ANNUAL REPORT: MUNICIPAL DEMARCATION BOARD PORTFOLIO COMMITTEE ON PROVINCIAL AND LOCAL GOVERNMENT 30 August 2005

REPRESENTATION AND DOCUMENTS From the Board: Dr V Mlokoti – Chairperson: Municipal Demarcation Board; Mr R M Somanje – Chief Financial Officer. Mr R H Monare – Manager: Municipal Demarcation Board; (Chief Executive & Accounting Officer) Documents Tabled: Annual Report 2004 – 2005 Strategic Plan 2005 - 2008

OVERVIEW The Board. Receipts for the Year 2004/05. Expenditure 2004/05. Performance against pre-determined objectives. Report of the Auditor-General. Outputs and Developments 2004/05. Ward Delimitation Municipal Capacity Assessments Analysis of the Municipal Roads and Public Transport Functions Metro Study Information on Consultants 2004/05. Strategic Direction – Medium Term Strategy 2005/06 – 2008/09. Approved Budget 2005/06. Draft Budgets 2006/07 – 2008/09. Conclusion.

THE BOARD 9 Members since 1 February 2004; Chairperson the only full time member of the Board; Manager (CEO and Accounting Officer) in charge of the Board’s Administrative Arm; 4 Operational Clusters; 26 Staff Positions in the Establishment: 4 Vacant; 85,7% Black; 38% Female; 4,7% Disabled.

RECEIPTS FOR THE YEAR 2004/05 Original MTEF Allocation 16,023,000 Additional MTEF Allocations during the Year First Additional Allocation Second Additional Allocation 1,000,000 5,500,000 Total MTEF for the Year 22,523,000 Add: Other Funding (Donor Funding) 3,970,201 Other Income (Interest & Sales) 200,528 TOTAL INCOME AT OUR DISPOSAL 26,693,729

EXPENDITURE – SELECTED ITEMS 2004/2005 Per Standard Item Expenditure Proportion of Total Funding General & Administrative Expenses 6,284,000 23.5% Board Members’ Emoluments 2,327,000 8.72% Audit Fees 477,000 1.79% Travel and Subsistence 1,893,000 7.09% Rental of Office Space 1,031,000 3.86% Staff Salaries 5,193,000 19.45% Staff Training and Development 72,000 0.27% Professional Fees GIS Support Ward Delimitation Municipal Capacity Assessments Study on Metros Study on Municipal Roads and Public Transport 6,071,000 22.74% Legal Fees 205,000 0.77%

EXPENDITURE 2004/05 Total expenditure amounted to R28,288,000. Net Deficit of R1,594 million at 31 March 2005 (5.97% of the budget). Primary reason for the deficit is logistical support for the ward delimitation process, which could not be compromised. During the year 2004/2005, the Board with the support of DPLG prepared and submitted a cabinet memo to request the Treasury Committee to approve an additional amount of R15 670 000 for the 2004/2005 financial year, for the delimitation of wards. However Treasury Committee only approved an additional R5,5 million. Therefore despite the fact that the Board’s budget was re-prioritised, there was expenditure that could not be compromised.

PERFORMANCE AGAINST PRE-DETERMINED OBJECTIVES The following identified as key objectives for the year 2004/2005: To manage and facilitate the determination and re-determination of municipal boundaries in accordance with relevant legal provisions; To manage and facilitate the delimitation of each municipality that qualifies to have wards, into wards; To collect relevant information and to maintain and update datasets to render advisory services on capacity and the division of powers and functions; To maintain and strengthen interaction with key stakeholders; To develop, strengthen and maintain the Board’s administrative and financial functions.

PERFORMANCE AGAINST PRE-DETERMINED OBJECTIVES Significant progress and achievements made with regard to the objectives. However challenges remained with respect to: Reconciliation of historical assets figures in the general ledger and in the assets register; The Board as a going concern. Important to note that: Our assets management system is in place. We have an assets register that fully identifies all the assets that belong to the Board; There are therefore no implications that there is mismanagement of assets at the Board.

REPORT OF THE AUDITOR-GENERAL A qualified Audit Report for 2004/2005, as a result of non-reconciliation of historical assets figure in the general ledger with the figure in the assets register; Emphasis of matter, as a result of the fact that the Board incurred a deficit of R1,944 million for the 2004/2005 financial year, R1,416 million for the 2003/2004 financial year, and R4,356 million for the 2002/2003 financial year. Since the Audit, decisive steps have been taken to ensure that there is proper reconciliation between the assets figure in the general ledger and the figure in the assets register.

OUTPUTS AND DEVELOPMENTS 2004/05 Outputs during the year in the following areas of work: Ward Delimitation; Municipal Capacity Assessments; Analysis of the Municipal Roads and Public Transport Functions; Study of current metropolitan municipalities and implication for future categorisation of additional Category A municipalities Activity on Municipal Boundary Re-determinations was minimal, as priority was given to ward delimitation.

WARD DELIMITATION Ward delimitation was done in terms of Local Government Municipal Structures Act, 1998 Wards were being delimited for local and metropolitan municipalities (Municipalities with less that 7 councillors do not have wards) 3754 wards in 2000 elections, 3878 wards for 2005/6 elections Formal handover of wards to IEC on 20 May 2005. However certain developments in 2005/2006 have resulted in a need to review wards for: Buffalo City Local Municipality; Nkonkobe Local Municipality; Matatiele Local Municipality; Umzimbuvu Local Municipality.

WARDS: OPEN QUESTIONS Should VDs again be used as building blocks in future local elections? Is the existing legal framework enhancing transformation and stabilisation of municipalities? (Spatial re-configuration every 5 years) Should the number of councillors/wards not be fixed – in line with Parliament and Provincial legislatures? (at least strict criteria to change number of councillors/wards only in exceptional circumstances) How can democracy and development be balanced? (using wards for planning) Do we need a review of the criteria for ward delimitation? (a number game, disregarding planning and service delivery needs, some criteria should be applied to electoral process etc) Should the review of ward boundaries not be a continuous process to satisfy local needs for service delivery and development? (perhaps a similar process as for outer boundaries) How can changes to municipal boundaries be synchronised with changes to ward boundaries? ( now a stop and go process, wards only every five years) Changes to the system would required timeous changes to the legal framework!

MUNICIPAL CAPACITY ASSESSMENTS For the 2004 capacity assessments, timeframes, the process was commenced earlier to ensure that the results can be available to municipalities for their IDP process. Recommendations on the adjustment of powers and functions between local and district municipalities were made to the MEC’s for Local Government in December 2004.

Capacity Assessments: Projects for 2004/2005 Activity Expected Output Timeframe Drafting of Provincial Local Government Capacity Reports A report per province which examines: The provincial changes in overall local government capacity between 2002 -2004. An indication of the provincial trends and variations in the performance of powers and functions January/early February 2005 Drafting of National Local Government Capacity Report A national report: Indicating the national shifts in municipal capacity, provincial comparison, national trends. Assessment of the municipal boundaries in relation to the capacity February/early March 2005 Update of the Viability Report The viability report would be updated based on the data received in the August 2004 capacity assessment.

ANALYSIS OF THE MUNICIPAL ROADS AND PUBLIC TRANSPORT FUNCTIONS A national Report clarifying uncertainties around these functions. Report completed and discussed by the Board during 2005/2006.

METRO STUDY A comparative report on the performance of existing metros, international trends, and future scenarios; Report completed and discussed by the Board during 2005/2006

Information on Consultants 2004/05 Project Number of Consultants Used 2004/05 Profile of Consultants Used 2004/05 Ward Delimitation Process 14 12 Black Males 2 Black Females Municipal Capacity Assessments 46 27 Black Males 13 Black Females 2 White Females 4 White Males Study of the metropolitan Municipalities 01 1 Black Male Analysis of Municipal Roads and Public Transport Functions

STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2005/06 – 2008/09 Strategic Plan identifies a number of Key Board Objectives that the Board will pursue over the current MTEF period; Key Board Objectives aimed at directly ensuring that the Board fulfils its mandate; The Key Objectives firmly based on the mission and mandate of the Board; Other strategic objectives pertaining to organisational and resources management, will also be pursued. The Key Strategic Objectives, with Indicators and Timeframes, are outlined in our Strategic Plan document. Allocation of resources in terms of requirements per key board objective.

STRATEGIC DIRECTION – MEDIUM TERM STRATEGY 2005/06 – 2008/09 Organisational and resource management strategies include: Capital Investment Strategy; Management Strategy for Financial Assets and Liabilities; Strategy on the use of consultants; Human Resources Strategy; Information technology Resource Strategy

APPROVED BUDGET 2005/06 Total Receipts of R23,9 million, with additional R9,1 million allocated in the last part of the last financial year; Some R3,9 million has gone to gazettes for wards; Indications are that the allocation for 2005/06 will be adequate for our work in this financial year.

DRAFT BUDGETS 2006/07 – 2008/09 Draft Budgets indicate shortfalls of: R5,1 million for the year 2006/07. R5,9 million for the year 2007/08. R6.6 million for the year 2008/09. Reasons for the shortfalls are: The MTEF allocation of R16,827,000 for 2006/07 is a drop of 30% from the 2005/06 allocation; The MTEF allocation of R17,664,000 for 2007/08 is a drop of 26% from the 2005/06 allocation; The MTEF allocation of R18,547,200 for 2008/09 is a drop of 23% from the 2005/06 allocation; All three cuts are too severe, and will compromise the Board’s operations; Our proposal is that the 2005/06 be dropped by 7% for 2006/07, maintained for 2007/08, and increased by 7% for 2008/09; Our proposal takes into account the need to maintain our operations at the same level – we are not expanding – and to take into account annual inflation We will need a substantial increase for 2009/10 as a result of the next round of ward delimitation.

Conclusion The Board has had a successful year, in terms of outputs against pre-determined objectives. However there are still challenges with some administrative and financial issues; We have a strategic plan in place to guide our operations going forward; Indications are that the MTEF allocations for the current year 2005/06 will be adequate to cover our operations for the year; Our estimates indicate shortfalls for the years 2006/07; 2007/08 and 2008/09; We will need a substantial MTEF increase for 2009/10 to do ward delimitation.

Thank you