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MUNICIPAL AMALGAMATIONS AND SERVICE DELIVERY: THE CASE OF KAGISANO-MOLOPO LOCAL MUNICIPALITY AND MANGAUNG METROPOLITAN MUNICIPALITY . SEMINAR TITLE: The Impact of Municipal Amalgamations on Service Delivery 07 November 2019 2
THE PROBLEM 1. A key municipal boundary re-determination objective is the establishment of municipalities that will fulfil constitutional obligations including that of delivering services to communities. However, it is yet to be ascertained whether amalgamations have resulted in municipalities that fulfil this objective. 3
PURPOSE 1. To assess the impact of municipal amalgamations on the fulfilment of a constitutional obligation i.e. the delivery of basic services in two municipalities: Kagisano-Molopo Local Municipality in the North West Province and Mangaung Metropolitan Municipality in the Free State Province. 4
METHODOLOGY 1. The research employed a mixed-methods approach using both secondary quantitative data and interviews with key stakeholders (national and provincial COGTA officials, National Treasury officials, senior municipal officials such as municipal managers and other Section 57 managers). 2. Assessment framework on transitional matters from COGTA covering legal, finance, HR, technical, IDP, communication and institutional matters was utilized. 3. For service delivery, assessment was based on 4 indicators before and after the merger focusing on water, sanitation, electricity and refuse removal. 5
KAGISANO-MOLOPO KEY FINDINGS: TRANSITION 1. Legal matters: Incomplete integration of records on fruitless, irregular and wasteful expenditure from Molopo. Impact in terms of AG reports. Both municipalities had no by-laws and policies were consolidated. 2. Human resource matters: Job evaluation report for exercise carried out after the merger cannot be located. Salary disparities yet to be fully resolved. Both were Grade 2 municipalities although those from Molopo were generally earning higher salaries. 3. Institutional matters: No agreement on new name for municipality. No agreement on logo. Molopo had an acting municipal manager and no S56 managers. 4. Communications: Communication unit exists but no communication strategy has been crafted. 6
KAGISANO-MOLOPO FINDINGS: FINANCIAL 1. Both pre-merger municipalities were highly dependent on government transfers. 2. Equitable Share (ES) was R43 million in Kagisano and R26 million in Molopo in 2010. Kagisano-Molopo received R59 million in 2011 – a decrease. However, Equitable Share has continued to increase post-merger. 3. Decline in audit results before merger. Both pre-merger municipalities’ audits were not finalized by the legislated deadline in 2010. 4. Improvements in audit opinions in Kagisano-Molopo from 2014 until disclaimer in 2018. 5. Improvements in cash management after the merger. 7
PRE-MERGER KAGISANO AND MOLOPO: SERVICE DELIVERY 80% 70% 60% 50% 40% 30% 20% 10% 0% Flush toilet connected to Refuse removal Piped water inside dwelling Electricity for lighting sewerage Kagisano (2001) 2% 1% 5% 67% Kagisano (2007) 3% 1% 9% 75% Molopo (2001) 34% 3% 30% 49% Molopo (2007) 37% 3% 30% 60% 8
KAGISANO-MOLOPO: SERVICE DELIVERY (POST- MERGER) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Flush toilet connected to Refuse removal Piped water inside dwelling Electricity for lighting sewerage KM 2011 8% 1% 11% 74% KM 2016 5% 0% 4% 83% NW 2016 47% 55% 28% 86% 9
POST-MERGER KAGISANO-MOLOPO: BACKLOGS (2011 - 2016) 120% 100% 80% 60% 40% 20% 0% Piped water <= 200m Sanitation - VIP or better Electricity for lighting Refuse removal 2011 29% 46% 26% 99% 2016 41% 28% 14% 100% Note: Number of households declined from 28531 in 2011 to 28274 in 2016 10
MANGAUNG KEY FINDINGS: TRANSITION 1. Legal matters: 26 by-laws awaiting gazetting (and 10 outstanding). 2. Human resource matters : Seven employees from the former Naledi municipality (currently based at Naledi Administrative Unit) have not been successfully placed. 3. IDP: Gaps in the information received from Naledi in terms of the Spatial Development Framework (SDF), i.e. land use. 11
MANGAUNG/NALEDI: FINANCIAL INDICATORS 1. Increased expenditure after the merger accompanied by increase in government transfers. 2. Equitable share was R596 million in Mangaung and R39 million in Naledi in 2015/16. Mangaung received R630 million in 2016/17 after incorporating Naledi (a decrease). 3. Mangaung identified as financially distressed in 2018. 4. Liquidity ratio dropped from 0.97 in 2016 to 0.1 in 2019. Weak liquidity position prompted Moody’s downgrade from Ba3 to B3 in August 2019. 5. Revenue collections deteriorated after the merger trend of poor collection was well established before the merger. 6. Although the number of employees dropped after the merger, salaries continued to increase partly due to industrial action. 12
MANGAUNG AND NALEDI PRE-MERGER BACKLOGS (2011 – 2016) 60% 50% 40% 30% 20% 10% 0% Refuse removal by Piped water <= 200m Sanitation - VIP or better Electricity for lighting municipality Mangaung 2011 5% 20% 9% 19% Mangaung 2016 3% 21% 4% 16% Naledi 2011 3% 10% 6% 53% Naledi 2016 8% 12% 2% 42% Note: Number of households in Mangaung increased from 231,921 in 2011 to 255,938 in 2016 Number of households in Naledi increased from 7,690 in 2011 to 8,378 in 2016 13
MANGAUNG SERVICE DELIVERY: CONSUMER UNITS (PRE & POST MERGER) 250 000 200 000 150 000 100 000 50 000 0 Water Sanitation Electricity Refuse 2014 166 962 148 869 194 410 188 594 2015 171 050 176 460 197 243 189 155 2016 175 556 176 460 186 717 208 294 2017 185 788 185 321 217 711 217 711 2018 187 839 201 349 217 711 217 711 14
KEY FINDINGS 1. Unresolved transitional issues have continued to affect both Kagisano- Molopo and Mangaung. 2. Context is important - Service delivery deteriorated in Kagisano-Molopo after merger in some areas although evidence suggests benefits for erstwhile Naledi community after incorporation (higher expenditure per capita, service delivery extended). 3. After merger, Equitable Share was lower than combined allocations of pre-merger municipalities as it depends on a formula (i.e. it was not a simple addition of pre-merger allocations). 4. Mangaung continued to provide services even after incorporation of Naledi but has experienced problems with the pace with which it is addressing backlogs. 5. Mangaung’s revenue collections deteriorated after the merger but this trend of poor collection was well established before the merger. 15
RECOMMENDATIONS 1. Revisit legislation on demarcation objectives – MEC made it clear both Kagisano and Molopo did not have a tax base. (Zero plus zero). Motive focuses on section 25(d) of Municipal Demarcation Act “need to share financial and administrative resources”. 2. Explore possibility of District Management Area (DMA) designation for Kagisano-Molopo. Services are being provided by the district municipality (except for refuse removal). 3. Kagisano-Molopo appeared on the national minister’s list of non- viable municipalities in 2014 and new request was for DMA designation or amalgamation (merging two struggling municipalities had not worked). This raises broader issue on frequency of amalgamations in South Africa which has to be debated. 4. Better monitoring of transitional issues by provincial COGTA. 16
RECOMMENDATIONS (Cont…) 5. Assess benefits of incorporating largely rural municipalities or areas into metros (increased densification versus redistribution of resources given apartheid legacy) based on international trends and literature. 6. More comprehensive and rigorous analyses, particularly on financial issues and financial implications of service delivery backlogs before mergers. 7. Find alternative ways to address problems of municipalities that will not be solved by demarcation – e.g. high vacancy rates, councillors who cannot provide effective oversight, record keeping, service culture, effective revenue collection (free from political interference) the reckless use of funds and consequences for mismanagement . 17
CONCLUSION 1. The research is currently at its final stages and will be processed through internal MDB processes before it is made available to the public. QUESTIONS AND COMMENTS 18
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