1. Presentation of the Property Rates Debt to the Port Folio Committee on Cooperative Governance & Traditional Affairs 25 October 2011 Presented by: Cathy Motsisi Chief Financial Officer

2. Introduction The purpose of this presentation is to: –Present the background on the devolution of Property Rates and challenges experienced in resolving the debts. –share with the Port Folio committee the initiatives put in place by DPW in collaboration with other departments to clear the Property Rates debt. 2

3. 3 Background - Devolution of Property Rates Grant The devolution of property rate funds was implemented on the 1 st April 2008 to ensure that Provinces take over the responsibility of paying property rates on properties that were administered by National Government on their behalf. This devolution was done after a consultative process with provinces through workshops and provincial visits to determine the state of readiness of the provincial departments. The main strategic goal of the devolution was to enable Provincial Accounting Officers to be fully responsible and accountable for the management of all aspects of property portfolio deemed Provincial.

4. 4 Responsibilities of the National Department The national Department of Public Works oversees the transfer of the function, provide support and training as needed to the Provincial Departments of Public Works Monitor the performance of the grant and payment of property rates to Municipalities Transfer payments to Provincial Departments of Public Works Work closely with the Department of Rural Development and Land Reform in vesting of relevant properties in the Provinces' name Submit quarterly performance reports to National Treasury Facilitate the requests for additional funding through the MTEF.

5. Challenges & Interim Solution Municipalitie s Delays in municipalities to generate invoices/ property rates schedules Municipalities with inefficient billing system Incorrect billing (Mixing water, electricity and rates) poor payment schedules No valuation rolls Delay in issuing invoices on properties affected by Municipal Demarcation of boundaries Invoices sent to wrong offices Municipalities billing DPW for properties which are not registered either in National or Provincial competency DPW Provinces have already adopted support strategies to assist low capacity municipalities. These initiatives includes assisting the municipalities to : –generate invoices –To obtain correct addresses for delivering invoices –Verify properties –Discuss the debt situation at Debt Management Forums in the Provinces.

6. Initiatives to Reduce the Debts A Task Team on Government debt owed to Municipalities was established on the 3 rd June 2011 with a key mandated of reducing the government debt. The team comprises of the Department of Public Works, Cooperative Governance, Performance Monitoring and Evaluation in the Presidency and National Treasury. An action plan which was based on a hands on approach was developed and piloted in two Municipalities; Ethekwini Metro in KZN and Port St Johns Municipality in Mthatha. Ethekwini Municipality The meeting took place on the 6 th and 7 th October 2011 between the Municipality, CoGTA, the KZN Provincial Department and Public Works. According to Ethekwini Municipality Government owes is R614 153 545. The debts includes other accounts which are not the responsibility of Public Works. A thorough verification process is underway establish the exact debts. Action plan is hereby attached for reference...\Reduction of the Government Debt to Municipalities\Ethekwini Municipality Action Plan on Govt debt 12102011.xlsx 6

7. Initiatives to Reduce the Debts cont. Port St John Municipality The meeting took place on the 12 th & 13 th September 2011 between Cogta, Municipality Eastern Cape Provincial and National Public Work. The Municipal claimed that National Public Works owes R2,7 million. From 2010/11 to current, DPW paid an amount of R3,557 million and proof of payments were submitted to the Municipality to reconcile and update the Billing System and a follow up meeting will be held in November. The Municipality claimed that Provincial Public Works owes R3,4 million however, after proof of payments were submitted it was realised that the Province had paid an amount of R1,279 million for the current financial year. An amount of R2 132 580.98 is the amount outstanding prior to Devolution of Property Rates which took place on the 1 st April 2008. The Municipality and National Public Works are in a process of conducting inspections, verifying ownership and reconcile the accounts...\Reduction of the Government Debt to Municipalities\ACTION PLAN PORT ST JOHNS MUNICIPALITY 190920011.docx..\Reduction of the Government Debt to Municipalities\ACTION PLAN PORT ST JOHNS MUNICIPALITY 190920011.docx 7

8. Initiatives to Reduce the Debts cont. Around February this year, NT requested all Municipalities to submit schedules of outstanding debts on Property Rates. The project was aimed at clearing all debts prior to 1 st April 2008. The consolidation of the schedules and supporting documents was concluded in September. DPW and NT has already met to discuss the way forward with regards to the validation of evidence submitted. DPW has commenced with the capacitation of the unit responsible for monitoring the grants to enable swift validation of the claims. The project is expected to be finalised by March 2012. 8

9. Property Rates Debts prior 1 st April 2008 Province Amount R’000 Eastern Cape24 150 490 Free State213 697 780 Gauteng12 190 760 Kwa-Zulu Natal100 436 943 Limpopo24 126 238 Mpumalanga7 010 370 North West7 781 702 Northern Cape8 295 586 Western Cape46 223 854 Total Outstanding443 913 723 9

10. Conclusion The debt reported by municipalities is indeed taken seriously by the department and to this end robust engagements with municipalities have already commenced. A meeting with the CFO’s of the Public Work departments is scheduled to take during the second week of November. The purpose of this meeting is to enhance the current collaborative effort of clearing the debts and promoting progress reporting on a monthly basis. 10

11. I Thank You! 11