses and withdraw investment.

The acting municipal manager, Mr Fadi, addressed each of the issues on the quite lengthy agenda with a refreshing honesty and directness.  He openly conceded that the KM was in a very poor financial state, that there were some very large creditors (NMMU around R15m, AG’s office around R5m, Eskom), and that only a fraction of these debts can be serviced per month. He said that this council had inherited a much worse situation than had been expected, or then had been described by the previous incumbents. Essentially, the KM was insolvent, with expenditure and debts far exceeding income. Payments were prioritised on a monthly basis.  However, some funds each month were reserved for infrastructure maintenance.  Thirty tons of tar had been recently acquired for pothole repair, which was now proceeding.

The KM has commissioned an investigation by auditors KPMG into past irregular financial practices. This report, due to be released soon, will form the basis of actions against staff suspected of financial wrongdoing. The MM stressed that the KM was determined to make a full recovery of all mismanaged funds, no matter who was responsible. 

Rates make up 40% to 60% of the KM income. In an effort to improve rates collections the KM staff has initiated a data cleansing project on all municipal records, which is now nearing completion. Once the KM is reassured that the data used for rates assessment and collection is reliable, they will be in a position to effectively prosecute non-paying debtors.

Salary payments currently consume 42% of the KM monthly budget, whereas the norm for municipalities should be in the 30% to 36% range. The KM has recently terminated the employment of 231 contract staff. These employees have taken legal action against the council to be reinstated.  The ex Chief Financial Officer, Ridwaan Abdullah has also appealed against his dismissal, and has won the case, requiring reinstatement.  A settlement has been reached with the former MM, Dr Rankwana, who has now left the KM.

Following the recent floods, disaster relief funding of R87m has been applied for from central government. It is uncertain when these funds will become available. These funds will be used for bridge construction and road and infrastructure repair. The MM stressed that any funds received for a specific purpose by the KM will be ring fenced and used only for the specified purpose.

The low cost housing development near Aston Bay has been put on hold while a revised Environmental Impact Assessment is drawn up. This report is expected before year end.  All agreed that the original plan involving 2400 housing units was unworkable and needed to be revisited.

The JBRA has applied to the KM for a seat on the Financial Oversight Committee (FOC) and on the Audit Committee. The Jeffreys Bay Residents Association is very disappointed that the council did not see fit to appoint Dr Gustav Barnard, a chartered accountant with the verifiable backing of at least 600 ratepayers in Jeffreys Bay,  to the Financial Oversight Committee.

The solution to the KM financial crisis is straight forward – cut expenditure ruthlessly, increase income through better debt collection, beg for assistance from less challenged sources, try to improve growth and job creation. The question remains as to whether the KM has the financial expertise and political will to take the necessary medicine.

Some significant steps have been taken to address the crisis in the municipality:
  • Senior staff suspected of wrongdoing have been suspended or fired.
  • A forensic audit report on financial irregularities has been commissioned.
  • Full recovery of all mismanaged or misappropriated funds will be pursued
  • 231 contract staff have been terminated, although still subject to arbitration
  • A data cleansing project has been run to facilitate more effective debt recovery
  • Disaster relief funding has been applied for
  • The unsustainable low cost housing development is on hold and under review

Without question, many serious issues remain:
  • Salary bill is still way over target, and must be dramatically reduced
  • Fraud and corruption cases must be brought against suspect officials
  • Wasteful and unnecessary expenditure must be identified and eliminated
  • Major outstanding debts must be reduced
  • Many critical infrastructure issues are outstanding and must be urgently addressed
  • KM operations are still very inefficient. Adequate management oversight must be exercised
  • Incompetent officials must be identified and either trained or removed rapidly

The JBRA stressed that their members were willing, keen and able to assist in various areas to assist in the KM recovery plan:
  • Residents Expertise can be used on the Audit committee and the Financial Oversight Committee
  • The KM can use the JBRA to communicate with residents in Jeffreys Bay
  • The Mobilitate website administered by the JBRA can be used to communicate residents’ problems efficiently to the KM
  • Residents can undertake projects in collaboration with the KM to resolve certain problem areas, for example, Caravan park, potholes, beach cleaning.

What is the way forward?  The KM’s credibility is very low amongst J Bay residents, due to years of corruption and mismanagement. The problems are very severe –
  • huge debts,
  • reducing income,
  • Blue Flag status lost,
  • tourism dying,
  • businesses closing,
  • unemployment growing,
  • infrastructure collapsing.

For Jeffreys Bay to recover from this gloomy situation, all sides are going to have to show statesmanship, tolerance, honesty, cooperation, and insight.  The KM must communicate the problems openly and honestly with the residents, must stamp out corruption and mismanagement, must dramatically improve efficiency, and must be seen to do so.  In turn, the residents must acknowledge the scale and severity of the problems facing the KM, and must be willing to shoulder some share of the burdens ahead

  • by keeping a close eye on the performance of the KM going forward
  • by becoming involved in projects,
  • by solving problems rather than just complaining about them.

If the KM fails, we will all suffer. If the KM succeeds in turning itself around, we will all benefit.

As a first step in open communication, the mayor, the MM and the Jeffreys Bay councillors have been invited to address a JBRA public meeting on Wednesday, 5th October at 10am in the Newton Hall on the problems facing Kouga, and the plans to fix them. We still await confirmation of their attendance. All residents are strongly urged to attend and to get involved.

Issued by Trevor Watkins, Chairman, Jeffreys Bay Residents Association.

Monday, 19 September 2011

Residents forking out for poor service

From Fin24Sep 18 2011 15:09by Antoinette Slabbert
Pretoria - Residents of towns and cities, as well as business enterprises, are having to shell out ever more for municipal taxes and services, but receive less and less in exchange. 
Municipalities use an ever-diminishing amount of this money to create infrastructure and budget little for repairs to and maintenance of existing infrastructure. 
This is evident from National Treasury's overview of municipal finances spanning the years 2006 to 2013, which was publicised last week. 
According to the Treasury report, municipal revenue from services since the 2007 financial year has risen an average 16.6% a year, reaching R72bn in the 2010 financial year. Over the next three years an average growth of 18.6% is expected. The steep escalation of bulk electricity costs is one driver of these increases. 
Accordingly, property tax has risen an average 12% a year and this increase is expected to persist at a rate of 10.2%. Other revenue from residents' pockets, including traffic fines, licences and permits, rose an average 12.4% between 2007 and 2010. 
Treasury has expressed concern over the fact that municipalities are relying more on government grants for infrastructure expenditure. These grants have also risen sharply in recent years. 
Municipalities are using less and less of their own money for infrastructure development. 
According to Treasury, this indicates that municipalities have exhausted their own historical cash reserves and, as a result of cost pressures, are struggling to keep generating surpluses on their operating budgets. Treasury said it is also possible that municipalities are deliberately replacing their own money with government grants in their capital budgets to enable them to use their own money - that coming from residents’ pockets - elsewhere. The major part of the operating budget towards which their own funds are increasingly being applied is staff costs, said Treasury. 
According to Economists.co.za director Mike Schüssler, in 2009 municipal staff members earned an average R17 375 a month. Workers in the formal private sector at that time earned an average of R9 495 - virtually half as much. 
According to Treasury, municipal salaries rose an average 15.4% from 2007 to 2010. 
Schüssler said municipal officials generally take home much more pay than those living in their council areas. They have greater security and take fewer risks than residents do. 
"Other expenses" in municipal operational budgets rose an average 16.7% over the same period. What exactly is included is not clear, but Treasury warns that municipalities should stop wasting money on things like large sponsorships for music fests and beauty competitions; expensive campaigns for eg voter education; liquor and entertainment; foreign "study trips"; motor vehicles, housing and cellphones for mayors, council members and staff; legal expenses and long suspensions of staff members on full pay; as well as consultants performing routine management tasks. 
Treasury is worried that municipalities are setting aside less and less money for repairs to, and maintenance of, infrastructure. The consequences are not evident in the short term and these types of savings are less "politically sensitive" than cancelling capital projects or cutting entertainment expenses, said Treasury. 
In the long run both service delivery and the local authority's ability to earn money from service delivery are impaired. 
Schüssler said operating revenue could soon run to more than 8% of the gross domestic product (GDP). In the 2007 financial year it was 5.9% and in the 2009/10 year 7.2%. 
The international norm is that state revenue should equal no more than 30% of GDP. According to government’s figures it is - with the exclusion of municipalities - already 28% of GDP. If municipalities and state enterprises are included, total government revenue in South Africa is certainly already more than 40% of GDP, said Schüssler.. 
Schüssler reckons municipalities' portion of the cake can in no way continue growing at this rate. Municipalities have to employ the money they receive more efficiently.  

Thursday, 8 September 2011

Another municipal year passes

The treasury released financial results for the fourth quarter of the 2010/11 municipal financial year. PAUL BERKOWITZ compares the numbers with previous years and reflects on another year of wasted opportunities. 

As a whole, municipalities continue to improve the quality of information they submit to treasury. Three years ago fewer than 50 municipalities produced financial reports, whereas this financial year every single one has submitted data. There’s not much other good news, sadly.  The results released on Friday cover the period April to June 2011 and provide a bird’s-eye view of the financial well-being of all 283 municipalities.

Read more at http://dailymaverick.co.za/article/2011-09-07-another-municipal-year-passes-along-with-wasted-chances