Presentation to the Select Committee on

Finance 26 FEBRUARY 2006

QUARTERLY PERFORMANCE OF THE MUNICIPAL INFRASTRUCTURE GRANT (MIG) – 2005/06 AND 2006/07 FINANCIAL YEARS

PART A: 2005/06 FINANCIAL REPORT

2005/06 FINANCIAL REPORT• Municipalities spent R5, 410 billion out of the total allocation of

R5, 436 billion as at the end of January 2006 • Expenditure represents 99,5 percent of the total transferred and

the allocation • Western Cape (100 %), Gauteng (100%), North West (99,9)

Eastern Cape (99,9 %), and KZN (99,7 %) are the best performing provinces

• Municipalities had R25 million MIG funds in their bank accounts – end December 2006

• Municipal spending started lower at R400 million in the first quarter of 2005/06 and improved to R1,7 billion in the last quarter of 2005/06 financial year

• Expenditure pattern shows that the municipal expenditure is normally lower in the first quarter due to the fact that the municipal financial year starts in the second quarter of the national financial year(from July each).

• Municipalities finalise their budgets for approval by their councils before the start of the financial year

Consolidated report 2005/06

Province

Allocation (R'000)

Transf to date

(R'000)

% Transf from total alloc

Actual Exp to date (R'000)

% Exp from total alloc

Amount not yet spent

(R'000)

Eastern Cape 1 063 817 1 063 817 100.00 1063 703 99.99 113

Free State 434 913 434 913 100.00 431 172 99.14 3 741

Gauteng 841 414 841 414 100.00 841 414 100.00 0

KwaZulu Natal 1 116 278 1 116 278 100.00 1113 243 99.73 3 035

Limpopo 727 769 727 769 100.00 721 033 99.07 6 736

Mpumalanga 360 506 360 506 100.00 352 974 97.91 7 532

Northern Cape 172 184 172 184 100.00 167 359 97.20 4 824

North West 422 254 422 254 100.00 422 252 100.00 2

Western Cape 297 027 297 027 100.00 297 027 100.00 0

Total 5 436 161 5 436 161 100.00 5 410 177 99.52 25 984

List of Municipalities still spending 2005/06 funds per province

EASTERN CAPE

MunicipalityAllocation

(R'000)

Transf to date (R'000)

% Transf from total alloc

Actual Exp to date

(R'000)

% Exp from total alloc

Amount not yet spent

(R'000)

Cacadu DM 25 796 25 796 100.00 25 682 99.56 113

Totals 25 796 25 796 100.00 25 682 99.56 113

FREE STATE

Municipality

Allocation (R'000)

Transf to date (R'000)

% Transf from total alloc

Actual Exp to date

(R'000)

% Exp from total alloc

Amount not yet spent

(R'000)

Xhariep DM 13 347 13 347 100 11 100 83.17 2 247

Lejweleputswa DM 14 162 14 162 100 13 906 98.19 257

Matjhabeng 74 266 74 266 100 73 071 98.39 1 196

Thabo Mofutsanyana DM 13 828 13 828 100 13 787 99.71 41

Total 115,604 115,604 100 111 864 96.76 3 740

KWAZULU-NATAL

Municipality

Allocation (R'000)

Transf to date (R'000)

% Transf from total alloc

Actual Exp to date

(R'000)

% Exp from total alloc

Amount not yet spent

(R'000)

Mkhambathini 2 141 2 141 100.00 1 088 50.83 1 053

Maphumulo 4 274 4 274 100.00 3 325 77.79 949

KwaDukuza 9 124 9 124 100.00 8 319 91.17 805

Nkandla 4 909 4 909 100.00 4 681 95.36 228

Total 20 448 20 448 100.00 17 413 85.16 3,035

LIMPOPO

Municipality

Allocation (R'000)

Transf to date

(R'000)

% Transf from total alloc

Actual Exp to date (R'000)

% Exp from total alloc

Amount not yet

spent (R'000)

Bohlabela DM 94 922 94 922 100.00 88 296 93.02 6 625

Waterberg DM 51 902 51 902 100.00 51 792 99.79 110

Total 146 824 94 922 154.68 140 088 95.41 6 736

MPUMALANGA

MunicipalityAllocation

(R'000)

Transf to date

(R'000)

% Transf from total

alloc

Actual Exp to date

(R'000)

% Exp from total alloc

Amount not yet spent

(R'000)

Gert Sibande DM 50 208 50 208 100.00 43,797 87.23 6 411

Ehlanzeni DM 37 231 37 231 100.00 36,112 96.99 1 119

Total 87 439 87 439 100.00 79,909 91.39 7 530

NORTHERN CAPE

Municipality

Allocation (R'000)

Transf to date (R'000)

% Transf from total alloc

Actual Exp to date (R'000)

% Exp from total

alloc

Amount not yet spent

(R'000)

Siyancuma 6 532 6 532 100.00 4 909 75.16 1 623

Frances Baard DM 11 700 11 700 100.00 9 152 78.22 2 549

Tsantsabane 7 473 7 473 100.00 6 820 91.26 653

Total 26 043 26 043 100.00 21 219 81.48 4 824

PART B: 2006/07 FINANCIAL REPORT

2006/07 FINANCIAL REPORT

• The total MIG allocation for the 2006/07 financial year is R6, 265 billion

• R3,57 billion transferred to municipalities in the three quarters

• Municipalities have spent R2,9 billion as at end December 2006 (R470,6 million in in the 1st quarter, R998,6 million in the 2nd quarter and R1,4 billion in the 3rd quarter)

• Expenditure represents 47,2 % of the total allocation and 84% of transferred amount

• Expenditure increased slightly in the third quarter by R13 million.

• There are more projects under construction in the third quarter as compared to the first and second quarter.

2006/07 QUARTERLY FINANCIAL REPORT

Transf Exp Transf Exp Transf Exp

EC 1,288,257 214,850 147,449 280,564 202,710 495,413 350,158 145,255FS 563,896 95,640 42,289 89,136 78,017 184,775 120,306 64,470GP 898,554 65,072 25,070 190,132 153,546 255,204 178,616 76,587KZN 1,262,412 225,556 130,214 242,651 180,711 468,208 310,925 157,283LMP 821,264 93,020 48,134 171,561 101,783 264,582 149,917 114,665MPU 470,284 42,929 440 109,589 46,183 152,518 46,623 105,895NC 130,922 15,700 11,573 32,720 8,299 48,420 19,872 28,548NW 525,574 62,959 23,726 133,087 128,659 196,046 152,385 43,661WC 304,137 58,901 41,750 103,393 98,644 162,294 140,393 21,900Total 6,265,300 874,627 470,644 1,352,833 998,551 2,227,460 1,469,195 758,265

Totals to dateBalanceProvinces

Allocations

Q1 (Apr - June) Q2 (July - Sept)

2006/07 QUARTERLY FINANCIAL REPORT

Transf Exp Transf Exp

EC 1,288,257 260,141 261,262 755,555 611,421 144,134FS 563,896 125,122 151,213 309,898 271,519 38,379GP 898,554 177,070 136,255 432,274 314,871 117,402KZN 1,262,412 238,424 367,797 706,632 678,722 27,910LMP 821,264 154,444 212,092 419,026 362,008 57,017MPU 470,284 68,288 93,347 220,806 139,970 80,836NC 130,922 20,597 29,557 69,017 49,429 19,588NW 525,574 166,248 155,581 362,294 307,966 54,328WC 304,137 73,610 75,180 235,904 215,574 20,331Total 6,265,300 1,283,945 1,482,286 3,511,405 2,951,481 559,924

BalanceProvinces AllocationsQ3 (Oct - Dec) Totals to date

Monthly comparative analysis of Actual Transfers against Actual expenditure

MONTHAMOUNT

TRANSFERRED EXPENDITURE Variances

APRIL 182,971 76,888 106,083MAY 271,537 129,449 142,088JUNE 420,119 264,306 155,813JULY 620,486 262,927 357,559AUGUST 301,627 331,744 -30,117SEPTEMBER 430,720 403,880 26,840TOTAL 2,227,460 1,469,194 758,266

Monthly comparative analysis of Actual Transfers against Actual expenditure

MONTHAMOUNT

TRANSFERRED EXPENDITURE Variances

OCTOBER 384,725 367,682 17,043NOVEMBER 499,741 466,423 33,319DECEMBER 399,479 648,181 -248,703TOTAL 884,466 834,104 50,362

Monthly Expenditure trends per province

Province Apr-06 May-06 Jun-06 July Aug-06 Sep-06 Expenditure To date

Eastern Cape 17 642 27 256 102 551 60 809 62 035 79 866 350 158Free State 1 779 21 879 18 631 18 010 36 258 23 749 120 306Gauteng 42 - 25 027 38 749 38 828 75 969 178 616Kwazulu-Natal 36 542 42 367 51 305 41 008 72 870 66 833 310 925Limpopo 7 538 10 953 29 642 31 524 39 160 31 099 149 917Mpumalanga 210 27 204 19 000 12 164 15 019 46 623Northern Cape 5 000 2 600 3 972 2 442 5 857 - 19 872North West 944 11 186 11 596 21 892 37 210 69 557 152 385Western Cape 7 190 13 182 21 378 29 493 27 362 41 789 140 393

Total 76 888 129 449 264 306 262 927 331 744 403 880 1 469 195

Monthly Expenditure trends per province

Province Oct - 06 Nov - 06 Dec - 06 Expenditure to date

Eastern Cape 77,731 81,192 102,340 611,421

Free State 32,246 43,860 75,108 271,519

Gauteng 58,767 59,539 17,949 314,871

Kwazulu-Natal 61,138 91,131 215,528 678,722

Limpopo 41,845 72,143 98,103 362,008

Mpumalanga 21,654 18,871 52,821 139,970

Northern Cape 5,106 12,463 11,988 49,429

North West 49,846 58,300 47,435 307,966

Western Cape 19,349 28,923 26,909 215,574

Total 367,682 466,423 648,181 2,951,481

PART C: MIG KPI REPORTMIG KPI REPORTSEPTEMBER 2006 SEPTEMBER 2006

Progress as end September 2006

Water supply is the most important basic service funded through MIG to poor communities in South Africa. Water services projects registered make up 47% of the total MIG value of registered residential projects at dplg. 

The next two biggest funding categories on MIG were sanitation (26%) and roads (22%) . 

WaterSanitationRoadsStormwaterStreet / Community LightingSolid Waste Removal26%

22%

2% 1%2%

47%

Progress as end September 2006

Since the start of MIG, R26 093.28 million (The total value of all the MIG projects, including the multi-year projects, registered on the dplg database) has been allocated to the B, P and E funding.

The bulk of the funding for registered projects in the programme is funded from MIG and is 81.26% of the total source of funding to date.

The contribution from the public (e.g. municipality’s own funds) and private sectors are 17.44% and 1.30% respectively since the inception of MIG.

Million % B (basic residential infrastructure) R23,461.21 98.91 P (public municipal service infrastructures) R2,550.64 9.78 E (social institutions and micro-enterprises infrastructures) R81.43

0,31

Total R26,093.28 100,00

Progress as end September 2006Up to the end of September 2006, 20 287 959 person days employment opportunities have been created through MIG projects. The employment opportunities for women (including female youth and disabled persons) in person days expressed, as a percentage was 35% of the total employment opportunities. The employment of youth was 36% of the total employment opportunities.

Employment on MIG Projects

20.91%

42.75%

13.31%

22.22%0.31% 0.51%

Women Men Youth (Female) Youth (Male) Disabled (Female) Disabled (Male)

Progress as end September 2006

Although many MIG projects are labour intensive not all are necessary EPWP projects. The dplg only recently started to register labour intensive projects that adhere to the EPWP guidelines.  Up to the end of September 2006 there were 464 registered MIG projects captured as EPWP projects with a total MIG value of R2 768.22 million  At the end of September 2006 the total number of Small Medium and Macro Enterprises is 1 362 and 656 Black Economic Empowerment companies was involved on implemented MIG projects by the municipalities.

Project Status of all (B-,P-& E

Components) projects Up to June 06 Up to September 06 Pre-Implementation 740 778 Design / Tender 761 745 Construction 2,472 2,504 Completed 1,831 2,168 Total 5,804 6,195

Progress as end September 2006

As at September 2006, 3,247,403 households have been serviced on completed MIG projects since the inception of MIG in April 2004.

Households serviced on Completed Projects Up to June 2006

June-September

Up to September

2007

Water 495,561 273,546 769,107 Sanitation 243,187 57,607 300,794 Roads 390,931 121,079 512,009 Multi purposes community halls 71,432 93,014 164,445 Multi purposes sport centre / fields 156,537 41,608 198,144

Parks and open spaces 439 0 439

Municipal Infrastructure Municipal Infrastructure Grant: CommitmentsGrant: Commitments

Commitments as at 31 January 2007Municipal Infrastructure Grant

National Financial Year

Eastern Cape 99% 82% 64%Free State 92% 74% 34%Gauteng 99% 44% 11%KwaZulu Natal 95% 91% 56%Limpopo 100% 90% 25%Mpumalanga 98% 60% 29%Northern Cape 98% 85% 65%North West 100% 90% 47%Western Cape 100% 93% 55%National 98% 78% 42%

Province 2006/07 (R'000)

2007/08 (R'000)

2008/09 (R'000)

Part D: INTERVENTIONS AND CHALLENGES

Actions taken to enforce compliance in terms of the Division of Revenue Act (DoRA) Act No 2 of 2006

• During 2005/06 dplg withheld funds to municipalities once in November 2005

• All MIG funds for 2005/06 were transferred to municipalities by end March 2006

• Office of AG raised concern for dplg to transfer all the funds with expenditure not satisfactory

• AG raised that dplg should have proposed to NT for funds to be stopped for re-allocation

• For 2006/07 most municipalities still under performing despite interventions by dplg and Sector Departments

• dplg implemented section 18(1) of DoRA during July, August, September, October, November and December 2006

Actions taken to enforce compliance in terms of the Division of Revenue Act (DoRA) Act No 2 of 2006

• dplg requested approval for the implementation of section 18(5) of DoRA (delaying funds for more than 30 but less than 120 days) from National Treasury.

• Due to persistent under-spending by municipalities, dplg has requested National Treasury to implement Sections 19 and 20 (stopping and re-allocations of allocation to municipalities)

• Some municipalities are experiencing financial difficulties due to overspending (e.g. Bela Bela, King Sabatha, Kgetleng Rivier and etc.) while others are under-spending substantially

• Once funds are stopped, they should be re-allocated to other municipalities.

• This process will be finalised by February 2007

TOTAL NUMBER OF MUNICIPALITIES IDENTIFIED FOR RE-ALLOCATIONS

PROVINCES NR OF MUNICIPALITIES

Eastern Cape 20

Free State 5

Gauteng 3

Kwazulu-Natal 31

Limpopo 12

Mpumalanga 12

Northern Cape 9

North West 10

Western Cape 3

Total 106

BENEFICIARIES MUNICIPALITIES FOR RE-ALLOCATIONS

The following municipalities will benefit from the re-allocation process:

- Municipalities that still have the highest number of bucket sanitation backlogs to meet the Dec 2007 target.- The best spenders with regard to the MIG programme

municipalities that have spent 70% or more as at 31 December 2006.- The 9 pilot municipalities from each province for immediate service delivery.-Cross boundary municipalitiesAll the funds to be re-allocated are ring-fenced for water and sanitation to help meet the target.

Other Interventions• The Municipal Infrastructure Unit has dedicated teams for each Province,

which consist out of at least 1 person from each directorate.• These teams monitor the project consolidate municipalities closely and

provide hands on support to these municipalities as and when needed• High risk municipalities iro project implementation are also closely

monitored by by the teams and interventions are done when needed • These teams interact with the Provincial MIG Unit on a daily basis and

attend monthly meetings with the Provincial MIG Unit, PMU’s of all receiving municipalities and sector departments.

• Action Plans are developed to deal with specific challenges within the province.

• Working sessions are being held with specific municipalities to address difficulties they are experiencing

• Provincial workshops are being held in all the provinces with municipalities to share the experiences and possible solutions for the challenges

GENERAL CHALLENGES FACING MUNICIPALITIES

• Planning in the context of Integrated Development Planning.

• Intergovernmental cooperation (Municipalities, provinces, and sector departments involvement in MIG implementation)

• Overlapping of financial years (National and Municipal)• Lack of capacity to manage MIG projects (Project

Management Units)• Supply chain management• Some municipalities complain about project registration• Technical reports and Environmental Impact Assessment

Recommendations

• Finance select committee notes the status of expenditure of municipal finances for the 2005/06 and 2006/07 financial years regarding Municipal Infrastructure Grant

• Finance select committee notes the progress made and the proposed interventions to be taken in helping municipalities with the MIG implementation.

• To note that the process to apply DORA measures for withholding of funds have been implemented and stopping and re-allocation of funds have been considered in order to correct under-expenditure.

THANK YOU