1. Presentation to the Select Committee on Finance 26 FEBRUARY 2006

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

3. PART A: 2005/06 FINANCIAL REPORT

4. 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

5. 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 Cape1 063 817 100.001063 70399.99 113 Free State 434 913 100.00431 17299.14 3 741 Gauteng 841 414 100.00841 414100.00 0 KwaZulu Natal1 116 278 100.001113 24399.73 3 035 Limpopo 727 769 100.00721 03399.07 6 736 Mpumalanga 360 506 100.00352 97497.91 7 532 Northern Cape 172 184 100.00167 35997.20 4 824 North West 422 254 100.00422 252100.00 2 Western Cape 297 027 100.00297 027100.00 0 Total5 436 161 100.005 410 17799.52 25 984

6. List of Municipalities still spending 2005/06 funds per province

7. EASTERN 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) Cacadu DM25 796 100.00 25 68299.56113 Totals 25 796 100.00 25 68299.56113

8. FREE STATE Municipality Allocatio n (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 13 347 100 11 10083.17 2 247 Lejweleputswa DM 14 162 100 13 90698.19 257 Matjhabeng 74 266 100 73 07198.39 1 196 Thabo Mofutsanyana DM 13 828 100 13 78799.71 41 Total115,604 100 111 86496.76 3 740

9. KWAZULU-NATAL Municipality Allocatio n (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) Mkhambathini2 141 100.00 1 08850.831 053 Maphumulo4 274 100.00 3 32577.79 949 KwaDukuza9 124 100.00 8 31991.17 805 Nkandla4 909 100.00 4 68195.36 228 Total20 448 100.00 17 41385.163,035

10. 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 DM94 922 100.0088 29693.026 625 Waterberg DM51 902 100.0051 79299.79 110 Total146 82494 922154.68140 08895.416 736

11. MPUMALANGA 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) Gert Sibande DM50 208 100.0043,79787.236 411 Ehlanzeni DM37 231 100.0036,11296.991 119 Total87 439 100.0079,90991.397 530

12. NORTHERN CAPE Municipality Allocatio n (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) Siyancuma6 532 100.004 90975.161 623 Frances Baard DM11 700 100.009 15278.222 549 Tsantsabane7 473 100.006 82091.26 653 Total26 043 100.0021 21981.484 824

13. PART B: 2006/07 FINANCIAL REPORT

14. 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 1 st quarter, R998,6 million in the 2 nd quarter and R1,4 billion in the 3 rd 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.

15. 2006/07 QUARTERLY FINANCIAL REPORT

17. Monthly comparative analysis of Actual Transfers against Actual expenditure

19. Monthly Expenditure trends per province

20. ProvinceOct - 06Nov - 06Dec - 06 Expenditure to date Eastern Cape77,73181,192102,340611,421 Free State32,24643,86075,108271,519 Gauteng58,76759,53917,949314,871 Kwazulu-Natal61,13891,131215,528678,722 Limpopo41,84572,14398,103362,008 Mpumalanga21,65418,87152,821139,970 Northern Cape5,10612,46311,98849,429 North West49,84658,30047,435307,966 Western Cape19,34928,92326,909215,574 Total367,682466,423648,1812,951,481

21. MIG KPI REPORT SEPTEMBER 2006 PART C: MIG KPI REPORT SEPTEMBER 2006

22. 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%).

23. 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.

24. Progress as end September 2006 Up 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.

25. 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.

26. 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.

27. Municipal Infrastructure Grant: Commitments

28. Commitments as at 31 January 2007

29. Part D: INTERVENTIONS AND CHALLENGES

30. 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

31. 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

32. TOTAL NUMBER OF MUNICIPALITIES IDENTIFIED FOR RE-ALLOCATIONS PROVINCESNR 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

33. 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 municipalities All the funds to be re-allocated are ring-fenced for water and sanitation to help meet the target.

34. 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

35. 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

36. 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.

37. THANK YOU