Stopping of Municipal Infrastructure Grant for OR Tambo DM Presenter: National Treasury | June 2017

Table of Contents Introduction Background What happened Reasons for stopping Interaction with OR Tambo Historical performance of OR Tambo 7) Way forward 8) Recommendation 9) Closing

Introduction MIG is a conditional grant and recognition of performance is linked to the implementation plans on registered projects The presentation seeks to update and inform the Committee on the amount of R90 million stopped from OR Tambo DM for MIG The decision to stop the portion of MIG was informed by a recommendation by CoGTA following monitoring process undertaken by the department Stopping and reallocation is a DoRA requirement which intends assisting fast spending municipalities and alleviate pressures against slow spending ones Municipalities that improve are assisted in future to ensure backlogs eradication indefinitely An amount of R509 million remains as MIG allocation for OR Tambo DM

Background Stopping and reallocation is a DoRA requirement done in terms of section 19 and 20 It requires consultations between the Transferring Officer and the municipalities National Treasury considers stopping the allocation on a recommendation or in its discretion A threshold of 40 per cent has been agreed to between CoGTA and NT This follows a lengthy in year monitoring of municipal readiness (implementation plan) and current spend Usually stopping is done subsequent to withholding of the transfers This was undertaken in the case of OR Tambo due to Slow spending or non reporting Non-responsiveness Non submission of supporting docs Hence the second transfer of OR Tambo was released on 22 December

What happened? National Treasury received a letter from COGTA dated 01 Feb 2017 requesting NT to stop the portion of their MIG allocation against underperforming municipalities including OR Tambo A recommendation to stop R90 million of OR Tambo was based on Poor monthly reporting, late appointment, spend less than 40% of transferred allocations, lack of commitment and poor performance NT wrote to all the affected municipalities affording them an opportunity to make a written representation (about 117 munics in total) OR Tambo responded to a letter from Treasury with the following Their MIG exp was 46 percent instead There was a misunderstanding between parties (CoGTA) OR Tambo met with CoGTA to resolve misunderstanding of reports esp on non-registered projects That slow spending was caused by later transfer of second tranche NT assessed the letter and supporting docs from OR Tambo Provincial CoGTA also supported OR Tambo through a letter dated 22 Feb NT assessed the letter and supporting docs from OR Tambo and found ….

Reasons for stopping OR Tambo still submitted unregistered projects in their motivation Some contracts were still be appointed in February i.e VIP (5233 units) Expenditure numbers reported through section 71 differ with CoGTA 2017/18 projects to the tune of R40 million would be moved to 2016/17 Projects that worth R150 million were still on feasibility and design stage

Interaction with OR Tambo National Treasury has been engaging on regular basis with the CFO of OR Tambo Exchanging reports and reasons for stopping the MIG OR Tambo also wrote on a number of occasions to NT motivating against stopping especially responding to the concerns raised Almost on weekly basis NT would communicate with OR Tambo through the office of the CFO NT’s concern was the low reported expenditure against the 46 percent report The subsequent reports suggested that OR Tambo was still below 40 per cent… the current spending is sitting at 59 per cent as per CoGTA

Historical performance of MIG

Way Forward The stopping of R90 million cannot be reversed because the year has ended Concerted effort be done by all stakeholders to support OR Tambo against the remaining allocation OR Tambo should avail themselves for site inspection/verification of expenditure An improved performance on the MIG 2017/18 would qualify OR Tambo for an additional MIG through the stopping and reallocation process

Recommendation Note that OR Tambo be assisted in the new year following verification on MIG performance Government to improve on its process for stopping and reallocation and improve on consultation