SALGA 2014/15 Annual Report

SALGA ANNUAL REPORT 2014/15

The SALGA logo above is the organisation’s highest visual symbol. It diﬀerentiates SALGA from other local government associations around the world. The three golden spheres on the logo represent the three spheres of government, namely: national government, provincial government and local government.

SALGA logo comprises four different colours. Green - Fertility and growth Gold - Wisdom Burgundy - Success Cream - Peaceful thoughts

Published by SALGA PO Box 2094 Pretoria 0001 South Africa

Tel: +27 12 369 8000 Fax: +27 12 369 8001

www.salga.org.za

RP: 165/2015 ISBN: 978-0-621-43672-3 Title of Publication: SALGA Annual Report 2014/15 CONTENTS

Part A: General information 3 2.2. Highlights of performance per SALGA strategic 52 goal 1. List of abbreviations/acronyms 4 2.2.1. Goal 1: Local government delivering equitable 52 2. Foreword by the Chairperson 6 and sustainable services 3. Chief Executive Officer’s overview 8 2.2.2. Goal 2: Safe and healthy environment and 59 communities 4. Strategic overview 10 2.2.3. Goal 3: Planning and economic development 63 4.1. SALGA’s strategic plan 2012-2017 10 at a local level 4.2. Key policy and strategic frameworks impacting 11 2.2.4. Goal 4: Effective, responsive and accountable 68 on local government local government for communities 4.2.1. The Medium-Term Strategic Framework (MTSF) 11 2.2.5. Goal 5: Human capital development in local 80 4.2.2. The local government turnaround strategy 11 government (LGTAS) 2.2.6. Goal 6: Financially and organisationally 89 4.2.3. The millennium development goals (MDGs) 12 capacitated municipalities 4.2.4. The new growth path 12 2.2.7 Goal 7: Effective and efficient administration 93 4.2.5. The national development plan 12 4.2.6. Emerging issues and strategic realignment 13 4.3. SALGA membership and stakeholders 13 Part D: Human resource management 105 1. Introduction 106 4.3.1. SALGA members 13 1.1. Talent acquisition 106 4.3.2. Key stakeholders 13 1.2. Individual performance management 107 4.4. Vision 15 1.3. Labour relations compliance 108 4.5. Mission 15 1.4. Employee relations 109 4.6. Values 15 1.5. Skills development 110 5. Legislative and other mandates 15 1.6 Employee wellness programme 113 5.1. Legislative mandate 15 1.7 Employee recognition awards 113 5.2. SALGA mandate 17 1.8 Occupational health and safety 114 6. Organisational structure 18

Part E: Annual financial statements 115 Part B: Governance 21 1. Chief Financial Oﬃcer’s review 117 1. Introduction 22 2. Report of the Accounting Authority 129 2. SALGA governance framework 22 3. Report of the audit and risk committee 141 2.1 SALGA national executive committee (NEC) 23 4. report of the performance management and 147 2.2 SALGA provincial executive leadership 25 remuneration committee 2.3 Relationship between national and provincial 29 5. Report of the auditor-general to Parliament on 158 bodies SALGA 2.4 SALGA internal oversight structures 36 6. Accounting Authority’s responsibilities and 161 2.5 SALGA management 39 approval 5. Social responsibility 40 7. Annual ﬁnancial statements 163

Part C: Performance information 43 1. Introduction 44 2. Predetermined objectives 44 2.1. Highlights of performance per SALGA mandate 45 2.1.1. Lobby, advocate and represent role 45 2.1.2. Employer role 46 2.1.3. Capacity buidling role 46 2.1.4. Support and advisory role 47 2.1.5. Strategic proﬁling role 50 2.1.5. Knowledge and informanation-sharing role 50 PART A: GENERAL INFORMATION

3 1. LIST OF ABBREVIATIONS/ACRONYMS

AC Audit Committee EPWP Expanded Public Works Programme APP Annual Performance Plan ER Employee Recognition Ald Alderman ESTA Extension of Security of Land Tenure Act AGSA Auditor-General of South Africa EWP Employee Wellness Programme ASGISA Accelerated and Shared Growth Initiative of FBS Free Basic Service South Africa FFC Financial and Fiscal Commission AU African Union FS Free State BAAM Business-Adopt-A-Municipality GIS Geographic Information System BCEA Basic Conditions of Employment Act GIZ Gesellschaft für Internationale Zusammenarbeit CD Community Development GP Gauteng CDP Councillor Development Programme GRAP Generally Recognised Accounting Practice CEO Chief Executive Officer HDA Housing Development Agency CFO Chief Finance Officer HDF Human Development Framework CIP Councillor Induction Programme HOD Head of Department CLGF Commonwealth Local Government Conference HR Human Resources CLLR Councillor HRDCSA Human Resource Development Council of South CMRA Centre for Municipal Research and Advice Africa CoGTA Department of Cooperative Governance and HRM&D Human Resources Management and Traditional Affairs Development COO Chief Operations Officer ICAS Independent Counselling and Advisory Service CRDP Comprehensive Rural Development Programme ICT Information and Communication Technology CSIR Council for Scientific and Industrial Research ICLEI International Council for Local Environmental DACF District Assemblies Common Fund Initiatives CSR Corporate Strategy and Research IDP Integrated Development Plan DAFF Department of Agriculture, Forestry and Fisheries IGR Intergovernmental Relations DBSA Development Bank of Southern Africa IMATU Independent Municipal and Allied Trade Union DCoG Department of Cooperative Governance IMFO Institute of Municipal Finance Officers DEA Department of Environmental Affairs IOM International Organization for Migration DHS District Health System IGR Intergovernmental Relations DM District Municipality ILO International Labour Organisation DoE Department of Energy IPAP Industrial Policy Action Plan DoJ Department of Justice IRM Integrated Risk Management DPME Department of Planning, Monitoring and ISDF Integrated Service Delivery Framework Evaluation IUDG Integrated Urban Development Grant DPSA Disabled People South Africa KPI Key Performance Indicator DRDLR Department of Rural Development and Land KZN KwaZulu-Natal Reform LAN Local Area Network DRM Disaster Risk Management LED Local Economic Development DSD Department of Social Development LG Local Government DST Department of Science and Technology LGA Local Government Association of England and EC Eastern Cape Wales ECD Early Childhood Development LGCCC Local Government Climate Change Champions ED Executive Director LGES Local Government Equitable Share EDI Electricity Distribution Industry LGFF Local Government Fiscal Framework EDP Economic Development Planning LGHR Local Government Human Resources EESDCF Employment Equity Skills Development LGICT Local Government Information Communication Consultative Forum Technology EIUG Intensive User Group of Southern Africa LGS Local Government Support EMS Emergency Medical Services LGSETA Local Government Sector Education Authority LGSTT Local Government Support Task Team PEO Provincial Executive Officer LGTAS Local Government Turnaround Strategy PFMA Public Finance Management Act LODLOG Local Democracy and Local Governance PHDA Priority Housing Development Areas LP Limpopo PMA Provincial Members Assembly LR Labour Relations PMS Performance Management System LRA Labour Relations Act PRZ Provisional Restructuring Zones MASP Municipal Audit Support Programme RM Risk Management MBI Municipal Benchmarking Initiative PHC Primary Healthcare M&E Monitoring and Evaluation SADC Southern African Development Community MDB Municipal Demarcation Board SALGA South African Local Government Association MDG Millennium Development Goals SALGBC South African Local Government Bargaining MFMA Municipal Finance Management Act Council MHS Municipal Health Services SAMHS South African Military Health Service MHSCG Municipal Human Settlements Capacity Grant SANBS South African National Blood Service MID Municipal Institutional Development SANEDI South African National Energy Development Institute MINMEC Ministers and Members of Executive Council Meeting SANRAL South African National Roads Agency Limited MIS Municipal Infrastructure Services SASCOC South African Sports Confederation and Olympic Committee MMC Member of the Mayoral Committee SCLG SALGA Centre for Leadership and Governance MoU Memorandum of Understanding SCM Supply Chain Management MP Mpumalanga SCOA Standard Charts of Accounts MPAC Municipal Public Accounts Committee SDA Service Delivery Agreement MSA Municipal Systems Act SDF Spatial Development Framework MTEF Medium-Term Expenditure Framework SERI Social Economic Rights Institute of South Africa MTSF Medium-Term Strategic Framework SIP Strategic Infrastructure Project MYPD Multi-year Price Determination SMME Small, Medium, Micro-sized Enterprise NC Northern Cape SPLUMA Spatial Planning and Land Use Management Act NCOP National Council of Provinces SWC SALGA Women Commission NDA National Development Agency SWPN Strategic Water Partnership Network NDP National Development Plan ToR Terms of Reference NEC National Executive Committee UCLG United Cities and Local Government NEDLAC National Economic Development and Labour Council UCLGA United Cities and Local Governments of Africa NEPAD New Partnership for Africa’s Development UK United Kingdom NERSA National Energy Regulator of South Africa UNEP United Nations Environment Programme NGP National Growth Plan UNISA University of South Africa NHI National Health Insurance USDG Urban Settlement Development Grant NMA National Members Assembly VVSG The Association of Flemish Cities and Municipalities NOB National Office Bearers WC Western Cape NSDP National Spatial Development Perspective WC/WDM Water Conservation / Water Demand NW North West Management NWG North West Government WG Working Group NWG National Working Group WILGS Women in Local Government Summit OHS Occupational Health and Safety WIPLGS Women in Provincial Local Government Summit OLG Organised Local Government WSA Water Services Authority PA Personal Assistant WSP Water Services Provider PDP Professional Development Programme PEC Provincial Executive Committee 2. FOREWORD BY THE CHAIRPERSON

It is with a great sense of honour and privilege that I present SALGA’s 2014/2015 annual report. The report provides an opportunity for reﬂection on the organisation’s contribution to the performance of the local government sector. SALGA endeavours at all times to create an enabling and conducive environment for municipalities to execute their developmental mandate to the communities that they serve. This annual report also provides a synopsis of activities performed by the organisation between April 2014 and March 2015 whilst providing context to the governance of SALGA in relation to its role and mandate.

The period under review cuts across two prominent milestones in the era of our democracy with the country having celebrated twenty years of democracy in 2014 Cllr. Thabo Manyoni and 2015 marking fifteen years of developmental and democratic local government. Chairperson of the NEC These significant milestones compel us as organised local government to critically reflect on the strides made by the sector in its efforts to deliver equitable and sustainable services to citizens while acknowledging the challenges that undermine the integrity of local government.

To this end, one of the key priorities for SALGA in the period 2014/15 was to inﬂuence the legislative and policy review process for local government by lobbying against policies and legislation that have an undesirable impact on local government. We made several legislative and policy proposals this year which will contribute to a functional local government. Some of the submissions relate to the upper limits of salaries for senior managers, the devolution strategy for local government, the amendment of the Public Oﬃce Bearers Act, the draft monitoring, support and interventions framework, property rates bill and legislation relating to cable theft, to mention just a few.

I am pleased to say that the deployment of part-time representatives to the National Council of Provinces (NCOP) contributed immensely in improving SALGA’s visibility in the NCOP, it also provided the necessary impetus in providing consistency in relation to advocating and lobbying for the interests of local government.

Accountability within local government is a key success driver in the adherence to the principles of good governance. SALGA has invested substantial effort in elevating the discourse around corruption in local government. In our view these investments are starting to yield positive dividends. As a key outcome of the Anti-Corruption Summit the organisation developed a consequences and accountability framework for the sector, while municipalities were also assisted and encouraged to implement their own tailored anti-corruption policies. These efforts were jointly addressed with key stakeholders in the sector namely Ethics SA, the Department of Cooperative Governance and Traditional Affairs, Gauteng Provincial Government, National Prosecuting Authority, Public Service Commission, Public Protector and GIZ.

SALGA has always been at the fore front of building a functional local government that is responsive to the growing needs of its communities. This cannot be achieved without growing the leadership quotient in municipalities particularly with those who need to play their oversight role in councils. The establishment of the SALGA Centre for Leadership and Governance (SCLG) is a ground-breaking initiative which we believe provide a platform for futuristic thinking through thought leadership development engagements. The establishment of the SCLG unequivocally demonstrates SALGA’s commitment to promote eﬀective leadership as the driving force in achieving the goals of a transformed and developmental local government.

The leadership of SALGA has never been comfortable with the notion of poor ﬁnancial management in local government. We have monitored the Auditor General’s MFMA outcomes report with keen interest with the objective of improving the narrative around accountability in the sector. We took a bold step in June 2014 to launch the Municipal Audit Support Programme (MASP) to provide hands-on support to municipalities who received adverse or disclaimed audit opinions. The MASP Programme is executed through a delivery model based on benchmarking and peer review.

6 Many of our municipalities face the growing risk of ﬁnancial and organisational viability and this informs SALGA’s persistence in advocating for a fundamental overhaul in relation to the ﬁscal framework for local government. Financially sustainable municipalities are the cornerstone of a functional local government system. One of the key highlights that deserves particular mention is SALGA’s successful lobbying for a transitional grant at the 2014 Budget Forum. This grant is to subsidize additional and administrative costs that emerge as a result of boundary changes following an election, and will immediately assist those municipalities undergoing restructuring in 2016. SALGA also took part in a process of reviewing ways of maximising the resources through reforms to capital grants to municipalities.

SALGA has done well in building recognition and brand equity for the local government sector in South Africa through its work in the international arena, which has seen SALGA’s commitments across borders grow in leaps and bounds. SALGA has continued to provide sister associations within the region and the continent direct support and advice in areas relating to governance and eﬀective lobbying and advocacy strategies. We have also played an active leadership role in the structures of world bodies such as the UCLG and the CLGF, as well as the UCLGA within the continent. The City of Joburg (COJ) will host the next Africities Summit in November 2015 and SALGA has played a central role in supporting COJ to secure the bid to host this prestigious summit which was launched in October 2014.

The Local Government Association of England and Wales requested SALGA to participate in a peer review of local government in England which we deemed a signiﬁcant opportunity. Participating in a peer review with a respected international organisation was indeed gratifying and an indication that SALGA is a strong force in the international arena of organised local government. In conclusion, it is important for me to mention that SALGA has once again received a clean audit from the Auditor General of South Africa, the third one consecutively. This achievement demonstrates SALGA’s commitment to lead from the front in promoting the practices of accountability and a local government which is responsive. I wish to convey to the CEO and the Executive Management Team of SALGA my heartfelt thanks for the energy they put into running a clean administration which is exemplary to its members. It is our ﬁrm belief that the sum total of these investments will over time contribute to a high performing local government sector that we can all be proud of.

Cllr Thabo Manyoni SALGA Chairperson 31 July 2015

7 3. CHIEF EXECUTIVE OFFICER’S OVERVIEW

SALGA has achieved notable successes in 2014/15. The organisation made good progress in implementing its strategy, thereby laying a strong foundation in delivering on the strategic goals of the organisation for 2017. Building a resilient and sustainable organisation is a key factor in ensuring that we deliver on the mandate given to us by our members. Good governance has therefore been a business imperative to our continued success as an organisation. SALGA has once again received a clean bill of health from the Auditor-General for the period under review, the third one in a row. This demonstrates our commitment to accountability. SALGA has achieved 98 percent against its APP in 2014/15 – an outstanding achievement. The organisation maintains a relatively high proﬁle position locally with our members and with stakeholders in provincial and national government, as well as with international bodies and other inﬂuential bodies with relevance to local government.

The organisation has achieved improved ﬁnancial sustainability, an important feat in building a resilient body that is responsive to the needs of its member municipalities. The organisation increased its revenue by 20.3 percent to R502.7 million. In addition, it recorded over 36.2 percent increase in cash and cash equivalents, and 210 percentage increase in its total assets. Payment levels or collections rate were maintained at over 85 percent.

During the past year, we also cemented our objective of building the organisation internally by actively promoting values of being a caring organisation. In consolidating the successes and sustaining the change agenda, the financial and reputational gains made have enabled SALGA to offer best-practice service benefits to its employees by means of employer contributions to the medical aid and pension fund, a group risk scheme and adequate funeral cover.

As a result of the implemented service benefits and improved employee engagement, the staff turnover was reduced from 11, 7 percent in 2012/13 to 5,5 percent in 2014/15. Establishing a strong employer value proposition is making SALGA increasingly attractive as an employer of choice to those with a passion for making a difference in the local government sector. We have also done well at recognising the good work of employees through an annual employee recognition awards event, and offering employees educational assistance and capacity building programmes as well as emotional and physical wellness support programmes.

We will look at back at 2014/15 as a year in which we nailed our colours to the mast in implementing programmes that will bring about tangible results for the sector in the long-term by launching the municipal audit support programme for municipalities who consistently achieve unqualiﬁed audits and through the small town regeneration programme. These programmes were rolled out in line with the priorities of the organisation outlined in the 2012-2017 strategy. We also accelerated the implementation of key capacity building programmes through the councillor induction programme and the senior management induction programme. The national development plan explicitly outlines the importance of building a capable state and it is in that light that we at SALGA will continue to do all we can to capacitate our members through strategic programmes.

The various successes outlined above serve to highlight the importance of SALGA as a whole and also to raise the bar for all municipalities in terms of what we should achieve in the forthcoming year. Only through close collaboration and a constant striving to achieve more will we be able to ensure that the service delivery landscape of the country at large is enriched and we are able to build a better future for all.

Finally, I would like to extend my heartfelt thanks to the National Executive Committee of SALGA. The support of the NEC has continuously been strong and it is always motivating to feel its strength and energy. I would also like to acknowledge the executive management team, which jointly worked hard to implement the goals and strategy of the organisation.

8 I wish to also thank all SALGA’s stakeholders - both in national and provincial government - for their support in realising programmes for our municipalities, thereby enabling us to better discharge our developmental mandate. I am also grateful to all our partners in the national and provincial spheres of government, the ministry and the Department of CoGTA in particular, Cities Network, Municipal Demarcation Board, Local Government SETA and the National Treasury.

We are grateful for the guidance of the National Legislature (Parliament) in the form of the NCOP and its committees, as well as the National Assembly Committees, in particular the portfolio committee on local government and traditional aﬀairs who have been unﬂinching in their support of our organisation. Thank you for embracing the concept that local government is also your business.

Xolile George Chief Executive Oﬃcer Date: 31 July 2015

9 4. STRATEGIC OVERVIEW

4.1 SALGA’s Strategic Plan 2012-2017

The ﬁve-year (2012 to 2017 period) strategic plan was developed against the backdrop of South Africa’s third successful democratic local government elections. The high voter turnout (which increased from 49% in 2000 to 57% in 2011) is testament to the importance of local government to South Africans. But while signiﬁcant gains have already been made in building a democratic local government, consolidation is still required.

In 2009, government adopted the Local Government Turnaround Strategy (LGTAS). Cabinet also adopted a Medium Term Strategic Framework (MTSF) with twelve outcomes, one of which focuses specifically on ensuring a responsive, accountable, effective and efficient local government. Furthermore, government assessed the state of local government in the period preceding the elections in 2011. This resulted in several challenges being identified, including:

y Leadership and governance challenges relating to responsiveness and accountability; y Financial and fiscal management including the inter-governmental fiscal regime; y Cooperative governance especially intergovernmental relations; y Varied performance across municipalities in delivering basic services; y Varied performance across municipalities in growing local economies; y The continuation of apartheid spatial development patterns and inequity; y A lack of human resource capital to ensure professional administrations and positive relations between labour, management and councils; and y The absence of a differentiated approach to support and govern municipalities that recognises the differences in the nature and character of municipalities and how this is critical in the challenges that municipalities face.

Given the expectations around the 2011 local elections, SALGA reviewed, from a strategic perspective, what it could do to build on this. This review gave the association the impetus to achieve the following:

y Build on what has already been developed in terms of the LGTAS; y Identify key challenges that continue to impact on local government; y Assert the importance of this sphere of government and intensify the need to clarify and strengthen the powers and functions of the sphere; y Emphasise the need for local government to fulfil its developmental mandate as articulated in the Constitution of the Republic of South Africa and the White Paper on Local Government; y Sharpen the focus and priorities of local government as a basis for harnessing and coordinating efforts aimed at strengthening the sector; y Engage with its members to develop a programme of action that is responsive and relevant to the differentiated needs of its members; and y Strengthen the position of SALGA as a unitary structure that is aligned in terms of its strategy and structure and is capacitated as a structure of organised local government that is geared to deliver on its mandate.

The strategic plan asserts the notion that local government must be empowered, resourced and capacitated to assume its role of service delivery and development to the people of South Africa. It also commits SALGA to adopting a member-centric approach. The plan is built on the underlying assumption that the association will work closely with its partners and stakeholders to develop the local government sector.

10 4.2 Key policy and strategic frameworks impacting on local government

The strategic plan of SALGA is aligned to legislation and policy mandates. In this context it commits the organisation to be member-centric, engage in meaningful partnerships, position the organisation for high performance and ultimately demonstrate seriousness and commitment to growing and developing the sector.

The strategy of SALGA is also informed by national policy and strategic frameworks:

4.2.1 The Medium-Term Strategic Framework (MTSF)

On 22 December 2009, Cabinet approved the local government turnaround strategy of the Department of Cooperative Governance and Traditional Aﬀairs (CoGTA). This resulted in Cabinet prioritising 12 outcomes for the remaining years of the MTSF:

OUTCOMES 1 Quality basic education 2 A long and healthy life for all South Africans 3 All people in South Africa are and feel safe 4 Decent employment through inclusive economic growth 5 A skilled and capable workforce to support an inclusive growth path 6 An efficient, competitive and responsive economic infrastructure network MTSF 7 Vibrant, equitable and sustainable rural communities contributing towards food security for all 8 Sustainable human settlements and improved quality of life for all households 9 Responsive, accountable, effective and efficient local government 10 Protect and enhance the environmental assets and natural resources of the country 11 Create a better South Africa, a better Africa and a better world 12 An efficient, effective and development-oriented public service and an empowered, fair and inclusive citizenship

While local government has to contribute towards the achievement of all outcomes (especially outcomes 4, 6, 7, 8 and 10), outcome 9 is especially pertinent to SALGA.

4.2.2 The local government turnaround strategy (LGTAS)

Outcome 9 speciﬁcally addresses local government. It is underpinned by the ‘Ten point plan for local government’. This seeks to reinforce and support the implementation of the LGTAS. It comprises ten local government outcomes and 44 corresponding performance indicators:

OUTCOMES Improve the quantity and quality of municipal basic services to people. This is speciﬁcally related to the areas of 1 access to water, sanitation, electricity, waste management, roads and disaster management Enhance the municipal contribution to job creation and sustainable livelihoods through local economic 2 development (LED)

3 Ensure the development and adoption of reliable and credible integrated development plans (IDPs)

4 Deepen democracy through a refined ward committee model 5 Build and strengthen the administrative, institutional and financial capabilities of municipalities 6 Create a single window of coordination for support, monitoring and intervention in municipalities 7 Uproot fraud, corruption, nepotism and all forms of maladministration affecting local government

CoGTA 10-POINT PLAN / LGTAS CoGTA 8 Develop a coherent and cohesive system of governance and a more equitable intergovernmental ﬁscal system 9 Develop and strengthen a politically and administratively stable system of municipalities 10 Restore the institutional integrity of municipalities

11 4.2.3 The millennium development goals (MDGs)

GOALS 1 Eradicate extreme poverty and hunger 5 Improve maternal health 2 Achieve universal primary education 6 Combat HIV/Aids, malaria and other diseases MDGs 3 Promote gender equality and empower women 7 Ensure environmental sustainability 4 Reduce child mortality 8 Develop a global partnership for development

4.2.4 The new growth path

The new growth path is a broad framework that sets out a vision and identiﬁes key areas where jobs can be created. It is intended to address unemployment, inequality and poverty in a strategy of creating a signiﬁcant increase in new jobs in the economy, mainly in the private sector.

It sets a target of creating five million new jobs in the next 10 years. This target is projected to reduce unemployment from 25% to 15%. To accomplish this, the plan identifies specific ‘job drivers’. These drivers include:

y Investing in infrastructure for employment and development: Substantial investment in infrastructure, both to create employment directly through construction, operation, maintenance and the production of inputs, as well as indirectly, by improving eﬃciency across the economy; y Identifying and supporting key economic sectors: Targeting more labour-absorbing activities across the main economic sectors and the agricultural and mining value chains, manufacturing and related services; y Seizing the potential of new economies: Taking advantage of new opportunities in the knowledge and green economies; y Investing in social capital and public services: Leveraging social capital in the social economy and the public sectors; y Facilitating effective spatial development: Fostering rural development and regional integration.

The new growth path stresses the need to align macro-economic measures, micro-economic interventions and social partner commitments. This is done to achieve the shared goals that the framework aims to achieve. It concludes with setting out the priorities, sequencing and implementation plans.

4.2.5 The national development plan

The national planning commission produced a national development plan (Vision 2030) (NDP) outlining a long-term vision and strategy for South Africa. Cabinet has endorsed the NDP, a blueprint for eliminating poverty and reducing inequality in the country by 2030. This is the strategic framework for detailed government planning going forward. The commission believes that the problem of uneven capacity and varied performance is particularly acute at the local government level. The current local government system has only been in place for just over a decade. This means that there are signiﬁcant challenges that still need to be addressed. However, despite major obstacles relating to ﬁnance, human resources and a limited autonomy, municipalities are making progress.

There are many positive stories in the local government sector. These range from municipalities that generally perform well to those that just manage to fulﬁl their responsibilities in speciﬁc areas, such as basic service delivery, poverty alleviation and infrastructure development.

12 It is clear from the various municipal performance reviews that greater attention needs to be given to the obstacles that prevent the worst performing local and district municipalities from fulﬁlling their core functions. In particular, the following elements are suggested:

y Closer consideration of the varied capacity of municipalities and the need to achieve a better ﬁt between the capacities and responsibilities of municipalities; y Addressing the issue of mandates that have no funding; y Addressing the issue of the adequacy of the powers and functions of municipalities, particularly where a lack of these powers and functions hampers development. The focus is on the transfering of functions such as housing, public transport and land use management to local government; and y Addressing the ineﬃcient two-tier system of local government.

4.2.6 Emerging issues and strategic realignment

The SALGA strategic plan does not exist in isolation. As such, it is inevitable that it will be impacted by events that have occurred after its development. These include State of the Nation addresses, Cabinet makgotla, national and provincial elections and the SALGA leadership makgotla. Given the signiﬁcance of these events, SALGA has to create ﬂexibility at a strategic level, to ensure that it is aligned to local government and intergovernmental matters. To do this, SALGA undertakes the following:

y Reviews key performance indicators (KPIs) and priority programmes as a basis of assessing how issues may be included; and y Incorporates the information into the annual performance plans of SALGA.

This approach ensures that SALGA will manage unforeseen issues in its strategy on an ad-hoc basis. This will have implications in terms of regulatory compliance, resource utilisation and budgetary allocations.

4.3 SALGA membership and stakeholders

4.3.1 SALGA members

Since its establishment in 1996, SALGA has focused on fulfilling its mandate of supporting local government transformation. This has taken place in a complex environment, characterised by the highly diverse and diffuse membership base of the country’s 278 municipalities, which collectively constitute an independent, interdependent and inter-related sphere of government. These members range from deep rural municipalities, which struggle with severe service delivery backlogs and institutional challenges, to sophisticated cities that have significant institutional capacity. Municipalities are therefore classified in accordance with the criteria in the Local Government: Municipal Structures Act, 1998 (Act No. 117 of 1998):

y Metropolitan (Category A); y Local (Category B); and y District municipalities (Category C).

The SALGA strategic plan must therefore respond to the diﬀerentiated needs of the various municipalities. In addition, the SALGA Constitution makes provision for associate member organisations that are strongly concerned with or involved in local government matters, and which comply with criteria determined by SALGA’s national executive committee (NEC).

4.3.2 Key stakeholders

The eﬃcient management of stakeholders has become a core element of business strategies in many successful organisations. In line with SALGA’s mandate to represent, promote and protect the interest of local government, the association recognises the

13 important role that stakeholders play within the local government sphere. Stakeholders are integral in shaping and supporting the implementation of the SALGA mandate and programme of action. The diagram below outlines the manner in which SALGA engages with stakeholders as part of a broader process of representing, supporting and servicing its members.

Associate members Private sector Civil society

State owned Donor agencies entities

Research Professional bodies institution SALGA

Other international International partners municipal

Municipalities Government

Stakeholders also play a vital role in bolstering the resource capacity of SALGA. The three categories of SALGA stakeholders are brieﬂy discussed below.

4.3.2.1 Government

SALGA has to maintain and develop multi-level relationships with different government spheres. It also has to develop and maintain these relationships to ensure that it effectively fulfils its mandate. Of particular importance, are the relationships with CoGTA and national and provincial departments, that impact on service delivery, municipal functioning and the institutions within which SALGA represents local government. These institutions include the Financial and Fiscal Commission; National Council of Provinces and Ministers and Members of Executive Council Meetings (MINMECs) (including their political and administrative officials and staff).

4.3.2.2 Non-governmental entities

SALGA interacts with a range of entities that have a role in the local government sector. These non-governmental entities include the private sector, research and training institutions, professional bodies, international donors and development partners.

4.3.2.3 Internal

As a national organisation, SALGA must have functional and political integration between its constituent members and the municipalities they represent. This is necessary if it is to be eﬀective in any appreciable manner. It is required that integration be actively fostered and developed. These relationships should be multi-level networks of relationships between the SALGA national oﬃce, the SALGA provincial structures and individual municipalities (local, district and metropolitans).

14 4.4 Vision Vision To be an association of municipalities “To be an association of municipalities that is at the cutting- that is at the cutting-edge of quality and edge of quality and sustainable services.” sustainable services. Mission To be consultative, informed, mandated, 4.5 Mission credible and accountable to our membership and to provide value for money

“To be consultative, informed, mandated, credible and Values accountable to our membership and to provide value for Responsive, Innovative, Dynamic and Excellence. money.”

4.6 Values

Our values are:

y Responsiveness y Innovation y Dynamism y Excellence 5. LEGISLATIVE AND OTHER MANDATES

SALGA is managed by various key legislative, policy and regulatory frameworks. These are:

5.1 Legislative mandate

5.1.1 The Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996)

Section 163 of the Constitution envisages an important role for organised local government. An Act of Parliament must cater for the recognition of national and provincial organisations representing municipalities. This Act must determine the procedures by which local government may consult the national and provincial government, designate representatives to participate in the National Council of Provinces (NCOP) and nominate persons to the Financial and Fiscal Commission (FFC).

5.1.2 The Organised Local Government Act, 1997 (Act No. 52 of 1997)

The Organised Local Government Act recognises SALGA as a representative of organised local government. This allows local government to designate up to ten part-time representatives to the NCOP in Parliament. It also allows it to nominate two additional people to the FFC that advises the ﬁnance ministry on budget issues. Furthermore, SALGA participates in intergovernmental structures at provincial and district levels. It is able to inﬂuence national and provincial legislation and to gauge the impact of such legislation on local government.

5.1.3 The White Paper on Local Government (1998)

The White Paper on Local Government (1998) refers to how the constitution allows for municipalities to organise forms of municipal association. As such, the White Paper identifies the key role of SALGA as being the effective representation of local government in the legislative processes of all spheres of government. In its intergovernmental executive processes, SALGA affects the status, institutions, powers and functions of municipalities. In order to do this effectively, the association must develop its own policy and advocacy capacity. It also has to develop a strong internal mandate and undergo extensive consulting processes. According to the 15 White Paper, organised local government (OLG) is an employer organisation and therefore constitutes the employer component of the South African Local Government Bargaining Council (SALGBC). This means that SALGA has a key role to play, not only as an employer in the SALGBC, but also in building capacity in labour relations among its membership. It also has to maintain open and constructive relationships with organised labour. The successful transformation of local government requires that the relations between employer bodies and municipal trade unions are reconstructed around a common commitment to a developmental role for local government.

The negotiation of this partnership requires vision and leadership. It also requires expertise in labour relations, bargaining, conﬂict resolution and human resource management and development. As such, SALGA has the potential to make a strong contribution to the development of municipalities throughout the country. This can be done by:

y The provision of specialised services to supplement and strengthen the capacity of municipalities; y Research and information dissemination; y Facilitating shared learning between municipalities; y Human resource development; and y Councillor training. SALGA has a signiﬁcant role to play in this training. The training is also required to coincide with the election of new municipal councillors.

5.1.4 The Municipal Systems Act, 2003 (Act No. 32 of 2000)

The Municipal Systems Act provides that all municipalities must comply with any collective agreements concluded by organised local government within its mandate. This is done on behalf of local government in the bargaining council established by municipalities. This Act suggests that all municipalities are bound by the terms of agreements negotiated by OLG through SALGA with the respective trade unions.

5.1.5 The Municipal Finance Management Act, 2003 (Act No. 56 of 2003)

The Municipal Finance Management Act was established to secure sound and sustainable management of the ﬁnancial aﬀairs of municipalities and other institutions in the local sphere of government. The Act seeks to establish treasury norms and standards for local government and to provide for all related matters.

5.1.6 The Intergovernmental Relations Framework Act, 2005 (Act No. 13 of 2005)

The Intergovernmental Relations Framework Act establishes a framework for local government and other spheres of government to promote and facilitate intergovernmental relations. It also provides for mechanisms and procedures to facilitate the settlement of intergovernmental disputes and all associated matters.

5.1.7 SALGA Constitution

The constitution of SALGA has undergone three phases of development. It was adopted in May 2000 followed by two further reviews in 2004 and 2007:

y Phase 1: 1996 – 2000 (adopted May 2000); y Phase 2: 2000 – 2004 (adopted 24 September 2004); and y Phase 3: 2004 – 2007 (adopted 25 April 2007).

16 5.2 SALGA mandate

A developmental local government is an essential part of the public sector. National growth and development imperatives are dependent on the ability of local government to deliver on its mandate. SALGA has to utilise the resources and partnerships at its disposal to build a local government sector that has the required capacity to facilitate poverty alleviation, economic development and creation of jobs, and harness the socio-economic opportunities that the state has geared itself to provide for its people. SALGA serves as the representative voice of all 278 municipalities. Since its establishment, the association has endeavoured to bring focus to its mandate of supporting local government transformation in a complex environment. This has been characterised by a highly diverse membership base of municipalities. Its mandate rests on six pillars:

SALGA MANDATE Transform local government to enable it to fulfil its developmental mandate

Knowledge and Lobby, Advocate Capacity Support and Strategic Employer Body Information and Represent Building Advice Profiling Sharing t Lobby, advocate, t Acts as an employer t Build the capacity of t Support and advise t Build the profile t Serve as the protect and body representing the municipality as our members on and image of local main hub of local represent the all municipal an institution as well a range of issues government within government interest of local members and, as leadership and to assist effective South Africa as knowledge and government at by agreement, technical capacity of execution of their well as outside the intelligence and relevant structures associate members. both Counillors and mandate. country. to facilitate peer and platforms. Officials. learning within the sector.

The Voice of Local Government

SALGA has six main functions as indicated in the diagram above:

y Lobby, advocacy and represent: This refers to representing the interests of members in legislatures and other policy- making and oversight structures. It also refers to engaging with various stakeholders in public debates and other platforms in the interest of local government. y Employer body: This refers to being an effective employer that represents its members. This representation is carried out in collective bargaining as stipulated in the Labour Relations Act. However, it also includes various other structures including but not limited to those established in the SALGBC. y Capacity building: This refers to facilitating capacity building initiatives through representing member interests in the Local Government Sector Education Authority (LGSETA). y Support and advise: SALGA needs to provide the tools and services that enable municipalities to understand and interpret trends, policies and legislation affecting local government and to implement them. y Strategic profiling: Elements here refer to enhancing the profile and image of local government as an important and credible agent for the delivery of services. Profiling needs to take place on a national level as well as in Africa and the rest of the world. y Knowledge and information sharing: This refers to building and sharing a comprehensive hub of local governmental knowledge and intelligence. This will enable the informed delivery of the other mandates of SALGA. The knowledge hub is also a useful reference point for all who seek local government information.

17 6. ORGANISATIONAL STRUCTURE

As with all public sector institutions, the political governance structures are supported by an administration. In the case of SALGA, there are both the established national administration as well as nine provincial administrations. Support is not only provided on logistics and the convening of meetings, but also at a technical level. Support is provided to the governance structures to ensure that information and data is collected and consolidated and that proper reports are tabled for consideration at meetings. Technical support is provided to add value to the quality of reports tabled for consideration, by ensuring that the information and data generated by the various governance structures is properly packaged and analysed. In addition, the administration is there to ensure that reports and recommendations are appropriately placed in context by considering all legal, ﬁnancial, human resources and other implications. Recommendations are required to be clearly outlined for informed decision-making. The administration is also a generator of reports and recommendations for consideration by SALGA’s governance structures. Therefore, it must facilitate the processing of reports through all SALGA structures, to ensure full and broad participation by the organisation in the decision- making process. In this regard, the national executive committee (NEC), at its Lekgotla in August 2007, considered a detailed presentation on the development of policy positions by the organisation and similarly to establish a mandate to inform a SALGA position on any matter.

18 Chief Legal Compliance Executive and Risk Officer

Corporate Secretariat, Governance and Strategic Programmes Chief of Operations Performance Management Unit Internal Audit

Communications and Marketing

Economic Governance, Municipal Municipal Development Corporate Finance and Provincial IGR and Community Institutional Infrastructure and Strategy and Corporate Offices International Development Development and Services Management Research Services Relations Planning

Eastern tInternational tCollective tSolid waste tHuman tDevelopment tResearch tFinance control Cape relations and bargaining and management development management protocol labour relations planning tPolicy tAsset tWater and tSafety and development and management Free State tInter- tMunicipal sanitation security tEconomic analysis governmental human resources development tSupply chain relations support tElectricity and tHealth (ICT, ASGISA, tStrategy and management energy business planning tSocial cohesion IDPs, PGDS, NSPS, tHuman resources tAdvocacy and tSkills EPWP) Gauteng lobbying development tTransportation and city tOrganisational and roads diplomacy performance tAdministration and capacity- tLocal tGovernance building government management tInformation and support tClimate tDisaster change and management ﬁnance Knowledge communication KwaZulu- tSingle public t Parliamentary environmental management technology Natal t service tMunicipal entity aﬀairs and research management tSpecial programmes oversight Monitoring and tFinancial reporting tLocal support t 5-Year Local mainstreaming evaluation and systems t government tP3 country Limpopo Government tSustainable (youth, gender, transformation project tStakeholder Strategic Agenda human HIV, etc.) management coordination settlement relations Mpumalanga

Northern Cape

Noth West

Western Cape

PART B: GOVERNANCE

21 1. INTRODUCTION

Corporate governance essentially involves balancing the interests of many stakeholders within SALGA. These include its members, stakeholders, leadership and management, government and the community. Since corporate governance also provides the framework for attaining the organisational goals and objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and public accountability.

Over the past decade, it has become increasingly apparent that the sustainability of economies, societies and organisations are integral. Organisational activities impact the health of the societies and economies of which they are part. In turn, the sustainability of these organisations is dependent on the health of the societies and economies to which they contribute. These are complex systems, shaped by the inherently interdependent relationships between stakeholders at all levels — individuals, organisations, communities, governments and regulators. In today’s highly connected world, all boundaries are permeable. In such a world, SALGA has graduated to the next level. We do not only pursue organisation-centric sustainability, but the sustainability of the larger system. When SALGA resolved to be sustainable, the organisation committed to more than a series of internal initiatives. It is committed to a diﬀerent way of operating that takes into account the health of the larger system of which it is part and upon which it depends. Sustainability represents a fundamental shift; where multiple outcomes drive decisions, long-term future outcomes are balanced against today’s demands and a broader set of stakeholder purposes have to be considered.

Local governments across the world are increasingly being given responsibility to address most of their service delivery functions. Municipalities are therefore expected to manage their localities to ensure environmental, economic and social sustainability. It is against this background that SALGA, as the voice of organised local government in South Africa, is committed to the creation of ﬂexible network approaches with key stakeholders. This is in order to carry out joint programmes of research and learning, information and technology sharing, management development and coordinated action on common problems, as a direct response to these global challenges facing municipalities.

2. SALGA GOVERNANCE FRAMEWORK

SALGA is a Schedule 3A Public Entity, recognised in terms of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA) and audited as one entity. As such, it reports to the Minister of Cooperative Governance. SALGA is funded through a combination of sources including a national government grant, membership fees from municipalities and donations from the donor community for speciﬁc projects.

SALGA is bound by one constitution. SALGA governance structures consist of the national conference, provincial conferences, national members assembly, provincial members assemblies, national executive committee, provincial executive committees, national working groups as well as provincial working groups. Its point of departure is to strengthen the local sphere of government in delivering a developmental agenda that is aligned to national strategic priorities and which reinforces the work of the national and provincial spheres of government. The eradication of poverty and unemployment, alongside the stimulation of growth, lies at the heart of local government’s mandate and has found expression in the government-wide programme. As the front-line of service delivery, local government also plays a pivotal role in consolidating and deepening democracy at the grassroots level.

The SALGA Constitution outlines and defines the roles and responsibilities of its political governing bodies. In an effort to improve the coordination and alignment of the SALGA governance structures at a provincial and national level, the SALGA National Members Assembly (NMA) of March 2008 adopted the SALGA governance framework. This framework allows for the effective consultation, mandating and reporting between structures and further allows for effective decision-making by SALGA. The schedule of meetings allows for the national executive committee (NEC) to convene every three months and for provincial executive committees (PECs) and national and provincial working groups to convene in between meetings of the NEC.

22 2.1 SALGA national executive committee (NEC)

The NEC consists of:

y The Chairperson of SALGA; y Three Deputy Chairpersons; y Six additional members who are elected separately by the National Conference; y Nine Provincial Chairpersons of SALGA who are ex-oﬃcio members of the NEC; y The head of the administration; and y The NEC may co-opt no more than three additional members.

The duties of the NEC are to:

y Meet at least once every three months and when the need arises; y Exercise day to day executive authority; y Act in accordance with the directions of the SALGA National Conference or SALGA Members Assembly; y Submit a report of its activities during the previous ﬁnancial year to the National Conference or National Members Assembly, whichever occurs ﬁrst; and y Develop, review and adopt the SALGA administration policies.

Cllr Thabo Manyoni Chairperson

Cllr Flora Maboa Boltman Cllr Nombulelo Hermans Cllr Mpho Nawa Deputy Chairperson Deputy Chairperson Deputy Chairperson

Cllr Abe Bekeer Cllr Subesh Pillay Cllr Zibonele Dumzele Cllr Boltumelo Moloi Cllr Chris Neethling Cllr Zukiswa Ncitha Cllr Dudu Mazibuko Cllr Grace Mthimunye Cllr Baldwin Mathibe Nec Member NEC Member NEC Member NEC Member NEC Member NEC Member NEC Member NEC Member NEC Member

Cllr Nomakhosazana Meth Cllr Sebenzille Ngangelizwe Cllr Parks Tau Cllr Welcome Mdabe Cllr David Magabe Cllr Mafika Nkosi Cllr Willie Johnson Cllr Kaone Lobelo Cllr Demetri Qually Chairperson: Eastern Cape Chairperson Free State Chairperson Gauteng Chairperson Kwa-Zulu Natal Chairperson Limpopo Chairperson Mpumalanga Chairperson Northern Cape Chairperson North West Chairperson Western Cape

23 The SALGA NEC members for 2014/15 and the dates of meetings attended were:

NEC Member DATE DATE DATE # Attended 03 July 2014 30 October 2014 13 February 2015 Cllr T Manyoni Yes No Yes 2/3 Cllr N Hermans Yes Yes Yes 3/3 Cllr M Nawa Yes Yes Yes 3/3 Cllr F Maboa-Boltman Yes Yes Yes 3/3 Cllr DCP Mazibuko No No Yes 1/3 Cllr S Mashilo Yes N/A N/A 1/1 Cllr G Mthimunye N/A N/A Yes 1/1 Cllr C Neethling Yes No Yes 2/3 Cllr J Matlou Yes N/A N/A 1/1 Cllr T Matibe N/A N/A Yes 1/1 Cllr B E Moloi Yes Yes Yes 3/3 Cllr Z Ncitha Yes No Yes 2/3 Cllr W Johnson Yes Yes Yes 3/3 Cllr N Meth Yes No Yes 3/3 Cllr D Magabe Yes Yes Yes 3/3 Cllr G Lobelo Yes Yes Yes 3/3 Cllr B Mzangwa Yes N/A N/A 1/1 Cllr Ngangelizwe N/A Yes Yes 2/2 Cllr M Nkosi Yes Yes Yes 3/3 Ald D Qually Yes Yes Yes 3/3 Cllr P Tau Yes No Yes 2/3 Cllr S Mdabe Yes No Yes 2/3 Cllr A Bekeer Yes Yes Yes 3/3 Cllr Z Dumzela Yes Yes Yes 3/3 Cllr S Pillay Yes No Yes 2/3 Cllr F Ratlhaga N/A N/A No 0/1 Quorum Yes Yes Yes meetings

24 2.2 SALGA provincial executive leadership

The provincial executive committee (PEC) consists of:

y The Chairperson; y Three Deputy Chairpersons; y Six additional members who are elected separately by the Provincial Conference; and y The PEC may co-opt no more than three additional members.

The PEC’s duties are to:

y Meet at least once every three months and when the need arises; y Exercise day to day executive authority in the province; y Act in accordance with the directions of the Provincial Conference or Provincial Members Assembly; y Submit a report of its activities during the previous ﬁnancial year to the Provincial Conference or Provincial Members Assembly, whichever occurs ﬁrst; y Develop, review and adopt SALGA’s administrative policies; and y Generate reports of activities in the province to be tabled at least quarterly at the NEC.

The SALGA PEC members for 2014/15 were:

2.2.1 SALGA Eastern Cape

Name Designation Municipality Cllr Nomakhosazana Meth Chairperson OR Tambo District Cllr Deon De Vos Deputy Chairperson Cacadu District Cllr Mxolisi Koyo Deputy-Chairperson Chris Hani District Cllr Luleka Simon Co-opted member Buﬀalo City Metro Cacadu Cllr Nozibele. Makanda Co-opted member Chris Hani District Cllr Themba Tinta Co-opted member Buﬀalo City Metro Cllr Thando Ngcolomba Co-opted member Nelson Mandela Bay Metro Cllr Maria Hermans Additional member Nelson Mandela Bay Metro Cllr Nomfundo Mabunu Additional member Gariep Cllr Makhaya Twabu Additional member Alfred Nzo District Cllr Nomasikizi Konza Additional member Amatole District Cllr Vukile Balura Additional member Cacadu District Cllr Thandekile Sabisa Additional member OR Tambo District

25 2.2.2 SALGA Free State

Name Designation Municipality Cllr Sebenzile Ngangelizwe Chairperson Matjhabeng Cllr Bhekumzi Charles Stoﬁle Deputy Chairperson Matjhabeng Cllr Nthabiseng Mokotjo Deputy Chairperson Mangaung Metro Cllr Disebo Nakedi Deputy Chairperson Moqhaka Cllr Mongi Geolion Ntwanambi Additional member Xhariep District Cllr Thandiwe Ivy Reachable Additional member Letsemeng Cllr Nesta Rabela Additional member Mangaung Metro Cllr Lindiwe Ursula Makhalema Additional member Dihlabeng Cllr Victoria de Beer Co-opted member Ngwathe Cllr Tshidi Koloi Co-opted member Moqhaka Cllr Vuyizile Mona Co-opted member Letsemeng Cllr Lenox Rubulana Co-opted member Matjhabeng Cllr Phindi Maleka Co-opted member Lejweleputswa District

2.2.3 SALGA Gauteng

Name Designation Municipality Cllr P Tau Chairperson City of Joburg Cllr P Mkonza Deputy Chairperson Ekurhuleni Cllr G Hlongwane Deputy Chairperson Emfuleni Cllr C Seerane Deputy Chairperson West Rand District Cllr B Modisakeng PEC member Sedibeng District Cllr F Bhayat PEC member Mogale City Cllr T Ernest PEC member City of Tshwane Cllr M Mathikge PEC member Merafong City Cllr M Mﬁkoe PEC member City of Joburg Cllr P Tsotetsi PEC member Sedibeng District Cllr R Mashego PEC member Ekurhuleni Cllr B Baloyi PEC member Midvaal Cllr K Ramokokgopa PEC member City of Tshwane

26 2.2.4 SALGA KwaZulu-Natal

Name Designation Municipality Cllr SW Mdabe Chairperson iLembe District Cllr J Nxumalo Deputy Chairperson eThekwini Metro Cllr J Khumalo Deputy Chairperson Amajuba District Cllr TVB Mchunu Deputy Chairperson uThungulu District Cllr N Gumede Additional member eThekwini Metro Cllr M E Ndobe Additional member Harry Gwala District Cllr C Ndlela Additional member Msunduzi Cllr NH Gumede Additional member uGu District Cllr Y Bhamjee Additional member uMgungundlovu District Cllr N Vilane Additional member UMkhanyakude District Cllr EN Molefe Additional member Nquthu Cllr P Khaba Additional member Abaqulusi

2.2.5 SALGA Limpopo

Name Designation Municipality Cllr D M Magabe Chairperson Sekhukhune District Cllr S Lamola Deputy Chairperson Waterberg District Cllr D Mmetle Deputy Chairperson Tzaneen Cllr L Mapoulo Deputy Chairperson Capricorn District Cllr K Lekalakala PEC member Modimolle Cllr N Sibanda PEC member Lepelle Nkumpi Cllr G Kganyago PEC member Capricorn District Cllr O Mafefe PEC member Sekhukhune District Cllr L Nhlapo PEC member Bela-Bela Cllr S Ramaremela PEC member Mopani District Cllr T Nkadimeng Co-opted member Polokwane Kgoshi S Dikgale Co-opted member House of Traditional Leaders Cllr T B Matibe NEC member Vhembe District

27 2.2.6 SALGA Mpumalanga

Name Designation Municipality Cllr Maﬁka Nkosi Chairperson Chief Albert Luthuli Cllr Mavis Charles Deputy-Chairperson Mbombela Cllr Salome Sithole Deputy-Chairperson Emalahleni Cllr Reinas Khumalo Deputy-Chairperson Bushbuckridge Cllr Lesetja Dikgale Member Nkangala District Cllr Terror Shabangu Member Ehlanzeni District Cllr Tunu Mnisi Member GertSibande District Cllr VelaphiMagagula Member ThabaChweu Cllr Lindi Masina Member Govan Mbeki Cllr Mandla Mhlanga Member Nkomazi Cllr Sylvia Nxumalo Member Bushbuckridge Cllr Lindiwe Ntshalintshali Member Emalahleni Cllr Mandla Khayiyana Member Govan Mbeki

2.2.7 SALGA Northern Cape

Name Designation Municipality Cllr Willie Johnson Provincial Chairperson Frances Baard Cllr Winnie Ngobeza Deputy Chairperson Sol Plaatje Cllr Nokhaya Mjila Deputy Chairperson ZF Mgcawu Cllr Sipho S’thonga Deputy Chairperson Emthanjeni Cllr Dineo Moyo Additional member Gamagara Cllr Victor Makoke Additional member John Taolo Gaetsewe Cllr Jan Tonyane Additional member Tsantsabane Cllr Lorenzo Faber Additional member Nama Khoi Cllr Eileen Drage- Maritz Additional member Namakwa Cllr Brenda Mpamba Co-opted member Thembelihle Cllr Moses Nhlapho Co-opted member Sol Plaatje Cllr Lulamile Nkumbi Co-opted member Emthanjeni Cllr Katerina Dodds Co-opted member Mier

28 2.2.8 SALGA North West

Name Designation Municipality Cllr Kaone Lobelo Chairperson Greater Taung LM Cllr Lenah Miga Deputy Chairperson Mahikeng LM Cllr Mbulelo Zephe Deputy Chairperson Dr Kenneth Kaunda DM Cllr Sheila Mabale-Huma Deputy Chairperson Rustenburg LM Cllr Afrika Thale Additional member Ramotshere Moiloa LM Cllr Sarah Nkatlo Additional member Dr Kenneth Kaunda DM Cllr Suzan Montshioagae Additional member Dr Ruth Segomotsi Mompati DM Cllr Ezra Mdangai Additional member Bojanala Platinum DM Cllr Francis Ratlhaga Co-opted member Bojanala Platinum DM Cllr Doctor Kgosi Mohadi Co-opted member Maquassi Hills LM

2.2.9 SALGA Western Cape

Name Designation Municipality Ald Demetri Qually Chairperson City of Cape Town Cllr Georlene Wolmarans Deputy Chairperson Knysna Cllr Grant Twigg Deputy Chairperson City of Cape Town Cllr Edward Njadu Deputy Chairperson Central Karoo District Cllr Francois Schippers Additional member Saldanha bay Cllr Ian Iversen Additional member City of Cape Town Cllr Steven Vuba Additional member City of Cape Town Cllr Clera Meyer Additional member Cape Winelands District Ald Anton Coetsee Additional member Overstrand Cllr Johan Rademeyer Additional member Drakenstein Municipality Ald Belinda Walker Co-opted member City of Cape Town Cllr Sumeia Ndayi Co-opted member Bitou Cllr Belinda Landingwe Co-opted member City of Cape Town

2.3 Relationship between national and provincial bodies

The SALGA Constitution regulates the relationship between SALGA and its provincial members. All provincial members are to constitute themselves in terms of the constitution of SALGA and be affiliated to SALGA. In addition, provincial executive committees (PECs) must generate reports of activities in the province to be tabled at least quarterly at the national executive committee (NEC). SALGA’s national office and the nine provincial offices each have a distinct and complementary role to play in the execution of the SALGA mandate.

29 2.3.1 SALGA working groups

The SALGA National Conference held from 30 August to 1 September 2011 elected a new NEC, in line with the provisions of the SALGA Constitution, as amended. The NEC is empowered to establish working groups and appoint the chairpersons of such working groups. SALGA working groups are structures of the NEC that deal with political detail on behalf of the NEC and their main purpose is to encourage, ensure and promote local government matters which, inter alia, will include:

y Cooperative governance; y Consultation and coordination; and y Participative decision-making.

The working groups, operating within their derived mandate, must develop policies, strategies and programmes to address critical local government issues and must serve as a forum through which organised local government can consult on a political level, in order to contribute towards the creation of democratic and economically viable local government.

2.3.2 National working groups

The SALGA national and provincial working groups form a critical component of the SALGA governance structures. The working groups (national and provincial) are established by national and provincial executive committees respectively, with the chairperson of the working groups appointed from the additional and co-opted members. The number of working groups is determined by the NEC based on, inter alia, the key functional areas of local government. Having considered the key functional areas of local government and to facilitate strategic alignment with the SALGA functional areas, the NEC resolved that the following national working groups be established and replicated in provinces:

a. Economic development and planning; b. Climate change, environmental aﬀairs and sustainability; c. Municipal ﬁnance; d. Community development; e. Municipal trading services; f. Municipal infrastructure planning; g. Human resource development and collective bargaining; h. Governance and intergovernmental relations; and i. Councillor welfare and support (only at national level).

30 SALGA’s national governance structures convened as follows during 2014/15:

National governance structures Date of meeting National executive committee 03 July 2014 30 October 2014 13 February 2015 National office bearers 02 July 2014 30 October 2014 13 February 2015 Community development working group 12 June 2014 11 September 2014 11 January 2015 Municipal trading services working group 20 June 2014 11 September 2014 23 January 2014 Governance, IR and IGR working group 12 June 2014 19 September 2014 22 January 2014 Human resource management working group 12 June 2014 11 September 2014 22 January 2014 Municipal finance working group 10 June 2014 21 September 2014 12 March 2014 Economic development and planning working 13 June 2014 10 September 2014 21 January 2014 group Municipal infrastructure planning working 20 June 2014 11 September 2014 23 January 2014 group Climate change, environmental affairs and 11 June 2014 12 September 2014 22 January 2014 sustainability working group

2.3.3 SALGA provincial governance structures

SALGA Eastern Cape Provincial governance Date of meeting structures Provincial executive meeting 23-24 June 2014 15-16 September 2014 04-05 December 2014 03-04 March 2015 Community development 09 June 2014 03 September 2014 04 November 2014 02 March 2015 working group Municipal trading services 27 May 2014 20 August 2014 20 November 2014 13 February 2015 working group Governance, IR and IGR working 17 June 2014 25 September 2014 21 November 2014 27 February 2015 group Human resource management 05 June 2014 04 September 2014 28 November 2014 19 February 2015 working group Municipal finance working 06 June 2014 05 September 2014 14 November 2014 20 February 2015 group Economic development and 10 June 2014 19 September 2014 26 November 2014 26 February 2015 planning working group Municipal infrastructure 27 May 2014 20 August 2014 20 November 2014 13 February 2015 planning working group Climate change, environmental 02 May 2014 03 September 2014 14 November 2014 23 February 2015 affairs and sustainability working group

31 SALGA Free State Provincial governance structures Date of meeting Provincial executive meeting 18 July 2014 Special Meetings 02 December 2015 18 March 2015 20 August 2014 21 October 2014 30 October 2014 Community development working 28 May 2014 07 August 2014 18 November 2014 11 February 2015 group Municipal trading services working 27 May 2014 07 August 2014 04 November 2014 10 February 2015 group Governance, IR and IGR working 27 May 2014 14 August 2014 19 November 2014 04 March 2015 group Human resource management 28 May 2014 08 August 2014 04 November 2014 10 February 2015 working group Municipal finance working group 06 June 2014 08 August 2014 05 November 2014 11 February 2015 Economic development and 29 May 2014 08 August 2014 05 November 2014 11 February 2015 planning working group Municipal infrastructure planning 27 May 2014 07 August 2014 04 November 2014 10 February 2015 working group Climate change, environmental 27 May 2014 07 August 2014 04 November 2014 10 February 2015 affairs and sustainability working group

SALGA Gauteng Provincial governance structures Date of meeting Provincial executive meeting 04 June 2014 19 September 2014 13 November 2014 23 March 2015 Community development 05 June 2014 29 August 2014 13 November 2014 06 February 2015 working group Municipal trading services 05 June 2014 22 August 2014 31 October 2014 13 February 2015 working group Governance, IR and IGR working 05 June 2014 29 August 2014 13 November 2014 13 February 2015 gGroup Human resource management 05 June 2014 22 August 2014 13 November 2014 20 February 2015 working group Municipal finance working group 05 June 2014 05 September 2014 07 November 2014 06 March 2015 Economic development and 05 June 2014 05 September 2014 07 November 2014 06 March 2015 planning working group Municipal infrastructure planning 05 June 2014 05 September 2014 13 November 2014 06 March 2015 working group Climate change, environmental 05 June 2014 29 August 2014 28 November 2014 27 March 2015 affairs and sustainability working group

32 SALGA KwaZulu-Natal Provincial governance structures Date of meeting Provincial executive meeting 04 June 2014 19 September 2014 13 November 2014 13 March 2015

Community development 03 June 2014 18 September 2014 12 November 2014 13 March 2015 working group Municipal trading services 05 June 2014 29 August 2014 13 November 2014 6 February 2015 working group Provincial executive meeting 05 June 2014 22 August 2014 31 October 2014 13 February 2015

Governance, IR and IGR working 05 June 2014 29 August 2014 13 November 2014 13 February 2015 group Human resource management 05 June 2014 22 August 2014 13 November 2014 20 February 2015 working group Municipal finance working group 05 June 2014 05 September 2014 07 November 2014 06 March 2015

Economic development and 05 June 2014 05 September 2014 07 November 2014 06 March 2015 planning working group Municipal infrastructure planning 05 June 2014 05 September 2014 13 November 2014 06 March 2015 working group Climate change, environmental 05 June 2014 29 August 2014 28 November 2014 27 March 2015 affairs and sustainability working group

SALGA Limpopo Provincial governance structures Date of meeting Provincial Executive Meeting 29 May 2014 22 September 2014 02 December 2014 13 March2015 Community development working 12 May 2014 18 August 2014 06 November 2014 13 February 2015 group Governance, IR and IGR working 15 May 2014 18 August 2014 07 November 2014 13 February 2014 group Human resource management 16 May 2014 18 August 2014 06 November 2014 13 February 2015 working group Municipal finance working group 16 May 2014 18 August 2014 06 November 2014 11 February 2015 Economic development and 15 May 2014 18 August 2014 07 November 2014 12 February 2015 planning working group Municipal infrastructure planning 14 May 2014 18 August 2014 06 November 2014 09 February 2015 working group

33 SALGA Mpumalanga Provincial governance structures Date of meeting Provincial executive meeting 05 June 2014 26 August 2014 26 November 2014 19 March 2015 Community development working 14 May 2014 07 August 2014 06 November 2014 12 February 2015 group Governance, IR and IGR working 15 May 2014 07 August 2014 06 November 2014 11 February 2015 group Human resource management - 05 August 2014 04 November 2014 10 February 2015 working group Municipal finance working group 13 May 2014 05 August 2014 04 November 2014 10 February 2015

Economic development and 16 May 2014 08 August 2014 06 November 2014 12 February 2015 planning working group Municipal infrastructure planning 16 May 2014 07 August 2014 04 November 2014 10 February 2015 working group Climate change, environmental 05 June 2013 07 August 2014 04 November 2014 10 February 2015 affairs and sustainability working group Municipal trading services working 15 May 2014 07 August 2014 04 November 2014 10 February 2015 group

SALGA Northern Cape Provincial governance structures Date of meeting Provincial executive meeting 20 June 2014 08 August 2014 24 October 2014 20 March 2015 20 August 2014 Community development working 14 May 2014 05 August 2014 04 November 2014 25 February 2015 group Governance, IR and IGR working 14 May 2014 05 August 2014 04 November 2014 25 February 2015 group Human resource management 15 May 2014 06 August 2014 05 November 2014 26 February 2015 working group Municipal finance working group 15 May 2014 06 August 2014 05 November 2014 26 February 2015

Economic development and 15 May 2014 06 August 2104 05 November 2014 26 February 2015 planning working group Municipal infrastructure and 15 May 2014 06 August 2014 05 November 2014 26 February 2015 services

34 SALGA North West Provincial governance structures Date of meeting Provincial executive meeting 05 June 2014 14 September 2014 28 November 2014 11 March 2015 Community development 14 May 2014 06 August 2014 05 November 2014 04 February 2015 working group Municipal trading services 14 May 2014 06 August 2014 05 November 2014 11 February2 015 working group Governance, IR and IGR working 16 May 2014 07 August 2014 03 November 2014 09 February 2015 group Human resource management 16 May 2014 07 August 2014 06 November 2014 09 February 2015 working group Municipal finance working group 15 May 2014 08 August 2014 07 November 2014 10 February 2015 Economic development and 15 May 2014 08 August 2014 04 November 2014 10 February 2015 planning working group Municipal infrastructure planning 14 May 2014 06 August 2014 05 November 2014 11 February 2015 working group Climate change, environmental 13 May 2014 05 August 2014 04 November 2014 12 February 2015 affairs and sustainability working group

SALGA Western Cape Provincial governance structures Date of meeting Provincial executive meeting 3 April 2014 11 July 2014 05 December 2014 23 January 2015 12 March 2015 Community development working 14 May 2014 13 August 2014 12 November 2014 18 February 2015 group Municipal trading services working 15 May 2014 14 August 2014 13 November 2014 19 February 2015 group Governance, IR and IGR working 16 May 2014 15 August 2014 14 November 2014 20 February 2015 group Human resource management 15 May 2014 14 August 2014 13 November 2014 19 February 2015 working group Municipal finance working group 14 May 2014 13 August 2014 12 November 2014 18 February 2015 Economic development and 16 May 2014 15 August 2014 14 November 2014 20 February 2015 planning working group Municipal infrastructure planning 15 May 2014 14 August 2014 13 November 2014 19 February 2015 working group Climate change, environmental 15 May 2014 14 August 2014 13 November 2014 19 February 2015 affairs and sustainability working group

35 2.4 SALGA internal oversight structures

2.4.1 Audit committee

The SALGA audit committee was established in terms of the PFMA and the Treasury regulations. The responsibilities of the audit committee have been determined by the national executive committee (NEC). Its modus operandi is outlined in the audit committee charter that is reviewed annually to ensure its relevance. In accordance with the Treasury Regulations 27.1.3 and 27.1.4, the audit committee has been constituted to ensure its independence. All members and the chairperson are outside the public services arena. The composition of the audit committee members is such that all Treasury regulations and audit committee charter requirements are met in terms of the ﬁnancial and legal literacy and the independence of the committee.

The chairperson of the audit committee reports on its activities to the national executive committee on a regular basis. All members give a declaration at each audit committee meeting of any personal or ﬁnancial interests that may conﬂict with their duties in this regard.

The audit committee convenes regularly and is attended by external auditors, the Chief Executive Officer, Chief Financial Officer, the Head of Internal Audit and relevant corporate officials. For the period under review, the audit committee has fulfilled all the requirements in terms of its responsibilities and functions, as per the audit committee charter, the PFMA and Treasury regulations.

Five meetings were held during 2014/15 as per the following dates:

Member Record of attendance 22 May 2014 29 July 2014 19 September 2014 30 January 2015 20 March 2015 Mr T Zakuza - chairperson

Ms OM Matloa - member

Ms P Ndumo - member

Mr N Mhlongo - member

Adv J Ralefatane - member

2.4.2 Performance management and remuneration panel

A performance management and remuneration panel is an advisory body established by the NEC in December 2007 to have an oversight over the implementation of performance management system, policy and procedures, as well as the remuneration policies and practices of SALGA, including the following:

y Review and ensure the proper application of organisational performance management policy and procedures, remuneration philosophies, strategies and other policies aligned to the approved organisational strategy and objectives of SALGA; y The panel is empowered to consider and make recommendations to the NEC on all matters relating to the performance management and remuneration of SALGA; and y Policy frameworks and policy decisions taken by the panel are binding to all administrative structures of SALGA.

The panel comprises members who are external professionals from the private sector and members of the NEC of SALGA. It functions independently of the management structures within SALGA and endeavours to remain and preserve its objectivity at all times.

36 Composition of the committee

The committee is comprised of nine members, including four NEC members elected by the NEC and six independent members from the private sector. The Chief Executive Oﬃcer of SALGA sits on the panel in an ex oﬃcio capacity to present recommendations to the panel. The committee is comprised of the following members:

Committee member Background Meeting dates: 2014/15 05 June 2014 14 March 2015 Cllr Thabo Manyoni SALGA National Chairperson Cllr Nombulelo Hermans SALGA Deputy Chairperson (NEC member) Cllr Nomakhosazana Meth SALGA Eastern Cape Provincial Chairperson (NEC member) Cllr Speedy Mashilo Chairperson of the HR development and collective bargaining working group (NEC member) Mr Chose Choeu Committee chairperson Ms Elizabeth Dhlamini-Kumalo Committee member Dr Fazel Randera Committee member Ms Laura Machaba-Abiodun Committee member Mr William Huma Committee member

Evolving process and role of the panel

The work of the panel is governed by the terms of reference that outline its duties and authority. The panel makes input towards the SALGA priorities, assisting the organisation in improving corporate excellence and the achievement of eﬀective and eﬃcient administration.

The role of the panel includes, amongst others, contribution and making direct input in the following:

Overall review of policies

Regarding policy review processes, the panel is empowered to:

y Conduct regular reviews, of the performance management policy and procedure and application framework at SALGA, to ensure its relevance and proper application; y Conduct regular reviews, as necessary, of the SALGA remuneration philosophy, policy and detailed structure, in the context of salary reviews and structures. This includes checking on the consistency of job evaluation and the relationship between role size and actual pay levels; and y Regular reviews of the SALGA strategy (as updated from time to time) and related annual performance plan, including the impact on other related government strategies, so as to ensure congruence with the organisational performance plans.

Performance

The panel has reviewed and signed oﬀ the performance scorecards of the CEO and senior executive levels and subsequently submitted these for approval by the NEC. The panel oversees the performance assessment process of the CEO and monitors its execution in a process that ensures coaching and aligning of his performance with the organisational strategy.

37 The committee directs the performance assessment of the CEO by reviewing reports and evidence relating to all of the CEO’s key performance areas and related KPIs, through direct engagements of coaching and reviews in intensive sessions, which are held quarterly. In all cases, the panel assesses any requests for deviation and makes its recommendations regarding these to the NEC.

Remuneration

The panel conducts an annual review of all salary adjustments and the overall increase to budget and makes recommendations to the NEC regarding the ﬁnal outcomes thereof. In so doing, the panel considers the integrity of the remuneration policy and framework, and monitors the application thereof. The Panel reviews all annual performance bonus recommendations and calculations, as well as salary levels for all roles, and submits its ﬁnal recommendations for consideration by the NEC. In assessing all remuneration cases, the panel considers related factors including the following:

y Organisational aﬀordability; y Overall organisational performance; y Managing of anomalies and requests for interim increases; and y Consistency of adherence to approved policy and objective job evaluation.

Employee benefits

The panel assisted in the shaping of the employee benefits offering that was implemented in SALGA in April 2014. The panel members shared various best practice ideas to help guide the final proposal and guided the benchmark that was executed to ensure SALGA’s bouquet of benefits compare well with other leading organisations. Benefits that were introduced include:

y A pension fund with monthly employer contributions; y A medical aid beneﬁt with benchmarked employer contribution; y An attractive group risk cover beneﬁt; and y Funeral cover.

Panel oversight, process, and progress

The panel has made an enormous contribution towards the thorough inculcation of the institutionalisation of the individual performance management in an effort to advance effective and efficient administration towards the consolidation of SALGA as a centre of corporate excellence. Excellent progress has been achieved both on performance management and remuneration matters within the organisation.

The panel has conducted a range of oversight activities and has made various decisions during the period under review. Several factors relating to organisational development must be recognised including, amongst others, the following:

y The panel has successfully contributed to the internalisation of performance management in the organisation; y SALGA has maintained high performance outcomes in 2012/13 and 2013/14, thereby resulting in the organisation achieving a clean audit outcome from the Auditor-General and performance rewards being awarded to eligible employees, in recognition of the enhanced organisational performance improvement; y The panel has contributed significantly towards the approval of an employee service benefits offering implemented in April 2014; y Good progress has been made in revising SALGA’s remuneration policy and ensuring that employees are remunerated fairly in accordance with an established benchmarked salary framework for SALGA; and y Ongoing support and coaching by the panel is appreciated to ensure the firm establishment of SALGA as a centre of excellence. 38 2.5 SALGA management

As with all public sector institutions, the political governance structures are supported by an administration. In the case of SALGA, there are both the established national administration as well as nine provincial administrations. Support is not only provided on logistics and the convening of meetings, but also at a technical level. Support is provided to the governance structures to ensure that information and data is collected and consolidated and that proper reports are tabled for consideration at meetings. Technical support is provided to add value to the quality of reports tabled for consideration, by ensuring that the information and data generated by the various governance structures is properly packaged and analysed. In addition, the administration is to ensure that reports and recommendations are appropriately placed in context by considering all legal, ﬁnancial, human resources and other implications. Recommendations are required to be clearly outlined for informed decision-making. The administration is also a generator of reports and recommendations for consideration by SALGA’s governance structures. Therefore, it must facilitate the processing of reports through all SALGA structures, to ensure full and broad participation by the organisation in the decision- making process.

Below is SALGA management both at national and provincial level:

Management team at SALGA national:

Name Designation Directorate Xolile George Chief Executive Officer Office of the CEO Seana Nkhahle Executive Manager Office of the CEO Nceba Mqoqi Chief Financial Officer Finance and Coporate Services Lorette Tredoux Executive Director Governance, IGR and International Relations Rio Nolutshungu Executive Director Municipal Institutional Development Jean De La Harpe Executive Director Municipal Infrastructure Services Antonette Richardson Acting Executive Director Corporate Strategy and Research Phila Xusa (resigned) Executive Director Economic Development and Management Planning Marx Mapuriwa Acting Executive Director Economic Development and Management Planning Mandu Mallane Acting Executive Director Community Development Simphiwe Dzengwa Executive Director Municipal Finance

Management team for SALGA provincial offices:

Name Designation Province Gcinikhaya Mpumza Provincial Executive Officer SALGA Eastern Cape Zwe Ndala (until Feb 2015) Acting Provincial Executive Officer SALGA Free State Zanoxolo Futwa Provincial Executive Officer SALGA Free State Lucky Leseane Provincial Executive Officer SALGA Gauteng Sabelo Gwala Provincial Executive Officer SALGA KwaZulu Natal Thapelo Matlala Provincial Executive Officer SALGA Limpopo Gugu Langa Provincial Executive Officer SALGA Mpumalanga Modibedi Mongwe Provincial Executive Officer SALGA Northern Cape Nancy Ngwenya (until Feb 2015) Provincial Executive Officer SALGA North West Sam Makhubu Provincial Executive Officer SALGA North West Khalil Mullagie Provincial Executive Officer SALGA Western Cape

39 5. SOCIAL RESPONSIBILITY

Social responsibility is an ethical framework which suggests that an entity, be it an organisation or individual, has an obligation to act for the beneﬁt of society at large. Social responsibility is a duty every individual has to perform so as to maintain a balance between the economy and its eco-systems. Organisational sustainability addresses the dynamic interactions among the economic, environmental and social impacts and interactions in the short, medium and long-term. SALGA strives to achieve this through the incorporation of ethical, transparent, responsible and accountable business practices into its operations, the institutional framework and strategies, decision-making, voluntary practices and organisation culture.

The legacy of apartheid education policies has seriously fragmented education systems in poorer communities. Since 1994, education has been at the forefront of government’s priorities. Research has demonstrated that children who participate in early childhood development (ECD) programmes are better equipped socially, emotionally and intellectually. Yet only 43% of children under the age of ﬁve are exposed to an ECD programme. As a result, the NDA has identiﬁed ECD centres in various municipalities across the country that need support.

Mindful of SALGA’s 2010 National Member’s Assembly resolution to support Mandela Day programmes in local government, SALGA entered into a partnership with the National Development Agency (NDA) of the National Department of Social Development in a campaign aimed at improving ECD centres.

In signing the memorandum of understanding with the NDA, SALGA was mindful of the fact that South Africa’s achievement of the millennium development goals (MDGs), in as far as maternal and infant mortality is concerned, depended considerably on:

y Mothers and children accessing a healthcare programme pre- and post-natal; y Children having assess to educational toys; and y Children in ECD centres having access to clean water and a safe environment.

As part of the Mandela Day celebrations on 18 July 2010, a signiﬁcant step was made towards entrenching Mandela Day as a feature of local government when municipalities made a SALGA National Members Assembly (SALGA NMA: 2010) resolution to support Mandela Day. The aim of the day is for everyone to make a diﬀerence by dedicating their time to doing something positive, wherever they live.

As an association mandated by the constitution to represent municipalities, SALGA’s role is not only to ensure that it participates in Mandela Day but also encourages and assists all municipalities to have holistic and integrated Mandela Day programmes as part of their existing community development and engagement programme. Therefore Mandela Day responses cannot be viewed in isolation of legislation governing social development and municipalities. Thus far; SALGA ensures the following: y Guidelines to assist municipalities: In partnership with the Nelson Mandela Foundation and 46664, SALGA annually disseminates SALGA guidelines for local government participation in the Nelson Mandela Day. In addition, national and provincial circulars are sent to municipalities; y Mandela Day activities: Annually, in partnership with municipalities, national and provincial oﬃces embark on Mandela Day activities. These activities have largely focused on the elderly and children; and y In 2014/15 SALGA, in partnership with the National Development Agency (NDA) of the National Department of Social Development, agreed on a campaign entitled SALGA-NDA Adopt-an-ECD-centre. The campaign aimed at improving ECD centres and it was rolled out in all provinces.

40 Below is a list of all the centres that SALGA adopted in all the nine provinces in each province:

SALGA OFFICE EARLY CHILDHOOD CENTRE National Ebenhezer Early Childhood Development Centre Eastern Cape Zwelodumo Early Childhood Development Centre Free State TJ Teleka Early Childhood Development Centre Gauteng Ithemba Labantwana Early Childhood Development Centre KwaZulu-Natal Letty Mkhize Crèche Limpopo Ditlokwe Early Childhood Development Mpumalanga Siyacathula Early Childhood Development Centre Northern Cape Kagisho Early Childhood Development Centre North West Itukise Early Childhood Development Centre Western Cape 1. Khanyolwethu Educare 2. Umzomhle Educare 3. Bongani Educare 4. Masizahe Educare

41 42 PART C: PERFORMANCE INFORMATION

43 1. INTRODUCTION

SALGA’s strategic goals are the focus around which the organisation delivers long-term results. They are the focal point around which resources and eﬀorts of the organisation are harnessed and galvanised towards a common purpose. SALGA recognises that it cannot achieve these goals on its own, and that delivery of its mandate depends on eﬀective intergovernmental relations and dynamic partnerships and stakeholder engagement. Through these relationships and its strategic goals, SALGA will drive service delivery, transformation, growth and development in the sector as a whole.

SALGA has identiﬁed seven strategic goals:

y Accessible, equitable and sustainable municipal services delivered by local government; y Safe and healthy environment and communities; y Planning and economic development at local level; y Effective, responsible and accountable local government for communities; y Human capital development in local government; y Financially and organisationally capacitated municipalities; and y Effective and efficient administration.

In order to achieve these goals in the long-term, SALGA has identified a number of key performance indicators (KPIs) that will allow the organisation to measure its progress towards fulfilling its mandate. SALGA made excellent progress in meeting its KPIs during the year under review, achieving a 98% success rate through attaining 84 of its 86 KPIs. This means that only two KPIs were not achieved – one in the first strategic goal and one in the third strategic goal.

2. PREDETERMINED OBJECTIVES

The Auditor-General of South Africa currently performs the necessary audit procedures on the performance information to provide reasonable assurance in the form of an audit conclusion. The audit conclusion on the performance against predetermined objectives is included in the report to management, with material ﬁndings being reported under the ‘predetermined objectives’ heading in the ‘Report on other legal and regulatory requirements’ section of the auditor’s report.

Refer to page 158 of the report of the Auditor-General, Part E: Annual Financial information.

The SALGA annual report was audited by the Auditor-General. The audit process entailed sampling of performance targets for audit. The sampling varies from one year to another. For 2014/15, the Auditor-General selected goals 1, 2, 4 and 7 as the sample for the performance audit. These goals represent the following portfolios respectively:

y Municipal infrastructure services; y Community development; y Governance and intergovernmental relations; and y Corporate governance and ﬁnance and corporate services.

The four selected goals were audited in-depth inclusive of all the KPIs and targets that comprise these goals.

The performance information 2014/15 reﬂects on SALGA’s performance and achievements in relation to the seven organisational goals, 69 targets and 86 key performance indicators (KPIs) and associated performance targets, as per the approved SALGA Annual Performance Plan 2014/15.

44 This past year brought a signiﬁcant number of challenges and achievements. The organisation entered the year with a deﬁned vision to promote the interest of member municipalities, focusing primarily on three apex priority areas:

y To review the legislative and policy framework within which municipalities operate; y To review the ﬁscal and ﬁnancial management framework of municipalities; and y To build municipal capacity.

Much progress has been made in the delivery of the SALGA’s mandate and goals.

2.1 Highlights of Performance per SALGA Mandate

2.1.1 Lobby, advocate and represent municipalities

SALGA’s members appreciated the increased effectiveness and efficiency of SALGA’s support and representation of municipalities in intergovernmental structures, including the NCOP. The designation of the part-time representatives to the NCOP improved the visibility of SALGA in the NCOP and provided consistency in terms of representation, advocating and lobbying for the interests of local government. At the strategic planning session of the NCOP and the session of committees held in August and September 2014, the part-time representatives were a constant voice, advocating for a review of legislation impacting negatively on local government. NCOP has since agreed to address this matter and has called on SALGA to provide detailed information on legislation that impacts negatively on local government. As the NCOP was newly constituted in 2014, this represents significant progress in building relationships with this key institution to address the constraints hampering local government’s performance

SALGA lobbied at the 2014 budget forum for R139 000 000 towards a municipal demarcation transition grant. The grant is to subsidise additional institutional and administrative costs arising from boundary changes to take effect subsequent to the elections of 2016. Subsequent to the budget forum, CoGTA has put forward further demarcation proposals to the Municipal Demarcation Board (MDB) that will address the socalled non-financially viable municipalities. More work has to be undertaken to lobby for further financial and technical support for these ‘new’ municipalities.

The infrastructure grant review continues to review ways to maximise existing resources via reforms to capital grants to municipalities, rather than seeking solutions that require additional funds or signiﬁcant reforms to operating or capacity building grants. This collaborative eﬀort between the National Treasury, the Department of Cooperative Governance (DCoG), the Financial and Fiscal Commission (FFC), the Department of Planning Monitoring and Evaluation (DPME) and SALGA engaged all relevant stakeholders at national (primarily sector departments) and local government levels to ensure full consultation.

y The current grant system’s emphasis on new infrastructure has been at the expense of the sustainable investment in existing infrastructure; y An unintended impact of the emphasis on expanding infrastructure networks has been the failure to suﬃciently maintain and renew existing municipal infrastructure. Increasingly this has resulted in service failure; and y Asset management practices over the life cycle of grant funded assets need to be incentivised and enforced so that citizens can rely on functional municipal infrastructure without electricity blackouts, potholes or taps running dry.

The review recommended that the conditions of the grant system be amended so that renewal can be funded from grants. This will of course have a positive ﬁnancial impact on the sustainability of municipal infrastructure.

45 2.1.2 Employer role

SALGA continues to build on its strengths as an effective employer organisation and in the day to day provision of advisory services to municipalities. In the recent past there has been increased visibility in the role played by SALGA in representing municipalities in dispute resolution and misconduct cases. A number of cases were recorded during the year under review, including conciliation, litigation and arbitration. Effective legal representation by SALGA resulted in the long standing wage curve dispute being finalised by the Labour Appeal Court in favour of affected municipalities. The same can be said of advice provided to municipalities on a range of labour relations and human resource matters.

Below is a table on representation on different matters:

Province Number of Disciplinary Conciliations Arbitrations municipalities hearings and represented grievances Eastern Cape 32 25 190 118 Free State 8181026 Gauteng SALGA Gauteng due to available capacity doesn’t represent municipalities in Conciliations and Arbitrations KZN 52 33 63 78 Limpopo 13 52 54 46 Mpumalanga 18 26 17 11 Northern Cape 32 17 8 17 North West 23 81 74 56 Western Cape 30 180 118 40 Total 208 432 534 392

The impact of this favorable ruling is that municipalities will be saved from retrospective wage curve back payment on the one hand and, on the other, municipalities will be enabled to focus their eﬀorts on concluding outstanding job evaluation and wage curve implementation.

Two hundred and seventy four municipal employees across provinces were trained on TASK job evaluation (JE). The trained employees will serve in the various JE unit structures that will ﬁnalise JE in all municipalities.

2.1.3 Building leadership and technical capacity of the sector

SALGA has worked with the Department of Science and Technology (DST) and the Council for Scientific and Industrial Research (CSIR) in building technical skills in the waste management sector through the development of formal qualifications on waste management. The sector did not have a dedicated qualification and as a result, two postgraduate degrees on waste management were developed: the BSc Hons (Waste Management) through the University of North West and MSc (Waste Management) through the University of Natal. The first intake of students was in 2015 for the BSc Hons and the MSc will commence with the enrolment in 2016 at the University of Natal.

The knowledge sharing and advocacy in renewable energy and energy efficient innovations activities have been undertaken mainly in the form of workshops. Most of these knowledge sharing workshops were structured according to the priorities identified in the SALGA renewable energy and energy efficient (RE EE) strategy for local government, and in particular on:

y Institutionalisation of the energy mandate (energy strategies); y Municipal own energy eﬃciency; and y Energy access for all.

46 Around 120 municipalities participated in different energy efficiency and knowledge sharing innovations on energy efficiency and renewable energy.

The roll out of the small towns regeneration training programme achieved the following:

y Created an awareness among municipal officials on why and how small town regeneration should be prioritised as vital spaces for regional and local economic development; y Provided a platform for economic development practitioners to share international and national good practice on implementing sustainable and meaningful small town regeneration approaches; y Contextualised small town regeneration as a systematic and holistic approach covering areas such as governance, infrastructure provision and maintenance and financial management, which must find expression in the overall integrated development plan of municipalities; and y Equipped participants with a practical approach of identifying stakeholders, defining their roles and meaningful participation.

In March 2015, 51 local leaders from across the country were given sponsored entry to Development & Management of Local Government, an NQF level 6 programme executed by WITS.

The launch and establishment of the SALGA Centre for Leadership and Governance (SCLG) is another milestone for SALGA. The SCLG will develop municipal leaders who will drive a development agenda through active reﬂection and thought leadership in the sector. The medium- to long-term implementation of coherent learning and knowledge programmes through the SCLG should result in:

y Improved audit reports from the Auditor-General; y Improved strategic and policy choices or trade-oﬀs on developmental objectives and service provision; y Enhanced sustainability and evidence based decision-making at a local level; and y Improved decision-making at all spheres of government as local leaders take up national and provincial leadership positions.

The SCLG has secured over R14million in funding from the LGSETA to develop leadership capacity in the areas of governance, media and stakeholder engagement and ethics.

The Centre is in the process of concluding peer learning agreements with its counterparts in Malawi and Namibia toward building the capacity of local government associations in the SADC Region.

SCLG strategic interventions have seen strategic inputs made to the LGSETA Strategic Planning, the Buﬀalo City Metropolitan Municipality Mayoral Lekogtla and Nelson Mandela Bay Metropolitan Municipality Mayoral Induction.

SALGA also facilitated training (portfolio based) and leadership development programmes for councillors and senior municipal officials, benefiting 1 149 officials in the following:

y Portfolio based councillor development programme; y Senior manager induction programme; and y Leadership development workshops.

47 Below is a breakdown of all senior management induction and councillor induction programmes conducted:

Senior Councillor Leadership Councillor induction management development development programme induction Province programme workshop programme 2011 2013 2015 2014/15 2014 /15 2014/15 Eastern Cape 1017 41 15 461 28 24 Free State 761 96 - 300 34 - KwaZulu-Natal 1670 131 - 524 62 96 Gauteng 1265 - - 178 74 - Limpopo 1318 97 - 349 36 - Mpumalanga 736 20 - 236 33 - Northern Cape 431 - - 135 14 - North West 615 13 - 246 25 132 Western Cape 585 12 - 54 20 - Total Trained 8398 410 15 2483 326 252

Other capacity building programmes conducted:

Local democracy and local democracy Executive municipal leadership Province and governance learning programme development programme (EMLDP) (LODLOG) Eastern Cape 382 Free State -63 Kwa-Zulu-Natal 2 124 Gauteng 2 123 Limpopo 5 102 Mpumalanga 271 Northern Cape 6 148 North West - 119 Western Cape -- Total trained 20 832

2.1.4 Support and advisory role

SALGA developed and launched the multidisciplinary municipal audit support programme (MASP) which is based on four pillars: leadership, governance, financial management and institutional capacity. SALGA launched MASP to assist all municipalities to maintain good audit outcomes (unqualified with no findings or with findings) and to improve poor audit outcomes (disclaimer, adverse, qualified and audits not finalised) by focusing on the four pillars. The MASP is placing particular emphasis on those municipalities with adverse/disclaimer opinions as well as those municipalities whose audits were not finalised by the legislated deadline – these are called “red zone” municipalities. For the year under review, 22 municipalities in the red zone were assisted of which nine have improved and migrated from the red zone.

Transversal support in the form of workshops for councillor capacity building, revenue management/enhancement, internal audit support and audit action plan guidance was provided.

48 In addition, two transversal audit issues were addressed in Limpopo through SALGA’s eﬀorts and impacted positively on audit outcomes of all municipalities in the province:

y SALGA wage curve agreement (the national oﬃce facilitated the resolution of this matter); and y Provincial roads matter (Limpopo provincial oﬃce facilitated the resolution of this matter).

SALGA also ﬁnalised an agreement with research institute PARI to perform research into the red zone municipalities. The number of red zone municipalities has reduced from 79 in 2012/13 to 60 in 2013/14.

Water services master classes were conducted during the year. These dynamic, practical and interactive sessions, which included municipal and sector leaders, demonstrated the value of improved sharing of municipal data and aligned benchmarks and targets across the range of MBI water services performance improvement eﬀorts.

As part of a wider package of interventions, SALGA is undertaking to support municipalities with mining activities. As a result, guidelines were developed to assist municipalities to improve their relationship with mining houses in the delivery of social/ rental housing. The guidelines, which plainly set out the legislation and related responsibilities of the mining companies towards the municipality and community, will serve to strengthen the position of municipalities so that they engage more ﬁrmly with mining companies and leverage private sector resources for the achievement of development priorities as set out in the integrated development plan (IDP).

As part of the BZK programme to improve the capacity of municipalities to deliver social and rental housing, SALGA undertook a number of projects in 2014/15, targeting the 13 municipalities which have been selected for the delivery of social housing. A benchmark exercise was undertaken, which assisted those municipalities to assess their readiness for implementation, as well as the strengths and weaknesses. The workshops facilitated real information sharing and peer learning for social housing oﬃcials.

For three metro municipalities, the support was taken one step further by providing hands-on assistance. The technical assistance to eThekwini, Nelson Mandela and Mangaung metros differed in that support to one was related to policy, another to strategy, and a third to project implementation. The interventions in Nelson Mandela Bay and Mangaung have provided the necessary technical assistance and momentum to get the municipal rental housing strategy and policy off the ground. In eThekwini, SALGA convened a team of experts (from NASHO, HDA and independent social housing experts) to visit a particular site for a planned social housing project in Warwick Junction in the city centre. The interaction enabled metro rental housing officials to gain better insight into some of the practical implementation issues related to the project: building design, target beneficiaries, placement of building on site, integration into surrounding community, and property management. The overall impact of these activities is that these municipalities are strengthened to deliver social housing, specifically as a result of technical assistance and advice provided by SALGA and peer learning forums orchestrated by SALGA.

On electricity matters, SALGA engaged with Eskom concerning a framework agreement which would cover all municipalities in whose area Eskom reticulates electricity, and serve as a measure towards preparing for service delivery agreements. However, instead of a framework, SALGA and Eskom agreed to enter into a memorandum of understanding (MoU) to address the various industry and operational challenges within the sector. An MoU was signed on 30 October 2014 with the purpose of engaging in a process of active partnering to establish a cooperative and collaborative working relationship between Eskom, SALGA (and ultimately, municipalities) to work towards the long-term sustainability of electricity reticulation. The MoU highlights electricity distribution industry issues in general, and speciﬁc operational challenges impacting delivery of electricity to end users.

Performance Management Support was also provided to municipalities. The overall objective of the Municipal PMS Support Programme is to provide hands-on support & assistance to capacitate municipalities and enable them to develop and implement Performance Management Systems (PMS).

Various support initiatives have been implemented through:

y Assessment of PMS functionality in municipalities to measure the level of compliance with PMS legislation & regulations; y PMS support plans based on the AG’s Findings, PMS Assessments, Human Capital Profiling & MASP; 49 y Workshops held to create awareness, deepen knowledge and understanding for effective implementation of PMS; yReview of SDBIPs and ensure that performance agreements/plans of the municipal manager and senior managers are aligned to measurable objectives as approved in the SDBIPs and the Budgets; ySupport municipalities to develop and implement employee performance monitoring and review systems; yDevelopment and review of PMS policies/frameworks; yDevelopment and recommendation of processes & tools of cascading PMS to employees below senior managers; yTraining of municipal PMS role players (cllrs and officials) to capacitate them with PMS capabilities.

Table below shows the number of municipalities supported:

Province Total number of municipalities Number of municipalities supported Eastern Cape 45 24 Free State 24 15 Gauteng 12 7 KwaZulu-Natal 61 18 Limpopo 30 19 Mpumalanga 21 13 Northern Cape 23 10

North West 32 9 Western Cape 30 7 Total 278 122 Some municiplities have been supported more than once on different initiatives

2.1.5 Strategic profiling

SALGA’s enhanced proﬁling of local government in continental and global forums and platforms, as well as strengthening local governance and decentralisation globally, has gained increasing traction during the period under review. SALGA also played a critical role in re-unifying the United Cities and Local Governments of Africa (UCLGA) and is currently leading the Southern African chapter of the organisation, particularly to strengthen local democracy in our neighbouring countries and support the establishment of local government associations in our region.

Our role in the UCLG and Commonwealth Local Government Forum (CLGF), among others, has also been entrenched. The pursuit of democratic local government in our neighbouring countries and abroad is a key mandate of the 2011 National Conference.

2.1.6 Knowledge and information sharing

To continue serving as the main hub of local government knowledge and intelligence, SALGA developed a knowledge hub which aims to provide users with current and local government knowledge. The municipal barometer is also up and running. The barometer was uploaded with time series data on demographic trends, economic growth, service delivery and municipal ﬁnance data.

In the sphere of knowledge exchange and learning events, SALGA facilitated 20 learning events during the ﬁnancial year.

50 The table and chart below provide a broad overview of the audited organisational performance over the 12-month period from 1 April 2014 to 31 March 2015.

Table 1: 2014/15 annual performance in terms of the six SALGA mandates

Mandate Total Achieved Percent Not Percent (%) achieved (%) Lobby, advocate and represent 11 11 100 - - Employer body 7 7 100 - - Capacity building 10 10 100 - - Support and advice 26 26 100 - - Strategic proﬁling 1 1 100 - - Knowledge and information sharing 13 11 85 2 15 Other (internally focused) 18 18 100 - - Total 86 84 98 2 2

Table 2: 2014/15 annual performance in terms of the three APEX priorities

APEX priority Total Achieved Percent Not Percent (%) achieved (%) AP1 - Review of the legislative and policy framework 4 4 100 - - AP 2 - Review of the ﬁscal and ﬁnancial management framework 2 2 100 - - AP 3 - Improved municipal capacity 36 34 94 2 6 Total APEX priorities 42 40 95 2 5 Other 44 44 100 - - Total 86 84 98 2 2

Table 3: 2014/15 Annual performance in terms of the seven strategic goals

KPIs Achieved Percent Not Percent Strategic goal (%) achieved (%) 1. Local government delivering equitable and sustainable services 9 8 89 1 11 2. Safe and healthy environment and communities 7 7 100 - - 3. Planning and socio-economic development at local government 17 16 94 1 6 level 4. Effective, responsive and accountable local governance to 11 11 100 - - communities 5. Human capital development in local government 16 16 100 - - 6. Financially and organisationally capacitated municipalities 7 7 100 - - Externally focused goals 67 65 97 2 3 7. Effective and efficient administration 19 19 100 - - Total KPIs iro 2014/15 SALGA annual performance plan 86 84 98 2 2

51 2.2 Highlights of performance per SALGA strategic goals

2.2.1 Goal 1: Local government delivering equitable and sustainable services

The infrastructure grant review continues to review ways to maximise existing resources via reforms to capital grants to municipalities, rather than seeking solutions that require additional funds or signiﬁcant reforms to operating or capacity building grants. This is a collaborative eﬀort between the National Treasury, the Department of Cooperative Governance (DCoG), the Financial and Fiscal Commission (FFC), the Department of Planning Monitoring and Evaluation (DPME) and relevant stakeholders at national (primarily sector departments) and local government levels.

A decision was made to introduce variety in the type of grants going to different municipalities. This will impact on the long- term evolution of the grant system by institutionalising a differentiated approach between metropolitan or non-metropolitan municipalities, as well as the different circumstances or performance of rural and urban municipalities and various categories in between. Over time, even greater discretion will be given to high-performing municipalities, and reforms should move towards a single, loosely conditioned grant for urban cities.

The review has deﬁned numerous guiding principles as well as identiﬁed a number of reforms for immediate implementation in the 2015 MTEF. These include:

y Establishing a greater variety in the type of grants going to diﬀerent municipalities; y The merging of a single public transport grant for cities; and y The merging of the municipal water infrastructure grant, water services operating subsidy, and rural households infrastructure grant.

Recommendations for reforms

y Merge the urban settlements development grant for metros, the municipal infrastructure grant for secondary cities and the integrated national electrification programme for both into a consolidated integrated urban development grant (IUDG) for urban municipalities. This will allow cities greater flexibility to meet challenges that require integrated responses; y Base the public transport infrastructure grant on formulae and integrating it with the operational subsidy grant for greater flexibility in public transport grants; and y Consolidate various overlapping water and sanitation grants into one grant. This will reduce administrative overlap at national and municipal levels.

Through participation in the infrastructure grant review process, SALGA ensured that the issue of renewal (refurbishment, rehabilitation and overall asset management) was included in the scope of the review. There are more than 100 municipalities in the towns and small local municipalities category (mostly in the Free State, Northern Cape and Western Cape) that do not feature in SIPs or other priority programmes and receive low infrastructure grant allocations dues to relatively low backlogs. Sustainable asset management, particular of older infrastructure in established settlements, is a major challenge for such areas as well as ﬁnancing large ‘lumpy’ infrastructure investments. Conditions for grants to these will be adapted so that grant funds can be used for the renewal of existing assets, rather than limited to the creation of new infrastructure, as is currently the case. Renewal funding will be conditional on credible asset management maintenance plans and proof of proper maintenance.

Achievements

Water, electricity and waste management services

y Water services master classes were conducted that demonstrated the value of sharing of municipal data. The master classes also aligned benchmarks and targets across the range of municipal benchmarking initiative (MBI) water services performance improving efforts; 52 y Best practices in the delivery of water and sanitation was shared with KZN water services authorities; y An action plan on the local government contribution towards the implementation of the national water resources strategy was developed; y Funding for the development of a framework to define the role of local government in the catchment management agencies was secured from the Kingfisher programme (a joint South African-Dutch strategic initiative in water management); y An action plan to mitigate water interruptions was developed with Rand Water and Gauteng municipalities; y Support was provided to Mopani to develop an action plan to address various delivery mechanisms, understand cost structures and separate bulk and reticulation infrastructure; y The transfer of technical skills from Umgeni to Ugu was facilitated; y A memorandum of agreement between SALGA and Rand Water was signed, in terms of which a water conservation/water demand management (WC/WDM) fund was established; y A contract for water conservation and demand management performance was developed and launched. This was a partnership with the Strategic Water Partnership Network (SWPN) and GIZ; y Comprehensive comments on their bulk water tariffs was developed and submitted to all water boards; and y The municipal water services benchmarking report and the water services league was launched.

Human settlements

y Guidelines were developed to help municipalities improve their relations with mining houses in the delivery of social/rental housing; y A benchmark exercise for the delivery of social and rental housing was undertaken with 13 municipalities, as part of the BZK programme; y As part of the benchmark exercise, hands-on assistance was provided to eThekwini, Nelson Mandela and Mangaung metros on policy, strategy and project implementation; y SALGA’s national draft policy on backyard rental was supported by the Human Settlements Technical Ministers and Members of Executive Councils Meeting (MINMEC); y SALGA lobbied the National Department of Human Settlements to allow USDG funds to be used to provide bulk and connector services for informal settlement upgrading projects and backyard rental upgrading schemes; y SALGA conducted research on the Northern Cape’s district accreditation model. The finding is that the model ensures better service for communities in rural areas in low-capacity local municipalities; y SALGA’s advocacy and lobbying on behalf of metros with regard to the municipal human settlements capacity grant (MHSCG) resulted in this grant not being entirely lost to the metros, although it was significantly delayed and amended. Continued SALGA pressure also resulted in the grant being disbursed before the end of the financial year; y Three knowledge-sharing workshops on the difficult and complicated issues of evictions and illegal occupation of land and buildings were held in KZN, Western Cape and Eastern Cape. Fifty five municipalities participated in the workshops, which were held in collaboration with the Socio-Economic Rights Institute of South Africa (SERI); and y SALGA engaged with the National Department of Human Settlements (NHNR) on its plan to place a moratorium on the use of municipal waiting lists for the allocation of completed houses, and to phase out the municipal housing waiting lists. This would have had a detrimental effect on local service delivery. As a result of SALGA’s representations, it was decided that further consultation was needed to address the issues involved.

53 Roads and transport

y Municipalities were engaged on their role in promoting transport, including roads; y A position paper regarding the transfer of freight from road to rail was discussed with stakeholders in the transport sector, including municipalities, and tabled at SALGA national executive committee (NEC); y SALGA shaped the direction of the review of the Gauteng e-toll system; y Together with other stakeholders, SALGA developed the latest national road traﬃc law enforcement code; and y In partnership with the Department of Transport, SALGA recruited, placed and trained transport planning interns with selected municipalities.

Waste management

y Knowledge-sharing sessions were held in all provinces to assist municipalities to learn from each other on various initiatives for attaining a cleaner environment in their areas; y SALGA assisted Johannesburg and Tshwane with a programme to minimise food waste. The project was done in collaboration with the Department of Trade and Industry (the dti) and the United Nations Environment Programme (UNEP); y A web-based tool to guide municipalities in choosing the relevant alternative technology for turning waste into energy was developed by SALGA in collaboration with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), GreenCape, the Department of Environmental Affairs (DEA) and the South African National Energy Development Institute (SANEDI). y Together with the Department of Science and Technology (DST) and the Council for Scientific and Industrial Research (CSIR), SALGA has achieved the introduction of two postgraduate degrees specifically on waste management through the Universities of North West and Natal. The first intake of BSc Hons students was in 2015, while an MSc will commence in 2016; y A peer sharing session was conducted for municipalities based on the differentiated approach for waste management support. Support was also provided by the DEA; y The municipalities of Gamagara (Northern Cape), Ratlou (North West) and Ndwedwe (KZN) were assisted with the development of integrated waste management plans; and y A rigorous integrated operational and partial capital costing model was developed for municipal services, including storm water, roads and municipal health services. The costing will be used to engage with National Treasury, among others, to lobby for funding instruments.

Electricity

y An MoU was signed with Eskom. Its purpose is to establish a cooperative and collaborative working relationship between Eskom, SALGA (ultimately municipalities) to achieve the long-term sustainability of electricity reticulation. The partnership will address operational challenges impacting delivery of electricity to end users and distribution issues in general; y A strategic relationship between SALGA and the Intensive User Group of Southern Africa (EIUG) has resulted in access to various research projects in the electricity and energy sector; y SALGA represented municipalities and advocated municipal issues regarding cable theft at the 2nd annual cable theft summit; and y Provinces were supported in the implementation of the diﬀerentiated approach through the credit control and debt collection policy and electricity local regulation guidelines.

54 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Variance Variance achieved ) achieved and under (both over Not applicable Not applicable 2014/15 Targeted stakeholders were Targeted engaged on bulk and municipal infrastructure funding through local government infrastructure 2015. by 31 March review grant tabled comments and SALGA the budget to recommendations of the local on the review forum government infrastructure grant. Support peer sharing to and sustainable municipallearning for services by was provided provision 2015.31 March The key was on issues of focus and electricity. waste water, Targeted Targeted stakeholders engaged on bulk and municipal infrastructure funding through local government infrastructure grant by review 2015. 31 March Support peer to sharing and learning sustainablefor municipal services by provision 31 March 2015. Engage targeted stakeholders on the position on OLG bulk and municipal infrastructure funding (including housing and roads) Facilitate support Facilitate municipalities forto sustainable service (tradingprovision services) Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result infrastructure grant addressesreview bulk and municipal infrastructure funding (including housing and roads) supported on institutional arrangements for sustainable service provision KPI number number 1 1 1 government Local 1 4 2 Municipalities Goal Target Goal Target Below are detailed performance results as per the key performance indicators in the 2014/15 annual performance performance plan: indicators as per the key detailed performance results are Below 55 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Variance Variance achieved ) achieved and under (both over Not applicable Not applicable 2014/15 Support on delivery was facilitated of social housing including support to funding approach backyarder interventions by 2015. 31 March to developed Guidelines were improveassist municipalities to with miningtheir relationship houses in the delivery of social/ housing. rental lobbied the National SALGA Department of Human amend the USDGSettlements to policy explicitly allow USDG to bulk provide be used to funds to and connector services as as well internal bulk. were Consultations also conducted in Mpumalanga Cape provinces.. Western and extend to the USDGA proposal additional local municipalitiesto (secondary cities), reticulation services settlement informal for as projects as well upgrading upgradingbackyard rental schemes was developed. Research on the cost of serviceResearch including cost drivers for provision, management wasenvironment conducted 2015 by 31 March Facilitate support Facilitate on delivery of social housing including tofunding approach support backyarder interventions by 2015 31 March Research on the costResearch of service provision, including cost drivers environment for management conducted by 2015 31 March Facilitate support Facilitate municipalitiesto rental in aﬀordable units Conduct research on the cost of service provision, including cost drivers environmental for management Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result supported address to social housing and backyard interventions cost of service includingprovision environmental management cost drivers KPI number number 1 3 3 Municipalities 1 3 4 into Research Goal Target Goal Target

56 status Performance Not achieved variance Reason for Due to disagreements between SALGA and Eskom the memorandum of understanding (MoU) was only on 30signed October 2014 littlewhich gave provinces time for the monitor to implementation. is rolled Target the next to over ﬁnancial year Not applicable Achieved Not applicable Achieved Variance Variance achieved ) achieved and under (both over Under achieved Not applicable Not applicable 2014/15 SALGA entered into an into entered SALGA with Eskom towards agreement industryaddressing challenges, in the absence of framework A memorandum ofagreement. the by understanding was signed parties at the NEC lekgotla on 29-30 October 2014 Knowledge cleaner sharing for in all was facilitated environment 2015 by 31 March nine provinces Relevant stakeholders Treasury, National (municipalities, and FFC) engaged were CoGTA process review grant through on the funding options for by 31 Marchinfrastructure renewal 2015 Support to provinces agreement monitor withprocesses Eskom by 2015 31 March Knowledge cleanersharing for environment byfacilitated 2015 31 March Relevant stakeholders engaged on the funding options infrastructurefor by renewal 2015 31 March Support monitoring of framework processes agreement with Eskom Knowledge cleanersharing for environment Engage stakeholders options on the OLG infrastructurefor fundingrenewal and(refurbishment replacement) Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result of framework isagreement monitored cleaner environment municipaladdress priorities funding options infrastructurefor renewal and(refurbishment takenreplacement) account in LG into infrastructure grant process review KPI number number 1 5 5 Implementation 1 6 6 for Campaign/s 1 7 7 position on OLG Goal Target Goal Target

57 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Variance Variance achieved ) achieved and under (both over Not applicable Not applicable

2014/15 Support on was facilitated regulatory (authority) for role municipal infrastructure services including housing (accreditation) and transport 2015. by 31 March Roads and transport with municipalitiesConsultations conducted in orderwere of engage on the role to municipalities in promoting transport in their including roads organisational structures. Human settlements on research Conducted the Northern Cape district understand model to accreditation the districthow well model of make worked, and to accreditation on whetherrecommendations the same model should be rolled Workshops out in other provinces. held in KZN,were Eastern Cape, Gauteng and Northern Cape to the ﬁndings and discuss itsshare application in those provinces. An organised local governmentAn organised prioritiseposition paper to use of roads instead freight of rail for by and approved was developed committeethe national executive 2015 after by 31 March of SALGA consultation with all stakeholders including municipalities in the transport sector Support on facilitated regulatory (authority) municipal for role infrastructure services including housing and(accreditation) transport by 2015 31 March OLG position paper OLG todeveloped prioritise use of rail of instead freight for by 31 Marchroads 2015 Support regulatory to (authority) function municipal andfor infrastructure services housing (incl. and transport) OLG position paper OLG todeveloped prioritise use of rail of instead freight for roads Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result supported in their authority function municipal servicesfor housing(incl. andaccreditation transport) developed todeveloped prioritise use of rail of instead freight for roads KPI number number 1 8 8 Municipalities 1 8 9 position paper OLG Goal Target Goal Target

58 2.2.2 Goal 2: Safe and healthy environment and communities

A key priority for South Africa is the development of sustainable human settlements where social, health, economic and environmental factors are addressed in an integrated manner. Local government has a crucial role to play in this regard. Hence, there is need to focus on safe and healthy environments and communities. This goal encapsulates the various interventions that are implemented to build safe, healthy and environmentally-aware communities. It also incorporates a speciﬁc focus on eradicating poverty, inequality, marginalisation and xenophobia at a municipal level.

Achievements

Climate change

y SALGA partnered with the Department of Environmental Affairs (DEA) to develop and implement the local government support (LGS) strategy, aimed at establishing the status of performance of environmental management in local government, as well as articulating the barriers and challenges that impede good performance of environmental functions in municipalities. à Fifteen municipalities were selected for immediate support and intervention. The choice was based on their location in ecologically sensitive areas and their limited capacity to deal with current environmental issues and threats; à A local government support task team (LGSTT) was formed. à In October 2014, the first local government support municipal workshop was convened in Ekhurhuleni. It was attended by the 15 municipalities and initiated a detailed profiling to establish the nature and range of challenges and develop intervention plans; and à Key strategic outputs of the LGS strategy are: – a legal protocol to define the range and scope of functions to be performed by municipalities; – a costing framework to attempt to define the costs of performing such functions and provide indicative funding requirements; and – a set of performance indicators to assist municipalities and other authorities to measure the progress of municipality in addressing environmental sustainability. à A framework for specific climate change support to municipalities was developed by SALGA and distributed to provinces; and à Climate change workshops were held with targeted municipalities in six provinces (Free State, Mpumalanga, Limpopo, North West and KwaZulu-Natal).

Energy efficiency/renewable energy

y About 120 municipalities took part in knowledge-sharing activities on energy efficiency and renewable energy; y A web platform (http://www.cityenergy.org.za) was developed between SALGA and Sustainable Energy Africa (SEA) to disseminate information to municipalities on energy efficiency and renewable energy innovations; y A common position on small scale embedded generation was approved by SALGA national executive committee. This provides a framework to ensure the safe and sustainable development of roof top panels and other embedded technologies; y SALGA is providing comments on the National Energy Regulator of South Africa’s (Nersa) consultation process to develop a set of rules on small scale embedded generation; y SALGA moderated a session during the National Biogas Conference 2015 on energy generation from biogas in municipal waste water treatments plants and landfill with the objective of getting projects off the ground; and y With support from GIZ, a biogas potential assessment tool has been developed and is being used by municipalities and 59 DoE to identity feasible projects in municipal waste water treatment plants. These projects will reduce the electricity consumption in the water works, resulting in more sustainable municipalities. With the aid of this tool, several municipalities have already assessed the biogas potential in their waste water treatment plants and identified feasible projects.

Disaster management, migration and municipal health services

y SALGA partnered with the National Disaster Management Centre to build capacity among municipalities in disaster risk reduction. This included legislative requirements, how to declare disasters and how to access municipal disaster grants; y SALGA signed a memorandum of understanding (MoU) with the International Organisation on Migration (IOM) to build capacity among municipalities in migration. The interventions will help municipalities in planning and managing migration; and y The draft generic by-laws for municipal health services (MHS) were developed and circulated to provincial oﬃces. Case studies on four MHS projects were documented for publication.

Sports, libraries and cemeteries

y A libraries project was piloted with the National Library Services to provide computers to municipal libraries; y A memorandum of understanding (MoU) with the South African Sport and Olympic Committee (SASCOC) was signed to provide support in the development of sport and recreation in municipalities; and y SALGA facilitated workshops on integrating poverty eradication in municipal programmes.

Transversal issues

y The outcomes report of the SALGA women’s commission (SWC) national lekgotla was adopted and a working session for a draft programme of action was convened; y A workshop for the development of guidelines on youth development for local government was convened with municipalities. The guidelines will provide clear actions and approaches to youth development for local government; y SALGA convened the municipal dialogue on HIV and AIDS. Its purpose was: à to present and reflect on SALGA’s initiatives on mainstreaming HIV and AIDS in local government; à to share experiences and understanding on the functioning of AIDS councils as a way of coordinating the fight against HIV and AIDS; and à To present and discuss SALGA’s proposal for strengthening local government response to HIV and AIDS. y SALGA hosted the disability reference group round table meeting, attended by the Departments of Social Development (DSD) and Cooperative Governance and Traditional Affairs (CoGTA). As a result of the attendance of the national DSD, SALGA is now part of the reference group for the disability policy; y Save the Children hosted an end-of-project workshop on mainstreaming the rights of children and development of action plans, which was attended by SALGA and pilot municipalities; and y A national seminar was held to present the concept paper to define local government approach to providing services to older persons.

60 status Performance variance Reason for Variance Variance achieved) and under (both over Not applicable Not applicable Achieved .Not applicable Not applicable Achieved Not applicable Not applicable Achieved 2014/15 Municipal knowledge sharing and advocacy energy in renewable efficient innovationsand energy been undertakenactivities have of workshops bymainly in the form 2015 31 March Targeted municipalities were Targeted supported participate to in strategic change and climate environment 2015. by 31 March initiatives change climate A framework for support municipalities was to with the intentiondeveloped of establishing criteria for selecting be municipalities to supported change on climate outinterventions the roll through IDP toolkitof the lets respond and knowledge/ raising awareness workshops Scenario-based capacity building risk disaster for programme management was developed. workshops were Training byconducted in all the provinces 2015 31 March Municipal sharing and advocacy in energyrenewable efficientand energy innovations by 2015 31 March Targeted Targeted municipalities supported to participate in strategic andenvironment changeclimate by initiatives 2015 31 March Scenario-based capacity building programme fordeveloped municipalimproved disastersplanning for 2015 by 31 March Facilitate sharing Facilitate and promotion of innovation in energyrenewable efficiencyand energy Targeted Targeted municipalities supported to participate in strategic environmental management and changeclimate initiatives Improved onprogramming managementdisaster and risk reduction Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result and energy efficiencyand energy innovation and benefits thereof and promoted shared management and changeclimate advocated strategies and municipalities supported government capacity riskon disaster reduction KPI Number number 2 9 10 Renewable energy 2 9 11 Environmental 2 11 12 local Improved Goal Target Below are detailed performance results as per the key performance indicators in the 2014/15 annual performance performance plan: indicators as per the key detailed performance results are Below 61 status Performance variance Reason for Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable Achieved Not applicable Not applicable Achieved Not applicable Not applicable Achieved Not applicable 2014/15 Stakeholders were lobbied on theStakeholders were implementation of the monitoring forand evaluation framework disastermunicipal compliance to risk 2015 management by 31 March Capacity building interventions in all provinces facilitated were a 2015 through by 31 March memorandum of understanding with the International Organisation on Migration (IOM) . workshops were Training conducted in all the nine provinces. Local government’s position on government’s Local municipal health with inputs on the municipal funding model municipal health servicesfor and tabled atwas developed the National Municipal Health and municipal Forum Manager’s health summit held on 25-26 June 2014 Model for improved community improved Model for in all provincesfacilities was piloted 2015. by 31 March for framework developed SALGA sportcemeteries, and recreation as communityand well libraries. in piloted These frameworks were An MoU with SASCOC provinces. pilot the to in order was signed sport framework and recreation Stakeholders lobbied on implementation of the M&E framework municipalfor DRMcompliance to by requirements 2015 31 March Capacity building interventions in allfacilitated by provinces 2015 31 March Local governmentLocal position and funding municipalmodel for health services relevanttabled to stakeholders by 2015 31 March Model for improvedModel for community facilities in all provincespiloted 2015 by 31 March Stakeholder consensus on monitoring of disaster management and risk practicesreduction Enhanced capacity of local government to deal with population migration Local governmentLocal position and funding model on municipal health tabled with stakeholders Model for improvedModel for community facilities local governmentfor andadopted implemented Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result planning on disaster risk reduction of local government in dealing with issues migration local government on funding of health services community facilities local governmentfor piloted KPI Number number 2 12 13 municipal Improved 2 13 14 capacity Improved 2 14 15 Clear position of 2 15 16 improved Model for Goal Target

62 2.2.3 Goal 3: Planning and economic development at a local level

Poorly developed municipalities continue to suﬀer from a lack of integrated planning and delivery by the diﬀerent spheres and agencies of government, as well as the absence of focused programmes targeting economic development and job creation. There is therefore an urgency to address planning and economic development at a local level, as it will serve as a critical foundation for the development and viability of municipalities.

This goal encapsulates the various planning and economic development initiatives that are implemented to build safer, healthier, and environmentally aware and active communities. It also incorporates a speciﬁc focus on eradicating poverty and inequality at a municipal level.

SALGA’s initiatives were mainly centred on three programme areas aimed at stimulating economic development and creating conditions conducive for investment attraction, job creation and strengthening the capacity of municipalities to execute their developmental mandate. EDP identiﬁed the regeneration of small towns, strengthening the capacity of economic development practitioners and capacitating municipal oﬃcials to implement the recently promulgated Spatial Planning and Land Use Management Act, 2013 (Act No. 16 of 2013) (SPLUMA) as the main areas of focus during the year.

Achievements

Small towns regeneration programme

The SALGA training programme aims to inﬂuence municipalities to target small towns as entry points to bring about spatial transformation, stimulate economic growth, create employment and make optimum use of available services, which in most cases are underutilised. The emphasis was on creating a space for sharing issues and common concerns and creating opportunities for linkages in local government.

y The format of the training was reduced from ﬁve to two days to avoid municipal oﬃcials being away from their duties for too long; and y 181 local economic development practitioners from 54 municipalities in all provinces were trained.

Professional development programme (PDP)

The PDP’s objective is to develop focused, creative and motivated economic development practitioners. It addresses the challenges associated with governance and institutional arrangements, and promotes professional credibility and shared approaches by economic development practitioners.

y The course consists of six sessions delivered over eight days and spread over six months; and y PDP training sessions were rolled out to 76 economic development planning practitioners from Eastern Cape, North West, Western Cape, and KwaZulu-Natal.

Implications of the SPLUMA

y EDP conducted municipal capacity-building initiatives that included four sessions in the Eastern Cape, two joint sessions with municipalities and the South African cities network and influenced the content of the SPLUMA regulations that were gazetted in March 2013; y SALGA also undertook a SPLUMA implementation readiness assessment and used the outcome of the assessment to lobby the Department of Rural Development and Land Reform to defer the implementation of the SPLUMA to a date not earlier than 1 July 2015, to enable municipalities to adequately prepare and factor the SPLUMA implications into their IDPs; and y Municipalities were kept abreast of developments through two circulars that highlighted key actions with implications for municipalities. 63 status Performance Not achieved variance Reason for Not applicable Achieved Not applicable Achieved The conference The conference was scheduled to take place in March 2015. However, as the SALGA National Members wasAssembly scheduled to take place at the same time, it was deemed toappropriate postpone the the to conference next financial year Variance Variance achieved) and under (both over Not applicable Not applicable Under achieved 2014/15 The professional development The professional (PDP) wasprogramme training through implemented sessions held in the Eastern Cape by 31and KwaZulu-Natal provinces 2015 March The PDP for EDPs was developed EDPs The PDP for in Eastern Capeand implemented and KwaZulu-Natal by 30 June 2014 A conference concept note was concept note A conference all with inputs from developed table a round Further, provinces. discussion was held on the content by 31 March of the conference 2015 PDP implemented inPDP implemented KZN and EC by 2015 31 March PDP developed forPDP developed EDP practitioners by 30 June 2014 Convene a nationalConvene on the conference byEDP programme 2015 31 March Provide a capacityProvide programme economicfor development practitioners Provide a capacityProvide programme economicfor development practitioners Sharing of information on economic development Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result in capacity and skills support to municipalities on supportimproving trading informal to and co-ops as as well SMMEs in capacity and skills support to municipalities on supportimproving trading informal to and co-ops as as well SMMEs municipalities on the of LEDdevelopment SDF and strategies, approaches regional LED line with theto framework KPI number number Goal Target 3 16 17 gaps Address 3 16 18 gaps Address 3 17 19 Support Below are detailed performance results as per the key performance indicators in the 2014/15 annual performance performance plan: indicators as per the key detailed performance results are Below 64 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Not applicable Achieved Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable Not applicable Not applicable Not applicable 2014/15 Guidelines on youth developmentGuidelines on youth local for developed were togovernment and disseminated by 31 December 2014 all provinces The study on the state of localThe study on the state in Southeconomic development Africa was conducted by 31 December 2014 Capacity building was facilitated ofin municipalities on the tools povertyintegrating in municipal 2015 31 March by programmes Municipal case studies were and a publication,documented was developed the Basics’, ‘Beyond as an electronicand disseminated booklet by all the provinces to 2015 31 March The annual SALGA women’s women’s The annual SALGA commission (SWC) was Lekgotla White 2014 in held in November Mpumalanga River, Guidelines on developmentyouth for programmes local government todisseminated offices byprovincial 31 December 2014 Study on state of LEDStudy on state in SA conducted by 31 December 2014 Capacity building onfacilitated povertyintegrated eradication facilitated by in all provinces 2015 31 March Municipal case studies documented inand disseminated by 31all provinces 2015 March Annual SALGA Annual SALGA women’s commission Lekgotla held by 31 March 2015 Integrated toapproaches ofmainstreaming issues defined Youth and documented Sharing of information on economic development Municipal capacity building on integrated poverty eradication approaches facilitated Municipal best practices anddocumented disseminated Integrated toapproaches mainstreaming of gender issues defined and documented Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result municipalities on the of LEDdevelopment SDF and strategies, approaches regional LED line with theto framework transversal issues transversal government planning capacity on poverty eradication approaches and monitoring and evaluation of poverty eradication approaches and access to oninformation issues transversal and access to oninformation KPI number number Goal Target 3 17 20 Support 3 19 21 local Improved 3 19 22 profiling Improved 3 19 23 Improved knowledge 3 19 24 Improved knowledge

65 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Not applicable Achieved Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable Not applicable Not applicable Not applicable 2014/15 report was developed status quo on the provision of serviceson the provision for older persons was defined and 2015 by 31 March documented The e-participation was tool 30 June 2014 and by developed workshops held in nine provinces 2015 by 31 March Partnerships to support to Partnerships local HIV to government response established withand AIDS were GIZ, municipalities and sector departments as provincial as well and local AIDS councils by 2015 31 March A survey on the status quo of in localdisability programmes government was conducted. A and finalised by 31 March 2015. and finalised by 31 March Municipalities were assisted in the assisted Municipalities were of actiondevelopment plans to issues in their children mainstream 2015 31 March programmes A local government approach report Partnerships established / support to formed local government HIV and to response AIDS by 31 March 2015 E-participation tool 30 by developed June 2014 Status quo on the disability inprogrammes local government bydeveloped 2015 31 March Municipalities in theassisted ofdevelopment actions plans for ofmainstreaming issues by children 2015 31 March Local governmentLocal on theapproach of servicesprovision older personsto defined and bydocumented 2015 31 March Integrated toapproaches mainstreaming of HIV and AIDS issues defined and documented Engage government and industry to enhance local government ICT Integrated toapproaches mainstreaming of disability issues defined and documented Integrated toapproaches mainstreaming issuesof children defined and documented Integrated toapproaches mainstreaming of older persons issues defined and documented Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result and access to oninformation issues transversal programme jointlyprogramme (with national departments and entities) on municipal andwebsites municipal broadband and access to oninformation issues transversal and access to oninformation issues transversal and access to oninformation issues transversal KPI number number Goal Target 3 19 25 Improved knowledge 3 20 29 Implement a 3 19 26 Improved knowledge 3 19 27 Improved knowledge 3 19 28 Improved knowledge

66 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable Not applicable Not applicable 2014/15 A training programme for the for A training programme implementation of the small town was programme regeneration 30 June 2014 and by developed Free out in Eastern Cape, rolled and KwaZulu-Natal byState 2015 31 March An assessment and analysis report on of readiness on municipal state by 30 June was developed SPLUMA 2014. 26/2014) highlighting (no. A circular key municipal actions required SPLUMA for in preparation implementation was developed municipalities. to and disseminated Capacity building support on Eastern to was provided SPLUMA 2015. Cape by 31 March Spatial restructuring guidelines in collaboration developed were 2014.with DRDLR by 30 September A further document outlining spatial eﬀect to possible tools restructuring was also developed 2015 by 30 September The small town regenerationThe small town by 30 was developed programme out in NorthJune 2014 and rolled by in partnership West with CLGF 2015 31 March 30 June 2014 Report developed on the municipal of readinessstate on the SPLUMA implementation by 30 June 2014 Spatial restructuring guidelines bydeveloped 2014 30 September Small town regeneration programme by developed 30 June 2014 Training programme Training implementationfor of small town regeneration bydeveloped Streamline development planning supported Streamline development planning supported Develop a programme unlock ruralto economies Develop a programme unlock ruralto economies Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result planning legislation and case law barometer training programme municipalitiesfor on the SPLUMA and its regulations implemented planning legislation and case law barometer training programme municipalitiesfor on the SPLUMA and its regulations implemented a programme for for a programme municipal support on rural development and agriculture a programme for for a programme municipal support on rural development and agriculture KPI number number Goal Target 3 21 30 annual Produce 3 21 31 annual Produce 3 24 32 Implementation of 3 24 33 Implementation of

67 2.2.4 Goal 4: Effective, responsive and accountable local government for communities

South Africa has a critical need to address issues of local governance and cement the power and status of this sphere within a broader democratic governance framework. This goal encapsulates the various governance and intergovernmental issues - from legislation and policy, to funding and institutional arrangements. It covers issues across all spheres of government and speciﬁc issues in relation to the local sphere of government. From a governance perspective, the goal includes a particular focus on corruption at a local government level. Given the related importance of South Africa’s engagement with the continent and the world as whole from a governance perspective, the goal also incorporates a focus on international relations from a local government perspective.

Achievements

Framework for municipal support and intervention

y The practical model for municipal support and intervention was developed; y SALGA also developed a process ﬂow chart on the support and monitoring application of section 139 interventions. Ultimately, the practical model intends to address prevention of interventions in municipalities.

Participation in national and provincial legislatures

y The designation of the part-time representatives to the NCOP improved SALGA’s visibility in the NCOP and provided consistency in terms of representation, advocating and lobbying for the interests of local government. SALGA was part of the historic occasion where the NCOP participated for the ﬁrst time in the debate on the State of the Nation Address in June 2014.

Councillor support and welfare

y Across the country SALGA provided on-going support and advice to individual municipalities on the implementation of the upper limits notice on salaries, allowances and beneﬁts of diﬀerent members of municipal councils; y Support was also provided for other councillor welfare and support issues as and when requested, such as: à Councillor cellphone allowances; à Space for ward councillors; à Full time councillors - Section 12 notice; à Travel allowance; à Grading of municipalities; à Payments to councillors outside the upper limits notices; à Tools of trade; and à SASRIA implementation.

Accountability and oversight

y SALGA developed a consequences and accountability framework; y Nine municipal public accounts committees (MPAC) visits were conducted and eight MPAC good practice case analysis were held across all provinces; y Municipalities were supported in the implementation of the differentiated model for the separation of functions; y On completion of the overall process, SALGA will be able to develop an MPAC good practice case document, which will be the organised local government (OLG) official publication on good practices on oversight; 68 y SALGA participated in a number of anti-corruption events organised by and with various stakeholders (Ethics SA, CoGTA; Gauteng Provincial Government, IMATU, GIZ, National Prosecuting Authority, the Hawks, Office of the Public Service Commission, Office of the Public Protector, Office of the Premier, University of Pretoria); y An inception report was prepared for the national anti-corruption survey which is an annual assessment of the state of anti- fraud and anti-corruption measures in municipalities in South Africa to be completed in 2015/16; y Municipalities were supported to implement the anti-corruption summit resolutions as well as with their anti-corruption policies as and when requested; and y SALGA participated in a radio station panel discussion with panellist from the Competition Commission and Corruption Watch on the topic “Corruption is now a South African way of life - If we can’t accept that, how can we change it?”

Boundaries re-determination and ward delimitation

y The MDB participated in PWG meetings, PEC meetings, governance and IGR Practitioners Forums and PMAs, and at the NMA which recommended that the process be re-opened after the 2016 local government elections. This financial year, six MDB circulars were disseminated to municipalities to keep them abreast with ongoing developments in the demarcation processes; and y In all the affected provinces, SALGA participated in the MBD information sessions/consultation processes with municipalities. Issues discussed included: public participation and consultation, ward delimitation process, cross-boundary issues and poorly configured wards, alignment to services boundaries of other sector departments, post-delimitation engagements and feedback and continuous and identifiable wards.

Policy and legislative review

y Legislative and policy proposals submitted by SALGA this year included: à the Development Bank of Southern Africa Amendment Bill; à Extension of Security of Land Tenure Act, 1997 (ESTA); à Amendment of the Remuneration of Public Oﬃce Bearers Act; à SPLUMA; à Draft monitoring, support and intervention framework; à Upper limits for the salaries of senior managers; à Draft framework agreement for a sustainable mining industry entered into by organised labour, organised business and government; à Terms of reference for SALGA position paper on mining and local government - an assessment of legislation and national framework; à Terms of reference for the devolution strategy for local government; à Proposals on the review of the OLG Bill, OLG Act 1997; à LG: General Laws Amendment Bill; and à Impact of the Public Administration Management Bill and the Property Rates Amendment Bill on municipalities. y Legislation negatively impacting on local government were presented and discussed at the Parliamentary strategic session, at the national municipal managers forum, at the Mpumalanga governance indaba; as well as to the Free State summit. Proposals on legislative amendments were adopted by all PMAs under Apex 1.

69 status Performance variance Reason for achieved) Variance (both Variance over and underover Not applicable Not applicable Achieved 2014/15 The model for municipal supportThe model for and intervention and was developed comments for provinces to circulated municipalities byfrom 2015. 31 March the IR implemented SALGA implementation plan through participating in a number of IGR briefing and developed fora (technical) for speeches and presentations notes, in IGR SALGA councillors representing PC CoGTA, MUNIMECs, (MINMECs, fora coordinating premier’s PCC, PC finance, 2015. 31 March by etc) forum, Facilitate the Facilitate development of a model municipal support and intervention which is transparent, with clearconsultative standards protocols, and institutional arrangements by 2015 31 March Implemented structured engagement with national departments as identified in IGR the SALGA implementation plan 2015 by 31 March Structured engagement between local government atand executive andprovincial national level the improve to governance for environment municipalities Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result coherent supportcoherent developed KPI number number 4 25 34 Refined model for Goal Target Below are detailed performance results as per the key performance indicators in the 2014/15 annual performance performance plan: indicators as per the key detailed performance results are Below 70 status Performance variance Reason for achieved) Variance (both Variance over and underover Not applicable Not applicable Achieved Not applicable Not applicable Achieved 2014/15 update on the status of upperupdate 2015);limits notice (5 February upper limits notice (24 February 2015); and 2015 upper limits notice 2015) (27 March an 07/2015 which gave Circular 10/2015 on the 2014/15 Circular 14/2015 on the gazetted Circular Coordinated governance hands-onCoordinated support municipalities to was provided on critical challenges governance advice and guidelines opinions, through the country municipalities across to on a number of governance issues . all to disseminated were circulars Three municipalities during the period under review: 1) 2) 3) Municipal performance management support was(PMS) programme (127) district in targeted implemented byand local municipalities per province 2015 31 March Coordinated governance hands-on support provided municipalities onto critical governance challenges by 201531 March Implementation of a municipal performance management (PMS) support programme districtin targeted and local municipalities by per province 2015. 31 March Municipalities supported deliverto accountable and effective governance Capacitate and support municipalities and develop to implement performance management (PMS) system Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result self-sufficient ablemunicipalities, effective deliver to and accountable governance and support municipalities and develop to implement performance management system (PMS) KPI number number 4 26 35 Sustainable and 4 26 36 Capacitate Goal Target

71 status Performance variance Reason for achieved) Variance (both Variance over and underover Not applicable Not applicable Achieved 2014/15 SALGA effectively participated effectively and SALGA with legislative engaged on OLG 2015 31 March by processes joint sitting of the attended SALGA and and the NCOP National Assembly on the the debates contributed to SALGA of the Nation Address. State played role the significant highlighted as theby local government as well the confront challenges that continue to sector and how these could be resolved Effective participationEffective and engagement of with legislative OLG byprocesses 2015 31 March Structured engagement with national and provincial inlegislatures respect of policy and legislation impacting on local government Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result government influences policy and legislative be to outcomes to responsive more local government KPI number number 4 27 37 local Organised Goal Target

72 status Performance variance Reason for achieved) Variance (both Variance over and underover Not applicable Not applicable Achieved 2014/15 international congress of international congress th educating cities; UCLG culture summit. culture UCLG Smart Local Governance, Bilbao, Spain; Bilbao, Smart Governance, Local and Peer review of local government in review Peer England; BALA conference; UCLG world congress; UCLG International conference of localInternational conference authorities in solidarity with the people; Palestine 13 Smart local governance, Bilbao, Spain; Smart Bilbao, local governance, Africities oﬃcial launch;

SALGA continued to create platforms create continued to SALGA municipal international cooperationfor - the following: through y also engaged the GIZ and local SALGA on a numbergovernment in Zimbabwe municipalities.of issues that aﬀect created were platforms Further with signed MoUs that were through local government and the Palestine Cities and of Flemish the Association Municipalities (VVSG) . International Cooperation’s engagements with municipalities were held in provinces. y y y y y y y y Platform created to created Platform municipalfacilitate international cooperation by 2015 31 March Implementation of tothe framework guide international cooperation/s Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result facilitate municipalfacilitate international cooperation KPI number number 4 28 38 to created Platform Goal Target

73 status Performance variance Reason for achieved) Variance (both Variance over and underover Not applicable Not applicable Achieved Not applicable Not applicable Achieved 2014/15 Leadership capability and on oversight Leadership SALGA accountability was improved. the consequences andpresented accountability nine PMAs framework to 2014 and and September held in August 2015. held on 24-26 March NMA good practice held MPACS SALGA workshopscase analysis provincial best practices and identify share (to key challenges experienced by municipalities) in Northern Cape, North KwaZulu-Natal, Cape, Western and State, Free Gauteng, State, Free West, and MarchLimpopo between February 2015. and independent lobbied CoGTA SALGA benefits commission on councillors’ the for 2014. A proposal on 11 August the upper limits of2014/15 notice for salaries and allowances were councillor’’s by the NEC of 3 July 2014approved the remunerationand forwarded to commission on 11 August. Quarterly at the presented reports were councillor support working by groups 2015 31 March Improve leadershipImprove capability on oversight and accountability by 201531 March Support the implementation of the differentiated separation of functions models in municipalities by 201531 March good Promote practices and knowledge sharing among municipalities 2015 by 31 March and CoGTA independent commission lobbied; Quarterly reporting on continuous trainingadvice, and workshops conducted/provided on councillors’ benefits by 31 March 2015 Improve the ofeffectiveness andoversight accountability mechanisms and structures for Lobbied improved councillor payment dispensation and capacitated councillors Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result accountability inand oversight municipalities facilitated improved councillor payment dispensation and capacitated councillors KPI number number 4 29 39 Effective 4 30 40 for Lobbied Goal Target

74 status Performance variance Reason for achieved) Variance (both Variance over and underover Not applicable Not applicable Achieved 2014/15 Partnerships with identiﬁed civil societyPartnerships and other stakeholdersorganisations 2015. by 31 March promoted were Good practices and knowledge sharing among municipalities on innovative public participation approaches SALGA’s through was promoted of a draft fordevelopment concept note table on community round provincial and public participationinvolvement in roundlocal government and provincial table discussions held with civil society on public participationorganisations in Northern Gauteng Eastern Cape, Cape, 2015. by 31 March State and Free also participated in a number ofSALGA public participation during the initiatives year: t5IFDJWJDBDBEFNZOBUJPOBMSPVOEUBCMF by the Isandla Institute;organised t,3" ,FZ3FTVMU"SFB WG meeting with GIZ; t1VCMJDQBSUJDJQBUJPOSPVOEUBCMFJO Ditsobotla;; t4"-4" 4FDSFUBSJFT"TTPDJBUJPOPGUIF of SA) public participation,Legislature petitions and communication forum meeting; t*ODFQUJPONFFUJOHXJUI-VLIBOKJMPDBM a GSP andmunicipality formalise to civil society partnership on integrating the assets-based community-driven and approach; development t1VCMJDQBSUJDJQBUJPOEJBMPHVFXJUIUIF CoGTA Eastern Cape provincial Promote partnershipsPromote with identiﬁed civil society organisations and other stakeholders by 31 2015. March good Promote practices and knowledge sharing among municipalities on innovative public participation by approaches 2015 31 March Strengthened public participation andapproaches inprocesses municipalities Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result enhanced public participation in municipalities facilitated KPI number number 4 31 41 and Improved Goal Target

75 status Performance variance Reason for achieved) Variance (both Variance over and underover Not applicable Not applicable Achieved 2014/15 boundaries in Mpumalanga, North and NorthernWest Cape; boundaries in Eastern Cape, KwaZulu- boundaries in Eastern Cape, West; Limpopo and NorthNatal, boundaries; during 2014/15 for the 2016 localduring 2014/15 for elections; disseminated to municipalities via to disseminated 2015. oﬃces by 31 March provincial keepwith on-goingto them abreast in the demarcationdevelopments processes:;

Facilitated the participation of the MBD Facilitated governance structures as in SALGA as municipal participationwell in MDB 2015. 31 March by processes A report of boundary on reopening by the MDB process redetermination was tabled at GIGR on 22 January 2015 2015. NWG and NEC on 12 February Boundary re-determination and ward also discussed atdelimitation were 2015, which on 24- 26 March the NMA be re- that the process recommended opened after the 2016 local government elections – 3/2015- Redetermination of Circular – 2/2015: Redetermination of Circular – 1/2015: Redetermination of Circular – 4/2014: Delimitation of wards Circular – were MDB circulars following The Facilitate the Facilitate participation of the MBD in SALGA governance structures 2015.by 31 March the Facilitate participation of municipalities in andMDB processes engagements on delimitation byward 2015 31 March The views of municipalities on delimitationward incorporatedare in the ward delimitation by theprocess MDB Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result municipalities’ municipalities’ participation in ward delimitation process KPI number number 4 32 42 Facilitate Goal Target

76 status Performance variance Reason for achieved) Variance (both Variance over and underover 2014/15 boundaries.. boundaries in Free State; and State; boundaries in Free

– 5/2015: Redetermination of Circular The MDB participated in the NMA 2015, the2015 held on 24 March PWG the year, meetings throughout governance and IGRPEC meetings, in August and PMAs forums practitioner’s at SALGA 2015; as well and September Week. LP Finance and participated attended SALGA in MDB national launch of ward 2015. by 31 March delimitation process – 4/2015- Redetermination of Circular Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result KPI number number Goal Target

77 status Performance variance Reason for achieved) Variance (both Variance over and underover Not applicable Not applicable Achieved 2014/15 Provinces were assisted to support to assisted were Provinces municipalities on the implementation of the anti-corruptionof the outcomes 2015.summit by 31 March of the anti-corruptionThe resolutions all to disseminated summit were oﬃces by municipalities via provincial 2015. 31 March Mandeni and MtambananaUmvoti, with the assisted municipalities were and adoption of their anti- development corruption policies. Gert Chief Albert Sibande, Luthuli, Albert,Prince Kannaland and Beaufort supported of were on the revival West the anti-corruption a through strategy working session. the Limpopo speakersThrough forum, good anti-corruption practices were proﬁled. an anti-corruption facilitated SALGA between Beaufort initiative peer-learning and Knysna municipalities inWest up 2014 and held a follow November 2015 whereengagement in February its Municipality presented West Beaufort draft anti-corruption strategy. an assessment on the developed SALGA of anti-co-fraudstate and anti-corruption in municipalities. measures Support provinces in guiding municipalities on the implementation of the of the anti- outcomes corruption summit by 2015. 31 March Municipalities supported to combat corruption and maladministration Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result municipalities in the implementation of anti-corruption /strategies corruption free municipalities/ Interventions KPI number number 4 33 43 Support Goal Target

78 status Performance variance Reason for achieved) Variance (both Variance over and underover Not applicable Not applicable Achieved 2014/15 SALGA conducted the review of conducted the review SALGA impeding servicelegislation delivery by 2015.31 March on engaged with CoGTA SALGA of the OLG on the review proposals General Act 1997; and LG: OLG Bill, A presentation Amendment Bill. Laws andwas also made in Parliament on forum national municipal manager’s impact that negatively Locallegislation commissionThe NMA Government. local organised “Strengthening 8: identified proposals government” effectiveness, OLGs strengthen to framework governance accountability, sustainable long- and funding model for and impact. term relevance Conduct review ofConduct review impedinglegislation service delivery by 2015. 31 March Undertake a comprehensive of Organisedreview Government byLocal 2015. 31 March Develop policy on keyproposals local affecting areas government by 2015.31 March Stakeholders lobbied on the position SALGA theregarding comprehensive ofreview andlegislation policy framework impacting on municipalities Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result legislative frameworklegislative developmentalfor local government facilitated KPI number number 4 34 44 policy Improved and Goal Target

79 2.2.5 Goal 5: Human capital development in local government

Addressing the human resources management and development (HRM&D) and labour relations challenges in local government is therefore critical in building stability in the sector and ensuring that the sector is appropriately resourced and capacitated to fulﬁl its mandate. This goal encapsulates the various policy, strategy and support initiatives that are required to establish a comprehensive HRM&D dispensation for local government. It also focuses on labour relations as a key factor of productivity and service delivery. The goal places particular emphasis on achieving HRM&D stability and growth in the sector and supporting skills development and optimal human resourcing for local government.

Achievements

y One hundred and twenty seven municipalities were supported, assisted and guided in developing and implementing a performance management system (PMS),. The support provided includes training workshops to deepen the knowledge and understanding of PMS as well as ensure compliance with relevant legislative requirements; y Two hundred and seventy four municipal employees across provinces were trained on TASK job evaluation (JE). The trained employees will serve in the various JE unit structures that will finalise JE in all municipalities; y Roll out of the professionalisation framework implementation plan using four pillars: service orientation, leadership and management professionalism, technical professionalism, and institutional professionalism; y As part of the roll out of the human resource management and development strategy for local government, 114 municipalities across provinces were profiled using the municipal developmental human capital management profiling tool; y Launching and establishment of the SALGA Centre for Leadership and Governance (SCLG); and y SALGA facilitated portfolio based training and leadership development programmes for councillors and senior municipal officials; 1 149 councillors and senior municipal officials benefited from: à Portfolio-based councillor development programme (787); à Senior manager induction programme (252); and à Leadership development workshops (110).

80 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable Not applicable Not applicable 2014/15 job evaluation (JE) pension training, medical aid and home owners’ fund, 2015. allowance by 31 March An assessment report on compliance waswith collective agreements 2015 31 March by developed A review reportA review on operations and was of the SALGBC eﬀectiveness continued to SALGA developed. and reportmonitor on operations 2015. by 31 March of the SALGBC was The functioning of the SALGBC and reported at SALGA monitored governance structures throughout Quarterly presented reports were governance structures on SALGA to member to representation SALGA’s in DC provinces municipalities across arbitrations and conciliations, processes, 2015 31 March litigations by A local government service charter at the and presented was developed negotiations by for Exco SALGBC 2015 31 March Municipalities were supportedMunicipalities were and advised in the implementation of pertainingcollective agreement to Review, monitor and monitor Review, report on operations ofand eﬀectiveness by the SALGBC 2015 31 March Quarterly reports on the representation made in DC processes, conciliations arbitrations and bylitigation developed 2015 31 March Negotiate collectiveNegotiate on serviceagreement charter by 2015 31 March Municipalities supported and advised on the implementation of the collective by agreement 2015 31 March reportAssessment on compliance with collective agreements bydeveloped 2015 31 March 2014/15 KPI 2014/15 target Annual result A mutual gains approach collectiveto bargaining facilitated A mutual gains approach collectiveto bargaining facilitated Local governmentLocal service charter for negotiations with unions developed Review of existing collective agreements framework 2014/15 Outcome of the revised SALGBC remodelling monitored municipalities in conciliations, arbitrations and litigation collective onagreement service charter on compliance with collective agreements developed KPI number number 5 36 46 Implementation 5 37 47 Represent 5 38 48 Negotiate 5 38 49 report Assessment Goal Target Below are detailed performance results as per the key performance indicators in the 2014/15 annual performance performance plan: indicators as per the key detailed performance results are Below 81 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable 2014/15 A guideline framework on the municipal implementation measures of the amendments Labour andRelations Act was developed 31 March with municipalities by shared 2015 Through the auspices of the SALGBC the auspices of SALGBC Through SALGA Europe, to study tour of local the interests represented and ILO government in both NEDLAC The engagement 2015. by 31 March sought their expertise onwith ILO and upward issues of downward variation of existing conditions service, job evaluation Develop framework/ guidelines document municipalities onfor the implementation within 2measures themonths from enactment of the Act 2015 by 31 March Represent interests of interests Represent Government inLocal and ILO both NEDLAC 2015 (asby 31 March and when required) 2014/15 KPI 2014/15 target Annual result Coordinate ofprovision support to municipalities on the LRA implementation measures Represent theRepresent of Local interest atGovernment and ILO NEDLAC 2014/15 Outcome interpretation andinterpretation implementation of the amendment of the Labour Relation Act in the local government sector of the interest ofof the interest GovernmentLocal and ILO at NEDLAC assessed KPI number number 5 39 50 the Facilitate 5 40 51 Representation Goal Target

82 status Performance variance Reason for Not applicable Achieved Variance Variance achieved) and under (both over Not applicable - - senior -

2014/15 - SALGA capacity building - SALGA Service orientation

Developmental municipal human capital Proﬁling; job evaluation implementation TASK a out over that will be rolled process period; 3-year Municipal performance management support programmes; Support the framework for implementation of the local ongovernment: regulations appointment and conditions of employment of senior managers; and managementHuman resource policy and development. review SCLG and LDW SCLG (c) Technical prospectus. (d) Institutional t t t t t SALGA coordinated the coordinated SALGA operationalisation (implementation) framework of the professionalisation 31 municipalities by targeted for The professionalisation 2015. March implementation plan was rolled municipalities by 31 targeted out to pillars of 2015 in the following March professionalism: (a) induction programme manager’s and management Leadership (b) Coordinate theCoordinate operationalisation (implementation) of the Professionalisation targeted framework for municipalities by 2015 31 March 2014/15 KPI 2014/15 target Annual result Framework for Framework professionalization human of LG resources anddeveloped implemented 2014/15 Outcome municipalities thetowards implementation of the professionalisation framework KPI number number 5 41 52 Capacitate Goal Target

83 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable Not applicable 2014/15 Inductions of municipal senior managers and councillors were and presentedconducted in provinces in governance structures by 2015 31 March Phase 1 of the SALGA Centre for Centre 1 of the SALGA Phase (SCLG) and Governance Leadership the launch through was implemented National at SALGA of the centre 2015Members on 24 March Assembly with its products and servicestogether catalogue Executive coaching programme was coaching programme Executive under the theme ofimplemented workshopsleadership development (LDW) as part of support programme 2015 audits by 31 March improved for Oversee coordination of quarterly induction of senior municipal oﬃcials by 2015.31 March Induction of newly elected councillors every 6 months by 201531 March Implementation of the business 1 SCLG Phase 2015 plan by 31 March Implementation of coachingexecutive for programme municipalitiestargeted as part of support for programme audits by improved 2015 31 March 2014/15 KPI 2014/15 target Annual result Systems, structuresSystems, and partnerships enhancedfor capacity building programmes established Systems, structuresSystems, and partnerships enhancedfor capacity building programmes established Systems, structuresSystems, and partnerships enhancedfor capacity building programmes established 2014/15 Outcome induction and training of councillors/ senior management and assessment of theof the eﬀect intervention with facilitatethe aim to 60% retention in next of round elections building and preparation/s thetowards implementation of GovernmentLocal Leadership Development Academy municipalities thetowards implementation mentorship of LG programme KPI number number 5 42 53 Continuous 5 44 54 Awareness 5 45 55 Capacitate Goal Target

84 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable 2014/15 control; Credit 2) risk Disaster management; and 3) Migration; management 4) Performance Knowledge-sharing and inter- municipal peer learning programme 2015. by 31 March was implemented 20 knowledge and learning events and supported hosted facilitated, were information of SIKE (SALGA in the form and knowledge municipal exchange), and other knowledgemanagers forum sharing events SALGA coordinated the roll out of the roll coordinated SALGA portfolio based councillor development by in all provinces programmes 2015.31 March rolled were programmes The following out: 1) Knowledge sharing and inter-municipal peer learning programme by implemented 2015 31 March Coordinate roll Coordinate out of the portfolio based councillor development (CDP) byprogramme 2015 31 March 2014/15 KPI 2014/15 target Annual result Enhanced peer learning and knowledge- sharing within and between municipalities Systems, structuresSystems, and partnerships enhancedfor capacity building programmes established 2014/15 Outcome sharing and inter-municipal peer learning programme reviewed capacity building conducted KPI number number 5 47 57 Knowledge- 5 46 56 base Portfolio Goal Target

85 status Performance variance Reason for Not applicable Achieved Variance Variance achieved) and under (both over Not applicable 2014/15 was developed and completed in and completed was developed The hub will enable 2015. March data and the sector’s easy access to knowledge resources. knowledge and information inform,publication that aims to and proﬁle celebrate share, excellence municipal innovations, The publication is and partnerships. vation’. KNOW. ‘in. named The municipal data. with local level was uploaded withbarometer time series are data (indicators with data based onpopulated 2011 boundaries) on the following indicators: outcome 2007 and 2011 - 2001, 2007, and 2011 - 1996, 2001, trends Demographic and development Economic growth t t 1. Government Knowledge Hub Local 2. an annual developed SALGA 1. was updated Municipal barometer Municipal barometer and qualityMunicipal barometer management Local government data and knowledgeLocal centrally stored sourced, were products in the sector by 31and disseminated 2015 March and management Knowledge municipal innovation LG data and LG knowledge products centrallysourced, andstored in thedisseminated sector by 31 March 2015 2014/15 KPI 2014/15 target Annual result LG practitioners are LG kept of key abreast issues impacting on municipalities through knowledge- sharing programmes 2014/15 Outcome knowledge and access to oninformation issues transversal KPI number number 5 47 58 Improved Goal Target

86 status Performance variance Reason for Not applicable Achieved Variance Variance achieved) and under (both over Not applicable 2014/15 briefs were developed and developed were briefs uploaded. analysis of the socio-providing of districtseconomic environment and local municipalities based on data sets of the municipal also developed. were barometer aimed atworkshops which were knowledge awareness, creating dissemination and imparting of held withThe workshops were skills. municipalities SALGA, officials from and external stakeholders. 2011 spreadsheet2013 and indicators 2005-2013 Service delivery - 2001, 2007 and 2005- Municipal financial data for t t 2. local government municipal Four 3. reports Municipal profiling 4. conducted a number of SALGA Research of local government review A 15-year study was concluded The local government human was management strategy resource out in 114 municipalities acrossrolled exercise profiling through provinces 2015. A reportby 31 March on the specification wasHRMIS development developed LG HRM strategy LG out rolled framework 2015 by 31 March 2014/15 KPI 2014/15 target Annual result Local governmentLocal human resource policy and HRM) (LG strategy anddeveloped out rolled 2014/15 Outcome municipalities thetowards implementation of HR strategy KPI number number 5 48 59 Capacitate Goal Target

87 status Performance variance Reason for Not applicable Achieved Variance Variance achieved) and under (both over Not applicable 2014/15 Guidelines on the implementation of amendments was developed The 18 HRM 2015. by 31 March policies contained in the handbook in 2009 SALGA by developed all affected align to updated were the EEA amendmentspolicies to the local governmentand to on the appointment andregulations seniorconditions of employment for in an addition ofmanagers resulting 22 new policies by 31approximately issued in were 2015. Circulars March respect of the EEA amendments and onthe local government regulations 2015 senior managers by 31 March Develop guidelines on the implementation of amendments alland update bypolicies affected amendments by 2015 31 March 2014/15 KPI 2014/15 target Annual result Local governmentLocal human resource policy and strategy anddeveloped out rolled 2014/15 Outcome developed on thedeveloped implementation of amendments alland update bypolicies affected amendments KPI number number 5 49 60 Guidelines Goal Target

88 2.2.6 Goal 6: Financially and organisationally capacitated municipalities

Many municipalities face significant challenges in financial and organisational viability. This problem has persisted since the establishment of democratic local government and the picture has not changed significantly over the last few years. Hence there is a need to address some of the fundamental difficulties associated with the fiscal framework for local government. This goal encapsulates the various policy, strategy and support initiatives that are required to build an enabling fiscal framework (including sources of revenue generation) and adequate local government capacity (systems, processes and people) to deal with financial management. The ultimate focus of this goal is to build the long-term financial viability and broader sustainability of municipalities.

Achievements

y SALGA lobbied for a municipal demarcation transition grant of R139 000 000 at the 2014 budget forum. The grant is to subsidise additional institutional and administrative costs arising from boundary changes to take effect in the elections of 2016; y A Municipal Finance Management Act compliance barometer was developed; y A billing and revenue enhancement research project was developed; y SALGA continued to rollout the oversight capacity training tailor-made for councillors in all provinces, and assisted councillors to understand their role more clearly and how to operate more effectively; y Developed and launched multidisciplinary municipal audit support programme (MASP) which is based on four pillars: leadership, governance, financial management and institutional capacity. MASP will assist all municipalities to maintain good audit outcomes (unqualified with no findings or with findings) and to improve poor audit outcomes (disclaimer, adverse, qualified and audits not finalised. MASP is placing particular emphasis on those municipalities with adverse/ disclaimer opinions as well as those municipalities whose audits were not finalised by the legislated deadline (“red zone” municipalities). SALGA also finalised an agreement with a research institute PARI to perform research into the red zone municipalities; and y Developed a discussion paper on standard charts of accounts (SCOA).

89 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable Not applicable 2014/15 SALGA’s inputs on the review of the inputs on the review SALGA’s local government fiscal framework the budget forum to submitted were by 31 December 2014 A barometer on compliance withA barometer wasmunicipal finance legislation 2015 31 March by developed SALGA assisted provinces to provinces assisted SALGA support municipalities in revenue and control management, credit provision through outstanding debtors to presentation of concept/master thebuild municipal capacity through paper on of a research development poor municipalities, to debt owed billing and critical success factors to 2015. billing by 31 March building were Workshops/capacity on revenuealso held in provinces and control management, credit outstanding debtors SALGA’s input on SALGA’s of thethe review local government fiscal framework the to submitted by budget forum 31 December 2014 Develop barometer on compliance with municipal finance 31 by legislation 2015 March Provinces assisted Provinces supportto municipalities in revenue management, and control credit outstanding debtors provisionthrough of concept/master build to presentation municipal capacity 2015 by 31 March Lobbied for the for Lobbied of the localreview government fiscal framework Provinces supportedProvinces in encouraging municipalities comply withto legislation Assist provinces to provinces Assist support and advise municipalities on revenueimproving management, and control credit outstanding debtors Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result comprehensive onfiscal review fiscal allocations to municipalities municipal finance andlegislation policies developed framework forframework efficient budgeting, andrevenue expenditure management in local government KPI number number 6 50 61 the for Lobbied 6 51 62 on Barometer 6 51 63 Review legislative Goal Target Below are detailed performance results as per the key performance indicators in the 2014/15 annual performance performance plan: indicators as per the key detailed performance results are Below 90 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable 2014/15 With the coordination of provincial the coordination With 25 municipalities were offices, the improving supported towards functioning of the internal audit function and risk management matters 2015.by 31 March partAs risk in of addressing developed municipalities SALGA a risk management framework for 2015 . Municipalities by 31 March Provinces were supported roll were to Provinces out the councillor capacity building workshops) on (oversight programme by municipal audit committees 31 March 2015 Coordinate theCoordinate assistance (with officesprovincial and municipal finance directorate) supportingtowards municipalities with the improved functioning of the Internal audit function, risk management and byaudit committees 2015 31 March Provinces supportedProvinces out of thein the roll councillor capacity building programme on municipal audit by committees 31 March 2015 Improved functioning of internal audit units in municipalities facilitated Audit committeeAudit capacity building for programme out councillors rolled Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result functioning of internal audit units in municipalities facilitated of municipal audit committees KPI number number 6 52 64 Improved 6 52 65 functioning Effective Goal Target

91 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable 2014/15 SALGA coordinated the coordinated SALGA implementation of the municipal adoptedsupport for programme 2015. municipalities by 31 March help was launched to project A MASP support the 60 municipalities in opinions. adverse disclaimer, zone red project was undertakenA research causes of the root diagnose to governance transgressionspersistent the research From by municipalities. specific tailor-madeoutcomes support will be developed projects 22 the struggling municipalities. for supported, 9 ofmunicipalities were the from migrated already which have zone. red SALGA developed a discussion developed SALGA the specificdocument addressing with standardchallenges as associated withcharts of accounts (SCOA) endorsedspecific recommendations 2015. SALGA by the NEC 31 March help low to groups focus facilitated capacity and rural municipalities to make comments on the Accounting drafts exposure Board Standards Coordinate theCoordinate implementation of the SALGA municipal support programme adoptedfor municipalities by 2015 31 March Develop a position paper on the funding needs of the municipalities strugglingwho are implementto accounting and SCOA standards 2015 by 31 March Coordinate theCoordinate implementation of the SALGA municipal support programme adoptedfor municipalities Lobby for funding for Lobby assist strugglingto municipalities comply withto accounting and SCOA standards regulations Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result provincial ‘adopt ‘adopt provincial a municipality (to campaign’ support improved audit outcomes) SALGA’s position SALGA’s on differentiated approach KPI number number 6 53 66 Implement a 6 54 67 Implementation of Goal Target

92 2.2.7 Goal 7: Effective and efficient administration

Given the significant pressure that will be placed on SALGA to deliver its strategy, it is critical that it has an effective and efficient administration. This goal encapsulates the various interventions that SALGA will implement to ensure that its administration functions effectively and efficiently. These interventions will cover areas of governance, products and services, performance management, people development and marketing and communication. In particular the goal will also focus on consolidating SALGA as a unitary structure with a national footprint. Part of the process of consolidation will include a bolstering of SALGA’s financial and organisational viability.

Achievements

Business planning

y SALGA has continued to comply with the requirements of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA) and in particular the National Treasury Framework for the development of strategic and annual performance plans; y The 2014/15 Annual Performance Plan (APP) of SALGA was fully implemented during the ﬁnancial year; and y Quarterly reports were submitted to CoGTA and National Treasury. These quarterly reports provide status on the implementation of the SALGA APP and also provides management with information for corrective measures on those indicators that are lacking.

Municipal barometer and quality management

y SALGA uploaded the municipal barometer with time series data (indicators are populated with data based on 2011 boundaries) on the following outcomes indicators: à Demographic trends - 1996, 2001, 2007 and 2011; à Economic growth and development - 2001, 2007, and 2011; à Service delivery - 2001, 2007 and 2011; and à Municipal financial data for 2005 – 2013. y Four informative municipal briefs monthly electronic updates on district’s socio-economic performance have been developed and uploaded on the SALGA websites; y District municipal profile reports which provide analysis of the socio-economic environment of districts and local municipalities based on data sets of the municipal barometer were developed; y Conducted a number of workshops aimed at creating awareness, knowledge dissemination and imparting of skills. The workshops were held with officials from SALGA, municipalities and external stakeholders; y A partnership with the Department of Monitoring and Evaluation has been finalised; and y Partnerships with the following organisations have been initiated: à Foundation for Professional Development; à Department of Rural Development and Land Administration; à Department of Science and Technology (DST); and à Canadian International Development Agency (CIDA).

Research

A 15-year review of local government study has been concluded.

93 Knowledge management and municipal innovation

y SALGA’s development of a local government knowledge hub will build a body of knowledge and institutional memory of the local government sector; y In the sphere of knowledge exchange and learning events, SALGA facilitated the following: à Co-hosted the 8th national municipal manager’s forum; à Supported the hosting of the 4th South African urban conference; and à Facilitated a knowledge exchange session in the development of small and rural towns and townships. y SALGA developed an annual knowledge and information publication that informs, shares, celebrates and proﬁles municipal innovations, excellence and partnerships.

Marketing and communications

Communications

During 2014/15 SALGA dramatically increased communication through electronic, web and social media platforms. During the year SALGA Facebook followers increased from 400 in April 2014 to 9070 at the end of March 2015 with 178 tweets and retweets to Twitter and 73 posts to Facebook. Media relations has also made impact through daily media monitoring and reports on media clippings distributed to SALGA executive management team from across the country.

Ten media brieﬁngs were conducted, 29 media statements were issued and 104 media enquiries were received and responded to by the communication unit.

During the year 2014/15 ﬁve editions of the Voice of Local Government magazine and 13 provincial newsletters were developed and distributed to all our members municipalities and stakeholders.

The internal staff newsletter, Insight, was revitalised and a SIKE in Brief newsletter was introduced to staff of which 13 combined editions were produced and electronically circulated to all staff. A branded centralised internal notice, E-notice was developed and weekly multimedia screen updates ensured staff members were informed of strategic projects at SALGA.

Marketing

For the period 2014/15, in line with the organisation’s mandate to proﬁle the sector, SALGA embarked on a process to identify suitable service providers to assist the organisation with developing an integrated marketing and communication campaign for the sector. The objective is to roll out campaigns that capture the positive stories within local government relating to service delivery.

In preparation of the organisation celebrating 20 years’ existence, the organisation would undergo a rebranding to revitalise the current brand image of SALGA. SALGA also contributed to the 20-year celebrations of the country through a profile in the Sunday Times magazine. The organisation also contributed towards the awareness campaign for capacity building initiatives championed by municipal institutional development. The initiatives were for the roll out of the senior managers’ induction programme and the councillor induction programme. The campaigns were aimed at increasing the awareness on these initiatives by members and for the CDP to increase the number of councillors who would enrol for the programme. This was done through print media and the publications were targeted based on readership and circulation. For the first time since it was launched, the municipal manager’s forum convened in Mpumalanga and the 8th municipal manager’s forum was well publicised. A TNA breakfast briefing aired on Morning Live on SABC2 for the first time in the history of these forums. This platform gave viewers an opportunity to hear from municipal managers and their roles within a municipality. The National Members Assembly publicity has also grown in leaps and bounds with the amount of outside broadcasts with radio stations having increased from two to five including Kaya FM, SAFM, Ukhozi FM, Lesedi FM and live crossings with Morning Live.

94 Secretariat

In consideration of the institutional arrangements of South Africa’s intergovernmental relations (IGR) landscape; the challenges and constraints faced with SALGA’s deployment to IGR structures and critically assessed SALGA’s IGR representation and participation, the SALGA National Members Assembly of March 2008 adopted the SALGA governance framework.

National assessments of internal governance arrangements within SALGA were conducted after each quarter of the financial year. This is an ongoing mechanism to monitor and evaluate the functionality and effectiveness of SALGA’s internal governance structures. During 2014/15, all national governance structures held their meetings as per the approved year calendar. Furthermore, all meetings formed a prescribed quorum and also finished the business of the day as outlined in their agendas.

Legal, risk management, internal audit

Legal

SALGA had developed a legal protocol framework which formed part of a comprehensive approach to effectively coordinate legal services in the organisation. Key guiding principles that underpin the process when the legal department is engaged have been implemented. The outcome of the legal framework in the long term is to consolidate, streamline and coordinate processes in the legal department so as to ensure effective delivery of legal services under a single functionary. This has set in motion all institutional arrangements aimed at providing quality and efficient legal services. SALGA’s legal department has rolled out online legal content support on SALGA’s knowledge hub for municipalities.

y The online legislative solution covers all national, provincial and local government legislation; y Fully integrated with LexisNexis online products and updated daily, Gazettes Online allows member municipalities to stay abreast of amendments and proposed amendments to legislation; y Current Awareness Alert is a daily e-mail alert service that provides updates on three major areas: news, legislation and case law; y LexisNexis legislative solution intends to cover all municipalities that are in good standing; and y This solution takes the time and frustration out of legal research.

SALGA has secured services to roll out the new electronic legal request and response system. This solution will be attached to the SALGA requisition system as another form of requesting other than the procurement processes. The solution allows for workflows and tracking of information flow which builds up into an automated legal register in all three categories including a consolidated one, for audit purposes. A helpdesk solution has been built and configured using a process flow toolset, task centre. Three main categories of legal proceedings have been identified for inclusion in this helpdesk environment, namely contracts, legal opinion and litigation. Requests for assistance or inputs for any one of these three categories may vary from one another and thus three distinct processes have been modelled to cater for the three categories.

Internal audit

y Thirteen audits were performed as per the internal audit coverage plan for 2014/15; and y Improved internal controls within SALGA processes were audited. The number of recurring issues previously reported has reduced and management takes ownership for implementing controls on processes.

Externally focused - internal audit and risk management

Twenty one municipalities were assisted during 2014/15 on areas of internal audit, audit committees and implementation of action plans to address the ﬁndings of the Auditor-General of South Africa (AGSA).

95 Stakeholder management

For the period 2014/15 the stakeholder relations policy was revised to reflect input from provinces and directorates. All staff were trained on the policy through provincial and directorate workshops. A sign off policy will assist SALGA to manage all external stakeholders in a structured manner. The policy being institutionalised will also assist in developing a culture of detailed reporting on engagements with stakeholders as well as identifying the owners within the organisation.

Quarterly stakeholder engagements were convened with external stakeholders in collaboration with directorates. These stakeholder engagements were convened to form strategic partnerships with organisations to meet organisational objectives as outlined in the organisation’s ﬁve year strategy.

A stakeholder engagement was held in partnership with the Mail and Guardian to launch the water benchmarking initiative. Various interested parties in the media, public and private sectors were invited. Ahead of the Auditor-General’s announcement of audit outcomes, SALGA invited metro communicators to engage with the report to enable them to be ready to respond to the media. In the build up to the launch of the municipal audit support programme for municipalities in the red zone with audit outcomes, SALGA held a stakeholder engagement for audit ﬁrms to solicit their support for the programme. A strategic partnership was entered into with Proudly South African aimed at assisting municipalities with complying with legislation relating to procurement practices. An oﬃcial signing ceremony was convened to seal the partnership. SALGA entered into an MoU with Eskom aimed at forging relationships to deal proactively with issues relating to electricity distribution, service level agreements between municipalities and Eskom and compliance with legislation.

SALGA also joined hands with Rand Water to launch the water conservation fund and launched it to stakeholders as a side event at the National Members Assembly. The National Members Assembly was also used as a platform to sign an MoU with SASCOC as well as the Association of Flemish Cities and Municipalities (VVSG).

International relations

During 2014/15 SALGA participated in the following international platforms:

Africities official launch: 17 September 2014

The Africities summit was presented to the oﬃce bearers meeting held on 17 September 2014. The oﬃcial launch took place on 14 October 2014 in Johannesburg. The theme of the Africities summit in December 2015, to be held in Johannesburg, will be “Shaping the future of Africa with the people: Africa’s local government contribution to the Africa 2063 vision”.

Smart local governance: 6-7 November 2014, Bilbao, Spain

UN-Habitat´s local government and decentralisation unit contributed to the meeting of the UCLG committee of digital and knowledge-based cities that took place in Bilbao, Spain, on 6-7 November 2014.

13th International congress of educating cities: 13-15 November 2014

The theme for this congress, which took place on 13-15 November 2014, was “The educating city is an inclusive city”. Through lectures, presentations of experiences, mayors’ and experts’ round tables, and study tours, the congress dealt with the role of education, in the broadest sense of the term, as an essential instrument for social inclusion, fostering personal and collective development and the improvement of social coexistence and solidarity.

Local governments and different social agents and entities in cities are facing the major challenge of working towards social inclusion from a comprehensive perspective in order to confront social and economic inequality and the inequality of opportunities affecting different sectors of the population. These inequalities run the risk of deepening the rift given the rapid pace of change that is being lived through if a decisive effort is not made to stop them.

96 International conference of local authorities in solidarity with the Palestine people: 21-23 November 2014

SALGA, informed by the MoU it signed with the Association of Palestinian Local Authorities (APLA), which seeks among others to facilitate municipality to municipality support, participated in this conference on 21-23 November 2014 in Ramallah. The conference was organised by the UN International Year of solidarity with the Palestine People (2014). Its intention was: y To develop and deepen ideas that abound in Palestine and around the world on the Palestinian issue; and y To open new avenues of reﬂection, to explore and to identify new levers of intervention and of development that could be implemented at the local level of the territory.

The ambition of the conference was to bring together Palestinian (West Bank, Jerusalem and Gaza) and foreign local actors in order to promote linkages between them, to bring out new ideas and new initiatives, and to act constructively. Among others the conference introduced and outlined the beginning of answers on these issues, inspiring new ways of thinking and of acting, and new dynamics of solidarities.

UCLG world congress: 23-29 November 2014

UCLG world congress marked the 10th anniversary of the creation of United Cities and Local Governance (UCLG), which aims to be the united voice of local and regional governments at the global level. The congress took place on 23-29 November 2014 in Haikou, China. Focusing on the general theme “city managements and public service innovation”, delegates of member cities from across the globe brought together smart ideas and valued experiences that have helped shape the growth of their cities.

BALA conference: 20-22 January 2015

The conference was held under the theme “Unlocking investment opportunities”. The current developmental thinking places local government at the forefront of developmental issues and in ensuring basic service delivery through the promotion of inclusive development initiatives from all sectors of the economy.

Delegates from the regional countries brought together smart ideas and valuable experiences that have helped shape the growth of their cities.

Peer review of local government in England: 15-18 February 2015

The Local Government Association of England and Wales (LGA) requested SALGA’s support in an international peer review of English cities and city regions. Our participation included a comparison between the local government systems in England and South Africa. The comparisons included among others, the form, structure, powers, functions and systems of the English and South African local governments. LGA speciﬁcally requested SALGA to facilitate the executive mayor of the City of Joburg to participate in this process.

UCLG culture summit: 18-20 March 2015

SALGA, through its CEO was invited to the UCLG culture summit “Culture and sustainable cities”, which took place in Bilbao on 18-20 March 2015 and gave a presentation of the “Activities of SALGA on culture and sustainability” in the parallel session: “Networks and Agenda 21 for culture” that took place on 19 March 2015.

97 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable

2014/15

The anti-fraud helpline was

Legal: a legal and executed developed SALGA framework which formed protocol topart approach of a comprehensive legal services co-rdinate effectively was Training in the organisation. conducted on the framework as well as the LexisNexis Risk management: 2015/16 was facilitated, for Risk register CoGTA to and submitted developed as partTreasury of the and National Plan Annual Performance SALGA 2015/16. Internal audit: The internal audit plan was the various through implemented Quarterly conducted. audits that were the audit to submitted reports were committee. Anti-fraud: and reported to reviewed monitored, be operating successfully. SALGA monitored and evaluated the and evaluated monitored SALGA of the performanceimprovement and developedmanagement system quarterly assessment reports after conclusion of quarterly quality 2015 assurance by 31 March Develop and Legal execute Framework, Protocol Legal Coordinated Support to provided bythe organisation 2015 31 March and Facilitate Draftdevelop Risk 2015/16 for register by 31 January 2015 Implementation of the Internal Audit 2014/15 by Plan 2015 31 March theRevive implementation of anti-fraud the SALGA by Plan prevention 2015 31 March Monitoring and evaluation improved for performance management by system 2015 31 March Provision of Provision legalorganisational services; facilitation and execution of enterprise risk management create processes; andawareness visibility of anti-fraud and prevention improved processes; for internal controls auditedprocesses 2014/15. Performance management sustainedsystem and continuously improved Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result excellence modelexcellence support)(executive out rolled management sustainedsystem and continuously trough improved monitoring and evaluation KPI number Target Target number Goal 7 55 68 Operational 7 55 69 Performance Below are detailed performance results as per the key performance indicators in the 2014/15 annual performance performance plan: indicators as per the key detailed performance results are Below 98 status Performance Achieved variance Reason for A service provider was appointed assist with theto uploading on all documents that not on thewere repository due to in-house capacity constraints Not applicable Achieved Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Over Over achieved Not applicable Not applicable Not applicable 2014/15 779 documents for 2014/15 were scanned and uploaded2014/15 were repository by the SALGA into 2015 31 March An electronic online boardroom booking and was developed system 2015 by 31 March implemented A stable and adaptable ICT and was provided environment 2015. Allmaintained by 31 March to been upgraded lines have diginet times4MB ensuring response faster on the videoand improvement solution conferencing SALGA facilitated the compliance with facilitated SALGA office the OHS Act. 80% of SALGA accommodation complied with the 2015 OHS Act by 31 March A total of 69 A total Implementation of an online system boardroom for bookings by 2015 31 March Provide and Provide maintain a stable and adaptable ICT by environment 2015 31 March 80% of SALGA office 80% of SALGA accommodation in compliance byfacilitated 2015 31 March 40 000 documents (national office) thescanned to repository by 2015 31 March Improve SALGA’s SALGA’s Improve meeting facilities. Responsive ICTResponsive environment facilitated 80% of SALGA office 80% of SALGA accommodation in compliance with structural aspects in terms of access by persons in wheelchairs Repository of unclassified information. Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result appropriate interventions for clientimproved satisfaction environment maintained accommodation in compliance facilitated unclassified updated information KPI number Target Target number Goal 7 59 73 Determine 7 56 70 ICT Responsive 7 57 71 office 80% of SALGA 7 58 72 Repository of

99 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable Not applicable Not applicable 2014/15 Quarterly reports out of against the roll the stakeholder management strategy 2015 by 31 March developed were NOB received the assessment reportsNOB received on the implementation of governance support model as per the The reports were year-planner. SALGA 2015 tabled at NOB on 16 March Quarterly reports on the implementation of the marketing and developed communication plans were detailing all activities undertaken during the course of quarters by 31 2015 March Planning and reportingPlanning against pre- was coordinated determined targets on a quarterly basis. comply with the continued to SALGA Treasury of the National requirements of the development for framework and annual performancestrategic plans. Quarterly reports been submitted have as perTreasury and National CoGTA to by Nationalthe timeframes stipulated Treasury Quarterly reporting outagainst the roll of the stakeholder management by 31 Marchstrategy 2015 NOB/NEC receives two reports (M&E) on the implementation of the governance support model as year- per the SALGA planner 2014/15 by 2015 31 March Quarterly report on implementation of the 2014/2015 national marketing and communication plans by 31 March 2015 Planning andPlanning reporting against pre-determined coordinated targets 2015 by 31 March Stakeholder management out roll strategy Effective andEffective functioning governance structures Implementation of marketing and communication plans Translating the Translating strategic SALGA a qualityplan into annualassured performance plan achievingtowards impact in the local government sector Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result management out rolled strategy structure support model implemented communication plan 2014/15 implemented opinion for 2014/15opinion for obtained KPI number Target Target number Goal 7 60 74 Stakeholder 7 61 75 governance SALGA 7 62 76 Marketing and 7 63 77 Unqualified audit

100 status Performance Achieved variance Reason for Not applicable Achieved Not applicable Achieved Improved recruitment processes Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable 16% over achieved Not applicable 2014/15 Unqualified audit opinion was 2014/15 obtained for SALGA’s budget was aligned to budget was aligned SALGA’s objectives by strategic organisational 31 January 2015. was held on 19A budget forum discuss the 2015/16 2014 to November that ensure budget allocation and to to according the budget is aligned and strategic programmes SALGA The budget has been prepared goals. with transparency and in line with and templates Treasury National guidelines. 86% of funded vacant positions for 2015 filled by 31 March 2014/15 were 100% of employment conditions 2014/15 by 31 for implemented were are employees 2015. All eligible March in Contracts are staff benefits. receiving serviceplace with respective providers; ie ABSA; Momentum; Discovery Health and Old Mutual Unqualified audit 2014/15opinion for obtained Budget aligned organisationalto objectivesstrategic by 31 January 2015 70% of funded vacant posts filled by 2015 31 March 100% implementation of 2nd phase of sustainable employment conditions of service by implemented 2015 31 March Unqualified audit 2014/15opinion for obtained Budget aligned organisationalto objectives strategic Funded vacant posts Funded tofilled in order build organisational capacity improve to support SALGA to members 2nd phase of sustainable employment conditions ofimplemented service ensure to of staffprovide motivateand to employees optimalfor performance Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result opinion for 2014/15opinion for obtained aligned toaligned organisational objectivesstrategic business units ensured phase of sustainable employment conditions of service KPI number Target Target number Goal 7 63 78 Unqualified audit 7 64 79 2015/16 Budget 7 65 80 Capacitated 7 66 81 Implement 2nd

101 status Performance variance Reason for Not applicable Achieved Not applicable Achieved Not applicable Achieved Not applicable Achieved Variance Variance achieved) and under (both over Not applicable Not applicable Not applicable Not applicable 2014/15 Approved OHS committee report OHS committee andApproved and was developed recommendations the CEO in December to submitted 2014. Quarterly meetings OHS committee in this financial year convened were The employee recognition programme recognition The employee and provinces across was facilitated in Decemberhosted 2014. Employees as provincial as well directorates from The ERA recognised. offices were of also consisted steering committee as national as well from representatives offices all provincial Quarterly reports detailing the progress wellness out of employee on the roll and developed were programme tabled at the quarterly Employment 2015 by 31 March Equity Forums Approved employment equity reportApproved the to and submitted was developed of the DepartmentEE Registrar of 2014 Labour on 29 September Approved OHSApproved committee report and recommendations the to submitted CFO by 31 December 2014 Employee recognition programme acrossfacilitated andprovinces by hosted 31 December 2014 Quarterly report outon the rolled wellnessemployee withinprogramme the employee policy/wellness by programme 2015 31 March Approved employment equity report to submitted ofthe EE Registrar the Department of Labour by 31 October 2014 Employee recognition programme recognise to employee’s commitment, dedication and work and tohard a culture promote of work ethic in the workplace Employee wellnessEmployee programme out in therolled organisation, aproviding holistic wellness programme Employment equity report submitted the EE Registrarto of the Department of Labour in order an promote to equitable workplace OHS committee report and recommendations a safe ensure to workand healthy environment Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result 2014/15 employee recognition programme implementation of wellnessemployee programme ensured with skillsensured development, employment equity and OHS legislation ensured with skillsensured development, employment equity and OHS legislation KPI number Target Target number Goal 7 67 82 Implementation of 7 68 83 Structured 7 69 84 Compliance 7 69 85 Compliance

102 status Performance variance Reason for Not applicable Achieved Variance Variance achieved) and under (both over Not applicable 2014/15 The annual training report and workplace skills 2014/15 was plan for LGSETA to and submitted completed comply to in December 2014 in order and good requirements with legislative to oﬀered were Trainings governance. staﬀ as per the skills plan andSALGA by plans (PDPs) personal development 2015 31 March Annual training report and workplace skills plan LGSETA to submitted comply to in order with legislative andrequirements good governance by 31 December 2014 Annual training report and workplace skills plan LGSETA to submitted comply to in order with legislative andrequirements good governance Outcome 2014/15Outcome 2014/15 KPI 2014/15 target Annual result ensured with skillsensured development, employment equity and OHS legislation KPI number Target Target number Goal 7 69 86 Compliance

103 Mandela Day

104 PART D: HUMAN RESOURCE MANAGEMENT

105 1. INTRODUCTION

Our employees are SALGA’s key resource. SALGA recognises that the sustainability of the organisation also depends on providing fair remuneration, beneﬁts, working conditions and development opportunities that will attract and retain the right people with the right skills in order to execute the developmental mandate of the organisation.

The period under review marks a time where several human resources initiatives were implemented or improved to support and underpin the organisation’s strategic goals. With the focus being on establishing SALGA as centre of excellence, and on the attraction and retention of staﬀ, the following marks some highlights during the period under review:

y Implementation of service benefits to all staff; y Converting the nature of employment contracts from fixed term to permanent for all employees, excluding senior management; y Full automation of the individual performance management system; y Entering into an agreement with LGSETA to fund internships; and y Executive skills development interventions.

1.1 Talent acquisition

As at the end of the financial year, SALGA had a staff complement of 428 employees of whom 162 are employed at the national office in Pretoria, with the rest of the staff spread across the nine provincial offices. Senior SALGA appointees undergo psychometric assessments to ensure proper skills fit. In realising SALGA’s uniqueness as an organisation, it is important to have a focused job market and to expand its recruitment efforts to social media. The breakdown of the staff complement of 428 is reflected below:

Workforce profile per business units (excl. temporary staff)

Directorate / province Number of employees Oﬃce of the CEO (including CSR) 38 Finance and Corporate Services 68 Municipal Institutional Development 17 Municipal Infrastructure and Services 11 Municipal Finance 6 Governance and IGR 11 Economic Development and Planning 8 Community Development 9 Eastern Cape 32 Free State 33 Gauteng 29 Mpumalanga 24 North West 26 Northern Cape 27 Limpopo 29 Kwazulu Natal 28 Western Cape 32 Total 428

106 TERMINATION CATEGORIES

35 32 30 27 25

5 22 1 0 All Terminations Resignations Retirement Death End Contract

ETHNIC GROUPS

120%

100% 100% 100% 100% 100%

80% All positions ﬁlled

60% Males 50%

40% 33% Females

20%

1% 1% 3% 3% 3% 3% 0% AFRICANS INDIANS COLOUREDS WHITES

1.2 Individual performance management

The individual performance management system transcended into the use of an automated, user-friendly system during 2014/15. Various training and informative workshops were held across the organisation to thoroughly inculcate the process. All reviews and coaching sessions for 2014/15 were successfully completed electronically. This automation enables faster processing of performance results and ensuring credible performance reports. These eﬃciencies allow for the expertise in SALGA to have more time to focus on the execution of day to day responsibilities in responding to the needs of members and the sector generally.

The behaviour’s charter, which enhances individual performance management was implemented for executive management and will be rolled out to all staﬀ in the next ﬁnancial year. Several awareness workshops were held throughout the organisation to ensure that SALGA fosters a workforce with professional, value-driven behaviour amongst employees. A proper link between the behaviour’s charter and SALGA’s values were drawn.

107 1.3 Labour relations compliance

1.3.1 Employment equity within SALGA

In an eﬀort to comply with the labour relations Act, SALGA has an existing Employment Equity Committee which meets on a quarterly basis. The purpose of the committee is to discuss matters such as equity in the workplace, discrimination, disability, promotion, fair remuneration, disability and others as required by legislation. SALGA’s EE forum was amended to incorporate skills development committee and is now known as the employment equity skills development consultative forum (EESDCF). The purpose of adding skills development was to ensure compliance with legislation in terms of the Skills Development Act and Employment Equity Act. It was also important that SALGA as a learning organisation invests in its staﬀ as part of employee umpliftment.

1.3.2 Employment equity workforce profile

The table below reports the total number of employees (including employees with disabilities) in each of the following occupational levels:

Occupational levels Male Female Foreign nationals Total A C I W A C I W Male Female Top management 10-1 -3 -22 - - 18 Senior management 91126 - -2 - - 21 Professionally qualified and experienced specialists and mid- management 4542437133- 1 100 Skilled technical and academically qualified workers, junior management, supervisors, foremen, and superintendents 55614727241 1 153 Semi-skilled and discretionary decision making 11- - -72419- - 97 Unskilled and defined decision making 9---173-- - - 29 Total permanent 139 11 5 10 207 15 8 20 1 2 418 Temporary employees 5---4--- - - 9 Grand total 139 11 5 10 207 15 8 20 1 2 437

Note: A=Africans, C=Coloureds, I=Indians and W=Whites

108 The table below reports the total number of employees with disabilities only in each of the following occupational levels:

Occupational levels Male Female Foreign nationals Total A C I W A C I W Male Female Top management ----1--- - - 1 Senior management ------Professionally qualified and experienced specialists and mid- management ------Skilled technical and academically qualified workers, junior management, supervisors, foremen, and superintendents -----1-- - - 1 Semi-skilled and discretionary decision making 1------1 Unskilled and defined decision making ------Total permanent 1---11-- - - 3 Temporary employees ------Grand total 1---11-- - - 3 Note: A=Africans, C=Coloureds, I=Indians and W=Whites 1.4 Employee relations

The employee relations function is designed to ensure that there is a sound relationship between employer and employees. SALGA’s processes are designed to ensure fairness when it comes to issues of discipline and grievances, in addition it is a mechanism that makes provision for collective bargaining. Ordinarily it is expected that each employer should provide for an eﬀective employment relations process. To this eﬀect SALGA has an employment management relations policy which makes provision for the SALGA code of conduct, grievance procedure, disciplinary procedure, appeals procedure and dispute procedure.

SALGA has established a fraud hotline which is managed by SizweNtsalubaGobodo. Matters referred to the fraud hotline for further investigation are also dealt with by the employee relations unit. SALGA strives to always comply with the policy and adheres to the timeframes as stipulated. Below is a graphic representation of cases that SALGA honoured during the current reporting period.

Number of disputes

Labour Court

Disputes (CCMA)

Appeals

Grievance

Investigation

Formal Disciplinary cases (Final Written Warning, Demotion and Dismissals)

Progressive Disciplinary cases (Counselling, Verbal Warning & Written Warnings)

Implementation of employee service benefits 0 2 4 6 8 10 12 14 109 Effective from 1 April 2014, SALGA implemented service benefits to its employees and converted the nature of employment of employees at manager levels and below to permanent positions. By offering benchmarked service benefits, SALGA is able to position itself as a competitive employer of choice. The benefits offering also serves as an attraction and retention measure. The following benefits were introduced:

y Medical aid,; y Pension fund; and y Group risk cover.

1.5 Skills development

SALGA is a learning organisation that believes in investing in the development of its workforce. Employees are continuously exposed to learning interventions aimed at equipping them with skills, knowledge and abilities required to meet the needs of SALGA’s main clients, its member municipalities.

As per the relevant legislative requirements of the Skills Development Act, SALGA is required to annually submit a workplace skills plan (forecast of training interventions to be implemented) as well as annual training report (ATR) to the LGSETA. This report reﬂects how the skills budget was utilised for SALGA to be eligible for discretionary grants from the LGSETA to further develop its staﬀ and interns.

For the current reporting period a total of 27 skills development interventions were implemented and four conferences/workshops were attended. Fourbhundred and two employees across job levels were trained on the different short course/skills programmes. During this reporting period, study assistance was awarded to 48 officials who are doing Doctorate, Masters, Degrees, Diplomas, Certificates and Matric.With the conversion of employment contracts SALGA also amended its study assistance policy to enable more employees the opportunity to study or further their academic qualifications. It is very encouraging to see the enthusiasm of SALGA employees in aspiring to improve their existing qualifications. SALGA registered 13 employees with seven professional bodies. The following statistics depict the training programmes conducted from July 2014, until the end of March 2015.

110 2014/15 Summary of number of employees trained and inducted

450 400

350 Number of employees trained 300 Training programmes delivered 250 200 Study assistance

150 Induction programme 100 50 400 31 48 50 0 National view

Employment equity and gender: annual training report

450 402 Total number trained 400 340 Africans 350

300 Whites 245 250 Coloureds 200 151 150 Indians

100 Males 26 50 22 9 Females 0 Number of employees per race and gender

111 2014/15 Types of qualifications being studied

50 48 Qualiﬁcations: Study Assistance 45 40 Masters 35 PhD 30 25 Degrees 21 20 Diploma 15 9 10 10 Certiﬁcates 5 2 1 1 Matric 0 Qualifications

Training programmes conducted in 2014/15

Training Programmes Number of attendees Writing Queries 1 Cisco Network 1 Cobit 5. Foundation 1 File Plan and Records Development 13 Fiscal Decentralisation 3 MS Office 16 Project Management 14 Strike Handling 9 Supervisory Training 8 Compliance Course 1 Measuring ROI in Training 1 Minute Taking 42 2nd Annual HR Standards 2 Hazard Identification & Risk Assessment 22 Report Writing 29 Telephone & Reception Training 4 Public Speaking and Presentation Training 88 Planning ( Conference) 3 Coaching and Mentoring 18 Company Secretary course 1 CIPS Assessments Skills 8 Office Management 19 Job Analysis 4 Asset Management 2 EE Training 12 ABET 22 Monitoring and Evaluation 15

112 Training Programmes Number of attendees Finance for Non-Financial Managers 9 Strategic Management 11 Fire Fighting Training 23 Total 402

1.6 Employee wellness programme

SALGA embarked on an extensive drive to ensure wellness of its employees. SALGA provides the services of Independent Counselling and Advisory Service (ICAS) to its employees at no cost to the employees. The uptake by staff in the utilisation of ICAS was above average during the year under review. Counselling, whether telephonic or face-to-face, group counselling sessions and an array of other methods, form part of the ICAS offering and are aimed at providing professional assistance with matters that might hinder an employee from performing optimally in the workplace. Other physical wellness and employee bereavement support services are also offered to staff.

SALGA ﬁrmly promotes a healthy work life balance amongst its staﬀ members. In support of this, several other initiatives in addition to the employee assistance programme were presented.

The following graph illustrates the employee wellness activities for 2014/15:

Table 1.2

EWP activities

Wellness day

5 Blood drive 10 1 Emotional Impact Session Personal ﬁnancial 10 1 management training 1 TB Awareness Session 1 10 Women’s Month Activities 16 Days of No Violence Against Women and Children Sports Day

1.7 Employee recognition awards

The employee recognition awards is SALGA’s way of recognising excellence in employees. Employees who both perform well, and also go the extra mile while executing the mandate of SALGA, are nominated by their fellow staﬀ members in order to become eligible for an award. Recognition is an important component in the HR value chain. A formal recognition programme such as SALGA’s employee recognition awards serves as a catalyst to encourage even more outstanding work amongst employees. SALGA furthermore promotes the concept of working collaboratively in a team as well as forming multi-disciplinary teams to achieve a certain strategic objective. A reward category recognising and rewarding the best team was therefore included in the awards categories. 113 1.8 Occupational health and safety

A formal occupational health and safety (OHS) committee serves within SALGA. Apart from the fact that this is a legislative requirement, SALGA is committed to the provision of a safe and healthy work environment to its employees. The OHS committee carries out regular inspections on OHS requirements. Reports on the committee’s ﬁndings are presented to the executive members. All OHS representatives attend regular training interventions such as hazard identiﬁcation and risk assessment and rire emergency drill training to ensure that they are prepared to act in an emergency situation.

Through its commitment to human resources processes, SALGA has managed to establish a strong employee value proposition. When concerted eﬀorts between SALGA, its staﬀ and stakeholders come to fruition, it aids in positioning the organisation as an employer of choice, a high performance organisation which continuously challenges the status quo. In order to continue rendering an impeccable service to its members, SALGA ensures that best practice principles are incorporated into all employment practices within the organisation.

114 PART E: ANNUAL FINANCIAL STATEMENTS

115

116 &KLHI)LQDQFLDO2I¿FHU¶V5HYLHw

Nceba Mqoqi Chief Financial Officer

OVERVIEW OF OPERATING RESULTS

The year under review is characterised by a solid financial performance with a net surplus margin of 4.0 percent (2014: 9.8 percent) that has led to the organisation’s financial position becoming more stable and secure with an asset coverage rate of 20 times (2014: 40 times). The operating results for the year ended 31st March 2015 reflect a surplus of R 18.7 million (2014: R 39.0 million) representing a reduction of 52.1 percent (2014: 12.8 percent).

The major contributing factor to the reduction in surplus is due to an increase in programme costs i.e. costs incurred for service delivery to SALGA’s membership in pursuance of the organisation’ s mandate, namely: (i) lobbying; advocacy and representation; (ii) employer role; (iii) capacity building; (iv) providing support and advice; (v) strategic proﬁling of the local government sector and (vi) knowledge and information sharing.

Gross programme costs i.e. inclusive of ‘direct programme costs’ such as direct employee costs necessary for service provision to members and ‘indirect programme costs’ such as costs incurred in the actual service provision to members have increased by 22.8 percent to R 298.9 million (2014: R 243.5 million).

Relative to total operating expenditure gross programme costs comprise 62.3 percent (2014: 62.5 percent).

The 2014/15 financial year is characterised by advances made in the area of improvement in conditions of service for SALGA employees, in that, in the financial period under review SALGA introduced employee benefits as well as converted fixed term contracts of employment for employees below the level of director to permanent. The effect of the introduction of employee benefits has impacted SALGA’s statement of financial performance with an additional expenditure of R 29.6 million.

The employee beneﬁts introduced entail the following:

y Pension fund - an employer contribution based on 10.5 percent p.a. of an employee’s basic or pensionable salary towards pension and/or retirement funds. Employees are required to contribute a corresponding contribution of 6.5% p.a. based on their basic or pensionable salary. y Medical aid - an employer contribution capped at R 2 028 per month per employee. The contribution amount is reviewed annually depending on prevailing medical insurance inﬂation. y Group risk - an employer contribution that covers funeral beneﬁt for the employee at a cost of R20 per employee per month to the organisation and immediate family members. The risk cover also includes life assurance cover at 2 times an employee’s annual pensionable salary in case of death. The risk cover is based on 1.45 percent of SALGA’s basic payroll costs.

The above mentioned initiatives are to ensure that SALGA attracts and retains top talent; its remuneration philosophy is aligned with the organisation’s strategy; and drives sustainable performance in the long-and short-term.

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The solid performance was attributable to revenue (excl. interest) growth of 19.1 percent to R 489.6 million (2014: R 411.1 million).

The growth in revenue has been boosted by a strong growth in membership levies that have grown by 18.5 percent to R 429.1 million (2014: R 362.2 million) as a result of the review of the membership levy formula and organic growth.

KEY FINANCIAL INDICATORS

Financial Indicators 2015 2014 - Membership Levy revenue 429.1 362.2 - Government grant - Executive Authority 26.9 26.0 - Direct programme costs as a percentage of employee related costs 78% 79% - Administrator employee costs as a percentage of employee 22% 21% - Indirect programme costs as a percentage of operating expenses 19% 24% - Gross programme costs as a percentage of operating expenses 63% 65% - Total employee related costs as a percentage of operating expenses 57% 53%

Proﬁtability - Net surplus margin 4.0% 9.8%

Liquidity ratio - Current ratio 180% 187%

Solvency ratio - Solvency ratio 1.99 2.08 - Debt /Equity ratio 5.3% 7.8% - -Asset coverage rate (times) 20 14

Activity ratio - Debtor collection period after impairment (days) 28 26 - Debtor collection period before impairment (days) 62 48 - Membership levy payment levels rate(%) 87% 92% Exclude depreciation and amortisation

REVENUE

Revenue for the year (excl. interest) amounts to R 489.6 million (2014: R 411.1 million).

Operating revenue

The organisation is primarily funded by membership levies that are levied to member municipalities. For the year under review, membership levy revenue remained the main source of revenue for SALGA with membership levies comprising 88 percent (2014: 88 percent) of total revenue.

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Operating revenue distribution is as follows:

Operating revenue distribution per category - 2015 Operating revenue distribution per category - 2014

0% 1% 2% 1% 3% 3% 3% 0% 5% 6%

88% 88%

Rendering of services - Membership levies Rendering of services - Membership levies Transfers and subsidies - Executive Authority Transfers and subsidies - Executive Authority Revenue from non-exchange transactions¹ Revenue from non-exchange transactions¹ Donor funds recognised Donor funds recognised Revenue from capacity building programmes Revenue from capacity building programmes Other revenue Other revenue

The applicable membership levy formula for the year under review and ensuing ﬁnancial years is as follows:

0HPEHUVKLSOHY\IRUPXOD Metropolitan municipalities Flat rate plus CPI and 1 percentage point Local and district municipalities 1% of annual salary budget with a minimum of R500 000

The operating grant from the Executive Authority (Department of Cooperative Governance and Traditional Aﬀairs) has increased by 3.5 percent to R 26.9 million (2014: R 26.0 million) as part of national government cost-cutting measures.

The strong growth in revenue has also been buoyed by an increase of over 14.6 percent in ‘revenue from non-exchange transactions’ to R 39.2 million (2014: R 34.2 million).

The ‘other revenue’ category also includes recoveries in the form of delegate fees for attendance of SALGA’s governance structures at R 15.1 million (2014: R 6.0 million).

Operating revenue composition:

Operating revenue R million 2015 2014 % change Rendering of services - Membership levies 429.1 362.2 18.5 Transfers and subsidies - Executive Authority 26.9 26.0 3.5 Revenue from non-exchange transactions 12.3 1.4 758.4 Donor funds recognised 1.8 6.2 (70.9) Revenue from capacity building programmes 2.4 4.1 (41.6) Other revenue 17.1 11.1 53.4 Total operating revenue 489.6 411.1 19.1

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Membership levy payment level rate

As membership levy revenue comprises the majority of SALGA’s revenue stream, the payment levels rate for membership levies remains the most important key performance indicator for the organisation as it determines the tempo for programme rollout and the organisation’ s operational sustainability.

As at 31 March 2015 the payment levels for membership levies stood at 88 percent (2014: 92 percent). The collection rate for the current year remained within budget at 90 percent (2014: 94 percent).

The provincial split for payment levels rates as at 31 March 2015 and the prior year are tabulated below:

Payment levels rate provincial distribution 2015 2014 Current Current Province year Overall year Overall Eastern Cape 88 85 92 88 Free State 83 82 91 92 Gauteng 96 96 97 99 KwaZulu-Natal 90 86 95 90 Limpopo 94 96 95 96 Mpumalanga 91 92 93 95 Northern Cape 74 67 82 77 North West 87 85 92 94 Western Cape 97 96 96 96 Organisational payment levels rate 90 88 94 92

Overall membership levy payment level rate:

OverallMembership membership levy levy payment payment levels levels rate rate

-4%

89% 87% 92% 88% Percentage

2012 2013 2014 2015

Year

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The cumulative monthly interval of payment levels for the 2014/2015 as well as 2013/2014 ﬁnancial years are illustrated below.

The key feature of the payment level curve for the 2014/15 ﬁnancial year is that a cumulative payment levels rate of 61 percent was achieved at the constitutional due date of 31 July 2015 i.e. more than half of members had settled their membership levies.

A salient feature of the payment levels curve for 2014/2015 is that a cumulative payment levels rate of 84 percent was achieved at 30 September 2014 versus 67 percent at 30 September 2013.

The reduction in the cumulative payment levels rate at 31 March 2015 from 90 percent to 88 percent for the year is due to the raising of additional membership levy invoices in March 2015 as a result of the revenue assurance exercise undertaken annually.

In terms of the SALGA’s constitution (2012) membership levies are billed on 1 April and payable on 31 July each year, meaning that ideally by 31 July the payment levels should be 100 percent. However, as a result of some struggling members that are dependent on an equitable share for their ﬁnancial viability this is not always possible.

EXPENDITURE

Total operating expenditure (excl. ﬁnance cost) for the year increased by 27.8 percent to R 482.9 million (2014: R 377.8 million).

Total operating expenses

As mentioned above, the growth in operating expenditure is driven by the growth in direct programme costs i.e. programme related employee costs as part of building adequate internal capacity geared towards servicing SALGA’s membership directly. Thus in an eﬀort to be a more member-centric organisation, the growth in employee related costs is 38 percent to R 270.1 million (2014: R 195.8 million).

Employee related costs split between direct programme cost and administrative support costs R million 2015 2014 % change Employee related costs 270.1 195.8 38.0 – Direct programme costs 210.6 154.9 36.0 – Administrative support 59.5 40.9 45.5

Included in the employee related cost is direct programme cost that is employee cost geared towards service delivery to members and direct support to SALGA’s membership of R 210.6 million (2014: R 154.9 million). The portion relating to administration support to SALGA’s core business is R 59.5 million (2014: R40.9 million).

As indicated above, SALGA also introduced employee beneﬁts during the year and the additional expenditure incurred on employee beniﬁts amounts to R 29.6 million.

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Employee headcount grew by 13.2 percent to 437 employees as at 31 March 2015 (2014: 386 headcount).

Indirect programme costs which are incurred as part of discharging SALGA’s mandate to its members decreased by 0.4 percent to R 88.3 million (2014: R 88.7 million).

Operating expenditure distribution is as follows:

Operating expenditure distribution per category - Operating expenditure distribution per category - 2015 2014 12% 15% 13% 11% 2% 1%

9% 11%

62% 64%

Employee related costs (administrative support) Employee related costs (administrative support) Programme costs (direct and indirect) Programme costs (direct and indirect) Administrative overheads Administrative overheads Depreciation and amortisation Depreciation and amortisation Other operating expenses Other operating expenses

Programme related expenditure comprise the bulk of total expenditure incurred, for the year under review. The ratio of programme related expenditure is 61.9 percent (2014: 64.5 percent).

Operating expenditure split between programme and other expenditure Distribution % R million 2015 2014 % change 2015 2014 Gross programme costs (direct and indirect) 298.9 243.5 22.8 61.9 64.5 Other operating expenses 184.0 134.3 37.0 38.1 35.5 Total operating expenditure 482.9 377.8 27.8 100.0 100.0

The growth in membership levies of 18.5 percent, is primarily directed or utilised by activities that are geared towards servicing SALGA’s membership. This is illustrated by a R 54.4 million growth (representing 22.8 percent) in gross programme expenditure. Other expenditure growth is R 49.7 million (representing 37 percent).

Operating expenditure composition by category:

Operating expenditure by category R million 2015 2014 % change Employee related costs (administrative support) 59.5 40.9 45.5 Programme costs (direct and indirect) 298.9 243.5 22.8 Administrative overheads 54.4 32.8 65.9 Depreciation and amortisation 7.4 5.0 48.0 Other operating expenses¹ 62.6 55.6 12.6 Total operating expenditure 482.9 377.8 27.8

¹ -Operating expenditure excludes ﬁnance costs.

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Operating expenditure composition by economic classification:

Operating expenditure by economic classification R million 2015 2014 % change Employee related costs 270.1 195.8 38.0 Programme costs (indirect) 88.3 88.7 (0.4) Administrative overheads 54.4 32.8 65.9 Depreciation and amortisation 7.4 5.0 48.7 Other operating expenses ¹ 62.6 55.6 12.5 Total operating expenditure 482.9 377.8 27.8 ¹ - Operating expenditure excludes ﬁnance costs. NON-OPERATING REVENUE AND EXPENDITURE

The net non-operating revenue grew by over 100 percent to R 12.0 million (2014: R 5.7 million).

Non-operating revenue

Investment revenue increased by 97.1 percent to R 13.1 million (2014: 6.7 million),. The strong growth has been buoyed by investment revenue earned through investment of positive cash balances due to steady payment levels rate for membership levies being maintained. Finance costs remained steady at R 1.1 million with a negligible growth of 16 percent.

Non-operating revenue composition: Net non-operating revenue R million 2015 2014 % change Investment revenue 13.1 6.7 95.5 Finance costs (1.1) (1.0) 10.0 Net non-operating income 12.0 5.7 110.5

OPERATING SURPLUS

SALGA’s primary objective is not the pursuit of a surplus. However, as a result of sound ﬁnancial management practices and a rigorous procurement system, the organisation has been consistent in extracting value for money whilst delivering services to its membership.

Operating Surplus

The operating surplus for the year decreased by 52 percent to R 18.7 million (2014: R 39.0 million) mainly due to an increase in programme costs i.e. costs incurred for service delivery to SALGA’s membership in pursuance of the organisation’s mandate as well as improving SALGA employees’ conditions of service with the introduction of employee beneﬁts.

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Operating surplus

43.6

39.0 -52% R million 18.7

2013 2014 2015

Year

COMPARISON OF ACTUAL OPERATING RESULTS AGAINST ADJUSTED BUDGET

The SALGA budget is prepared on an accrual basis which is comparable with the financial statements. The original budget for the 2014/2015 financial year was approved by the Accounting Authority on 30 January 2014. The first adjusted budget for the 2014/15 financial year was approved by the Accounting Authority on 9 January 2015 and the final adjustment budget for 2014/15 was approved with the annual financial statements on 26 May 2015.

The budgets mentioned above cover the periods 1 April 2014 to 31 March 2015.The budget is prepared on the accrual basis using a classiﬁcation based on the nature of expenses in the statement of ﬁnancial performance.

Comparison of actual operating results against adjusted budget 2015 R million Actual Budget Variance Variance % Revenue 489.6 484.6 5.0 1.0 Expenses (482.9) (483.7) 0.8 0.2 Non-operating revenue 12.0 3.6 8.4 230.1 Operating surplus 18.7 4.5 14.2 313.3

The operating surplus for the year ended 31 March 2015 is R 18.7 million versus the budgeted R 4.5 million resulting in a positive variance of R 14.2 million.

An explanation of salient line items contributing to variances per major category are explained below:

Revenue

In revenue, the prominent positive variance is attributable to the following:

y Other revenue from exchange transactions - the positive variance is due to the over recovery for the convening of SALGA governance structures with more delegates attending than expected as well as the recovery of costs for the TASK Job Evaluation that is being rolledout to member municipalities. y Sponsorships and donations - the positive variance is largely due to sponsorship realised for the hosting of SALGA governance structures exceeding expectations.

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Expenditure

The prominent line item contributing to the positive variance in expenditure is the ‘indirect programme costs that results in several positive variances and in aggregate contribute to the R 1.2 million positive variance. The positive variance was realised due to budgetary control together with measures to contain escalating costs further emphasised by the National Treasury Instruction Note 1 of 2013/14 on cost containment measures.

Non-operating income

Investment income - the positive variance is mainly due to improved cash holding as a result of membership levy collections being realised early due to the early settlement discount strategy adopted as well as the better rates negotiated with our bankers.

A comparison of actual operating results against adjusted budget is illustrated below:

Comparison of actual operating results against adjusted budget

R 3.6 Non-operating revenue R 12.0

R 483.7 Expenses R 482.9

R 484.6 Revenue R 489.6

R 0.0 R 50.0 R 100.0 R 150.0 R 200.0 R 250.0 R 300.0 R 350.0 R 400.0 R 450.0 R 500.0 R million Budget Actual

Capital budget

Capital additions for the year ended 31 March 2015 amount to R 7.5 million versus the adjusted budget of the same amount resulting in nil variance.

Comparison of capital expenditure against adjusted budget R million 2015 2014 % change Capital acquisitions¹ 7.5 8.7 (13.8) ¹ - including intangible assets and property, plant and equipment.

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FINANCIAL POSITION

Statement of financial position R million 2015 2014 % change Current Assets 192.4 146.7 31.2 Non-Current Assets 32.1 32.0% 0.5 Total Assets 224.6 178.6 25.7 Current Liabilities 107.2 78.7 36.2 Non-Current Liabilities 5.8 7.1 (18.3) Total Liabilities 113.1 85.8 31.8 Net Assets 111.5 92.8 20.2

Net assets

The financial position of the organisation as at 31 March 2015 reflects positive net assets of R 111.5 million (2014: R 92.8 million). The growth in ‘net assets’ is due to the strong financial performance in the year under review.

In terms of solvency the organisation is solvent with a Debt/Equity ratio of 5.3 percent (2014: 7.8 percent) indicating an adequate asset coverage rate of 20 times (2014: 14 times).

Also refer to the Accounting Authority’s going concern considerations or assessment for the organisation included in its the report.

Statement of financial position R million 2015 2014 % change Cash and cash equivalents 154.4 116.5 32.6 Other current assets 38.0 30.2 26.0 Investment property 6.6 5.9 11.9 Property, plant and equipment 23.9 24.4 (2.1) Other non-current assets 0.6 0.6 (5.8) Other ﬁnancial assets 1.0 1.0 - Total Assets 224.6 178.6 25.7 Other current liabilities 96.3 69.9 37.8 Unspent conditional grants and receipts 1.8 4.8 (62.5) Provisions 7.1 - - Deferred revenue 2.1 3.9 (46.6) Current Liabilities 107.2 78.6 36.4 Non-Current Liabilities 5.8 7.1 (20.5) Total Net Assets 111.5 92.8 20.2

Current assets

Current assets increased by 31.2 percent to R 192.4 million (2014: R 146.7 million). The growth has been propelled by the growth in revenue and cash collections improved.

Current assets are comprised primarily by ‘Cash and cash equivalents’ at R 154.4 million (2014: R 116.5 million) and followed by ‘Other current assets’ at R 38.0 million (2014: R 30.2 million).

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‘Cash and cash equivalents’ increased by 32.6 percent mainly due to a steady payment levels rate that increased signiﬁcantly over the 2nd half of the ﬁnancial year as a result of vigorous debt procedures.

Included in ‘other current assets’ is ‘Trade and other receivables’ that increased by 25.4 percent to R 33.8 million (2014: R 26.9 million) as a result of increased membership levy revenue. Outstanding receivables comprise 6.9 percent (2014: 6.6 percent) of total revenue.

In terms of liquidity the current ratio is positive and exceeds current liabilities resulting in a ratio of 180 percent (2014: 187 percent).

Non-current assets

Non-current assets grew by 0.5 percent to R 32.1 million (2014: R 32.0 million) as a result of investment in operating capital.

Capital expenditure R million 2015 2014 % change Capital acquisitions¹ 7.5 8.7 (13.8) ¹ - including intangible assets.

Asset additions for the period, inclusive of intangible assets, amounts to R 7.5 million (2014: R 8.7 million) which aligns with the growth in employee headcount from 386 as at 31 March 2014 to 437 at 31 March 2015.

Current liabilities

Current liabilities are comprised primarily by ‘Trade and other payables’ at R 92.3 million (2014: R 67.1 million). These are trade creditors and accruals that are payable in the ordinary course of business, usually 30 days from statement date or fulﬁlment of a particular deliverable by a supplier.

Included in current liabilities are ‘other current liabilities’ such as ‘Deferred income’ and ‘Unspent conditional grants’ that constitute R 3.9 million (2014: R 8.6 million) of the total current liabilities. Deferred income and unspent conditional grants do not require settlement through payment; rather these are extinguished by fulﬁlment of the conditions of the grants.

Non-current liabilities

Non-current liabilities consist of the long-term portion of the ﬁnance lease obligation; operating lease liability; provisions and post- employment medical beneﬁt. These amount to R 5.8 million as at the end of the reporting period (2014: R 7.1 million).

Outlook for the year ahead

In terms of the allocation letter from National Treasury the operating grant that SALGA receives from the national ﬁscus shall be phasedout of the MTEF period. The total Parliamentary allocation for 2015/16 period is R 9.2 million, and R 1.4 million and R nil for 2016/17 and 2017/18 ﬁnancial periods respectively.

In 2014/15 the Parliamentary funding represented 5 percent of total revenue and 6 percent and 7 percent in 2013/14 and 2012/13 respectively. Therefore, the Parliamentary grant funding has been reducing in real terms over the last ﬁnancial periods. Notwithstanding these reductions the organisation has been able to report surpluses as a result of budgetary control and sound ﬁnancial management practices.

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The reduction in the operating Parliamentary grant is occurring against the backdrop of the organisation being presented with measures to alleviate over-reliance on a single source of revenue viz. membership fees. In an eﬀort, to address over reliance on a single source of revenue the organisation developed a funding model that was adopted by members during the National Members Assembly (NMA) held on 11-12 May 2010 in Kimberley. The funding model was presented to the Executive Authority and National Treasury during the intervening years, in an eﬀort to address the structural under unding of the organisation versus its mandate vis-à-vis legislated and mandatory participation in intergovernmental relations (IGR) structures.

However, despite the non-implementation of the funding model the organisation has seized the occurrence of phasing out the Parliamentary grant funding as an opportunity rather than a threat. At present measures geared towards strengthening SALGA’s financial independence have already begun with the research undertaken benchmarking with sister organisations internationally and the concept of ‘paid services’ being scoped together with other projects underway to position SALGA as a reservoir of innovation, knowledge and solutions for the local government sector. Despite the efforts, preliminary results indicate that the funding of SALGA’s participation at legislated and mandatory intergovernmental relations structures still remain a pivotal element of the funding model that needs to be funded from the national fiscus.

Conclusion

In conclusion, I express my sincere appreciation to the Chief Executive Oﬃcer, Xolile George, for his continued support, leadership, and strategic direction.

I also extend my appreciation to the Finance and Corporate Services team for their immense contribution during the year.

______Nceba Mqoqi Chief Financial Oﬃcer 31 July 2015

128 Report of the Accounting Authority

The current NEC was elected at the last National Conference held on 29 August 2011 to 1 September 2011, in terms of clause 11.1 of the SALGA constitution, where the chairperson, three (3) deputy-chairpersons, and six (6) additional members were elected.

The NEC has exercised its powers as conferred by the SALGA constitution in ﬁlling any vacancies in between National Conference, in terms of clause 11.3 of the SALGA constitution. The NEC can co-opt up to four additional members as members of the NEC and as at 31 March 2015 the NEC had four co-opted members.

The term of the SALGA NEC is ﬁve years; the current term is due to end at the conclusion of the current political term of oﬃce for local government.

With the exception of Xolile George who serves as an ex officio member in his capacity as Chief Executive Officer of the organisation, all other NEC members are councillors and are deemed to be ‘independent non-executive directors’ of SALGA as defined for state- owned enterprises (SOEs) in the September 2002 Protocol on Corporate Governance in the Public Sector. A non-executive director is a person who has not been employed by the SOE in any executive capacity for the preceding three financial years; and is (in relation to the SOE) not a significant supplier or customer, has no significant contractual relationship and is not a professional advisor, other than in his or her capacity as a director.

1. NATIONAL EXECUTIVE COMMITTEE MEMBERS’ INTEREST IN CONTRACTS

All NEC members are required to complete a register of interests. This register is updated on an annual basis. Refer to note 32 and 33 of the annual ﬁnancial statements for a full disclosure of related parties.

129 Report of the Accounting Authority 2. REMUNERATION OF NATIONAL EXECUTIVE COMMITTEE MEMBERS’ AND NEC SUB-COMMITTEES

2.1 National Executive Committee

Disclosure of remuneration paid to members of the Accounting Authority for 2014/15 per PFMA regulation 28.1.1(a).

2015

Sitting Reimbursed Subsistence Subsistence NEC member Allowance Travel Allowance Allowance Expenses Name ** Allowance * (local) * (foreign) * Refund Total Cllr Thabo Manyoni 11 141 - - 36 667 - 47 808 Cllr Mpho Nawa 12 857 - - 18 423 - 31 280 Cllr Nombulelo Hermans 12 856 28 854 - - - 41 710 Cllr Flora Maboa-Boltman 17 143 9 352 309 20 176 548 47 528 Cllr Dudu Mazibuko 1 714----1 714 Cllr Tiny Grace Mthimunye 7 713----7 713 Cllr Christiaan Neethling 12 855 24 910 1 454 - 203 39 422 Cllr Pinkie Moloi - - - 9 712 - 9 712 Cllr Willie Johnson 17 998 17 305 1 133 - - 36 436 Cllr Sebenzile Ngangelizwe 8 570 - - - - 8 570 Cllr Demetri Qually 18 869 4 495 412 - 1 270 25 046 Cllr GK Lobelo 12 855 - - - - 12 855 Cllr David Magabe 6 010 - - 4 396 - 10 406 Cllr Sibusiso W Mdabe 10 300 ----10 300 Cllr Nomakhosazana Meth 7 723----7 723 Cllr Zibonele Dumzela 7 713 ----7 713 Cllr Abraham Bekeer 10 301 858 206 - - 11 365 Cllr Maﬁka Nkosi 6 856 66 596 - - - 73 452 Cllr Zukiswa Ncitha 6 007----6 007 Total 189 481 152 370 3 514 89 374 2 021 436 760

130 Report of the Accounting Authority

Disclosure of remuneration paid to members of the Accounting Authority for 2013/2014 per PFMA regulation 28.1.1(a).

2014

Sitting Reimbursed Subsistence Subsistence Allowance Travel Allowance Allowance Expenses NEC member Name ** Allowance * (local) * (foreign) * Refund Total Cllr Thabo Manyoni 4 285 - - 78 856 - 83 141 Cllr Mpho Nawa 4 285 - - 73 554 - 77 839 Cllr Flora Maboa-Boltman 5 142 2 749 - - 67 7 958 Cllr Dudu Mazibuko 1 714 - - 12 900 - 14 614 Cllr Speedy Mashilo 4 285 - - 16 048 - 20 333 Cllr Christian Neethling 5 142 45 585 4 019 - 786 55 532 Cllr Joshua Matlou 2 571 - - - - 2 571 Cllr Boitumelo Moloi 2 571 - - 9 933 - 12 504 Cllr Willie Johnson 5 142 49 299 3 926 - 6 188 64 555 Cllr Parks Tau 3 428 - - - - 3 428 Cllr Balekile Mzangwa 2 571 - - 9 933 - 12 504 Cllr Demetri Qually 7 713 2 582 279 - 792 11 366 Cllr Gavin Lobelo 5 142 28 260 651 - - 34 053 Cllr David Magabe 3 428 - - 3 143 - 6 571 Cllr Sibusiso Mdabe 3 428 - - - - 3 428 Cllr Nomakhosazana Meth 857 24 774 1 395 18 034 - 45 060 Cllr Subesh Pillay 3 428 - - - - 3 428 Cllr Zibonele Dumzela 2 571 5 309 186 - - 8 066 Cllr Abraham Bekeer 4 285 4 045 930 - - 9 260 Cllr Maﬁka Nkosi 3 428 24 332 372 - - 28 132 Cllr Zukiswa Ncitha 857 - - - - 857 Total 76 273 186 935 11 758 222 401 7 833 505 200

** With effect from 1 July 2013 and in terms of Government Notice number R64 - determination of upper limits of salaries, allowances and benefits of different members of municipal councils, issued in terms of the Remuneration of Public Office Bearers Act, 1998 (Act No. 20 of 1998), dated 29 January 2014, SALGA is required to pay sitting allowances to councillors appointed to governance structures of organised local government. The said allowance is limited to R857 per sitting of the PEC or NEC or any committee of organised local government, regardless of the number of meetings that are attended by such councillor on a specific day.

On 25 March 2015 the above mentioned government notice was repealed via Government Notice number R243 - Determination of upper limits of salaries, allowances and benefits of different members of municipal councils. The sitting allowance has since been increased to R908 per sitting of the Provincial Executive Committee or National Executive Committee or any committee of organised local government, regardless of the number of meetings that are attended by such councillor on a specific day.

131 Report of the Accounting Authority

the UCLGA Southern Africa Regional Oﬃce (UCLGA-SARO), SALGA also participates in other world-wide bodies such as United Cities and Local Government (UCLG), Commonwealth Local Government Forum (CLGF) and Metropolis. In pursuit of SALGA’s mandate in these bodies, the SALGA NEC mandates NEC members to participate in them from time to time.

2.2 National executive committee oversight sub-committees

The NEC as the Accounting Authority or Board of SALGA subscribes to good governance principles as espoused in the King code on corporate governance (King III). Accordingly, internal oversight structures have been established and these include the audit and risk committee and the performance management and remuneration committee.

Members of NEC sub-committees not in the employ of the state such as those serving on the audit committee; and performance management and remuneration panel are reimbursed on an hourly basis according to professional fee schedules.

These committees are comprised of independent members who are charged with oversight responsibilities on governance matters.

2.2.1 Audit and Risk Committee

The organisation’ s audit committee is constituted in terms of section 77(a) of the PFMA; as well as per regulation 27.1.1; and 27.1.4 of the PFMA Treasury Regulations (2005).

The audit committee is constituted as follows:

Name of member Role Mr Temba Zakuza Chairperson Ms Octavia Matloa Member Ms Phumelele Ndumo Member Mr Nala Mhlongo Member Adv Motlatjo Ralefatane Member

The members of the audit and risk committee have been remunerated for the year under review and prior year as follows:

2015

Name of member Attendance fees * Reimbursed Total travel cost ** Mr Temba Zakuza 79 568 6 378 85 946 Ms Octavia Matloa 44 068 293 44 361 Ms Phumelele Ndumo 64 878 - 64 878 Mr Nala Mhlongo 13 465 495 13 960 Adv Motlatjo Ralefatane 24 482 950 25 432 Total 226 461 8 116 234 577

132 Report of the Accounting Authority

2014

Name of member Attendance fees * Reimbursed Total travel cost ** Mr Temba Zakuza 98 086 9 835 107 921 Ms Octavia Matloa 83 486 478 83 964 Ms Phumelele Ndumo 76 605 120 76 725 Mr Nala Mhlongo 91 764 2 865 94 629 Adv Motlatjo Ralefatane 73 107 2 226 75 333 Total 423 048 15 524 438 572

** Reimbursed travel allowance is remitted to members based on the applicable SARS rates deemed as expended.

2.2.2 Performance Management and Remuneration Committee

The organisation has a performance management and remuneration committee that supports implementation and institutionalisation of performance management within the organization. The committee is an advisory body to the NEC authorised to review, guide and support SALGA in the proper implementation and strategic alignment of the organisational performance management policy and procedures, remuneration philosophy and strategy.

The performance management and remuneration committee is constituted as follows:

Name of member Role Mr Chose Choeu Chairperson Ms Elizabeth Dlamini-Khumalo Member Dr Faizel Randera Member Ms Laura Machaba-Abiodun Member Mr William Huma Member Cllr Thabo Manyoni Ex officio member Cllr Nombulelo Hermans Ex officio member Cllr Nomakhosazana Meth Ex officio member

133 Report of the Accounting Authority

The members of the performance and remuneration committee have been remunerated for the year under review and prior year as follows:

2015

Name of member Attendance fees * Reimbursed Total travel cost ** Mr Chose Choeu 29 379 635 30 014 Ms Elizabeth Dlamini-Khumalo 29 379 570 29 949 Dr Faizel Randera 14 689 382 15 071 Ms Laura Machaba-Abiodun 29 379 635 30 014 Mr William Huma 29 379 91 29 470 Total 132 205 2 313 134 518

2014

Name of member Attendance Reimbursed Total fees * travel cost ** Mr Chose Choeu 55 970 1 138 57 108 Ms Elizabeth Dlamini-Khumalo 62 966 1 138 64 104 Dr Faizel Randera 58 302 1 327 59 629 Ms Laura Machaba-Abiodun 30 317 758 31 075 Prof Johan Hough 16 325 93 16 418 Mr William Huma 58 302 95 58 397 Mr Michael J Olivier 16 325 506 16 831 (by invitation – former chairperson)

Mr Zwelibanzi Mntambo 16 325 379 16 704 (by invitation – former member) Total 314 832 5 434 320 266

** Reimbursed travel allowance is remitted to members based on the applicable SARS rates deemed as expended.

134 Report of the Accounting Authority 3. REMUNERATION OF SENIOR MANAGEMENT

Senior management includes the Chief Executive Officer, Executive Directors and Provincial Executive Officers. The breakdown of senior management remuneration forms part of the annual financial statements and is reported on note 22 and 33.

3.1 Remuneration of senior management in aggregate

Annual Remuneration 2015 2014 Annual remuneration 15 902 806 21 895 198 Employer contribution to retirement and pension fund 1 560 173 - Performance related payments 1 914 469 2 220 009 Contribution to medical aid and pension fund - 128 808 Subsistence, cellphone, travel and other allowances 680 139 1 149 249 Employer contribution to group risk 241 592 - Employer contribution to medical aid 158 184 - Total 20 457 363 25 393 264

3.2 Remuneration of senior management per person

Disclosure of senior management remuneration per PFMA regulation 28.1.1

2015

Bonuses and Employer performance contribution Employer Employer related Subsistence to pension & contribution contribution payments and other retirement to medical to group Employee name Basic salary *** allowances * funds ** aid ** risk ** Total Mr Xolile George 3 240 528 600 880 217 330 317 338 22 308 47 914 4 446 298 Mr Nceba Mqoqi 1 523 390 211 824 32 330 149 107 24 336 22 991 1 963 978 Mr Seana Nkhahle 1 246 157 161 757 61 736 121 935 24 336 18 965 1 634 886 Ms Antonette Richardson 1 243 269 159 446 30 000 121 741 24 336 18 937 1 597 729 Mr Simphiwe Dzengwa 1 380 741 - 45 751 138 265 20 280 21 113 1 606 150 Ms Lorette Tredoux 1 378 636 179 311 30 000 135 000 6 084 20 901 1 749 932 Mr Rio Nolutshungu 1 471 096 180 502 58 224 144 066 - 22 244 1 876 132 Ms Jean De La Harpe 1 291 185 109 795 35 713 126 440 24 336 19 633 1 607 102 Ms Phila Xuza (resigned) 1 317 014 120 668 33 702 129 012 - 20 830 1 621 226 Ms Mandu Mallane 6 084 13 969 (Acting) 901 005 93 861 110 300 88 209 1 213 428 Mr Marx Mupariwa 6 084 14 095 (Acting) 909 785 96 425 25 053 89 060 1 140 502 Total 15 902 806 1 914 469 608 139 1 560 173 158 184 241 592 20 457 363

135 Report of the Accounting Authority

In the current year key management personnel have been redeﬁned in line with the accounting policy and limited to only executive management team (EMT) members who report directly to the Chief Executive Oﬃcer. As a result, only portfolio heads in terms of SALGA’s business units have been disclosed.

** With effect from 1st April 2014 and in an effort to be competitive in regard to the labour market, SALGA introduced employee benefits to all staff who are all defined contribution short term benefits such as employer contribution to pension, medical aid and group risk cover for all employees including EMT members.

The EMT is subject to written employment and performance agreements. The employment agreements regulate duties, remuneration, allowances, restraints, leave and notice periods of these executives. The performance agreements regulate performance and the merit based performance related rewards. None of these service contracts exceed ﬁve years.

* Other allowances comprise travel allowance, cellphone allowance and acting allowance (where applicable). International per diem is paid to employees who undertake SALGA’s mandate of strategic proﬁling. SALGA’s chairperson partakes in governance structures of internal bodies such as the local government Pan-African body, United Cities and Local Governments of Africa (UCLGA) as vice president; he is also President of the UCLGA Southern Africa Regional Oﬃce (UCLGA-SARO); SALGA also participates in other world-wide bodies such as United Cities and Local Government (UCLG); Commonwealth Local Government Forum (CLGF) and Metropolis. In pursuit of SALGA’s mandate in these bodies the chairperson is supported by the CEO.

*** Performance related bonuses are per the SALGA performance management policy that is implemented with an oversight role of the Performance Management and Remuneration Panel, which is comprised of independent non-executive members. The applicable performance rewards are based on merit and the applicable reward rates matrix range from 9% (minimum) to 20% (maximum).

SALGA’s performance management and remuneration committee is charged with the normalising SALGA’s remuneration framework, particularly in instances where salary bands of some executives are on a “personal to holder basis” till the expiry of the contract or through natural attrition or earlier. The CEO’s current remuneration has been identiﬁed as one of these category of employees. Notwithstanding the eﬀorts to manage the escalation of remuneration at SALGA, particularly those of executives, it is important to note that SALGA had to review its remuneration policies as they pertain to its executives and benchmark these with municipalities; particularly Metros, since metropolitan municipalities pose the greatest direct remuneration competitor to SALGA (also see report of the chairperson of SALGA’s Performance Management and Remuneration Panel in the annual report).

136 Report of the Accounting Authority

2014

Contributions to medical aid, Bonuses and pension fund, performance Subsistence and retirement related and other Employee name Basic salary funds * payments allowances Total Mr Xolile George 3 006 185 - 370 275 185 717 3 562 177 Mr Nceba Mqoqi 1 399 546 14 401 144 910 44 005 1 602 862 Mr Lance Joel (resigned) 1 489 948 - 189 605 110 583 1 790 136 Ms Antonette Richardson 1 157 191 - 126 953 25 190 1 309 334 Mr Jonathan Patrick (Acting) 722 843 31 736 75 176 12 750 842 505 Ms Lorette Tredoux 1 318 577 - 113 786 41 407 1 473 770 Mr Rio Nolutshungu 1 369 222 - 155 889 82 706 1 607 817 Mr Mthobeli Kolisa (resigned) 110 025 - 118 326 3 581 231 932 Mr Seana Nkhahle 1 157 191 - 119 416 55 067 1 331 674 Mr Gcinikhaya Mpumza 867 651 - 70 506 51 809 989 966 Ms Lulama Ceba (resigned) 71 079 5 223 - - 76 302 Mr Lucky Leseane 1 062 570 - 119 840 48 694 1 231 104 Mr Sandile Cele (resigned) 194 920 - - 2 500 197 420 Mr Thapelo Matlala 919 963 - 108 968 80 086 1 109 017 Ms Gugu Langa 981 657 77 448 88 015 49 643 1 196 763 Mr Johannes Ruiters (Acting) 522 119 - 39 951 35 339 597 409 Ms Nancy Ngwenya 965 970 - 94 214 78 223 1 138 407 Mr Khalil Mullagie 1 063 065 - 107 183 62 712 1 232 960 Ms Jean De La Harpe 801 190 - - 37 465 838 655 Mr Zwelandile Ndlala (Acting) 1 025 397 - 108 276 74 279 1 207 952 Mr Sabelo Gwala (Acting) 754 366 - 68 720 47 493 870 579 Ms Phila Xuza 934 523 - - 20 000 954 523 Total 21 895 198 128 808 2 220 009 1 149 249 25 393 264

* Other allowances comprise of travel allowance, cellphone allowance and acting allowance (where applicable).

Prior to the 2014/2015 ﬁnancial year SALGA’s EMT was remunerated on a total cost to company basis. EMT members were permitted to structure their package to allow for a thirteenth cheque, medical aid contribution, pension fund contribution or travel allowance.

137 Report of the Accounting Authority 4. GOING CONCERN CONSIDERATIONS

The SALGA NEC reviewed the annual ﬁnancial statements for 2014/15 and information regarding the forthcoming ﬁnancial year, to assess the going concern status of SALGA. Based on this information, the NEC has every reason to believe that SALGA will remain a going concern.

y SALGA will receive Parliamentary grant funding for the next two Medium Term Expenditure Framework (MTEF) periods per the notification from National Treasury via SALGA’s executive authority viz. Department of Cooperative Governance and Traditional Affairs (CoGTA). The total Parliamentary allocation for 2015/16 period is R9.2 million; 2016/17 period is R1.4 million and nil for subsequent periods. à This allocation notification represents a reduction of R18.6 million in 2015/16 or 67 percent and R27.9 million in 2016/17 period or 96 percent when compared with the 2014/2015 MTEF allocation notification. In 2017/18 the reduction is 100 percent. à Notwithstanding the abovementioned reductions in Parliamentary grant funding over the MTEF period the NEC is satisfied that SALGA’s continued existence is assured since over the last few years the actual Parliamentary funding has decreased in real terms when compared to total revenue. à In 2014/15 the Parliamentary funding represented 5 percent of total revenue; and 6 percent and 7 percent in 2013/14 and 2012/13 respectively. Despite these reductions the organisation has been able to report surpluses as a result of budgetary control and sound financial management practices, hence the NEC is assured of SALGA remaining a going- concern. à The NEC is engaging with the Ministers of CoGTA and Finance in an effort to reinstate SALGA’s funding from the national fiscus per the organisation’s funding model. à SALGA regards the cutting of its funding from the national fiscus as an opportunity, rather than a threat, and is taking measures to strengthen its financial independence. These measures involve research into similar interpersonal organisations and the concept of paid services. Projects are underway to position SALGA as a reservoir of innovation; knowledge and solutions for the local government sector. However, the measures being undertaken to cement SALGA’s financial independence do not wholly discard the funding model that was adopted by members at a National Members Assembly held on 10-11 May 2010 in Kimberley. The funding of SALGA’s participation at mandatory intergovernmental relations structures still remains a pivotal element of the funding model. y In terms of other funding SALGA has raised R 5.5 million (2014: R 3.8 million) in sponsorship revenue. y The organisation has secured R 2.1 million (2014: R 3.9 million) from donors to pursue its mandate in ensuing years. y In terms of conditional donor and grant funding secured, the organisation has leveraged about R 8.3 million (2014: R 8.3 million). y At 31 March 2015, the statement of financial position shows that SALGA has already secured R 3.6 million (2014: R 6.1 million) as ‘payments received in advance’. Included in the amount are membership levies paid in advance by member municipalities of R 3.0 million (2014: R 5.4 million). The remaining R 0.6 million (2014: R 0.7 million) will be defrayed through programme implementation. y The statement of financial position reflects total assets of the organisation at 31 March 2015 at R 224.6 million (2014: R 178.6 million). This represents an increase in assets of R 45.9 million (2014: R57.1 million) representing 25.7 percent (2014: 47 percent). y The organisation is solvent with total assets exceeding total liabilities by R 111.5 million (2014: R 92.8 million). y The solvency rate is 2.00 times (2014: 2.08 times), which means that SALGA had a liability of 100 cents for each 200 cents it held in total assets. y Total currents assets stand at R 192.4 million (2014: R 146.7 million) which is more than the current liabilities of R 107.3 million (2014: R 78.7 million).

138 Report of the Accounting Authority

y The current ratio is then 180 percent (2014: 187 percent) which means that SALGA had R 1,80 (2014: R 1,87) in current assets to cover every R1 of current liabilities. y The organisation’ s operations resulted in an operating surplus of R 18.7 million (2014: R 39.0 million), and the 2015/16 to 2017/18 MTEF cycle budget projects operating surpluses in terms of the organisational strategy. y The organisation also reviewed its membership levy formula for the 2015/16, resulting in a projected growth for membership levy revenue of 2.3 percent to R 438.9 million. The projection for the two outer years of the MTEF cycle is R 466.9 million and R 494.6 million for 2016/17 and 2017/18 respectively. In 2016/17 the organisation will disconnect the determination of membership levy revenue from the annual municipal salary budgets to a basis that is linked to CPI with 2015/16 being the base year. y Total revenue is projected at R 456.7 million R 474.5 million and R 500.1 million over the 2015/16 MTEF cycle.

Other aspects considered in assessing the organisation’s going concern are the following:

In section 163, the Constitution of the Republic of South Africa envisages an important role for organised local government and provides that an Act of Parliament must cater for the recognition of national and provincial organisations representing municipalities, and determine procedures by which local government may consult the national and provincial government, designate representatives to participate in the National Council of Provinces (NCOP) and nominate persons to the Financial and Fiscal Commission (FFC).

Hence the organisation exists as a result of the Organised Local Government Act, 1997 (OLGA) that was enacted by Parliament. SALGA is recognised as the sole voice of organised local government in South Africa.

There is no indication in the foreseeable future that the recognition granted by the Minister per the Government Gazette, regulation gazette no. 6087, volume 391 dated 30 January 1998, no. 18645 may be revoked, and the NEC thus concludes that SALGA will be in existence for the next 12 months.

SALGA is constituted by its member municipalities that are spread throughout South Africa. There is no indication in the near future that the governance model of the country in terms of which there are three levels of government (local, provincial and national) will change.

Lastly, as indicated above, the organisation has submitted the outcome of its revenue enhancement model to the Executive Authority (Department of Co-operative Governance and Traditional Aﬀairs) as part of the MTEF submission for the 2015/16 to 2017/18 planning cycle, and made necessary representations relating to the adequacy of the SALGA funding from the national ﬁscus. This submission was preceded by a formal engagement between the SALGA Chairperson and the Minister of Finance on 30 September 2010; and a further engagement between the CEO of SALGA and the Deputy Minister of Finance on 25 January 2011. However, the funding model is not fully implemented in the current MTEF cycle as the Executive Authority and National Treasury are considering the model. The NEC will continue to engage the Executive Authority and National Treasury for the implementation of the funding model. Despite the non-implementation of the funding model the NEC is convinced that SALGA’s continuation as a going concern is assured.

5. FRUITLESS AND WASTEFUL EXPENDITURE AND IRREGULAR EXPENDITURE

5.1 Fruitless and wasteful expenditure

Fruitless and wasteful expenditure is disclosed in note 39 of the annual financial statements. Fruitless and wasteful expenditure amounting to R 2 107 was incurred during the financial year. SALGA requested and was granted credit notes for fruitless and wasteful expenditure incurred in current and prior years amounting to R 2 966. The net effect is that there is an over-recovery of fruitless and wasteful expenditure in the current year of R 859.

139 Report of the audit and risk committee

5.2 Irregular expenditure

During the year under review, the organisation did not incur any expenditure deemed as irregular expenditure in terms of the Public Finance Management Act, 1999 PFMA, see note 40 to the annual ﬁnancial statements.

6. LOSSES, IRREGULARITIES AND OTHER MATTERS

Losses or irregularities are referred to in Section 55(2)(b) of the PFMA. The organisations materiality and signiﬁcance framework was developed and agreed to in terms of PFMA Treasury Regulation 28.3.1.

In terms of Section 55, the following are speciﬁed as matters that must be reported on in the annual report and ﬁnancial statements:

(i) any material losses through criminal conduct and any irregular expenditure and fruitless and wasteful; (ii) expenditure that occurred during the financial year; (iii) any criminal or disciplinary steps taken as a consequence of such losses or irregular expenditure or fruitless and wasteful expenditure; (iv) any losses recovered or written off; (v) any financial assistance received from the State and commitments made by the State on its behalf; and (vi) any other matters that may be prescribed.

SALGA’s annual ﬁnancial statements comply with the requirement as stated above.

7. MATERIALITY AND SIGNIFICANCE FRAMEWORK

The organisation has developed and the NEC approved the materiality and significance framework; developed in terms of the PFMA Treasury Regulation 28.3.1. The framework defines aspects of significance and materiality in terms of sections 54(2) and 55(2) (b)(i) of the PFMA.

The framework has been agreed to with the Executive Authority as required by the PFMA Treasury Regulation 28.3.1.

8. LEGAL PROCEEDINGS

The organisation is involved in a civil litigation matter disclosed in note 31 to the annual ﬁnancial statements.

140 Report of the audit and risk committee

Temba Zakuza Chairperson: Audit and Risk Committee

The Audit and Risk Committee is pleased to present the report for the ﬁnancial year ended 31 March 2015.

1. AUDIT AND RISK COMMITTEE

The SALGA Audit and Risk Committee is constituted in terms of section 77(a) of the Public Finance Management Act (PFMA) as well as Treasury Regulations 27.1.1; 3, and 4 and meets as per its approved terms of reference.

The Audit and Risk committee is a sub-committee of the National Executive Committee (NEC). The objectives of the audit committee are as follows:

y To review the effective, efficient and transparent systems of financial and risk management and internal control maintained by SALGA, which contribute to the efficient and effective utilisation of resources, safeguarding of assets and the accomplishment of established strategic objectives for operations or programmes of SALGA; y To promote the efficiency and effectiveness of accounting and management information systems; y To monitor that, in accordance with SALGA’s responsibility to its members, justifiable decisions pertaining to service rendering are taken as indicated in policy statements, practices and uncovering of malpractice; y To have access to a distinct and clear communications channel between the National Executive Committee, Executive Management Team, external auditors and internal auditors; y To inform SALGA regarding critical problems which must be addressed concerning the preparation and discussion of the financial statements; y To monitor the effectiveness of the internal audit function and internal controls; y To monitor management, internal audit and external audit with reference to the drafting and auditing of the financial statements; y To enhance the objectivity and credibility of reporting to stakeholders; and y In order to achieve its objectives, the audit committee is empowered to request all information necessary to assess and act on and to convene meetings, including in camera meetings, at any time.

141 Report of the audit and risk committee 2. AUDIT AND RISK COMMITTEE MEMBERS

The Committee comprises members who are external professionals from the private sector. It functions independently of the management structures within SALGA and endeavours to remain and preserve its objectivity at all times.

The audit and risk committee consists of the following non-executive independent members:

National Accounting Authority Executive Committee

Mr. Temba Zakuza Audit and Risk Committee (Chairperson) (independant non-executive members) Ms Octavia Ms Phumelele Mr Nala Adv Motlatjo Matshidiso Ndumo Mhlongo Ralefatane Matloa

Name of member and role Mr Temba Zakuza (Chairperson) Qualifications and other roles; board membership (past and present) Qualifications

– Chartered Accountant, South Africa (CA, SA) – Master’s in Business Administration (MBA); [University of Stellenbosch] – Certiﬁed Internal Auditor (CIA) – Postgraduate Diploma in Accounting; [University of Cape Town] – Postgraduate Diploma in Management – Financial Accounting; [University of Cape Town] – Bachelor of Commerce (Accounting); [University of the North]

Other board membership and professional affiliations

– Board member of Independent Regulatory Board of Auditors (IRBA) – Chairman of Education Training and Development Committee (IRBA) – Member of the Education Fund Committee (IRBA) – Chairman of the Centlec Audit Committee – Chairman of the Mbizana Local Municipality Audit Committee – Member of the Eastern Cape Department of Health Audit Committee – Member of the COEGA Development Corporation Audit Committee – Member of Council WSU and Chairman of Audit Committee – Trustee of Thuthuka Education Fund of SAICA

Mr Zakuza has held various other positions as member and chairperson of boards and associations and is actively involved in community service initiatives.

142 Report of the audit and risk committee

Name of member and role Ms Octavia Matshidiso Matloa (member) Qualifications and other roles; board membership (past and present) Qualifications – Chartered Accountant, South Africa (CA, SA) – Bachelor of Commerce, [University of Cape Town] – Honours Bachelor of Commerce, [University of Pretoria] Other board membership and professional affiliations – Member of Audit and Risk Committee; Petra Diamonds – Member of Audit and Risk Committee; National Treasury – Member of Audit and Risk Committee; Department of Defence and Military Veterans – Member of Audit and Risk Committee; Village Main Reef – Member of Investment Committee; Village Main Reef – Member of Nomination and Governance Committee; Village Main Reef – Member of Audit and Risk Committee; Great Basin Gold – Member of Audit Committee; Department of Transport – Member of Audit Committee; Urban Transport Fund – Member of Audit Committee; City of Tshwane – Member of South African Women in Mining Association Ms Matloa holds various directorships in several companies including Tsidkenu Chartered Accountants Inc. and Trusteeship in non-proﬁt organisations.

Name of member and role Ms Phumelele Ndumo (member) Qualifications and other roles; board membership (past and present) Qualifications – Bachelor of Commerce; [University of KwaZulu-Natal] – Higher Diploma in Computer Auditing; [University of the Witwatersrand] – Master’s in Business Leadership (MBL); [University of South Africa] – Executive Women Development Programme; {Gordon Institute of Business Science] Other board membership and professional affiliations – Non-executive director; Rand Water Board – Member of the Audit Committee; Department of Trade and Industry – Chairman of the Risk Committee; Department of Trade and Industry – Member of the Operations Committee; Government Employees Medical Scheme – Non-executive director and chairman of the Audit Committee; City of Johannesburg Revenue Management Unit – Member of Audit Committee; Department of Transport – Chairman of Audit Committee; Sedibeng Water – Member of Audit Committee; Magalies Water Ms Ndumo has held various other positions and is actively involved in community development initiatives.

143 Report of the Audit and Risk Committee

Name of member and role Mr Nala Mhlongo (member) Qualifications and other roles; board membership (past and present) Qualifications – Chartered Global Management Accountant (CGMA) – Chartered Management Accountant (ACMA) – Chartered Accountant, South Africa (CA, SA) – Bachelor of Commerce; [University of the Western Cape] – Honours Bachelor of Commerce; [University of the Western Cape] Other board membership and professional affiliations – Chairman of Audit Committee; KwaZulu-Natal Gambling and Betting Board – Chairman of Audit and Risk Committee and board member; Cross-Border Road Transport Agency – Chairman of Audit and Risk Committee; and board member; Water Research Commission – Chairman of Risk Committee; Companies and Intellectual Properties Commission (CIPC) – Member of Audit Committee; Companies and Intellectual Properties Commission (CIPC) – Part-time Commissioner; Department of Trade and Industry Copyright Review Commission – Member of Audit Committee; KwaZulu-Natal Provincial Government Mr Mhlongo has held various other positions in boards and board sub-committees and has been a Chief Financial Oﬃcer of various private and public sector institutions.

Name of member and role Advocate Motlatjo Ralefatane (member) Qualifications and other roles; board membership (past and present) Qualifications – B. Proc; [University of the North] – Bachelor of Laws (LLB); [University of the North] – Advocate of the Supreme Court of South Africa – Certificate in Labour Relations; [University of Pretoria] – Certificate in Human Rights; [University of Pretoria] – Certificate in Corporate Governance; [Institute of Directors of South Africa] – Certificate in Directorship; [University of the Witwatersrand] – Adv. Ralefatane also holds various other qualifications from several institutions. Other board membership and professional affiliations – Member of board; South African Medical Research Council (MRC) – Member of board; Technology Innovation Agency (TIA) – Non-executive director; Road Accident Fund (RAF) – Chairman of the Human Capital and Remuneration committee; Road Accident Fund (RAF) – Acting Judge; Labour Court – Non-executive director; Gauteng Enterprise Propeller (GEP) – Chairperson of Audit Committee; Ephraim Mogale Local Municipality – Member of the Institute of Directors; – Member of the Institute of Internal Auditors Adv Ralefatane has held various other non-executive directors positions in boards and board sub-committees and is actively involved in community development initiatives. She also held roles as an Appeals Adjudicator for the Department of Home Affairs.

144 Report of the Audit and Risk Committee 3. AUDIT AND RISK COMMITTEE MEMBERS’ ATTENDANCE

Five meetings were held during 2014/2015 financial year. These meetings were attended by external auditors, the Chief Executive Officer, Chief Finance Officer, the Head of Internal Audit, and other relevant corporate officials. The Chairperson of the Audit Committee reports on committee activities to the National Executive Committee on a regular basis. All members give a declaration at each Audit Committee meeting of any personal or financial interests that may conflict with their duties in this regard.

The table below highlights the Audit Committee members and the record of attendance of Audit Committee meetings.

Record of Attendance Member 22 May 2014 29 July 2014 19 September 2014 30 January 2015 20 March 2015 Mr Temba Zakuza 99 9 9 9 Chairperson Ms Octavia Matshidiso Matloa 8 8 9 9 9 Member Ms Phumelele Ndumo 99 9 9 9 Member Mr Nala Mhlongo Member 88 8 9 8 Advocate Motlatjo Ralefatane 8 88 99 Member

4. AUDIT COMMITTEE RESPONSIBILITY

The Audit Committee reports that it has complied with its responsibilities arising from Section 51(1) (a) (ii) and section 76(4) (d) of the PFMA as well as Treasury Regulations 27.1. The audit committee adopted appropriate formal Terms of Reference as its audit committee charter and has regulated its aﬀairs in compliance with these terms of reference and has discharged all its responsibilities as contained therein.

5. THE EFFECTIVENESS OF INTERNAL CONTROL

The review of the eﬀectiveness of the system of internal control by the audit committee is informed by the reports submitted by the internal audit function and management who are responsible for the development and maintenance of the internal control system.

Minor weaknesses have been reported from the reports issued by the Internal Audit Function and Auditor General. These weaknesses continue to be addressed by management.

6. RISK MANAGEMENT

An organisational risk register that identiﬁes the major risks and potential threats to the strategic and directorate/provincial objectives of SALGA has been developed. These risks are analysed, evaluated and mitigated by means of suitable measures. Management has also developed action plans to reduce the severity of each risk exposure to an acceptable level. On a quarterly basis, the Risk Management Unit reviews management assertions made on the status of implementation of action plans in the risk register and reports them to the audit and risk committee.

The internal audit function follows a risk-based approach and developed an appropriate Internal audit coverage plan in order to provide assurance on the eﬀectiveness of risk mitigating measures.

145 Report of the Audit and Risk Committee

7. EVALUATION OF FINANCIAL STATEMENTS

The audit committee has:

y Evaluated the annual ﬁnancial statements and performance information of SALGA for the period ended 31 March 2015. y Reviewed the Auditor-General’s report to management and management response thereto.

The audit committee concurs and accepts the Auditor-General‘s conclusion on the annual ﬁnancial statements. It is of the opinion that the audited ﬁnancial statements be accepted and read in conjunction with the report of the Auditor-General.

______Temba Zakuza Chairperson of the audit committee Pretoria 31 July 2015

146 Report of the Performance Management and Remuneration Committee

Chose Choeu Chairperson: Performance Management and Remuneration Committee

The performance management and remuneration committee is pleased to present its report for the year ended 31 March 2015.

1. PERFORMANCE MANAGEMENT AND REMUNERATION COMMITTEE

The performance management and remuneration committee (REMCO) is a sub-committee of the National Executive Committee (NEC) and it supports implementation and institutionalisation of performance management within the organisation. The Committee is an advisory body to the NEC, authorised to review, guide and support SALGA in the proper implementation and strategic alignment of the organisational performance management policy and procedures, remuneration philosophy and strategy.

2. RESPONSIBILITIES OF THE COMMITTEE

The National Executive Committee of SALGA established the performance management and remuneration committee as its advisory body that has an oversight over the implementation of the performance management system policy and procedures, as well as the remuneration policies and practices of SALGA.

The main purpose of the performance management and remuneration committee is to ensure the adoption of remuneration policies which:

y Aim to attract and retain top talent;

y Are aligned with the organisation’s strategy; and

y Arive performance in the long-and short-term.

The Performance management and remuneration committee was established to assist SALGA in maintaining the integrity of the performance management system; exercise oversight over the implementation of the performance management system and policy, as well as the remuneration policies and practices within SALGA; conﬁrm the appropriateness of the institutional goals of SALGA in pursuing its strategy; ensuring objective performance reviews; considering and making recommendations on all matters relating to performance management and remuneration to the National Executive Committee. The committee has oversight over the following:

y The committee is empowered to consider and make recommendations to the National Executive Committee on all matters relating to the performance management and remuneration of SALGA;

y Policy frameworks and policy decisions taken by the REMCO shall be binding to all administrative structures of SALGA; and 147 Report of the Performance Management and Remuneration Committee

y The committee presents reports to and receives feedback from SALGA’s national oﬃce bearers and National Executive Committees on all matters relating to their work.

The Committee’s terms of reference, inter alia, include the following responsibilities:

y Promoting the consistent attraction and retention of staff; the improvement and assessment of performance; and the motivation and reward of SALGA staff; y Approving the remuneration policy to be adopted by the organisation; y Ensuring that the remuneration strategy is market-related and competitive; y Determining specific remuneration packages for executive management team of the organisation; y Ensuring remuneration for executive management team, including their short and long-term incentives, is based on performance; y Considering the relationship between executive management team’s remuneration and the remuneration of SALGA’s other employees; y Approving the design of short-term incentive schemes, including determining targets and participation thresholds; y Approving the design of the long-term share incentive schemes, including determining the allocation criteria and performance conditions; y Reviewing and monitoring progress in people management; y To provide oversight of targets, ensuring that these remain challenging and reflect SALGA’s strategic objectives; and y Shall provide recommendations and suggestions on actions that must be taken to achieve agreed targets or to assist where deviations from targets are probable. 3. COMPOSITION OF THE COMMITTEE

The committee comprises members who are external professionals from the private sector and members of the National Executive Committee of SALGA as ex-oﬃcio members. It functions independently of the management structures within SALGA and endeavours to remain and preserve its objectivity at all times.

The performance management and remuneration committee consists of the following non-executive independent members:

National Accounting Authority Executive Committee

Mr Chose Choeu Performance Management (Chairperson) and Remuneration Committee

(independant Mrs Elizabeth Ms Laura Dr Faizel Mr William non-executive members) Dlamini- Machaba- Randera Huma Khumalo Abiodun

National Executive Committee Cllr Thabo Cllr. Nombulelo members, ex-officio members Cllr Nomakhosazana Manyoni Hermans Meth of REMCO

148 Report of the Performance Management and Remuneration Committee

Name of member and role Mr Chose Choeu (chairperson) Qualifications and other roles; board membership (past and present) Qualifications – Bachelor of Arts (cum laude), [University of the North] – Honours Bachelor of Arts (cum laude), [University of the North] – Masters degree in International relations, [University of Denver] – Company direction diploma, [Graduate Institute of Management and Technology] – Finance for non-financial managers certificate, [Wits Graduate School of Business Administration] – Executive Development Program, [University of the Witwatersrand] – Master of Philosophy, [University of Port Elizabeth] – Accelerated directorship programme certificate, [Institute of Directors] Mr Chose Choeu holds several other qualifications that range from Primary Teachers certificate; Parliamentary administration and procedure; Telecommunications network fundamentals; Telecommunications policy & management; Telecommunications regulatory master class; Diploma in public relations; Diploma in business management Other board membership and professional affiliations – Chairperson of the Audit Committee of the South African Parliament – Board member and Vice President of the South African Chamber of Commerce – Board member of the American Chamber of Commerce – Member of the Executive Committee of the American Chamber of Commerce – Member of the Board of the Free State Development Corporation – Chairperson of the Audit Committee of the Free State Development Corporation – Member of the Free State Province Premier’s Economic Advisory Council – Member of the Black Management Forum – Member of the Institute of Directors – Member of Black IT Forum – Member of the American Academy of Political Science.

149 Report of the Performance Management and Remuneration Committee

Name of member and role Mrs Elizabeth Dlamini-Khumalo (member) Qualifications and other roles; board membership (past and present) Qualifications – Masters in Management – Human Resources, [Wits Business School] – Post Graduate Diploma in Management – Human Resources, [Wits Business School] – Senior Executive Programme, [London Business School] – Diploma in Personnel Management, [Institute of Personnel Management] – General Management course, [Industrial Society, United Kingdom] – Secretarial course, [Anglo American Corporation] Mrs Elizabeth Dlamini-Khumalo holds various other in-house training courses at supervisory and managerial level. Other board membership and professional affiliations – Human Resources Director; Sandvik Southern African Companies & Vice President – Africa Region – Non-executive chairperson; EVA (Economic Value Acceleratotors) – Human Resources Director; African Continent British Oxygen Company (Afrox in South Africa) – Human Resources Director; Woolworths (Pty) Ltd – Human Resources Director; South African National Parks – Human Resources Director; Fedics Group – Head of department – Organisational transformation; Nedcor Limited.

Name of member and role Dr Faizel Randera (member) Qualifications and other roles; board membership (past and present) Qualifications – Undergarduate Medical degree; [Guy’s Hospital, London] – Diploma in Obstetrics and Gynaecology; [Royal College of Obstetrics and Gynaecology] – Postgraduate Vocational Training in General Practice; [ Guy’s Hospital. London] – Diploma course in Occupational Health; [National Institute for Occupational Health, Wits University] – Master course in Family Practice; [Wits Medical School] – Mini MBA; [South African Medical Association and Manchester Business School] Other board membership and professional affiliations – Health Advisor; Chamber of Mines, South Africa – Director; NEHAWU Investment Company – Director and chairperson, Liseko Strategic Investment Company, Johannesburg – Director and Chairman, Ethics Institute of South Africa – Trustee, Human Rights Committee of South Africa – Trustee, Foundation for Tolerance Education – Director, Board of Health Care Funders – Director, Netcare – Director, Private Health Care Forum Dr Randera holds various other directorships (past and present) such as board member of the World Medical Association; member of the Advisory Committee on Occupational Health and Safety.

150 Report of the Performance Management and Remuneration Committee

Name of member and role Ms Laura Machaba-Abiodun (member) Qualifications and other roles; board membership (past and present) Qualifications – Postgraduate Diploma in Education, [University of the Witwatersrand] (summa cum laude) – Bachelor of Commerce (Law); [University of the North] – Master of Arts in Communication and Training; [Governors State University] (magna cum laude) – Master of Business Administration (General Management); [Rosary College, USA] – Organisational Change Leadership Programme, [Harvard University, USA] Other board membership and professional affiliations – Chairperson – AMC International Group – Executive Head: Talent & Brand Woolworths (Pty) Ltd – Executive Consultant to the Superintendent Charlotte Mecklenburg School – Executive Director: Global Individual & Organisational Eﬀectiveness Brady Corporation (Milwaukee, Wisconsin; USA) – Regional Manager: Executive & Organisational Development, Solectron Corporation (Charlotte, North Carolina; USA)

Ms Machaba-Abiodun has held various other roles and positions in her career.

Name of member and role Mr William Huma (Member) Qualifications and other roles; board membership (past and present) Qualifications – B. Proc, [University of the North] – Bachelor of Laws (LLB), [University of the North] – Master of Laws (LLM), [North West University] – Doctor of Laws (LLD), [University of Pretoria] – Graduate Diploma in Company Direction, [Henley Management College] – Finance for non-financial managers certificate, [University of Witwatersrand] Mr. Huma has various certificates of attendance in Human Capital and Change Management from Accenture Limited (Chicago) and Oxford University (United Kingdom). Other board membership and professional affiliations – Advocate of the High Court of South Africa (Pretoria) – Fellow of the Institute of Directors of South Africa – Chairperson Board of Trustees; BDH Trust – Chief Executive Officer; BDH Group – Director: Corporate and Business Services; Group Five Limited – Chairperson – Performance Audit Committee of the Department of Health – Chairperson – Audit Committee of Department of Communications – Member – Audit Committee of Ekurhuleni Metropolitan Municipality – Member – Audit Committee of the Department of Health – Member – Audit Committee of the Department of Public Service and Administration.

151 Report of the Performance Management and Remuneration Committee 4. RECORD OF ATTENDANCE OF MEETINGS

The committee meets per its approved terms of reference, with the NEC members and Chief Executive Oﬃcer attending by invitation.

The committee Chairperson reports back to the NEC on the activities of the committee.

Record of attendance Name of member 20 January 2014 5 June 2014 14 March 2015 Mr Chose Choeu 999 Ms Elizabeth Dlamini-Khumalo 999 Dr Faizel Randera 989 Ms Laura Machaba-Abiodun 999 Mr William Huma 999

5. REMUNERATION PHILOSOPHY

SALGA’s remuneration philosophy is designed to attract, develop and retain passionate, committed and talented people who are required to eﬀectively implement the overall SALGA strategy to the beneﬁt of SALGA’s membership.

The remuneration strategy for the executive management team is based on principles of retention of key and critical skills and to drive performance in alignment with SALGA’s strategy, through guaranteed pay, short and long-term incentives. A signiﬁcant portion of the executive management team’s total potential remuneration is performance-related in order to drive the right behaviour to optimise the organisation’s performance taking into account the prevailing economic environment.

The performance management and remuneration committee and the National Executive Committee approved the SALGA remuneration and beneﬁts policy that espouses the organisations remuneration philosophy. Among the SALGA remuneration philosophy or principles is the following:

y All positions are evaluated for their relative size, scope and impact using the HAY job evaluation methodology.

5.1 The HAY Method

The Hay guide chart proﬁle method of job evaluation evolved over a 40 year period to its current form. The methodology is a combination of a point factor approach and the factor comparison method; it thus provides both a rating and a ranking. This is important, as the ‘ranking’ is sensitive to the value system of the organisation, while ‘rating’ gives a common basis for comparison across functions and across companies. There are two fundamental decisions to be made in designing a job evaluation system; ‘WHAT’ and ‘HOW’ factors should be measured.

152 Report of the Performance Management and Remuneration Committee 6. REMUNERATION AND BENEFITS

The organisation under the direction and advice of the performance management and remuneration panel introduced employee beneﬁts that were approved by panel on 20 January 2014 and by the NEC on 30 January 2014.

6.1 Harmonisation of conditions of service

The South African Local Government Association (SALGA) was established in 1996 as a voluntary body representing all the municipalities of the country and its nine Provincial Local Government Associations.

SALGA has demonstrated a political preference for a unitary structure. This has seen it driving one structure that is governed through a constitution as a central unit.

In 2002, the association merged the administration of the nine provincial associations. The national body entered into Memorandums of Understanding (MoUs) with the provincial associations which saw the assets, staﬀ and liabilities of the associations transferred to SALGA with eﬀect from July 2002. It also meant that the annual membership levies of those municipalities who were members of each of the provincial associations would be levied by SALGA and paid directly to the association. This process was completed and by 1 July 2006 all of the nine provincial local government associations had transferred their administration to SALGA.

The amalgamation of the nine provincial associations with SALGA national resulted in varying conditions of service with employees who were part of amalgamation in line with section 197 of the Labour Relations Act.

In the 2014/15 ﬁnancial year the organisation with the direction of the performance management and remuneration committee has harmonised the conditions of service across all SALGA employees.

6.2 Executive management team (EMT) remuneration

Executive management team (EMT) total remuneration package consists of the following:

y Total guaranteed pay which includes benefits, is subject to an annual review by the performance management and remuneration committee; y Variable pay short-term incentive scheme is designed to focus the executive management team on the achievement of the short-term strategic, financial and operational objectives in the annual performance plan (APP). The incentive is payable on achieving certain pre-defined stretch targets, in line with our strategy. The scheme rewards performance when targets are met, with higher rewards for exceptional performance; and y Variable long-term incentive are designed to align the objectives of senior management with those of SALGA’ s five-year strategic plan (2012 to 2017) and therefore ensure sustainable long-term performance.

6.3 Other employees remuneration

Other employee total remuneration package consists of the following:

y Total guaranteed pay, which includes benefits, is subject to an annual review by the performance management and remuneration committee; and y Variable pay short-term incentive scheme is designed to focus employees on the achievement of the short-term strategic, financial and operational objectives in the annual performance plan (APP). The incentive is payable on achieving certain pre-defined stretch targets, in line with our strategy. The scheme rewards performance when targets are met, with higher rewards for exceptional performance.

153 Report of the Performance Management and Remuneration Committee

6.4 Retention scheme – variable long-term incentive (LTI) scheme

The performance management and remuneration committee on 14 March 2015 approved a retention scheme in the year under review for all employees on ﬁxed-term contracts (FTC) that are performance based.

The retention scheme is a performance based long-term incentive (LTI) scheme designed to retain ﬁxed-term contract (FTC) employees that are talented; perform at an acceptable level and are critical in driving SALGA’s long-term strategy.

The long-term incentive scheme (LTI) grants conditional awards which vest after a three-year performance period, subject to the extent to which agreed performance conditions have been met. The performance conditions are determined by the performance management and remuneration committee and are based on an acceptable performance rating per SALGA’s performance rating matrix applicable for all employees.

6.5 Performance rewards - variable short-term incentive (STI) scheme

The organisation has a short-term incentive (STI) scheme that has been cascaded to all employee levels.

It is a variable pay short-term incentive scheme designed to focus all employees on the achievement of the short-term strategic, ﬁnancial and operational objectives in the annual performance plan (APP). The incentive is payable on achieving certain pre- deﬁned stretch targets, in line with SALGA’s strategy.

6.6 Behaviour Charter – variable short-term incentive (STI) scheme

The organisation has implemented the Behaviours Charter as part of its performance management system for the first time in 2014/2015 financial year. The Behaviours Charter is a framework that reflects key behaviours that will support the values and culture desired by the organisation.

Its objective is to shape operational excellence, support management and organisational development, develop capacity and core leadership within the organisation and to identify areas of individual and team development.

The Behaviours Charter component has a total weight of 15 in the performance scorecards of SALGA employees.

The Behaviours Charter is premised on two types of behaviour components:

(1) Enabling behaviour (supported by the organisation); and (2) Constraining behaviours (discouraged by the organisation).

The organisation’s individual performance management system (iPMS) focuses on enabling behaviour that is supported by the values espoused by the organisation:

t 8FXJMMVQIPMEUIFIJHIFTUMFWFMPGPSHBOJTBUJPOBMFUIJDTBOEBEIFSFUPQPMJDJFTBOEQSPDFEVSFT t 8FXJMMCFSFTQPOTJWFBOENFNCFSDFOUSJD t 8FXJMMTUSJWFGPSBOESFDPHOJTFFYDFMMFODF t 8FXJMMXPSLDPMMFDUJWFMZJODPPQFSBUJWFUFBNT t 8FXJMMDPNNVOJDBUFUJNFPVTMZ BDDVSBUFMZBOEBQQSPQSJBUFMZBOE t 8FXJMMQSPNPUFNVUVBMSFTQFDU

154 Report of the Performance Management and Remuneration Committee

All of the above mentioned behaviours have their sub-behavioural statements which will help as measures when deciding on the rating: t Sub-behavioural statements for enabling behaviours à Acts in accordance with SALGA’s mandate, vision, mission and values à Highest level organisational ethics and adhere to policies and procedures à Displays professionalism à Integrity à Adheres to SALGA’s policies and procedures t Sub-behavioural statements for enabling behaviours à Responds proactively, promptly and eﬃciently to customers à We will be responsive and member centric à Understanding of their customer’s business challenges and expectations à Accountability à Delivers quality service and outputs t Sub-behavioural statements for enabling behaviours à Self-development à Strive for and recognise excellence à Recognises good behaviour and good performance à Embraces change à Innovative à Strives for the attainment of the SALGA vision à Encourages an environment of continuous learning t Sub-behavioural statements for enabling behaviours à Aligns their individual goals to those of the team à Work collectively in cooperative teams à Considers the views, ideas and interests of all the team members à Assisting colleagues with workload and development à Encourages working together à Developing constructive relationships with external stakeholders à Shows collective ownership of results t Sub-behavioural statements for enabling behaviours à Open and transparent in communication à Communicate timeously, accurately and appropriately à Accessible and approachable à Shares and transfers knowledge à Provides ongoing feedback à Communicates proactively 155 Report of the Performance Management and Remuneration Committee

t Sub-behavioural statements for enabling behaviours à Treats everyone in SALGA with equal respect and dignity à Allow free expression of views à We will promote mutual respect à Developing constructive relationships à Creates a conducive environment à Engages with others in an appropriate manner

The performance measurements of the Behaviour’s Charter is conducted through the application of a 360 degree assessment which include feedback from an employee’s subordinates, peers and supervisor, as well as a self-evaluation.

6.7 Remuneration packages that are on “Personal to Holder” basis

SALGA has as part of its remuneration escalation management efforts, sought to provide very tight salary grading and remuneration curve for all positions per the Hay grading system. With this remuneration modelling exercise it has identified employees which are remunerated within the range at the time of adopting the Hay grading system and also identified employees that are outside the approved grading scales.

The organisation’s remuneration and beneﬁts policy recognises that there are a few instances where individual employees might be enjoying salary packages which exceed the maximum of the relevant salary band within the organisation’s salary framework. Examples of such instances include:

y Individual salaries inherited during the amalgamation of some of its provincial offices into the organisation; y Where the need for a certain skill requires SALGA’s salary offer to exceed the maximum of the salary band in order to attract this specific skill (note this will only be in instances where the successful candidate’s existing salary package is equal to or higher than the maximum of the SALGA salary band within the framework); y Where an employee has, due to higher annual salary increases as a result of continuous excelling performance, moved outside of the band irrespective of the fact that the bands may have been adjusted with the base cost of living increase on an annual basis; y Where certain employees’ salary packages exceed the maximum of the respective salary bands within the framework.

These employees who are outside this range, are ring-fenced as employees whose remuneration is being managed on a “personal to holder basis” until their contract employment term expires.

SALGA employs its executive management team on a fixed term contract. This applies to the incumbent Chief Executive Officer and his direct reports. The Chief Executive Officer’s current remuneration has been identified to be one of these category of employees who are on a “personal to holder basis” till the expiry of the contract or through natural attrition or earlier.

This means that when SALGA recruits a replacement candidate, it shall remunerate that new employee on the basis of the approved remuneration scale that will be substantially less than the current “personal to holder” legacy packages that is disclosed in the annual report.

Notwithstanding, the eﬀorts to manage the escalation of remuneration at SALGA, particularly those of executives, it is important to note that SALGA had to review its remuneration policies as it pertains to its executives and benchmark these with municipalities particularly Metro’s since metropolitan municipalities pose the greatest direct remuneration competitor to SALGA. The review exercise was necessitated by the recent recruitment and poaching of top SALGA Executives over the past three years by the Gauteng Metropolitan municipalities that have employed SALGA executives in droves. SALGA is alive to this labour market competitiveness. 156 Report of the Performance Management and Remuneration Committee

SALGA is committed to rectifying and normalizing the remuneration to be in harmony with the sector imperative of managing down the salary packages payable to executive management. This will also take into the account the upper limit guidelines that the Minister of Cooperative Governance and Traditional Aﬀairs (CoGTA) set for the sector which compels municipalities to recruit new Executive Managers at salary packages that will be in line with prescribed salary limits, and SALGA will use this as a basis when reviewing its salary packages for new recruits .

7. ORGANISATIONAL PERFORMANCE

As the performance management and remuneration committee we monitor and review organisational performance on a quarterly basis per the committee’s terms of reference.

In view of the organisation having attained 98 percent of its targets against pre-determined objectives and three consecutive clean audits, our oversight over organisational performance has been consistent and we are accordingly pleased with the achievement.

8. INDIVIDUAL PERFORMANCE MANAGEMENT

In regard to performance management of executives the committee provides oversight over formulation of targets, and ensures that these remain challenging and reﬂect SALGA’s strategic objectives. Through our oversight function we have determined that the organisations’ performance curve, which is formulated based on individual performance outcomes, is comparable with a standard performance curve for high performance organisations.

______Chose Choeu Chairperson: performance management and remuneration committee Pretoria 31 July 2015

157 Report of the auditor-general to Parliament on the South African Local Government Association

Report on the financial statements

Introduction

1. I have audited the financial statements of the South African Local Government Association set out on pages 164 to 234, which comprise the statement of financial position as at 31 March 2015, the statement of financial performance, statement of changes in net assets, cash flow statement and the statement of comparison of budget and actual amounts, for the year then ended, as well as the notes, comprising a summary of significant accounting policies and other explanatory information.

Accounting authority’s responsibility for the financial statements

2. The accounting authority is responsible for the preparation and fair presentation of these ﬁnancial statements in accordance with the South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA), and for such internal control as the accounting authority determines is necessary to enable the preparation of ﬁnancial statements that are free from material misstatement, whether due to fraud or error.

Auditor-general’s responsibility

3. My responsibility is to express an opinion on these ﬁnancial statements based on my audit. I conducted my audit in accordance with International Standards on Auditing. Those standards require that I comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the ﬁnancial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. I believe that the audit evidence I have obtained is suﬃcient and appropriate to provide a basis for my audit opinion.

Opinion

6. In my opinion, the financial statements present fairly, in all material respects, the financial position of the South African Local Government Association as at 31 March 2015 and its financial performance and cash flows for the year then ended, in accordance with SA Standards of GRAP and the requirements of the PFMA.

Emphasis of matters

7. I draw attention to the matters below. My opinion is not modiﬁed in respect of these matters.

158 Report of the auditor-general to Parliament on the South African Local Government Association Significant uncertainties

8. With reference to note 31 to the ﬁnancial statement, the entity is defendant in a lawsuit. The outcome of this lawsuit cannot be determined at present and no provision for any liability that may result has been made in the ﬁnancial statements.

Restatement of corresponding figures

9. As disclosed in note 34 to the financial statements, the corresponding figures for 31 March 2014 have been restated as a result of an error discovered during 2014/15 in the financial statements of the South African Local Government at, and for the year ended, 31 March 2014.

Report on other legal and regulatory requirements

10. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) and the general notice issued in terms thereof, I have a responsibility to report ﬁndings on the reported performance information against predetermined objectives for selected objectives presented in the annual performance report, non-compliance with legislation and internal control. The objective of my tests was to identify reportable ﬁndings as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, I do not express an opinion or conclusion on these matters.

Predetermined objectives

11. I performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the following selected objectives presented in the annual performance report of the public entity for the year ended 31 March 2015:

y Goal 1: Accessible, equitable and sustainable municipal services delivered by local government on pages 52 to 58; y Goal 2: Safe and healthy environment and communities on pages 59 to 62; y Goal 4: Effective, responsive and accountable local governance for communities on pages 68 to 79; and y Goal 7: Effective and efficient administration on pages 93 to 103.

12. I evaluated the reported performance information against the overall criteria of usefulness and reliability.

13. I evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with the National Treasury’s annual reporting principles and whether the reported performance was consistent with the planned objectives. I further performed tests to determine whether indicators and targets were well defined, verifiable, specific, measurable, time bound and relevant, as required by the National Treasury’s Framework for managing programme performance information (FMPPI).

14. I assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

15. I did not identify any material ﬁndings on the usefulness and reliability of the reported performance information for the selected objectives.

Additional matter

16. Although I identiﬁed no material ﬁndings on the usefulness and reliability of the reported performance information for the selected programmes objectives, I draw attention to the following matter:

159 Report of the auditor-general to Parliament on the South African Local Government Association Achievement of planned targets

17. Refer to the annual performance report on pages 43 to 103 for information on the achievement of planned targets for the year.

Compliance with legislation

18. I performed procedures to obtain evidence that the public entity had complied with applicable legislation regarding financial matters, financial management and other related matters. I did not identify any instances of material non-compliance with specific matters in key legislation, as set out in the general notice issued in terms of the PAA.

Internal control

19. I considered internal control relevant to my audit of the financial statements, the annual performance report and compliance with legislation. I did not identify any significant deficiencies in internal control.

Pretoriaetoria

31 July 2015

Pretoria 31 July 2015

160 Accounting Authority’s Responsibilities and Approval

The National Executive Committee as Accounting Authority is required by the Public Finance Management Act (Act 1 of 1999), to maintain adequate accounting records and is responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is the responsibility of the National Executive Committee to ensure that the annual financial statements fairly present the state of affairs of SALGA as at the end of the financial year and the results of its operations and cash flows for the period then ended. The external auditors are engaged to express an independent opinion on the annual financial statements and was given unrestricted access to all financial records and related data.

The annual ﬁnancial statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board.

The annual ﬁnancial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.

The National Executive Committee (NEC) is of the opinion, that the system of internal control provides reasonable assurance that the ﬁnancial records may be relied on for the preparation of the annual ﬁnancial statements.

The annual ﬁnancial statements set out on pages 164 to 234, which have been prepared on the going concern basis, and the performance information set out on pages 43 to 103 were approved by the NEC on 26 May 2015 and were signed on the NEC’s behalf by:

Thabo Manyoni Xolile George Salga Chairperson Chief Executive Oﬃcer Pretoria Pretoria 31 July 2015 31 July 2015

161 Accounting Authority’s Responsibilities and Approval 1. COMPOSITION OF THE ACCOUNTING AUTHORITY (NATIONAL EXECUTIVE COMMITTEE)

In terms of Section 49 of the PFMA and the SALGA constitution, the governing body of SALGA is the accounting authority also referred to as the National Executive Committee (“NEC”).

The accounting authority of SALGA is comprised by the following councillors:

Name of member Designation Provincial chairperson Role or Working Group (where applicable) Chairperson Cllr Thabo Manyoni Chairperson Office Bearer Cllr Mpho Nawa Deputy Chairperson Office Bearer Cllr Flora. Maboa-Boltman Deputy Chairperson Office Bearer Cllr Nombulelo Hermans Deputy Chairperson Office Bearer Cllr Dudu Mazibuko Member of the NEC Economic Development & Planning Cllr Tiny Grace Mthimunye Member of the NEC HR Development & Collective Bargaining Cllr Christiaan. Neethling Member of the NEC Municipal Trading Services Cllr Baldwin Matibe Member of the NEC Governance & Intergovernmental Tshitereke Relations Cllr Boitumelo P. Moloi Member of the NEC Municipal Infrastructure Cllr Nomakhosazana Meth Ex-officio member of the NEC Chairperson: SALGA Eastern Cape Cllr Sebenzile Ngangelizwe Ex-officio member of the NEC Chairperson: SALGA Free State Cllr Parks Tau Ex-officio member of the NEC Chairperson: SALGA Gauteng Cllr Sibusiso W. Mdabe Ex-officio member of the NEC Chairperson: SALGA KwaZulu-Natal Cllr David Magabe Ex-officio member of the NEC Chairperson: SALGA Limpopo Cllr Mafika Nkosi Ex-officio member of the NEC Chairperson: SALGA Mpumalanga Cllr Willie Johnson Ex-officio member of the NEC Chairperson: SALGA Northern Cape Cllr Kaone Mmusi G. Lobelo Ex-officio member of the NEC Chairperson: SALGA North West Cllr Demetri Qually Ex-officio member of the NEC Chairperson: SALGA Western Cape Cllr Zukiswa Ncitha Member of the NEC Community Development (co-opted) Cllr Subesh Pillay Member of the NEC Municipal Finance (co-opted) Cllr Abraham Bekeer Member of the NEC Councillor Support & Welfare (co-opted) Cllr Zibonele Dumzela Member of the NEC Environmental Change & (co-opted) Sustainability Mr Xolile George Ex-officio member of the NEC Chief Executive Officer

162 ANNUAL FINANCIAL STATEMENTS

163 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Statement of financial position as at 31 March 2015

2014 Figures in Rand Note(s) 2015 Restated

Assets Current assets Operating lease asset 6 41 305 32 225 Trade and other receivables from exchange transactions 8 37 949 785 30 127 743 Cash and cash equivalents 9 154 448 536 116 497 546 192 439 626 146 657 514 Non-current assets Investment property 2 6 600 000 5 900 000 Property, plant and equipment 3 23 902 654 24 412 036 Intangible assets 4 610 698 648 274 Deposits 5 1 028 068 1 028 068 32 141 420 31 988 378 Total assets 224 581 046 178 645 892 Liabilities Current liabilities Finance lease obligation 11 1 285 240 1 402 365 Operating lease liability 6 2 746 976 1 554 015 Trade and other payables from exchange transactions 15 92 297 948 67 111 759 Unspent conditional grants and receipts 12 1 790 897 4 778 917 Provisions 13 7 070 821 - Deferred revenue 14 2 065 059 3 868 244 107 256 941 78 715 300 Non-current liabilities Finance lease obligation 11 859 128 1 015 356 Operating lease liability 6 2 818 065 5 463 532 Employee beneﬁt obligation 7 637 000 653 000 Provisions 13 1 508 785 - 5 822 978 7 131 888 Total liabilities 113 079 919 85 847 188 Net assets Revaluation reserve 10 2 259 566 2 259 566 Accumulated surplus 109 241 561 90 539 138 Total net assets 111 501 127 92 798 704 Total net assets and liabilities 224 581 046 178 645 892

164 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Statement of financial performance

2014 Figures in Rand Note(s) 2015 Restated

Revenue Revenue from exchange transactions 17 429 100 083 362 244 562 Other revenue from exchange transactions 19 21 281 983 14 737 346 Investment income 23 13 130 438 6 661 582 Conditional sponsorship – LA Health 17 40 000 40 000 Grant recognised – Free State Department of Cooperative Governance and Traditional Aﬀairs 17 1 120 323 - Grant recognised - Eastern Cape Department of Local Government and Traditional Aﬀairs 17 98 987 1 435 274 Grant recognised – LG SETA (CIP) 17 845 509 1 513 377 Grant recognised – LG SETA (Capacity building) 17 1 743 088 1 412 939 Grant recognised – LG SETA (PBCDP) 17 2 589 879 - Government grants and subsidies - Executive Authority 17 26 904 000 25 999 000 Sponsorships and donations from non-exchange transactions 17 5 509 690 3 767 406 Grant recognised – Commonwealth Local Government Forum 17 41 560 - Grant recognised – GIZ Governance Support Programme 17 330 811 - Total revenue 502 736 351 417 811 486 Expenses Personnel 22 (270 140 551) (195 757 092) Administrative 20 (54 437 100) (32 779 260) Depreciation and amortisation expense 3 & 4 (7 429 746) (4 996 936) Indirect programme costs 20 (88 348 538) (88 702 476) Other expenses 20 (62 572 575) (55 598 270) Finance costs 26 (1 105 418) (952 680) Total expenses (484 033 928) (378 786 714) Surplus for the year 18 702 423 39 024 772

165 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Statement of changes in net assets

Revaluation Accumulated Figures in Rand surplus surplus Total net assets

Opening balance as previously reported 2 259 566 43 802 972 46 062 538 Adjustments Prior year adjustments - 7 711 394 7 711 394 Balance at 01 April 2013 as restated 2 259 566 51 514 366 53 773 932 Changes in net assets Surplus for the year - 39 024 772 39 024 772 Total changes - 39 024 772 39 024 772 Balance at 01 April 2014 2 259 566 90 539 138 92 798 704 Changes in net assets Surplus for the year - 18 702 423 18 702 423 Total changes - 18 702 423 18 702 423 Balance at 31 March 2015 2 259 566 109 241 561 111 501 127 Note(s) 10

166 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Cash flow statement

2014 Figures in Rand Note(s) 2015 Restated

Cash flows from operating activities Cash receipts from customers 481 783 871 416 173 042 Cash paid to suppliers and employees (448 435 389) (351 684 126) Cash generated from operations 33 348 482 64 488 916 Interest received 13 130 438 6 661 582 Interest paid (1 105 418) (952 680) Net cash flows from operating activities 29 45 373 502 70 197 818

Cash flows from investing activities Purchase of property, plant and equipment 3 (7 480 834) (8 547 496) Proceeds from sale of property, plant and equipment 3 331 574 161 785 Purchase of intangible assets 4 - (115 513) Movement in ﬁnancial assets - (214 448) Net cash flows from investing activities (7 149 260) (8 715 672)

Cash flows from financing activities Finance lease payments (273 252) (673 277) Net cash flows from financing activities (273 252) (673 277)

Net increase in cash and cash equivalents 37 950 990 60 808 869 Cash and cash equivalents at the beginning of the period 9 116 497 546 55 688 677 Cash and cash equivalents at the end of the period 9 154 448 536 116 497 546

167 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Statement of comparison of budget and actual amounts

Budget on comparable basis

Actual Difference amounts on between Approved comparable final budget Figures in Rand Note(s) budget Adjustments Final budget basis and actual Revenue Revenue from exchange transactions Rendering of services – membership levies 17 397 569 314 34 500 000 432 069 314 429 100 083 (2 969 231) Other revenue 19 6 794 400 3 615 574 10 409 974 21 281 983 10 872 009 Investment revenue 23 5 151 445 - 5 151 445 13 130 438 7 978 993 Total revenue from exchange transactions 409 515 159 38 115 574 447 630 733 463 512 504 15 881 771

Revenue from non-exchange transactions Conditional sponsorship – LA Health 17 40 000 - 40 000 40 000 - Grant recognised – Free State Department of Cooperative Governance and Traditional Aﬀairs 17 - 1 120 323 1 120 323 1 120 323 - Grant recognised - Eastern Cape Department of Local Government and Traditional Aﬀairs 17 - 98 987 98 987 98 987 - Grant recognised – LG SETA (CIP) 17 - 1 800 000 1 800 000 845 509 (954 491) Grant recognised – LG SETA (Capacity building) 17 - 700 000 700 000 1 743 088 1 043 088 Grant recognised – LG SETA (PBCDP) 17 - 6 207 306 6 207 306 2 589 879 (3 617 427) Government grants and subsidies 17 26 904 000 - 26 904 000 26 904 000 - Sponsorships and donations 17 1 800 000 2 700 000 4 500 000 5 509 690 1 009 690 Grant recognised – Commonwealth Local Government Forum 17 - 41 560 41 560 41 560 - Grant recognised – LG SETA (LDW) - 350 000 350 000 - (350 000) Grant recognised – GIZ Governance Support Programme 17 - 330 811 330 811 330 811 - Total revenue from non-exchange transactions 28 744 000 13 348 987 42 092 987 39 223 847 (2 869 140) Total revenue 438 259 159 51 464 561 489 723 720 502 736 351 13 012 631

Expenditure Personnel 22 (248 913 488) (21 214 841) (270 128 329) (270 140 551) (12 222) Administrative 20 (43 541 639) (9 094 963) (52 636 602) (54 437 100) (1 800 498)

(7 429 746) Depreciation and amortisation expense 3 & 4 (4 217 607) (3 212 484) (7 430 091) 345 Indirect programme costs 20 (88 384 465) (4 177 422) (92 561 887) (88 348 538) 4 213 349 Other expenses 20 (51 057 984) (9 875 281) (60 933 265) (62 572 575) (1 639 310) Finance costs 26 (1 877 592) 368 832 (1 508 760) (1 105 418) 403 342 Total expenditure (437 992 775) (47 206 159) (485 198 934) (484 033 928) 1 165 006 Surplus for the year 266 384 4 258 402 4 524 786 18 702 423 14 177 637

Also refer to note 41. 168 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

1. PRESENTATION OF FINANCIAL STATEMENTS - BASIS OF PREPARATION

Statement of compliance

The annual ﬁnancial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board in accordance with Section 91(1) of the Public Finance Management Act, 1999 (Act No 1 of 1999).

Basis of measurement

These annual ﬁnancial statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention as the basis of measurement, unless speciﬁed otherwise. They are presented in South African Rand.

In the absence of an issued and eﬀective Standard of GRAP, accounting policies for material transactions, events or conditions were developed in accordance with paragraphs 8, 10 and 11 of GRAP 3 as read with Directive 5.

A summary of the signiﬁcant accounting policies, which have been consistently applied in the preparation of these annual ﬁnancial statements, are disclosed below.

1.1 Going concern assumption

These annual ﬁnancial statements have been prepared based on the expectation that SALGA will continue to operate as a going concern for at least the next 12 months.

1.2 Significant judgements and sources of estimation uncertainty

In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts presented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revision to accounting estimates are recognised in the period in which the estimates are revised and in any future period affected. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include:

Trade receivables and other receivables

SALGA assesses its trade receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in surplus or deficit, management makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.

Fair value estimation

The carrying value less impairment losses of trade receivables and the carrying value of trade payables are deemed to approximate their fair values.

The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to SALGA for similar financial instruments.

169 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

Post-retirement medical benefits

The present value of the post-employment medical obligation depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost include the discount rate. Any changes in these assumptions will impact on the carrying amount of post-employment medical obligations.

SALGA determines the appropriate discount rate at the end of each year. This is the interest rate that will be used to determine the present value of estimated future cash outﬂows expected to be required to settle the medical obligations. In determining the appropriate discount rate, SALGA considers the medical aid inﬂation that have terms to maturity approximating the terms of the related medical liability.

Other key assumptions for medical aid obligations are based on current market conditions. Additional information is disclosed in note 7.

Effective interest rate

SALGA uses the prime interest rate to discount future cash ﬂows for payables and/or expenditure and the R186 government bond rate to discount the future cash ﬂows in receivables and/or revenue.

Allowance for doubtful debts

For trade receivables an impairment loss is recognised in surplus and deficit when there is objective evidence that it is impaired. The impairment is measured as the difference between the trade receivables carrying amount and the present value of estimated future cash flows discounted at the effective interest rate, computed at initial recognition.

Useful lives and residual values

SALGA re-assesses the useful lives and residual values of property, plant and equipment on a yearly basis. These assessments require judgements and assumptions to be made by management. The assessments involve the estimation of months or years based on past experience and historical information to determine the estimated period of time over which an asset is expected to be used. Other assessments involve the determination of value where a comparison of the resale value of the speciﬁc asset taking into consideration its age and condition. This determination represents the estimated amount that SALGA would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset was already of the age and in the condition expected at the end of its useful life.

Impairment of non-cash generating assets

Criteria developed by SALGA to distinguish non-cash-generating assets from cash-generating assets are as follows: SALGA’s mandate or intention is not in pursuit of commercial return but service delivery to its members’ assets acquired by SALGA are therefore solely to facilitate service delivery to its members (i.e. administrative in nature).

There is no uncertainty as to whether SALGA assets are non-cash generating assets, as SALGA does not have an asset or class of assets that operate or generate cash ﬂows independently from other assets, nor do its assets form part of a group of assets that generate cash ﬂows independently from other assets.

170 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

1.3 Investment property

Recognition and measurement

Investment property is property (land or a building-or part of a building-or both) held to earn rental income or for capital appreciation or both, rather than for:

y Use in the production or supply of goods or services. y Administrative purposes. or y Sale in the ordinary course of operations.

Investment property is recognised as an asset when it is probable that the future economic beneﬁts or service potential that are associated with the investment property will ﬂow to SALGA, and the cost or fair value of the investment property can be measured reliably.

Investment property is initially recognised at cost plus any transaction costs included in initial measurement.

Where investment property is acquired through a non-exchange transaction, its cost is its fair value as at the date of acquisition.

Costs include costs incurred initially and costs incurred subsequently to add to, or to replace a part of a property. If a replacement part is recognised in the carrying amount of the investment property, the carrying amount of the replaced part is derecognised.

Subsequent measurement

Subsequent to initial measurement, investment property is measured at fair value.

The fair value of investment property reﬂects market conditions at the reporting date.

A gain or loss arising from a change in fair value is included in net surplus or deﬁcit for the period in which it arises.

SALGA does not amortise the revaluation surplus subsequent to transfer. The revaluation surplus is realised upon disposal or retirement of the asset. Upon transfer of the owner occupied property to investment property the revaluation surplus is treated in the following manner:

y Any remaining part of the increase is credited directly to net assets in revaluation surplus; y On subsequent disposal of the investment property, the revaluation surplus included in net assets may be transferred to accumulated surpluses or deficits. The transfer from revaluation surplus to accumulated surpluses or deficits is not made through surplus or deficit; and y Fair value adjustments are recognised as profit or loss through the statement of financial performance Re-measurements to fair value are made annually to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period.

171 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

1.4 Property, plant and equipment

Property, plant and equipment are tangible non-current assets (including infrastructure assets) that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used for more than one period.

Initial recognition and measurement

The cost of an item of property, plant and equipment is recognised as an asset when:

y It is probable that future economic beneﬁts or service potential associated with the item will ﬂow to the entity; and y The cost of the item can be measured reliably.

Property, plant and equipment is initially measured at cost.

The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebates are deducted in arriving at the cost.

Where an asset is acquired through a non-exchange transaction, its cost is its fair value as at date of acquisition.

Where an item of property, plant and equipment is acquired in exchange for a non-monetary asset or monetary assets, or a combination of monetary and non-monetary assets, the asset acquired is initially measured at fair value (the cost). If the acquired item’s fair value was not determinable, it’s deemed cost is the carrying amount of the asset(s) given up.

When signiﬁcant components of an item of property, plant and equipment have diﬀerent useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The cost of an item of property, plant and equipment is recognised as an asset if and only if;

y It is probable that the future economic beneﬁts or service potential associated with the item will ﬂow to SALGA and the cost of fair value of the item can be measured reliably. y Where an asset is acquired at a cost that is less than a thousand Rand, its cost is fully depreciated in the period in which it is acquired.

Subsequent expenditure

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

Subsequent expenditure of an item of property, plant and equipment is recognised as an asset if and only if;

y It is probable that the future economic beneﬁts or service potential associated with the item will ﬂow to SALGA; and y The cost or fair value of the item can be measured reliably.

Costs of the day-to-day servicing are recognised in surplus and deﬁcit as incurred.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.

172 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

Following initial recognition at cost, land and buildings classiﬁed as property, plant and equipment is carried at revalued amount, being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Revaluations are made with suﬃcient regularity such that the carrying amount does not diﬀer materially from that which would be determined using fair value at the end of the reporting period.

When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals its revalued amount.

When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset.

Any increase in an asset’s carrying amount, as a result of a revaluation, is credited directly to a revaluation surplus. The increase is recognised in surplus or deﬁcit to the extent that it reverses a revaluation decrease of the same asset previously recognised in surplus or deﬁcit.

Any decrease in an asset’s carrying amount, as a result of a revaluation, is recognised in surplus or deﬁcit in the current period. The decrease is debited directly to a revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that asset.

The revaluation surplus in equity related to a speciﬁc item of property, plant and equipment is transferred directly to retained earnings when the asset is derecognised.

The revaluation surplus in equity related to a speciﬁc item of property, plant and equipment is transferred directly to retained earnings as the asset is used. The amount transferred is equal to the diﬀerence between depreciation based on the revalued carrying amount and depreciation based on the original cost of the asset.

Property, plant and equipment are depreciated on the straight line basis over their expected useful lives taking into account their estimated residual value.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average useful life Land Indefinite, not depreciated Buildings 20 to 75 years Furniture and fixtures 3 to 20 years Motor vehicles 5 years Office equipment 3 to 20 years IT equipment 3 to 4 years Leasehold improvements The shorter of useful life or lease term (36 to 60 months) Leased assets (Equipment) The shorter of useful life or lease term (24 to 36 months)

173 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

Residual values

The residual value, and the useful life and depreciation method of each asset are reviewed at the end of each reporting date. If the expectations diﬀer from previous estimates, the change is accounted for as a change in accounting estimate.

Reviewing the useful life of an asset on an annual basis does not require the entity to amend the previous estimate unless expectations diﬀer from the previous estimate.

Each part of an item of property, plant and equipment with a cost that is signiﬁcant in relation to the total cost of the item is depreciated separately.

The depreciable amount of an asset is determined by deducting the residual value of an asset from its original cost (or revalued amount, where applicable).

The depreciation charge for each period is recognised in surplus or deﬁcit unless it is included in the carrying amount of another asset.

No residual value is assessed for assets where the value of the residual is considered immaterial in relation to the cost of the asset. Management intends using the assets shown in the statement of ﬁnancial position over their entire economic life.

The residual values of motor vehicles are set as determined by market forces. When setting a residual value for a motor vehicle consideration is given to the expected useful life and expected proceeds that could be received today if the same vehicle at the end of its useful life were to be sold.

Derecognition

Items of property, plant and equipment are derecognised when the asset is disposed of or when there are no further economic beneﬁts or service potential expected from the use of the asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus or deﬁcit when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the diﬀerence between the net disposal proceeds, if any, and the carrying amount of the item.

The carrying amount of property, plant and equipment is reviewed for impairment when events or changes in the circumstances indicate that the carrying amount may not be recoverable.

Specific categories of property, plant and equipment:

Land and buildings

Land and buildings are separable assets and are accounted for separately, even when they are acquired together. Land has an unlimited useful life and therefore is not depreciated.

Buildings have a limited useful life and therefore are depreciable assets.

The useful lives of the land and buildings are re-assessed annually.

174 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

Furniture and fittings and office equipment

Office equipment and furniture and fittings are not currently componentised as no component accounting is considered necessary due to the nature of office furniture and fittings and office equipment, namely, that the useful lives of individual components do not differ from the whole.

Estimated useful lives are based on past experience and historical information.

IT equipment

IT equipment can be separated into the following components:

y Computer hardware y Computer software (integral part and embedded into hardware)

IT equipment is not currently componentised as no component accounting is considered necessary due to the nature of the computer information.

Expenditure relating to ongoing maintenance (which does not meet the recognition criteria), IT support and customisation is expensed in the statement of ﬁnancial performance as and when incurred.

Purchased software is recognised at cost, including all direct costs associated with the customisation and installation thereof.

Motor vehicles

Where there is an indicator of impairment, the recoverable amount of the individual asset is estimated. When the residual values are re-assessed annually, the carrying amount is compared to the resale value of the speciﬁc vehicle taking into consideration its age and condition.

Gains and losses

The gains or losses arising from derecognition or disposal of an item of property, plant and equipment is included in surplus and deﬁcit when the item is derecognised. The gains and losses arising from derecognition of an item of property, plant and equipment is determined as the diﬀerence between the net disposal proceeds, if any and the carrying amount of the item.

Leased assets

Leased assets can be separated into the following categories:

y Leases for oﬃce equipment y Leasehold improvements

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that SALGA will obtain ownership by the end of the lease term.

Leasehold improvements arise when SALGA improves the premises occupied under operating leases to suit operational requirements. Capitalised leasehold improvements are depreciated over the shorter of the estimated useful life of the asset and the lease term.

175 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

1.5 Intangible assets

An Intangable asset is identiﬁable if it is either:

y Separable, i.e. is capable of being separated or divided from an entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identiﬁable assets or liability, regardless of whether the entity intends to do so; or y Arises from binding arrangements (including rights from contracts), regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

An intangible asset is recognised when:

y It is probable that the expected future economic beneﬁts or service potential that are attributable to the asset will ﬂow to the entity; and y The cost or fair value of the asset can be measured reliably.

The entity assesses the probability of expected future economic beneﬁts or service potential using reasonable and supportable assumptions that represent management’s best estimate of the set of economic conditions that will exist over the useful life of the asset.

Intangible assets are initially recognised at cost.

Subsequent to initial recognition intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

An intangible asset is regarded as having an indeﬁnite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inﬂows or service potential. Amortisation is not provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life.

The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:

Item Useful life Computer software 2 to 5 years and indeﬁnite

Intangible assets are derecognised:

y On disposal; or y When no future economic beneﬁts or service potential are expected from its use or disposal.

The gain or loss is the diﬀerence between the net disposal proceeds, if any, and the carrying amount. It is recognised in surplus or deﬁcit when the asset is derecognised.

176 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

1.6 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residual interest of another entity.

Classification

SALGA has the following types of financial assets (classes and category) as reflected on the face of the statement of financial position or in the notes thereto:

Class Category Trade and other receivables from exchange transactions Financial asset measured at amortised cost Cash and cash equivalents Financial asset measured at amortised cost Other ﬁnancial assets (rental deposits) – exchange transactions Financial asset measured at amortised cost Operating lease receivables – exchange transactions Financial asset measured at amortised cost

SALGA has the following types of financial liabilities (classes and category) as reflected on the face of the statement of financial position or in the notes thereto:

Class Category Trade and other payables from exchange transactions Financial liability measured at amortised cost Membership levy received in advance (over-payment) – Financial liability measured at amortised cost exchange transactions Sundry payables – exchange transactions Financial liability measured at amortised cost Other payables (lodge cards) – exchange transactions Financial liability measured at amortised cost

Initial recognition

SALGA recognises ﬁnancial assets and liabilities in its statement of ﬁnancial position when the entity becomes a party to the contractual provisions of the instrument.

SALGA recognises ﬁnancial assets and liabilities using trade date accounting.

Initial measurement of financial assets and financial liabilities

When a financial asset or liability is recognised initially, SALGA measures it at its fair value, plus in the case of a financial asset or financial liability initially not subsequently measured at fair value, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.

Subsequent measurement of financial assets and financial liabilities

SALGA measures all ﬁnancial assets and ﬁnancial liabilities after initial recognition using the following categories:

y Financial instruments at amortised cost.

177 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

All ﬁnancial assets measured at amortised cost are subject to an impairment review.

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility.

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the entity estimate cash flows considering all contractual terms of the financial instrument (for example, prepayment, call and similar options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. There is a presumption that the cash flows and the expected life of a group of similar financial instruments can be estimated reliably. However, in those rare cases when it is not possible to reliably estimate the cash flows or the expected life of a financial instrument (or group of financial instruments), the entity shall use the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments).

Impairment and uncollectibility of financial assets

At the end of each reporting period SALGA assess whether there is any objective evidence (e.g. continuous defaults on settlement) that a ﬁnancial asset or group of ﬁnancial assets is impaired.

Financial assets measured at amortised cost.

If there is objective evidence that an impairment loss on financial assets measured at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in surplus or deficit.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed directly in surplus or deficit. The reversal does not result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in surplus or deficit.

Interest, losses or gains

Interest relating to a financial instrument or a component that is a financial liability, is recognised as income or expense in surplus or deficit.

Losses and gains relating to a financial instrument or a component that is a financial liability is recognised as income or expense in surplus or deficit.

178 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

1.7 Leases

Whether a lease is a finance lease or an operating lease depends on the substance of the transaction rather than the form of the contract. Situations that individually or in combination would normally lead to a lease being classified as a finance lease are:

y The lease transfers ownership of the asset to SALGA by the end of the lease term; y SALGA has the option to purchase the asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable for it to be reasonable certain, at the inception of the lease, that the option will be exercised; y The lease term is for the major part of the economic life of the asset even if title is not transferred; y At the inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset; y The leased assets are of such a specialised nature that only the lessee can use them without major modifications; y If SALGA can cancel the lease, the lessor’s losses associated with the cancellation are borne by SALGA; y Gains or losses from the fluctuation in the fair value of the residual accrue to SALGA (e.g, in the form of a rent rebate equalling most of the sales proceeds at the end of the lease); y The lessee has the ability to continue the lease for a secondary period at a rent that is substantially lower than market rent; and y A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership.

An operating lease is a lease other than a ﬁnance lease.

Finance leases - where SALGA is the lessee

Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease.

Minimum lease payments are apportioned between the ﬁnance charge and reduction of the outstanding liability. The ﬁnance charge is allocated to each period during the lease term so as to produce a constant periodic reduction of the remaining balance of the liability.

Subsequent to initial recognition the asset is accounted for in accordance with the accounting policy applicable to that asset.

Operating leases - where SALGA is the lessor

Operating lease income is recognised as revenue on a straight-line basis over the lease term.

Operating leases - where SALGA is the lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The diﬀerence between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability.

Any contingent rentals are expensed in the period in which they are incurred.

179 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

Assets under operating leases are not recognised in the statement of ﬁnancial position.

1.8 Cash and cash equivalents

Cash comprises cash on hand and demand deposits.

Cash and cash equivalents are measured at amortised cost.

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insigniﬁcant risk of changes in value.

Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. For an investment to qualify as a cash equivalent it must be readily convertible to a known amount of cash and be subject to an insigniﬁcant risk of changes in value. Therefore, an investment normally qualiﬁes as a cash equivalent only when it has a short maturity of, say, three months or less from the date of acquisition.

SALGA does not have an overdraft facility and is restricted in terms of section 66(3)(c) of the PFMA to borrow money, subject to the approval of the Minister (Executive Authority) in concurrence with the Minister of Finance.

1.9 Revaluation reserve

The revaluation reserve results from the revaluation of property, plant and equipment while still owner occupied. It remains after treating the same assets as investment property since they were vacated by the entity.

Upon transfer of the owner-occupied property to investment property the revaluations surplus is treated in the following manner:

y Any remaining part of the increase is credited directly to net assets in revaluation surplus. On subsequent disposal of the investment property, the revaluation surplus included in net assets may be transferred to accumulated surpluses or deficits. The transfer from revaluation surplus to accumulated surpluses or deficits is not made through surplus or deficit.

1.10 Impairment of non-cash-generating assets

Non-cash-generating assets are assets other than cash-generating assets.

Impairment is a loss in the future economic beneﬁts or service potential of an asset, over and above the systematic recognition of the loss of the asset’s future economic beneﬁts or service potential through depreciation (amortisation).

Recoverable service amount is the higher of a non-cash-generating asset’s fair value less costs to sell and its value in use.

Useful life is either:

(a) The period of time over which an asset is expected to be used by SALGA; or (b) The number of production or similar units expected to be obtained from the asset by SALGA.

Criteria developed by SALGA to distinguish non-cash-generating assets from cash-generating assets are as follows: SALGA’s mandate or intention is not in pursuit of commercial return but service delivery to its members, therefore assets acquired by SALGA are solely for service delivery or facilitate service delivery to its members( i.e. administrative in nature).

180 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

There is no uncertainty as to whether SALGA assets are non-cash generating assets, as SALGA does not have an asset or class of assets that operate or generate cash ﬂows independently from other assets, nor does its assets form part of a group of assets that generate cash ﬂows independently from other assets.

Identification

When the carrying amount of a non-cash-generating asset exceeds its recoverable service amount, it is impaired.

SALGA assesses at each reporting date whether there is any indication that a non-cash-generating asset may be impaired. If any such indication exists, SALGA estimates the recoverable service amount of the asset.

When SALGA is assessing whether there is any indication that an asset may be impaired, at a minimum the following indications are considered:

External sources of information

(a) Cessation, or near cessation, of the demand or need for services provided by the asset. (b) Signiﬁcant long-term changes with an adverse eﬀect on the entity have taken place during the period or will take place in the near future, in the technological, legal or government policy environment in which the entity operates.

Internal sources of information

(a) Evidence is available of physical damage of an asset. (b) Significant long-term changes with an adverse effect on the entity have taken place during the period, or are expected to take place in the near future, in the extent to which, or manner in which, an asset is used or is expected to be used. These changes include the asset becoming idle, plans to discontinue or restructure the operation to which an asset belongs, or plans to dispose of an asset before the previously expected date. (c) Evidence is available from internal reporting that indicates that the service performance of an asset is, or will be, significantly worse than expected.

Value in use

Value in use of a non-cash-generating asset is the present value of the asset’s remaining service potential.

The present value of the remaining service potential of non-cash-generating assets is determined using the following approach:

Service units approach

The present value of the remaining service potential of the asset is determined by reducing the current cost of the remaining service potential of the asset before impairment, to conform to the reduced number of service units expected from the asset in its impaired state. The current cost of replacing the remaining service potential of the asset before impairment is determined as the depreciated reproduction or replacement cost of the asset before impairment, whichever is lower.

Recognition and measurement

If the recoverable service amount of a non-cash-generating asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable service amount. This reduction is an impairment loss.

An impairment loss is recognised immediately in surplus or deﬁcit.

181 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

Reversal of an impairment loss

SALGA assess at each reporting date whether there is any indication that an impairment loss recognised in prior periods for a non- cash-generating asset may no longer exist or may have decreased. If any such indication exists, the recoverable service amount of that asset is estimated.

An impairment loss recognised in prior periods for a non-cash-generating asset is reversed if there has been a change in the estimates used to determine the asset’s recoverable service amount since the last impairment loss was recognised.

The carrying amount of the asset is increased to its recoverable service amount. The increase is a reversal of an impairment loss. The increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined (net of depreciation or amortisation) had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss for a non-cash-generating asset is recognised immediately in surplus or deﬁcit.

Any reversal of an impairment loss of a revalued non-cash-generating asset is treated as a revaluation increase.

After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the non-cash-generating asset is adjusted in future periods to allocate the non-cash-generating asset’s revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life.

1.11 Employee benefits

Short-term employee benefits

The cost of short-term employee beneﬁts, (those payable within 12 months after the end of the reporting period in which the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary beneﬁts such as study leave), are recognised in the period in which the service is rendered and are not discounted.

The organisation remunerates employees on total cost-to-company basis, this package includes SALGA’s portion of contribution in respect of retirement beneﬁts. The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.

The expected cost of bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

Defined contribution plans

Payments to deﬁned contribution retirement beneﬁt plans are charged as an expense as they fall due.

Payments made to industry-managed retirement benefit schemes are dealt with as defined contribution plans where the SALGA’s obligation under the schemes is equivalent to those arising in a defined contribution retirement benefit plan.

SALGA’s deﬁned contribution plans are as follows:

y Pension fund - an employer contribution based on 10.5% p.a. of an employee’s basic salary towards pension and/or retirement funds. Employees are required to contribute a corresponding contribution of 6.5% p.a. based on their basic salary.

182 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

y Medical aid - an employer contribution capped at R 2 028 per month per employee. The contribution amount is reviewed annually depending on prevailing medical insurance inflation. y Group risk - an employer contribution that covers funeral benefit for the employee and immediate family members. y The risk cover also includes life assurance at three times an employee’s annual salary in case of death. The risk cover is based on 1.45% of SALGA’s basic payroll costs. y Long-term incentive scheme - the employer provides for long-term incentive (LTI) scheme for fixed term contract (FTC) employees. These employees make-up the top management structure of the organisation and are employed on a five year fixed term contract. The incentive scheme is based on performance (merit) and the employee remaining in the employ of the organisation for a period longer than three years.

Defined benefit plans

A defined benefit plan is a post-employment benefit plan where the entity’s obligation is to provide the agreed benefits to current and former employees; and the actuarial risks fall, in substance, on the entity.

For defined benefit plans, the cost of providing the benefits is determined using the projected credit method.

Re-measurements or actuarial valuations are conducted on an annual basis by independent actuaries separately for each plan.

SALGA recognises the net total of the following amounts in surplus or deﬁcit:

t Interest cost; and t Re-measurements or actuarial gains and losses

Gains or losses on the curtailment or settlement of a deﬁned beneﬁt plan is recognised when SALGA is demonstrably committed to curtailment or settlement.

The amount recognised as an obligation in the statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service costs, and reduced by the fair value of plan assets.

SALGA provides post-employment health care beneﬁt upon retirement to some retirees.

The entitlement to post-retirement health care benefits is based on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment. Independent qualified actuaries carry out valuations of these obligations. An annual charge to surplus or loss is made to cover both these liabilities.

1.12 Provisions and contingencies

Provisions are recognised when:

y SALGA has a present obligation as a result of a past event; y It is probable that an outﬂow of resources embodying economic beneﬁts or service potential will be required to settle the obligation; and y A reliable estimate can be made of the obligation.

183 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

The amount of a provision is the best estimate of the expenditure expected to settle the present obligation at the reporting date.

Where the eﬀect of time value of money is material, the amount of a provision is the present value of the expenditures expected to settle the obligation.

The discount rate is a pre-tax rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the liability.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if SALGA settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for the reimbursement is limited to the amount of the provision.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if it is no longer probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation.

Where discounting is used, the carrying amount of a provision increases in each period to reﬂect the passage of time. This increase is recognised as an interest expense.

A provision is used only for expenditures for which the provision was originally recognised.

Provisions are not recognised for future operating surpluses.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 31.

1.13 Conditional grants and receipts

Revenue received from conditional grants, donations and funding are recognised as revenue and a corresponding asset to the extent that SALGA has complied with any of the criteria, conditions or obligations embodied in the agreement. To the extent that the criteria, conditions or obligations have not been met a liability is recognised.

1.14 Revenue from exchange transactions

Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets.

An exchange transaction is one in which SALGA receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange.

Measurement

Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.

184 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

Rendering of services

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably when all the following conditions are satisﬁed:

y The amount of revenue can be measured reliably; y It is probable that the economic beneﬁts or service potential associated with the transaction will ﬂow to SALGA; y The stage of completion of the transaction at the reporting date can be measured reliably; and y The costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

When services are performed by an indeterminate number of acts over a specified time-frame, revenue is recognised on a straight line basis over the specified time-frame unless there is evidence that some other method better represents the stage of completion. When a specific act is much more significant than any other acts, the recognition of revenue is postponed until the significant act is executed.

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

Stage of completion for membership levies

The membership levy entitles members to ‘services’ or ‘benefits of association’ for the financial period of SALGA. Although the formula for fees is based on annual budgeted salary, this is not relevant in terms of revenue recognition. The recognition of revenue depends, rather, on the timing, nature and value of benefits provided.

On the basis of the accounting standard GRAP 9, the stage of completion needs to be determined at year end, and revenue recognised in accordance with the stage of completion of the transaction.

The guidance in GRAP 9 par A11 of the Appendix also states that the membership levies should be recognised on the basis which reﬂects the timing of beneﬁts provided.

“Revenue recognition depends on the nature of the services provided. If the fee permits only membership, and all other services or products are paid for separately, or if there is a separate annual subscription, the fee is recognised as revenue when no significant uncertainty as to its collectability exists. If the fee entitles the member to services or publications to be provided during the membership period or to purchase goods or services at prices lower than those charged to non-members, it is recognised on a basis that reflects the timing, nature and value of the benefits provided”.

1.15 Revenue from non-exchange transactions

Non-exchange transactions are deﬁned as transactions where the entity receives value from another entity without directly giving approximately equal value in exchange.

Transfers are inﬂows of future economic beneﬁts or service potential from non-exchange transactions, other than taxes.

Recognition and measurement

An inﬂow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inﬂow.

185 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

As SALGA satisﬁes a present obligation recognised as a liability in respect of an inﬂow of resources from a non-exchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of revenue equal to that reduction.

Where a liability is required to be recognised it will be measured as the best estimate of the amount required to settle the obligation at the reporting date.

Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.

Transfers

Apart from services in kind, which are not recognised, SALGA recognises an asset in respect of transfers when the transferred resources meet the deﬁnition of an asset and satisfy the criteria for recognition as an asset.

Transferred assets are measured at their fair value as at the date of acquisition.

Conditional grants and receipts

Gifts and donations

Gifts and donations are recognised as assets and revenue when it is probable that the future economic beneﬁts or service potential will ﬂow to SALGA and the fair value of the assets can be measured reliably.

1.16 Investment income

Investment income is recognised on a time-proportion basis using the eﬀective interest method.

1.17 Budget information

General purpose ﬁnancial reporting by SALGA shall provide information on whether resources were obtained and used in accordance with the legally adopted budget.

The annual ﬁnancial statements and the budget are prepared on a comparable basis of accounting, therefore a comparison with the budgeted amounts for the reporting period have been included in the notes to the annual ﬁnancial statements.

1.18 Translation of foreign currencies

Foreign currency transactions

A foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

186 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

At each reporting date:

y Foreign currency monetary items are translated using the closing rate; y Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and y Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous annual financial statements are recognised in surplus or deficit in the period in which they arise.

When a gain or loss on a non-monetary item is recognised directly in net assets, any exchange component of that gain or loss is recognised directly in net assets. When a gain or loss on a non-monetary item is recognised in surplus or deﬁcit, any exchange component of that gain or loss is recognised in surplus or deﬁcit.

Cash ﬂows arising from transactions in a foreign currency are recorded in Rands by applying to the foreign currency amount the ruling spot exchange rate.

1.19 Comparative figures

Where necessary, comparative ﬁgures have been reclassiﬁed to conform to changes in presentation in the current year.

1.20 Fruitless and wasteful expenditure

Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised.

All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as income in the statement of financial performance.

1.21 Irregular expenditure

Irregular expenditure as deﬁned in section 1 of the PFMA is expenditure other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation, including-

(a) the PFMA; or (b) the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act; or (c) any provincial legislation providing for procurement procedures in that provincial government.

National Treasury practice note no. 4 of 2008/2009 which was issued in terms of sections 76(1) to 76(4) of the PFMA requires the following (eﬀective from 1 April 2008):

y Irregular expenditure that was incurred and identified during the current financial year and which was condoned before year end and/or before finalisation of the annual financial statements must also be recorded appropriately in the irregular

187 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

expenditure register. In such an instance, no further action is required with the exception of updating the note to the annual financial statements. y Irregular expenditure that was incurred and identified during the current financial year and for which condonement is being awaited at year end must be recorded in the irregular expenditure register. No further action is required with the exception of updating the note to the financial statements. y Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the register and the disclosure note to the financial statements must be updated with the amount condoned. y Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by the National Treasury or the relevant authority must be recorded appropriately in the irregular expenditure register. If liability for the irregular expenditure can be attributed to a person, a debt account must be created if such a person is liable in law. Immediate steps must thereafter be taken to recover the amount from the person concerned. If recovery is not possible, the accounting officer or accounting authority may write off the amount as debt impairment and disclose such in the relevant note to the annual financial statements. The irregular expenditure register must also be updated accordingly. If the irregular expenditure has not been condoned and no person is liable in law, the expenditure related thereto must remain against the relevant programme/expenditure item, be disclosed as such in the note to the annual financial statements and updated accordingly in the irregular expenditure register.

1.22 Related parties

SALGA operates in an economic sector currently dominated by entities directly or indirectly owned by the South African Government. As a consequence of the constitutional independence of the three spheres of government in South Africa, only entities within the national sphere of government in respect of the Executive Authority (CoGTA) and members of the NEC and their respective municipalities belonging from the local sphere of government are considered to be related parties.

Management are those persons responsible for planning, directing and controlling the activities of SALGA, including those charged with the governance of SALGA in accordance with legislation and SALGA Constitution.

Close members of the family of a person are considered to be those family members who may be expected to inﬂuence, or be inﬂuenced by, that management in their dealings with the entity.

A related party is considered to be related if one party has the ability to control the other party or jointly control or exercise significant influence over the other party in making financial and operating decisions or if the related party and the other entity are subject to common control.

Speciﬁc information with regards to related party transactions is included in the disclosure notes.

Identification of Related Parties

Controlling Entities Related Party identification

All municipalities are represented at SALGA through direct membership to SALGA, furthermore representation in SALGA structures is carried by the elected provincial representative at a Provincial Conference as well at National Conference.

The National Conference elects representatives that comprise the National Executive Committee of SALGA (Accounting Authority). Each municipality has a single vote that entitles it to vote at SALGA governance structures. A single municipality would not have control or significant influence over the running the affairs or determining the policies of SALGA. The control and significant influence over SALGA’s policies and finances is jointly held my all the 278 municipalities. In terms of SALGA’s constitution all the municipalities

188 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies are members and would have equal rights over the residual assets of the organisation upon dissolution. The ten directly elected members at National Conference and the nine ex-oﬃcio members elected by the respective Provincial Conferences are related parties of SALGA by virtue of being part of the National Executive as well as the Chief Executive who is also an ex-oﬃcio member of the NEC due to his role. The NEC has an option to co-opt up to three members, who once co-opted become related parties by virtue of being part of the National Executive of SALGA.

SALGA does not have a sister entity that is subjected to common control by the National Conference or jointly by the 278 municipalities in South Africa.

Significant Influence Entities Related Parties identification

Legislatively SALGA reports to the Department of Corporate Governance and Traditional Affairs (CoGTA). SALGA reports on a quarterly to the Minister of CoGTA in line with Public Finance Management Act (PFMA) and its regulations. CoGTA has significant influence over SALGA’s activities by virtue of CoGTA’s role as the designated Executive Authority in terms of the PFMA. The department is tasked with the function of developing national policies and legislation with regard to provinces and local government. CoGTA’s role has a direct impact or significant influence over the decisions of SALGA’s policies and finance decisions. Although disclosed as a Related Party transaction, the fees paid by CoGTA to SALGA are part of normal funding that Government grants to its entities.

Senior management of SALGA comprises of the Chief Executive Officer; Chief Financial Officer; Executive Manager in the Office of the Chief Executive; and other senior managers including their close family members have been identified as Related Parties of SALGA due to the significant influence that senior / key management exert over SALGA’s operating and finance policies.

The governing body members of SALGA, being the NEC; Audit Committee; and Performance and Remuneration

Committee members and their close families have been identified as Related Parties, due to the significant influence these structures exert over SALGA’s operating and finance policies.

SALGA does not provide loans whether at market rates/prices or non-market related rates/prices to either Senior Management; NEC members; Audit Committee; and Performance and Remuneration Committee members.

Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed.

Compensation paid to key management personnel including their family members, where relevant is included in the disclosure notes.

189 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Accounting policies

1.23 New standards and interpretations

Standards and interpretations issued, but not yet effective

The entity has not adopted the following standards and interpretations, which have been published issued but not yet eﬀective:

Standard/ Interpretation: Effective date: Expected impact: Years beginning on or after GRAP 18: Segment Reporting 1 April 2015 Additional disclosure in terms of GRAP 18 will be required. A working paper on the said disclosure has been developed and discussed with the Audit Committee.

SALGA is ready to implement new disclosure requirements when effective. GRAP 105: Transfers of functions between 1 April 2015 No impact since SALGA has no entities under entities under common control common control where transfer of functions is envisaged. GRAP 106: Transfers of functions between 1 April 2015 No impact since SALGA has no entities not entities not under common control under common control where transfer of functions is envisaged. GRAP 107: Mergers 1 April 2015 Not expected to impact. GRAP 20: Related parties No effective date has been No impact expected since SALGA is already determined by the Minister implementing IPSAS 20 in line with Directive of Finance 5 of the ASB. GRAP32: Service Concession Arrangements: No effective date has been No impact expected since it is unlikely to be Grantor determined by the Minister applicable to SALGA in view of its operations. of Finance GRAP108: Statutory Receivables No effective date has been No impact since SALGA does not have any determined by the Minister statutory receivables. of Finance IGRAP17: Service Concession Arrangements No effective date has been No impact expected since it is unlikely to be where a Grantor Controls a Significant determined by the Minister applicable to SALGA in view of its operations. Residual Interest in an Asset of Finance

190 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 2. INVESTMENT PROPERTY

2015 2014 Valuation Carrying value Valuation Carrying value Investment property 6 600 000 6 600 000 5 900 000 5 900 000

Reconciliation of investment property - 2015 Fair value adjustment gain / Opening balance (loss) Total Investment property 5 900 000 700 000 6 600 000

Reconciliation of investment property - 2014 Transfer from Fair value property, plant adjustment gain / Opening balance and equipment (loss) Total Investment property 4 300 000 3 600 000 (2 000 000) 5 900 000

Details of property (1) Stand 3278, Johannesburg, Gauteng (2) Stand 750, Kimberley, Northern Cape (3) Portion 654 of the farm Albinia no. 957, FT KwaZulu-Natal

Details of valuation The effective date of the revaluations was 31 March 2015. Revaluations were performed by an independent valuer, Mr. William John Hewitt NDPV, C.I.E.A., F.I.V. (SA), Appraiser of Mills Fitchet (TVL) CC. Mills Fitchet (TVL) CC is not connected to SALGA and has recent experience in location and category of the investment property being valued. The valuation was based on open market value for existing use. For the purpose of determining the market value of the investment properties the capitalisation of the “Net Annual Income”, generally considered to determine the market value of an income producing property such as shopping centres, offices and industrial or commercial properties where the building has an earning potential. Amounts recognised in surplus and deficit for the year. The only rental income received from letting a portion of the investment property relates to the Hillcrest property in KwaZulu- Natal, where a portion of the land is let to Mobile Telephone Networks (MTN) for a cellular phone mast erected on the land. Such leasing of the property is incidental and insignificant relative to the potential of the property. There’s no rental income earned on other investment property, rather they are held for capital appreciation. There are no restrictions on the realisation of investment property or the remittance of revenue and proceeds of disposal. There are also no contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements.

None of the investment property has been pledged as security for any loan.

Rental revenue from investment property (73 980) (73 980) Direct operating expenses from rental generating property 507 807 514 051 Direct operating expenses from non-rental generating property 1 209 945 1 416 225 191 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 3. PROPERTY, PLANT AND EQUIPMENT

2015 2014 Accumulated Accumulated depreciation depreciation Carrying Cost and Cost and Carrying value value accumulated accumulated impairment impairment Furniture and ﬁxtures 13 122 687 (4 387 316) 8 735 371 12 028 026 (3 752 161) 8 275 865 Motor vehicles 592 096 (509 663) 82 433 769 176 (430 626) 338 550 Oﬃce equipment 5 782 177 (1 987 795) 3 794 382 5 324 829 (1 624 916) 3 699 913 IT equipment 13 444 415 (5 875 647) 7 568 768 10 887 736 (2 996 315) 7 891 421 Leased assets 10 348 839 (6 627 139) 3 721 700 10 008 251 (5 801 964) 4 206 287 Total 43 290 214 (19 387 560) 23 902 654 39 018 018 (14 605 982) 24 412 036

192 loss Total reversal Total Impairment Impairment loss Impairment (14 049) (424 273) (14 313) 3 794 382 997) 1 392 367 (67 668) (741 970) (123 223) 8 735 371 property Depreciation Transfer to Transfer investment investment tinued) balance Additions Disposals Depreciation Opening balance Additions Disposals Opening LandBuildings and fixturesFurniture Motor vehiclesOffice equipmentIT equipment assetsLeased 7 345 800 1 200 000 2 327 046 1 771 939 2 854 324 529 537 5 909 751 (41 060) 1 194 488 - 5 018 289 - - 3 943 787 (19 812) 1 637 282 25 184 747 - (499 007) (77 009) - - 8 547 496 (689 163) (1 200 000) (2 400 000) - - (636 888) - - (117 659) (411 283) 72 954 (3 600 000) (1 372 928) - (113 978) - (4 963 682) 6 008 (2 449 284) (97 769) - - (215 428) 8 275 865 - - 82 196 7 587 95 791 - - 3 699 913 7 891 421 24 412 036 - - - 338 550 - - 4 206 287 Furniture and fixturesFurniture 8 275 865 Reconciliation of property, plant and equipment – 2015 of property, Reconciliation Motor vehiclesOffice equipment 3 699 913 338 550 547 104 - - (256 117) - 82 433 IT equipment assetsLeased plant and equipment - 2014 of property, Reconciliation 7 891 421 4 206 287 3 386 343 2 154 920 24 412 036 (292 407) 7 480 734 (3 330 302) - (374 124) (86 286) (2 639 508) (7 392 170) 7 568 769 (223 822) - 23 902 654 3 721 699 South African Local Government Association Government Local South African Government Act, 1 Local the Organised ito Management Act, 1999 and recognised Finance (Schedule 3A public entity the Public ito 2015 year ended 31 March for the Annual financial statements Notes to the annual financial statements in Rand Figures 3. (Con EQUIPMENT AND PLANT PROPERTY, 193 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 3. PROPERTY, PLANT AND EQUIPMENT (Continued)

Compensation received for losses on property, plant and equipment – included in operating profit.

IT equipment 331 574 161 785

Assets subject to lease (Net carrying amount)

Oﬃce equipment 2 054 675 2 282 839 Leasehold improvements 1 667 024 1 923 448 3 721 699 4 206 287

Other information

Property, plant and equipment fully depreciated and still in use (Gross carrying amount)

Furniture and ﬁxtures 15 382 15 392 Oﬃce equipment 23 322 24 921 38 704 40 313

194 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 4. INTANGIBLE ASSETS

2015 2014 Accumulated Accumulated depreciation depreciation and and accumulated accumulated Cost impairment Carrying value Cost impairment Carrying value Computer software 738 409 (127 711) 610 698 738 409 (90 135) 648 274

Reconciliation of intangible assets - 2015 Opening balance Amortisation Total Computer software 648 274 (37 576) 610 698

Reconciliation of intangible assets - 2014 Opening Impairment balance Additions Amortisation reversal Total Computer software 64 613 115 513 (33 254) 501 402 648 274

Other information

Fully amortised intangible assets still in use (Gross carrying amount) 49 156 49 156

5. DEPOSITS

At amortised cost Rental deposits held by lessors 1 028 068 1 028 068 Terms and conditions The deposits are refundable by the lessors only on termination of the lease agreement

Non-current assets Rental deposits held by lessors 1 028 068 1 028 068

6. OPERATING LEASE ASSET (ACCRUAL)

Current assets 41 305 32 225 Non-current liabilities (2 818 065) (5 463 532) Current liabilities (2 746 976) (1 554 015) (5 523 736) (6 985 322)

The operating lease asset arose as a result of straight-lining the operating lease receipts in accordance with GRAP 13.

195 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 SALGA leases a portion of its property in KwaZulu-Natal to a cellular phone operator for a cellular phone mast. The lease period on integration of SALGA KwaZulu-Natal into SALGA fold was 96 months. The annual escalation is 8% and the remaining lease period is 60 months.

The operating lease liability arose due to the straight-lining of operating lease payments in accordance with GRAP 13. Refer to note 30 for details on the non-cancellable operating lease rentals payable in future.

SALGA leases premises with a lease period ranging from 36 to 60 months. The average annual escalation is 9% and the average remaining lease term is 17 months.

All leases, except for Gauteng have extension options included in the contracts. The average annual escalation is 9% and the average remaining lease term is 34 months. Four of the lease contracts (National Oﬃce; KwaZulu-Natal; Northern Cape and North West) have extension options that are subject to negotiation between SALGA and the Lessors at the end of the current contracts. SALGA normally enters into negotiations to extend lease contracts at least six months before the termination of the lease.

The national oﬃce lease has an option to purchase. The purchase price shall be based on market value at the time of exercising the option.

7. EMPLOYEE BENEFIT OBLIGATIONS

Defined benefit plan

The plan is a post-employment medical beneﬁt plan.

Post-employment medical aid plan

When the then Western Cape Local Government Organisation (WECLOGO) was incorporated into SALGA, to form a unitary organisation WECLOGO had former employees for whom it contributed towards a medical aid post-employment benefit. One of the conditions of the unitary structure was that conditions of service of any employee in the employ of the provincial associations would not be affected upon amalgamation in line with section 197 of the Labour Relations Act. The WECLOGO members were incorporated into SALGA as of 1 February 2005 and SALGA inherited the post-employment medical benefit scheme of the two remaining pensioners.

SALGA contracted NMD Consultants and Actuaries (Pty) Ltd, an independent firm of actuaries not connected to SALGA to assist with the determination of the post-employment medical obligation as at 31 March 2015. The report provided by the actuaries valued the obligation at R 637 000 (2014: R 653 000). The decrease in the post-employment medical obligation is due to a deficit of R 5 000 as a result of changes in financial assumptions, surplus of R 5 000 due to health care cost inflation compared to expectations and surplus of R 14 000 due to actual demographic profile of the membership compared to expectations.

The amounts recognised in the statement of financial position are as follows:

Carrying value

Present value of the deﬁned beneﬁt obligation - wholly unfunded (637 000) (653 000)

196 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 Changes in the present value of the defined benefit obligation are as follows:

Opening balance 653 000 662 477 Beneﬁts paid (56 000) (52 477) Net expenses recognised in the statement of ﬁnancial performance 40 000 43 000 637 000 653 000

Net expense recognised in the statement of financial performance

Interest cost 54 000 47 000 Re-measurement or actuarial gain or loss (14 000) (4 000) 40 000 43 000

Key assumptions used

Assumptions used at the reporting date:

Discount rates used 7.93% 8.00% Medical cost trend rates 7.55% 14.96% Consumer Price Inﬂation 6.05% 6.65% Real discount rate 0.35% 0.42% Expected increase in healthcare costs 7.55% 8.15%

The post-employment health care liabilities have been valued using the projected unit credit discounted cash ﬂow method. This method was used to determine the past-service liabilities at the valuation date and projected annual expense in the year following the valuation date.

The discounted mean term of the post-employment medical beneﬁt liability was approximately 8.9 years as at 31 March 2015. The discount rate and CPI have therefore been based on the 8.9 year yield from the South African zero coupon government bond yield curve as at 28 March 2014, as published by the Bond Exchange of South Africa. The PA(90) female and male mortality tables were used.

Other assumptions

Assumed healthcare cost trend rates have a significant effect on the amounts recognised in surplus or deficit. A one percentage point change in assumed healthcare cost trend rates would have the following effects:

One One percentage percentage point increase point decrease Effect on the aggregate of the service cost and interest cost 43 440 36 960 Effect on defined benefit obligation 689 234 590 499

197 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 Defined contribution plan

It is the policy of SALGA to provide retirement beneﬁts to all its employees. A deﬁned contribution pension or retirement fund, subject to the Pensions Fund Act exists for this purpose.

SALGA is under no obligation to cover any unfunded beneﬁts.

The amount recognised as an expense for deﬁned contribution plans is 17 818 297 -

Included in deﬁned contribution plan information above, is the following plan which is accounted for as a deﬁned contribution plans:

y Pension fund - R 17 818 297 (2014: Rnil)

The deﬁned contribution plan commenced on 1 April 2014.

8. TRADE AND OTHER RECEIVABLES FROM EXCHANGE TRANSACTIONS

Trade receivables 33 828 986 26 982 814 Prepayments 2 437 114 1 489 488 Sundry receivables 1 683 685 1 655 441 37 949 785 30 127 743

Credit quality of trade and other receivables

The credit quality of trade and other receivables that are neither past nor due nor impaired can be assessed by reference to historical information about counterparty default rates. The credit qualities rating of each of these ﬁnancial instruments are as follows:

Low credit grade - The counter party has evidenced high occurrences of defaults and/or re-negotiations of contractual terms in prior periods. Furthermore an assessment of the financial position and liquidity position of the party has provided evidence of financial difficulties that may impede the recoverability of the outstanding amounts. As such the counter parties included in the low credit grade category pose a high credit risk to the entity.

Medium credit grade - The counter party has evidenced instances of defaults and/or re-negotiations of contractual terms in prior periods on the repayment of outstanding amounts. An assessment of the financial position and liquidity positions of the party has provided evidence of financial difficulties that may impede the recoverability of the outstanding amounts. The counter parties included in this credit grade category are active in an industry that is highly sensitive to market fluctuations and volatility in the international economies.

High credit grade - The counter party has evidenced no instances of defaults and / or re-negotiations of contractual terms in prior periods.

Trade receivables

Trade receivables schedule Trade receivables schedule (gross carrying amount) 76 082 131 49 240 651 Less: Allowance for doubtful debt (42 253 145) (22 257 837) 33 828 986 26 982 814

198 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 Trade and other receivables past due but not impaired

The ageing of amounts past due but not impaired is as follows: Not more than 30 days 6 694 938 1 242 414 More than 30 days but not more than 60 days 13 702 768 13 380 364 More than 60 days but not more than 90 days - - More than 90 days but not more than 120 days - - More than 120 days 13 431 280 12 360 036 33 828 986 26 982 814

The carrying amount of trade and other receivables that are past due and have re-negotiated settlement terms amount to R 2 380 142 (2014: R 9 316 453)

Trade and other receivables impaired

As of 31 March 2015, trade and other receivables of R 42 253 145 (2014: R 22 257 837) were impaired and provided for.

The ageing of impaired amounts is as follows: Not more than 30 days 800 880 - More than 30 days but not more than 60 days 1 483 627 297 192 More than 60 days but not more than 90 days - - More than 90 days but not more than 120 days - - More than 120 days 39 968 638 21 960 645 42 253 145 22 257 837

Reconciliation of allowance account for doubtful debt

Opening balance 22 257 837 23 912 965 Increase in allowance for doubtful debt 42 253 145 22 257 837 Decrease in allowance for doubtful debt (22 257 837) (23 912 965) 42 253 145 22 257 837

The creation and release of allowance for impaired receivables have been included in operating expenses in surplus or deﬁcit (note 21).

The maximum exposure to credit risk at the reporting date is the fair value of each class of loan mentioned above. SALGA does not hold any collateral as security.

SALGA is exposed to credit risk as a result of transactions entered into with customers on extended payment terms, and cash and cash equivalents held with commercial banks that may not be able to produce cash on demand.

SALGA manages these risks by independent checks and only using commercial banks approved by National Treasury. No changes occurred in the management of these risks from the prior year.

199 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 9. CASH AND CASH EQUIVALENTS

The carrying value of cash and cash equivalents is measured at amortised cost. None of the instruments included in the cash and cash equivalents were pledged as security for any ﬁnancial obligation.

Cash on hand 11 788 33 851 Bank balances 154 436 748 116 463 695 154 448 536 116 497 546

10. REVALUATION SURPLUS

The revaluation surplus is non-distributable.

Opening balance 2 259 566 2 259 566

Upon transfer of the owner-occupied property to investment property the revaluation surplus is treated in the following manner:

11. FINANCE LEASE OBLIGATION

Minimum lease payments due - within one year 1 423 843 1 549 101 - in second to ﬁfth year inclusive 924 769 1 070 490 2 348 612 2 619 591 less: future ﬁnance charges (204 244) (201 870) Present value of minimum lease payments 2 144 368 2 417 721

Present value of minimum lease payments due - within one year 1 285 240 1 402 365 - in second to ﬁfth year inclusive 859 128 1 015 356 2 144 368 2 417 721

Non-current liabilities 859 128 1 015 356 Current liabilities 1 285 240 1 402 365 2 144 368 2 417 721

It is SALGA’s standard operating practice to lease certain office equipment under finance leases. Obligations under finance leases are secured by the lessor’s title to the leased assets.

200 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 SALGA ordinarily concludes these leasing arrangements for a period that ranges between 24 to 36 months. The average lease period for the leased assets for oﬃce equipment is 25 months. The average remaining lease term is 16 months and the average eﬀective interest rate implicit in the lease was 9% (2014: 9%).

Interest rates are ﬁxed at the contract date. All leases have ﬁxed repayments and no arrangements have been entered into for contingent rent. There are purchase options entered into on these leased assets. SALGA does not renew the leases upon expiry as the useful life approximates the lease term.

SALGA’s obligations under ﬁnance leases are secured by the lessor’s claim over the leased assets, in an instant where SALGA defaults on the contractual lease payments. Refer to note 3.

Leased assets with a carrying amount of R 2 054 676 (2014: R 2 282 839) are subject to the lessors restrictions in terms of movement (relocation).

12. UNSPENT CONDITIONAL GRANTS AND RECEIPTS

Unspent conditional grants and receipts comprises:

Unspent conditional grants and receipts Government grant - Free State Department of Cooperative Governance - 1 120 323 Conditional sponsorship: LA Health 39 998 79 999 Government grant - Eastern Cape Department of Local Government and Traditional Aﬀairs 86 424 485 411 Local Government SETA - councillor induction programme - 622 515 National Treasury - councillor induction programme 429 209 429 209 Deutsche Gesellschaft fur Internationale Zusammernarbeit (GIZ) - LED Network 105 260 41 460 Local Government SETA – leadership development workshops (LDW) 350 000 - Local Government SETA - capacity building (CB) 256 912 2 000 000 Conditional grant – Commonwealth local government forum (CLGF) 112 973 - Local Government SETA – portfolio based councillor development programme (PBCDP) 410 121 - 1 790 897 4 778 917

Assets recognised and included in cash and cash equivalents amounting to R 1 790 897 (2014: R 4 778 917) are ring-fenced and can solely be used in terms of the conditions of the grants.

Movement during the year

Balance at the beginning of the year 4 778 917 6 279 714 Additions during the year 3 523 722 3 583 250 Revenue recognition during the year (6 511 742) (5 084 047) 1 790 897 4 778 917

The nature and extent of conditional government grants recognised in the annual financial statements and an indication of other forms of assistance from which SALGA has directly benefited are disclosed in note 18; any unfulfilled conditions attaching to government and other assistance has not been recognised in surplus or deficit and remain reflected as a liability (unspent conditional grants and receipts).

201 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 See note 18 for reconciliation of grants from national / provincial government and other Institutions.

13. PROVISIONS

Reconciliation of provisions – 2015

Opening Additions Total balance FTC employee long term incentive - 8 579 605 8 579 605

Non-current liabilities 1 508 785 - Current liabilities 7 070 821 - 8 579 606 -

The ﬁxed term contract (FTC) employee long-term incentive represents management’s best estimate of SALGA’s liability under one year incentive granted on FTC employee should the FTC employees performance be acceptable in terms of SALGA’s merit based rating matrix. Furthermore, should the employee remain in the employ of SALGA for a period exceeding three years, whereupon the incentive shall vest in the FTC employee. Based on prior experience FTC employees tend to leave SALGA within three years., Hence as part of a retention scheme, the incentive scheme was introduced for the ﬁrst time in 2014/15. The provision is based on 20 percent p.a. of the FTC employee basic package.

14. DEFERRED REVENUE

Deferred revenue arises from donor funded projects, whose funds when received in advance are classiﬁed as deferred revenue and recognised as and when the donor requirements are fulﬁlled. The organisation has the following donor funded projects:

Masibambane project 2 065 059 3 868 244

Assets recognised and included in cash and cash equivalents amounting to R 2 065 059 (2014: R3 868 244) are ring-fenced and can solely be used in terms of the Masibambane project business plan.

Movement during the year – Masibambane project

Balance at the beginning of the year 3 868 244 4 817 736 Revenue recognised during the year (1 803 185) (949 492) 2 065 059 3 868 244

Masibambane project is a European Union donor funded programme (funds are channelled through the Department of Water Aﬀairs) aimed at capacity building, infrastructure development and ensuring viable and sustainable delivery of water and sanitation services.

202 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 Movement during the year - SDC Project

Balance at the beginning of the year (549 269) (1 558 043) Additions during the year 549 269 3 299 950 Revenue recognised during the year - (2 291 176) Included in trade and other receivables (sundry receivables) (Note 8) - 549 269 --

The Swiss Agency for Development and Co-operation (SDC) agreed to support SALGA to build capacity in the monitoring and implementation of energy eﬃciency. The project has two components: t.POJUPSJOHPGFOFSHZFöDJFODZUBSHFUTJOUIFCVJMEJOHTFDUPSUPUIF%FQBSUNFOUPG&OFSHZBOE$PPQFSBUJPOTVQQPSUUP SALGA; and t5IFJNQMFNFOUBUJPOPGUIFDBQBDJUZCVJMEJOHDPNQPOFOU5IFQSPKFDUXBTDPNQMFUFEPO%FDFNCFSBOEJUXBTXPVOE up in 2014 with outstanding receivables settled.

15. TRADE AND OTHER PAYABLES FROM EXCHANGE TRANSACTIONS

Trade payables 14 418 396 7 355 727 Membership levy received in advance 3 604 087 6 135 176 Sundry payables 602 765 323 032 Accrued leave pay 12 686 213 10 954 273 Accrued thirteenth cheque 1 616 781 1 362 458 Accrued expenses 34 930 180 25 664 079 Accrued performance rewards 20 079 455 12 940 436 Other payables (lodge cards) 4 360 071 2 376 578 92 297 948 67 111 759

203 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 16. FINANCIAL INSTRUMENTS DISCLOSURE

Categories of financial instruments

2015 Financial assets At amortised Total cost Operating lease receivables – exchange transactions 41 305 41 305 Trade and other receivables from exchange transactions 33 828 986 33 828 986 Sundry receivables from exchange transactions 2 437 114 2 437 114 Cash and cash equivalents 154 448 536 154 448 536 190 755 941 190 755 941

Financial liabilities At amortised Total cost Trade and other payables from exchange transactions 49 348 576 49 348 576 Membership levy received in advance 3 604 087 3 604 087 Sundry payables 602 765 602 765 Other payables (Lodge cards) 4 360 071 4 360 071 57 915 499 57 915 499

2014 Financial assets At amortised Total cost Operating lease receivables – exchange transactions 32 225 32 225 Trade and other receivables from exchange transactions 26 982 814 26 982 814 Sundry receivables from exchange transactions 1 655 441 1 655 441 Cash and cash equivalents 116 497 546 116 497 546 145 168 026 145 168 026

Financial liabilities At amortised Total cost Trade and other payables from exchange transactions 33 019 806 33 019 806 Membership levy received in advance 6 135 176 6 135 176 Sundry payables 323 032 323 032 Other payables (Lodge cards) 2 376 578 2 376 578 41 854 592 41 854 592

204 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 17. REVENUE

Total revenue disclosed in the statement of ﬁnancial performance is made up as follows:

Revenue from exchange transactions 429 100 083 362 244 562 Revenue from non-exchange transactions 39 223 847 34 167 995 Other revenue (refer note 19) 21 281 983 14 737 347 Investment income (refer note 23) 13 130 438 6 661 582 Total revenue 502 736 351 417 811 486

The amounts included in revenue arising from exchanges of goods or services are as follows:

Rendering of services - membership levies 429 100 083 362 244 562 Other revenue 21 281 983 14 737 347 450 382 066 376 981 909

The amount included in revenue arising from non-exchange transactions is as follows:

Conditional sponsorship – LA Health 40 000 40 000 Grant recognised – Free State Department of CoGTA 1 120 323 - Grant recognised - Eastern Cape Department of Local Government and Traditional Aﬀairs 98 987 1 435 274 Grant recognised – LG SETA (CIP) 845 509 1 513 377 Grant recognised – LG SETA (Capacity building) 1 743 088 1 412 939 Grant recognised – LG SETA (PBCDP) 2 589 879 - Transfers – Government grant and subsidies 26 904 000 25 999 000 Sponsorship and donations 5 509 690 3 767 406 Grant recognised – Commonwealth Local Government Forum 41 560 - Grant recognised – GIZ governance support programme 330 811 - 39 223 847 34 167 996

205 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 18. GOVERNMENT GRANTS AND SUBSIDIES

Transfers and subsidies - Executive Authority 26 904 000 25 999 000

Conditional grant -Free State Department of Cooperative Governance - grant

Balance unspent at beginning of year 1 120 323 1 120 323 Conditions met - transferred to revenue (refer to note17) (1 120 323) - - 1 120 323

Conditions still to be met - remaining liability (refer to note 12).

SALGA engages provincial and national departments for assistance in terms of building capacity in the respective provinces and funding certain programmes. The Free State funding is split between programme support (40%) and building internal capacity in the province (60%).

Conditional sponsorship: LA Health

Balance unspent at beginning of year 79 999 120 000 Conditions met - transferred to revenue (refer to note17) (40 000) (40 001) 39 999 79 999

Conditions still to be met - remaining liability (refer to note 12).

A conditional sponsorship was obtained from LA Health to fund SALGA’s website redesign and rejuvenation. The sponsorship has the condition that SALGA’s webpage must bear LA Health presence (logo on each page in a format to be agreed upon by the parties for a period of ﬁve years). This amount will thus be amortised over this ﬁve-year period.

Conditional grant - Eastern Cape Department of Local Government and Traditional Affairs

Balance unspent at beginning of year 485 411 420 684 Current-year receipts / (refunds) (300 000) 1 500 000 Conditions met - transferred to revenue (refer to note17) (98 987) (1 435 273) 86 824 485 411

Conditions still to be met - remaining liability (refer to note 12).

The grant from the Eastern Cape Department of Local Government and Traditional Affairs is firstly to fund internal capacity within SALGA for the implementation of collaborative support to municipalities specifically focusing on capacitating municipal oversight structures, and provide assistance to enhance and promote oversight in the municipalities. Secondly, the grant is to fund SALGA’s councillor induction programme, ward committees training, and the training of traditional leaders. For the prior year a portion of the grant that was targeted for support to five municipalities within the Eastern Cape province has been returned to the department at its request. SALGA and the department could not agree on the terms of the grant.

206 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 Conditional grant - LGSETA - councillor induction programme (CIP) grant

Balance unspent at beginning of year 622 515 2 135 891 Conditions met - transferred to revenue (refer to note17) (845 509) (1 513 376) Included in trade and other receivables (sundry receivables) 222 994 - - 622 515

A conditional grant was obtained from LGSETA to assist in SALGA’s programme to induct the new councillors after the 18 May 2011 local government elections into the local government sphere.

Conditional grant -National Treasury - CIP grant

Balance unspent at beginning of year 429 209 429 209

Conditions still to be met - remaining liability (refer to note 12).

A conditional grant was obtained from National Treasury to assist with SALGA’s programme to train new entrants to the local government sphere after the 18 May 2011 local government elections, heading up the ﬁnancial management portfolio in their respective municipalities.

Conditional grant -Deutsche Gesellschaft fur Internationale Zusammernarbeit (GIZ) - LED network grant)

Balance unspent at beginning of year 41 460 640 668 Current-year receipts 63 800 83 250 Conditions met - transferred to revenue (refer to note17) - (682 458) 105 260 41 460

Conditions still to be met - remaining liability (refer to note 12).

The grant is funded by Deutsche Gesellschaft fur Internationale Zusammernarbeit (GIZ) to build capacity within SALGA for a local economic development (“LED”) specialist.

Conditional grant - local government SETA leadership development workshops (LDW)

Current-year receipts 350 000 -

Conditions still to be met - remaining liability (refer note 12).

The grant is from the Local Government Sector Education and Training Authority (LG SETA). Its intention is to provide support to SALGA’s capacity; building programmes targeted to SALGA members, i.e. municipalities; and its primary aim is to fund the Leadership Development Workshop (LDW).

207 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 Conditional grant - local government SETA (capacity building)

Balance unspent at beginning of year 2 000 000 1 412 939 Current-year receipts - 2 000 000 Conditions met - transferred to revenue -(refer to note17) (1 743 088) (1 412 939) 256 912 2 000 000

Conditions still to be met - remaining liability (refer to note 12).

The grant is for the activation of capacity building through a human resources development indaba that will inform SALGA’s programme on human resource development for the sector. The grant received from the LG SETA will also fund the following projects:

y Capacity-building, y Conducting a feasibility study for the facilitation of local government leadership academy scoping; and y Development of requirements speciﬁcation for the HRM&D information systems.

Conditional grant - GIZ governance support programme

Current-year receipts 255 000 -

Conditions still to be met - remaining liability (refer to note 12).

The grant is from Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) and its primary aim is to provide ﬁnancial support to SALGA for the following:

y Develop, pilot and roll out the research instrument at a sample of red zone municipalities; y Train SALGA staﬀ on research instrument and methodology; y Data analysis and report write up; y LED and LGCICT marketing material for SALGA events; y Technical website development; y Training for SALGA network teams on Drupal content management system and online facilitation techniques; y LED materials (manuals & handbooks) for municipalities; and y Compiling and printing LED newsletter and distributing to Municipalities.

The grant is from the Local Government Sector Education and Training Authority (LG SETA). Its intention is to provide support to SALGA’s capacity building programmes targeted at SALGA members, i.e. municipalities, and its primary aim is to fund the Leadership Development Workshop (LDW).

Conditional grant - Commonwealth local government forum (CLGF)

Current-year receipts 112 973 -

Conditions still to be met - remaining liability (refer to note 12).

208 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 The grant from the Commonwealth local government forum (CLGF) is to fund SALGA’s partnership with CLGF to support local government in promoting local economic development. The objectives of the intervention is to address the following key actions to enable local government to play its full role in LED;

y Provide clear national framework for LED; y Create an enabling environment; and y Local strategies to promote LED partnerships with the private sector.

Conditional grant - LGSETA portfolio based councillor development programme (PBCDP)

Current-year receipts 3 000 000 - Conditions met - transferred to revenue -(refer to note17) (2 589 879) - 410 121 -

Conditions still to be met - remaining liability (refer to note 12).

The grant is from LGSETA and it is intended to provide ﬁnancial support to SALGA to enable the roll-out of a portfolio based councillor development programme (PBCDP) programme. The programme is targeted at reaching at least 5 000 councillors to be provided with portfolio based training based on their respective roles in municipalities.

19. OTHER REVENUE

Revenue from capacity building programmes 2 423 990 4 147 305 Sundry revenue 1 006 781 1 168 104 Delegate fees - national and provincial members assembly 15 053 400 6 028 000 Management fee – LGSETA (PBCDP) 816 667 Commission revenue 11 337 11 501 Rent revenue 73 980 78 980 Discount received 1 710 90 Donor funds recognised 1 803 186 3 240 668 Debt impairment reversed 6 000 12 000 Gain or (loss) on foreign exchange diﬀerences 84 892 50 699 21 281 983 14 737 347

20. EXPENSES

Disclosed expenses comprise the following: Administrative expenses

Impairment loss 223 822 215 428 Impairment reversal - (597 193) Lease rentals 34 590 101 32 071 694 Allowance for doubtful debts 19 934 437 (1 651 667) Repairs and maintenance 346 190 265 895 Loss on disposal of assets 42 550 475 103 Investment property fair value adjustments (700 000) 2 000 000 54 437 100 32 779 260 209 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 Indirect programme costs

Remuneration of councillors 1 276 399 7 094 721 Professional and advisory services (member support) 29 403 861 24 713 285 Travel expenses 16 254 299 16 875 651 Venue hire and accommodation expenses 28 086 200 29 310 700 Capacity building expenses 4 453 629 4 898 772 Logistical support expenses 8 874 150 5 809 347 88 348 538 88 702 476

Other expenses

Advertising 8 283 824 5 604 896 Auditors remuneration 4 053 408 3 305 323 Bank charges 154 760 148 653 Cleaning 617 444 549 993 IT consumables 370 205 293 477 Professional and advisory services 3 285 831 1 213 717 Donations 69 245 2 154 767 Entertainment 14 045 205 235 Gifts 83 983 94 904 Insurance 309 547 521 543 Community development initiatives 188 373 - IT support and licence fees 14 830 001 11 154 699 Marketing 4 719 447 3 827 669 Magazines, books and periodicals 63 951 316 001 Motor vehicle expenses 126 955 142 104 Postage and courier 890 766 1 105 575 Printing and stationery 5 923 833 5 973 494 Security costs 1 800 301 1 848 204 Staﬀ welfare 973 590 594 566 Subscriptions and membership fees 765 275 417 674 Telephone and fax 2 546 017 3 174 464 Training 2 621 978 2 446 998 Assets expensed 102 701 250 917 Municipal charges – utilities 4 196 024 4 298 102 Municipal charges - other levies 1 387 026 1 110 939 Uniforms 85 885 95 762 Legal settlements (CCMA) 172 670 - Other oﬃce accommodation costs 267 995 530 282 Recruitment costs 3 302 298 3 476 102 Corporate governance costs 369 097 741 559 General expenses (3 900) 651 62 572 575 55 598 270

210 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 21. SURPLUS

Surplus for the period is stated after accounting for the following amongst others:

Operating lease charges Premises y Straight-lined amounts 34 222 439 31 867 242 y Other lease expenses - 1 760 Equipment y Lease expenses 367 662 204 452 34 590 101 32 073 454

Loss on sale of property, plant and equipment 42 550 475 103 Legal fees 59 124 572 427 Impairment on property, plant and equipment 223 822 215 428 Reversal of impairment on property, plant and equipment - (95 791) Reversal of impairment on intangible assets - (501 402) Amortisation of intangible assets 37 576 33 254 Depreciation of property, plant and equipment 7 392 170 4 963 682 Employee costs 270 140 551 195 757 092 Amount expensed in respect of retirement benefit plans 17 858 297 43 000 Defined contribution funds 17 818 297 - Defined benefit funds 40 000 43 000 Litigation settlement (CCMA) 172 670 -

211 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 22. EMPLOYEE RELATED COSTS

Annual remuneration 192 330 763 170 959 843 Performance rewards 22 468 502 13 616 301 Employer contribution medical aid 8 713 839 - UIF 729 700 643 608 SDL 2 152 494 1 780 152 Other payroll levies 5 923 449 5 766 508 Leave pay accrual charge 2 718 186 2 286 730 Cell phone allowance 4 177 139 - Employer contribution group risk 3 083 568 - Other short term costs 1 445 009 703 950 Deﬁned contribution plan – Employer contribution pension fund 17 818 297 - Long-term beneﬁts - incentive scheme 8 579 605 - 270 140 551 195 757 092

Remuneration of senior management

Annual remuneration 15 902 806 21 895 198 Employer contribution to retirement and pension funds 1 560 173 - Performance rewards 1 914 469 2 220 009 Contributions to Retirement, medical, and pension funds - 128 808 Subsistence; cell phone; and travel allowances 680 139 1 149 249 Employer contribution to group risk 241 592 - Employer contribution to medical aid 158 184 - 20 457 363 25 393 264

Also refer to note 32 - Related parties for further details on remuneration of senior management.

In the current year Key Management Personnel has been redeﬁned in line with the Accounting Policy and limited to only EMT members who report directly to the Chief Executive. Only portfolio heads in terms of SALGA’s business units have therefore, been disclosed.

23. INVESTMENT INCOME

Interest income Bank 10 053 876 4 737 443 Trade and other receivables at amortised cost – interest revenue 3 076 562 1 924 139 13 130 438 6 661 582

Total interest revenue, calculated using the effective interest rate, on financial instruments not at fair value through surplus or deficit amounted to R 13 130 438 (2014: R 6 661 582).

212 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 24. FAIR VALUE ADJUSTMENTS

Investment property (fair value model) (see note 2) 700 000 (2 000 000)

25. IMPAIRMENT OF ASSETS

Impairments Property, plant and equipment 223 822 215 428 An impairment loss has been recognised on items of property, plant and equipment due to the said assets having no future service potential. Furniture and fixtures were damaged by water flooding in the SALGA Free State office resulting in these assets having no service potential R123 223 (2014: R117 659). Impairment losses were recognised for IT equipment no longer required for delivery of services to members over the longer planning period due to technological obsolescence R 86 286 (2014: R 97 769). Office equipment amounting to R 14 313 (2014: R nil) was impaired due to the equipment having no service potential over the longer planning period. All these assets are not required for the delivery of services to members, either currently, or over the longer planning period and some have evidenced physical damage to the asset. 223 822 215 428 Reversal of impairments Property, plant and equipment - (95 791) Property, plant and equipment previously impaired was reinstated as a result of a significant increase in the need for the services derived from the said asset items. The significant increase in the need for the assets service potential has indicated evidence significantly better than expected. The recoverable service amount of the asset was based on its value in use. Intangible assets - (501 402) Impairment previously recognised on intangible assets reversed due to the change in the intent/commitment to migrate electronic document management to another software solution (SAP CRM module) and to enhance the functionality of the existing software solution (paper trail) and thereby significantly increasing the need for the intangible asset service potential. The recoverable service amount of the asset was based on its value in use. A decision to use other software solutions previously halted has also significantly increased the need for the assets service potential. Therefore the service potential has indicated evidence significantly better than expected. The recoverable service amount of the asset was based on its value in use. - (597 193) Total impairment losses recognised (reversed) 223 822 (381 765)

213 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 The main classes of assets aﬀected by impairment losses are:

y Furniture and ﬁxtures - R 123 223 (2014: R 117 659) y IT equipment - R 86 286 (2014: R 97 769) y Oﬃce equipment - R 14 313 (2014: R nil)

The main events and circumstances that led to the recognition of these impairment losses are as follows:

y Furniture and fixtures - SALGA Free State office was damaged by water flooding resulting in these assets having no service potential; y IT equipment - these assets are not required for the delivery of services to members, either currently, or over the longer planning period due to technological obsolescence; and y Office equipment - these assets are not required for the delivery of services to members, either currently, or over the longer planning period and some have evidenced physical damage to the asset.

Value in use

In determining the recoverable amount of the assets subjected to Impairment reversals SALGA considered the following:

y Usefulness of the assets and their current state. SALGA’s IT department/experts are of the opinion that the intangible assets have an indefinite useful life and will be assessed annually for usefulnes; y The intention of management on the current use of the assets and upgrades effected on specific assets; y The nature/classes of the assets affected, being both intangible and tangible i.e. software, furniture and fittings and office equipment; y The appropriateness of the carrying value of the assets prior the change in use; and y In the absence an active market for the same assets due to technological advancements and change in design, management opted for the cost replacement approach to determine value in use, this was done through the application of consumer price increase (CPI) on the affected assets.

SALGA determined the value in use of the assets aﬀected by impairment reversal as follows:

A depreciated replacement cost approach was used, where the replacement cost of an asset is the cost to replace the asset’s gross service potential. This cost is depreciated to reﬂect the asset in its used condition. In the absence of an active market for assets of a similar condition the depreciated replacement cost is measured as the reproduction or replacement cost of the asset, whichever is lower, less accumulated depreciation calculated on the basis of such cost, to reﬂect the already consumed or expired service potential of the asset.

26. FINANCE COSTS

Trade and other payables (859) (1 203) Finance leases 184 169 250 070 Trade and other payables at amortised cost – interest expense 922 108 703 813 1 105 418 952 680

Total interest expense, calculated using the effective interest rate, on financial instruments not at fair value through surplus or deficit amounted to R 1 105 418 (2014: R 952 680).

214 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 27. TAXATION

No provision is made for taxation as SALGA is exempt from income tax in terms of section 10(1) of the Income Tax Act.

No Value Added Tax (VAT) was applicable to SALGA as it is exempt from complying with the Value Added Tax Act.

28. AUDITORS’ REMUNERATION

Audit fees 4 053 408 3 305 323

29. CASH GENERATED FROM OPERATIONS

Surplus 18 702 423 39 024 772 Adjustments for: Depreciation and amortisation 7 429 746 4 996 936 Loss on sale of assets 42 550 475 103 Loss/(gain) on foreign exchange (84 891) (50 698) Fair value adjustment to investment property (700 000) 2 000 000 Recognised/(reversed) Impairment loss 223 822 (381 765) Increase/(decrease) in allowance for doubtful debt ¹ 19 934 437 (1 651 667) Movements in operating lease assets and accruals (1 461 586) 287 579 Movements in retirement beneﬁt liability (16 000) (9 477) Movements in provisions 8 579 605 - Increase in accruals relating to employee costs 7 139 019 3 499 518 Changes in working capital: Trade and other receivables from exchange transactions (27 756 479) 6 674 805 Trade and other payables from exchange transactions 18 132 061 17 783 001 Unspent conditional grants and receipts (2 988 020) (1 500 797) Deferred revenue from exchange transactions (1 803 185) (949 492) 45 373 502 70 197 818

¹ The increase in allowance for doubtful debt is primarily due to an increase in customers categorised as low credit grade (high risk customers) and the number of customers on this credit grade has increased to 22 (2014: 18).

215 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 30. COMMITMENTS

Authorised capital expenditure

Already contracted for but not provided for

y Property, plant and equipment 156 649 -

Total capital commitments

Already contracted for but not provided for 156 649 -

Authorised operational expenditure

Already contracted for but not provided for

y Expenditure 14 862 103 13 196 706

Total operational commitments

Already contracted for but not provided for 14 862 103 13 196 706

Total commitments

Authorised and contracted capital expenditure 156 649 - Authorised and contracted operational expenditure 14 862 103 13 196 706 15 018 752 13 196 706

This committed operational expenditure relates to expenditure where purchase orders were issued and handed-over to suppliers as at year-end. The committed capital expenditure relates to the purchase of a motor vehicle were the purchase order was issued to the supplier but not delivered at year-end. All these commitments will be realised in the normal operating cycle of SALGA and are funded from internal resources.

Operating leases - as lessee (expense)

Minimum leases payments due - within one year 29 678 849 35 176 738 - in second to ﬁfth year inclusive 25 369 250 54 396 867 55 048 099 89 573 605

SALGA has ten operating leases for oﬃce accommodation across all provinces. Operating lease payments represent rentals payable by SALGA for its administrative oﬃce accommodation.

Leases are negotiated for an average term of ﬁve years. The average extension period is 1.8 years (2014: 2.8 years). The average escalation rate is 9%.

All leases, except for Gauteng have extension options included in the contracts. Four of the lease contracts (National Oﬃce; KwaZulu-Natal; Northern Cape and North West) have extension options that are subject to negotiation between SALGA and the

216 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 Lessors at the end of the current contracts. SALGA normally enters into negotiations to extend lease contracts at least six months before the termination of the lease.

Operating leases - as lessor (income)

Minimum leases payments due - within one year 70 092 64 900 - in second to ﬁfth year inclusive 341 112 315 745 - later than ﬁve years - 95 360 411 204 476 005

SALGA leases a portion of its property in KwaZulu-Natal to a cellular phone operator for a cellular phone mast. The lease period upon integration of SALGA KwaZulu-Natal into SALGA was 96 months. The annual escalation is 8% and the remaining lease period is 60 months.

31. CONTINGENT LIABILITIES

(i) SALGA is defending a matter against alleged breach of contract which was instituted by Millionsure Insurance Brokers (Pty) Limited. The plaintiﬀ claims payment of R8 336 250 interest at a rate of 15.5% from July 2004. SALGA has lodged a counter- claim of R10 377 104. The expected outcome is unknown and the legal costs incurred thus far in defending the matter forms part of legal costs as disclosed in note 21.

217 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 32. RELATED PARTIES

Relationships Members of the National Executive Committee (“NEC”) Chairperson (office bearer) Cllr T Manyoni Executive Mayor: Mangaung metropolitan municipality Deputy Chairperson (office bearer) Cllr M Nawa Executive Mayor: West Rand district municipality Deputy Chairperson (office bearer) Cllr F Maboa-Boltman Mayor: Gert Sibande district municipality Deputy Chairperson (office bearer) Cllr N Hermans Mayor: Umsobomvu Local Municipality Member of the NEC Cllr. D Mazibuko Executive Mayor - Uthukela district municipality Member of the NEC Cllr TG Mthimunye Mayor – Dr JS Moroka local municipality Member of the NEC Cllr C Neethling Ward Councillor - George local municipality Member of the NEC Cllr. TB Tshitereke Executive Mayor – VhembedDistrict municipality Member of the NEC Cllr BP Moloi Executive Mayor - Dr Kenneth Kaunda district municipality Member of the NEC (co-opted) Cllr. Z Ncitha Executive Mayor - Buffalo City metropolitan municipality Ex-officio member of the NEC Cllr W Johnson Chief Whip - Frances Baard district municipality Ex-officio member of the NEC Cllr P Tau Executive Mayor - City of Johannesburg metropolitan municipality Ex-officio member of the NEC Cllr S Ngangelizwe Mayor – Matjhabeng local municipality Ex-officio member of the NEC Cllr Demetri Qually City of Cape Town metropolitan municipality Ex-officio member of the NEC Cllr GK Lobelo Mayor - Greater Taung district municipality Ex-officio member of the NEC Cllr D Magabe Executive Mayor - Sekhukhune district municipality Ex-officio member of the NEC Cllr SW Mdabe Ilembe district municipality Ex-officio member of the NEC Cllr N Meth Executive Mayor OR Tambo district municipality Member of the NEC (co-opted) Cllr S Pillay MMC - City of Tshwane metropolitan municipality Ex-officio member of the NEC Cllr M Nkosi Executive Mayor - Chief Albert Luthuli district municipality Member of the NEC (co-opted) Cllr A Bekeer Councillor -Drakenstein local municipality Member of the NEC (co-opted) Cllr Z Dumzela Executive Mayor -Joe Gqabi local municipality Ex-officio member of the NEC Mr X George Chief Executive Officer

218 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand Executive Authority Executive Authority National Department of Co-operative Governance and Traditional Aﬀairs (CoGTA)

Members of the Audit and Risk Committee Chairperson of Audit Committee Mr Temba Zakuza Member of Audit Committee Ms Octavia Matloa Member of Audit Committee Ms Phumelele Ndumo Member of Audit Committee Mr Nala Mhlongo Member of Audit Committee Adv M Ralefatane

Members of the Performance Management and Remuneration Panel Chairperson of Performance and Remuneration Panel Mr Chose Choeu Member of Performance and Remuneration Panel Ms Elizabeth Dlamini-Khumalo Member of Performance and Remuneration Panel Dr Faizel Randera Member of Performance and Remuneration Panel Ms Laura Machaba-Abiodun (resigned 14 March 2015) Member of Performance and Remuneration Panel Mr William Huma

Executive Management Team Senior Management - Chief Finance Oﬃcer Mr Nceba Mqoqi Senior Management – Executive Manager: Oﬃce of the CEO Mr Seana Nkhahle Senior Management - Executive Director (Corporate Strategy Ms Antonette Richardson & Research) Senior Management - Executive Director (Community Ms Mandu Mallane (Acting) Development) Senior Management - Executive Director (Municipal Finance) Mr Simphiwe Dzengwa Senior Management - Executive Director (Governance, Inter- Ms Lorette Tredoux Governmental Relations) Senior Management - Executive Directors (Municipal Mr Rio Nolutshungu Institutional Development) Senior Management - Executive Director (Municipal Ms Jean De La Harpe Infrastructure and Services) Senior Management - Executive Director (Economic Ms Phila Xuza (resigned) Development and Planning) Senior Management - Executive Director (Economic Mr Marx Mupariwa (Acting) Development and Planning)

219 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014

Related party balances The balances disclosed hereunder are as a result of transactions at arm’s length in terms of SALGA Constitution and on normal terms that SALGA undertakes with any of its customers.: i.e. there are no special terms and conditions that are no more or less favourable than it is the norm for SALGA to conduct its business. Amounts included in Trade receivables (Trade Payables) regarding related parties Mangaung metropolitan municipality 74 125 6 000 West Rand district municipality (48 703) (68 704) Nelson Mandela Bay metropolitan municipality - 148 800 Umsobomvu local municipality 10 000 - Gert Sibande district municipality 40 274 88 692 Uthukela district municipality (30 870) 349 142 Nkangala district municipality (not related party in current year) (21 462) 299 947 Dr. JS Moroka local municipality (current year) 113 689 Mopani district municipality (not related party in current year) - 243 244 Dr Kenneth Kaunda district municipality (95 692) (61 436) City of Johannesburg metropolitan municipality 80 160 89 541 Thabo Mofutsanyane district municipality (not related party in current year) - 5 000 Frances Baard district municipality 51 000 (17 168) City of Cape Town metropolitan municipality 74 425 32 800 Greater Taung district municipality 17 755 13 121 Sekhukhune district municipality (23 161) 182 251 Ilembe district municipality 516 083 75 123 OR Tambo district municipality 918 210 64 470 City of Tshwane metropolitan municipality 81 725 16 100 Chief Albert Luthuli district municipality (172 320) 121 441 Drakenstein local municipality 180 208 289 611 Joe Gqabi local municipality 200 715 (35 426) Buﬀalo City metropolitan municipality 1 214 125 763 500 Vhembe district municipality (current year) 150 130 - Matjhabeng local municipality (current year) 306 819 - George local municipality 42 863 -

Related party transactions Transfers - government grant and subsidies Department of Cooperative Governance and Traditional Aﬀairs 26 904 000 25 999 000

Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed.

The fees paid by the Department of Cooperative Governance and Traditional Aﬀairs to SALGA are part of normal funding that Government grants to public entities to further state policies.

220 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand

Key management information Class Description Number Non-executive board sub-committee members Audit and Risk Committee (5); and 10 Performance Management and Remuneration Panel (5) Non-executive board members Accounting Authority 22 Executive board member Chief Executive Oﬃcer 1 Executive management Executive Management Team (Senior Management 9 excludes the Chief Executive Oﬃcer)

33. KEY MANAGEMENT PERSONNEL

National executive committee members

With effect from 1 July 2013 and in terms of Government Notice R.64 - determination of upper limits of salaries, allowances and benefits of different members of municipal councils, issued in terms of the Remuneration of Public Office Bearers Act, 1998 (Act No. 20 of 1998), dated 29 January 2014. SALGA is required to pay sitting allowances to councillors appointed to governance structures of organised local government. The said allowance is limited to R 908 (2014: R 857) per sitting of the Provincial Executive Committee or National Executive Committee or any committee of organised local government, regardless of the number of meetings that are attended by such councillor on a specific day.

No remuneration or compensation was provided to close family members of NEC members. There were no transactions entered with entities that are owned by NEC members.

Executive management team

No loans were advanced to senior management and no remuneration or compensation was provided to close family members of senior management. There were no transactions entered with entities that are owned by senior executives of SALGA.

Audit committee members

No loans were advanced to audit committee members and no remuneration or compensation was provided to close family members of audit committee members. There were no transactions entered with entities that are owned by audit committee members.

Performance management and remuneration panel members

No loans were advanced to performance management and remuneration panel members and no remuneration or compensation was provided to close family members of performance management and remuneration panel members. There were no transactions entered with entities that are owned by the performance management and remuneration panel members.

Entities, department and agencies

The fees paid by the Department of Cooperative Governance and Traditional Aﬀairs to SALGA are part of normal funding that government grants to public entities to further the policies of government.

221 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand National executive committee (NEC) 2015

Sitting Reimbursed Subsistence Subsistence allowance travel allowance allowance Expense ** allowance * (local) * (foreign) * refund Total Cllr Thabo Manyoni 11 141 - - 36 667 - 47 808 Cllr Mpho Nawa 12 857 - - 18 423 - 31 280 Cllr Nombulelo Hermans 12 856 28 854 - - - 41 710 Cllr Flora Maboa-Boltman 17 143 9 352 309 20 176 548 47 528 Cllr Dudu Mazibuko 1 714----1 714 Cllr Tiny G Mthimunye 7 713----7 713 Cllr Christian Neethling 12 855 24 910 1 454 - 203 39 422 Cllr Boitumelo Moloi - - - 9 712 - 9 712 Cllr Willie Johnson 17 998 17 305 1 133 - - 36 436 Cllr Sebenzile Ngagelizwe 8 570----8 570 Cllr Demetri Qually 18 869 4 495 412 - 1 270 25 046 Cllr Gavin Lobelo 12 855----12 855 Cllr David Magabe 6 010 - - 4 396 - 10 406 Cllr Sibusiso Mdabe 10 300----10 300 Cllr Nomakhosazana Meth 7 723 ----7 723 Cllr Zibonele Dumzela 7 713 ----7 713 Cllr Abraham Bekeer 10 301 858 206 - - 11 365 Cllr Maﬁka Nkosi 6 856 66 596---73 452 Cllr Zukiswa Ncitha 6 007----6 007 189 481 152 370 3 514 89 374 2 021 436 760

** With effect from 1 July 2013 and in terms of Government Notice R.64 - determination of upper limits of salaries, allowances and benefits of different members of municipal councils, issued in terms of the Remuneration of Public Office Bearers Act, 1998 (Act No. 20 of 1998), dated 29 January 2014. SALGA is required to pay sitting allowances to councillors appointed to governance structures of organised local government. The said allowance is limited to R857 per sitting of the Provincial Executive Committee or National Executive Committee or any committee of organised local government, regardless of the number of meetings that are attended by such councillor on a specific day. The remuneration paid to councillors who serve on the NEC (Accounting Authority) is limited to the sitting allowance.

On 25 March 2015 the above mentioned government notice was repealed via Government Notice R 243 - determination of upper limits of salaries, allowances and benefits of different members of municipal councils. The sitting allowance has since been increased to R908 per sitting of the Provincial Executive Committee or National Executive Committee or any committee of organised local government, regardless of the number of meetings that are attended by such councillor on a specific day.

* Reimbursed travel and local subsistence allowances is remitted to NEC members in terms of SALGA policy for participating in governance structures of organised local government (where applicable). The rates used for local travel and subsistence are based on SARS rates deemed as expended. International per diem is paid to NEC members who undertake SALGA’s mandate of strategic proﬁling. For example SALGA’s Chairperson partakes in governance structures of internal bodies such as the local government pan-African body, United Cities and Local Governments of Africa (UCLGA) as vice president. He is also President of the UCLGA Southern Africa Regional Oﬃce (UCLGA-SARO), SALGA also participates in other world-wide bodies such as United Cities and Local Government (UCLG); Commonwealth Local Government Forum (CLGF) and Metropolis. In pursuit of SALGA’s mandate at these bodies the SALGA NEC mandates NEC members to participate at these bodies from time to time. 222 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2014

Sitting Reimbursed Subsistence Subsistence Expense allowance travel allowance allowance Total refund ** allowance * (local) * (foreign) * Cllr Thabo Manyoni 4 285 - - 78 856 - 83 141 Cllr Mpho Nawa 4 285 - - 73 554 - 77 839 Cllr Flora Maboa-Boltman 5 142 2 749 - - 67 7 958 Cllr Dudu Mazibuko 1 714 - - 12 900 - 14 614 Cllr Speedy Mashilo 4 285 - - 16 048 - 20 333 Cllr Christian Neethling 5 142 45 585 4 019 - 786 55 532 Cllr Joshua Matlou 2 571 - - - - 2 571 Cllr Boitumelo Moloi 2 571 - - 9 933 - 12 504 Cllr Willie Johnson 5 142 49 299 3 926 - 6 188 64 555 Cllr Parks Tau 3 428 - - - - 3 428 Cllr Balekile Mzangwa 2 571 - - 9 933 - 12 504 Cllr Demetri Qually 7 713 2 582 279 - 792 11 366 Cllr Gavin Lobelo 5 142 28 260 651 - - 34 053 Cllr David Magabe 3 428 - - 3 143 - 6 571 Cllr Sibusiso Mdabe 3 428 - - - - 3 428 Cllr Nomakhosazana Meth 857 24 774 1 395 18 034 - 45 060 Cllr Subesh Pillay 3 428 - - - - 3 428 Cllr Zibonele Dumzela 2 571 5 309 186 - - 8 066 Cllr Abraham Bekeer 4 285 4 045 930 - - 9 260 Cllr Maﬁka Nkosi 3 428 24 332 372 - - 28 132 Cllr Zukiswa Ncitha 857 - - - - 857 76 273 186 935 11 758 222 401 7 833 505 200

** With effect from 1 July 2013 and in terms of Government Notice number R.64 - determination of upper limits of salaries, allowances and benefits of different members of municipal councils, issued in terms of the Remuneration of Public Office Bearers Act, 1998 (Act No. 20 of 1998), dated 29 January 2014. SALGA is required to pay sitting allowances to councillors appointed to governance structures of organised local government. The said allowance is limited to R857 per sitting of the Provincial Executive Committee or National Executive Committee or any committee of organised local government, regardless of the number of meetings that are attended by such councillor on a specific day. The remuneration paid to councillors who serve on the NEC (Accounting Authority) is limited to the sitting allowance.

* Reimbursed travel and local subsistence allowances is remitted to NEC members in terms of SALGA policy for participating in governance structures of organised local government (where applicable). The rates used for local travel and subsistence are based on SARS rates deemed as expended. International per diem is paid to NEC members who undertake SALGA’s mandate of strategic proﬁling. For example SALGA’s chairperson partakes in Governance structures of internal bodies such as the local government aan-African body, United Cities and Local Governments of Africa (UCLGA) as vice president; he is also President of the UCLGA Southern Africa Regional Oﬃce (UCLGA-SARO); SALGA also participates in other world-wide bodies such as United Cities and Local Government (UCLG); Commonwealth Local Government Forum (CLGF) and Metropolis. In pursuit of SALGA’s mandate in these bodies the SALGA NEC mandates NEC members to participate at these bodies from time to time.

223 Employer group risk **group Total contribution tocontribution Employer medical aid ** contribution tocontribution 997) funds ** Employer retirement contribution to pension andto and other Subsistence allowances * allowances related payments Bonuses and performance 901 005 93 861 110 300 88 209 6 084 13 969 1 213 428 3 240 528 600 880 217 880 317 3381 317 014 120 668 22 308 33 702 47 914 4 446 848 129 012 - 20 830 1 621 226 Basic 15 902 806 1 914 469 680 689 1 560 173 158 184 241 592 20 457 913 salary Mr George Xolile Mr Marx Mupariwa (Acting) 909 785 96 425 25 053 89 060 6 084 14 095 1 140 502 Mr Nceba MqoqiMr Seana Nkhahle RichardsonMs Antonette Mr Dzengwa Simphiwe Tredoux Ms Lorette Mr Rio NolutshunguMs Jean De La Harpe Xuza (resigned) Ms Phila 1 523 390Ms Mandu Mallane (Acting) 1 243 269 1 246 157 1 380 741 211 824 159 446 161 757 1 378 636 1 471 096 1 291 185 32 330 - 30 000 179 311 61 736 180 502 109 795 149 107 121 741 45 751 121 935 30 000 58 224 35 713 24 336 138 265 24 336 135 000 24 336 144 066 126 440 22 991 20 280 18 937 18 965 6 084 1 963 978 24 336 1 597 729 - 1 634 886 21 113 20 901 19 633 1 606 150 22 244 1 749 932 1 607 102 1 876 132

Executive Management Team Management Executive 2015 South African Local Government Association Government Local South African Government Act, 1 Local the Organised ito Management Act, 1999 and recognised Finance (Schedule 3A public entity the Public ito 2015 year ended 31 March for the Annual financial statements Notes to the annual financial statements in Rand Figures 224 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand In the current year key management personnel has been redeﬁned in line with the accounting policy and limited to only executive management team (EMT) members who report directly to the Chief Executive Oﬃcer, therefore only portfolio heads in terms of SALGA’s business units have been disclosed.

** With effect from 1st April 2014 and in an effort to be competitive in regard to the labour market, SALGA introduced employee benefits to all staff that are all defined contribution short term benefits such as employer contribution to pension; medical aid and group risk cover for all employees including EMT members.

The EMT members are subject to written employment and performance agreements. The employment agreements regulate duties, remuneration, allowances, restraints, leave and notice periods of these executives. The performance agreements regulate performance and the merit based performance related rewards. None of these service contracts exceed ﬁve years.

* Other allowances comprise travel allowance. cellphone allowance and acting allowance (where applicable). International per diem is paid to employees who undertake SALGA’s mandate of strategic profiling. SALGA’s chairperson partakes in governance structures of internal bodies such as the local government pan-African body, United Cities and Local Governments of Africa (UCLGA) as vice president. He is also President of the UCLGA Southern Africa Regional Office (UCLGA-SARO). SALGA also participates in other world-wide bodies such as United Cities and Local Government (UCLG), Commonwealth Local Government Forum (CLGF) and Metropolis. In pursuit of SALGA’s mandate in these bodies the Chairperson is supported by the Chief Executive Officer of the organisation.

*** Performance related bonuses are per the SALGA performance management policy that is implemented with an oversight role of the Performance Management and Remuneration Panel comprised of independent non-executive members. The applicable performance rewards are based on merit and the applicable reward rates matrix range from 9% (minimum) to 20% (maximum).

SALGA’s performance management and remuneration Panel is charged with normalising SALGA’s remuneration framework, particularly in instances where salary bands of some executives are on a “personal to holder basis” until the expiry of the contract or through natural attrition or earlier. The Chief Executive Officer’s current remuneration has been identified as one of the category of employees. Notwithstanding the efforts to manage the escalation of remuneration at SALGA, particularly those of executives, it is important to note that SALGA had to review its remuneration policies as it pertains to its executives and benchmark these with municipalities particularly Metros since metropolitan municipalities pose the greatest direct remuneration competitor to SALGA (also see report of the Chairperson of SALGA’s performance management and remuneration committee in the annual report).

225 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 2014

Contributions to medical aid; Bonuses and pension fund; performance Subsistence Basic and retirement related and other salary fund payments allowances * Total Mr Xolile George 3 006 185 - 370 275 185 717 3 562 177 Mr Nceba Mqoqi 1 399 546 14 401 144 910 44 005 1 602 862 Mr Lance Joel 1 489 948 - 189 605 110 583 1 790 136 Ms Antonette Richardson 1 157 191 - 126 953 25 190 1 309 334 Mr Jonathan Patrick (Acting) 722 843 31 736 75 176 12 750 842 505 Ms Lorette Tredoux 1 318 577 - 113 786 41 407 1 473 770 Mr Rio Nolutshungu 1 369 222 - 155 889 82 706 1 607 817 Mr Mthobeli Kolisa (resigned) 110 025 - 118 326 3 581 231 932 Mr Seana Nkhahle 1 157 191 - 119 416 55 067 1 331 674 Mr Gcinikhaya Mpumza 867 651 - 70 506 51 809 989 966 Ms Lulama Ceba (resigned) 71 079 5 223 - - 76 302 Mr Lucky Leseane 1 062 570 - 119 840 48 694 1 231 104 Mr Sandile Cele (resigned) 194 920 - - 2 500 197 420 Mr Thapelo Matlala 919 963 - 108 968 80 086 1 109 017 Ms Gugu Langa 981 657 77 448 88 015 49 643 1 196 763 Mr Johannes Ruiters (Acting) 522 119 - 39 951 35 339 597 409 Ms Nancy Ngwenya 965 970 - 94 214 78 223 1 138 407 Mr Khalil Mullagie 1 063 065 - 107 183 62 712 1 232 960 Ms Jean De La Harpe 801 190 - - 37 465 838 655 Mr Zwelandile Ndlala (Acting) 1 025 397 - 108 276 74 279 1 207 952 Mr Sabelo Gwala (Acting) 754 366 - 68 720 47 493 870 579 Ms Phila Xuza 934 523 - - 20 000 954 523 21 895 198 128 808 2 220 009 1 149 249 25 393 264

* Other allowances comprise travel allowance, cellphone allowance and acting allowance (where applicable).

Prior to the 2014/15 ﬁnancial year SALGA’s EMT was remunerated on a total cost to company basis. EMT members were permitted to structure their package to allow for a thirteenth cheque; medical aid contribution; pension fund contribution or travel allowance.

SALGA’s performance management and remuneration committee is charged with normalising of SALGA’s remuneration framework, particularly in instances where salary bands of some executives are on a “personal to holder basis” until the expiry of the contract or through natural attrition or earlier. The Chief Executive Officer’s current remuneration has been identified to be one of these category of employees. Notwithstanding the efforts to manage the escalation of remuneration at SALGA, particularly those of executives, it is important to note that SALGA had to review its remuneration policies as it pertains to its executives and benchmark these with municipalities particularly Metros, since metropolitan municipalities pose the greatest direct remuneration competitor to SALGA (also see report of the Chairperson of SALGA’s performance management and remuneration committe in

226 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 the annual report).

Audit Committee and Performance and Remuneration Panel members

2015

Attendance Reimbursed fees travel cost Total Audit and Risk Management Committee Mr Temba Zakuza (chairperson) 79 568 6 378 85 946 Ms Octavia Matloa 44 068 293 44 361 Ms Phumelele Ndumo 64 878 - 64 878 Mr Nala Mhlongo 13 465 495 13 960 Adv Motlatjo Ralefatane 24 482 950 25 432 Performance Management and Remuneration Panel Mr Chose Choeu (chairperson) 29 379 635 30 014 Ms Elizabeth Dlamini-Khumalo 29 379 570 29 949 Dr Faizel Randera 14 689 382 15 071 Ms Laura Machaba-Abiodun 29 379 635 30 014 Mr William Huma 29 379 91 29 470 358 666 10 429 369 095

** Reimbursed travel allowance is remitted to members based on the applicable SARS rates deemed as expended.

2014

Attendance Reimbursed fees travel cost Total Audit and Risk Management Committee Mr Temba Zakuza (chairperson) 98 086 9 835 107 921 Ms Octavia Matloa 83 486 478 83 964 Ms Phumelele Ndumo 76 605 120 76 725 Mr Nala Mhlongo 91 764 2 865 94 629 Adv Motlatjo Ralefatane 73 107 2 226 75 333 Performance Management and Remuneration Panel Mr Michael J Olivier (chairperson) 16 325 506 16 831 Ms Elizabeth Dlamini-Khumalo 62 966 1 138 64 104 Dr Faizel Randera 58 302 1 327 59 629 Mr Zwelibanzi Mntambo 16 325 379 16 704 Ms Laura Machaba-Abiodun 30 317 758 31 075 Prof Johan Hough 16 325 93 16 418 Mr William Huma 58 302 95 58 397 Mr Chose Choeu (chairperson) 55 970 1 138 57 108 737 880 20 958 758 838

* Members of SALGA’s NEC sub-committees are remunerated for participating in SALGA’s governance structures based on SALGA’s policy for remuneration of NEC sub-committees. Attendance fees are based on an hourly rate and claimable hours are capped regardless of the duration on the meeting or preparation time. ** Reimbursed travel allowance is remitted to members based on the applicable SARS rates deemed as expended. 227 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2014 34. PRIOR PERIOD ERRORS

In the prior periods SALGA used to recognise the full liability and expense upon issuance of a purchase order (obligating event) but this was not in accordance to GRAP. In the current year, SALGA adopted the percentage of completion method to achieve fair presentation. The prior year ﬁgures have also been restated in order to achieve comparability in presentation.

The correction of the error(s) results in adjustments as follows:

Statement of financial position Decrease in expenditure accrual (current liabilities) (15 479 754) Increase in accumulated surplus 15 479 754

The eﬀect on periods prior to 2014 is as follows:

Decrease in expenditure accrual (current liabilities) (7 711 394) Increase in accumulated surplus 7 711 394

The eﬀect on accumulated surplus for periods prior to 2014 is as follows: 7 711 394

Statement of financial performance Decrease in other expenses 900 401 Decrease in personnel expenses 153 563 Decrease in indirect programme costs 6 714 395 Increase in surplus for the year 7 768 359

The eﬀect on periods prior to 2014 is as follows:

Decrease in other expenses 5 759 602 Decrease in indirect programme costs 1 951 792 Increase in surplus for the year 7 711 394

Statement of financial performance and budget versus actual amounts Decrease in other expenses 900 401 Decrease in personnel expenses 153 563 Decrease in indirect programme costs 6 714 395 Increase in surplus for the year 7 768 359 35. COMPARATIVE FIGURES

Certain comparative ﬁgures have been reclassiﬁed in order to achieve comparability.

The eﬀects of the reclassiﬁcation is as follows:

Statement of financial position Decrease in operating lease liability – current 5 606 435 Increase in operating lease liability – non-current (5 606 435)

228 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 36. RISK MANAGEMENT

Financial risk management

SALGA’s activities expose it to a variety of ﬁnancial risks: market risk (including currency risk, fair value interest rate risk, cash ﬂow interest rate risk and price risk), credit risk and liquidity risk.

Liquidity risk

Prudent liquidity risk management implies maintaining suﬃcient cash. SALGA receives cash in the form of membership levies from its members and grants from government. The entity maintains liquidity by limiting capital and operational expenditure within the approved budget.

SALGA’s risk to liquidity is as a result of inadequate funds available to cover future commitments. SALGA manages liquidity risk through an ongoing review of future commitments and credit facilities.

2015

Maturity analysis Trade payables Other payables Not later than one month 38 403 771 - later than one month and not later than three months; 21 696 236 - later than three months and not later than one year; and 9 851 909 13 114 099 later than one year and not later than ﬁve years. - 10 075 733 69 951 915 23 189 832

2014

Maturity analysis Trade payables Other payables Not later than one month 35 405 851 - later than one month and not later than three months; 14 302 894 - later than three months and not later than one year; and 13 870 597 11 455 548 later than one year and not later than ﬁve years. - 1 668 356 63 579 342 13 123 904

Values presented in the maturity analysis are undiscounted according to the terms of the instrument. These amounts will all be settled in cash. Trade payables are considered to mature in 30 days after year end as these suppliers require 30 days settlement terms. No changes between the current and prior year assumptions have been made.

Credit risk

Credit risk consists mainly of cash deposits, cash equivalents, derivative ﬁnancial instruments and trade receivables. The entity only deposits cash with major banks with high quality credit standing and limits exposure to any one counter party.

Trade receivables comprise of municipalities which are invoiced once a year based on their budgeted salary cost. There is no independent rating, therefore management assesses the credit quality of the customer, taking into account its ﬁnancial position, past experience and other factors. The entity establishes an impairment that represents its estimate of incurred losses in respect of trade receivables.

229 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand Market risk

Interest rate risk

SALGA’s interest rate risks arises from market and economic factors, loans and other payables, cash and cash equivalents and loans and other receivables. The entity’s exposure to interest rate risk is minimal due to the following factors:

y No interest is levied on overdue trade receivables; y Interest paid on trade payables is limited as it is the policy of the entity to settle within the credit terms, cash ﬂow permitting in order to comply with the Public Finance Management Act (PFMA) requirements; and y The PFMA does not allow for the entity to utilise bank overdrafts, without prior approval of the Executive Authority and Minister of Finance.

Based on the activities of SALGA the only area aﬀected by interest rate risk is ﬁnance leases and investment income earned on call deposits and other bank balances.

At 31 March 2015, if interest rates at that date had been 200 basis points lower with all other variables held constant, surplus for the year would have been R 250 500 (2014: R 114 178) lower arising mainly as a result of lower interest earned on call deposits and bank balances.

If interest rates had been 200 basis points higher, with all other variables held constant, surplus would have been R 250 500 (2014: R 114 178) higher, arising mainly as a result of higher interest expense on variable payable and receivables.

The sensitivity is higher in 2015 than in 2014 because of an increase in cash and cash equivalents held during the year.

Cash flow interest rate risk

SALGA’s exposure to this type of risk arises when the entity has a financial instrument with a floating interest rate. The entity is seldom exposed to this type of risk. When the need arises management employs conservative approaches with a limited risk exposure such as call accounts or limit the risk completely by employing fixed deposits. The following credit facilities are available, which are payable 30 days from statement date:

y Lodge cards R 15 000 000 y Oﬃce equipment rentals R 4 400 000 y Fleet cards R 50 000

Fair value interest rate risk

SALGA’s exposure to this type of risk is slightly higher than the cash flow interest rate risk, primarily due to the conservative investment philosophy. Ordinarily fixed deposits expose the entity to this type of risk. The entity manages this risk by keeping fixed investments on a shorter-term to mitigate the impact that this type of risk might have on the organisation.

Foreign exchange risk

SALGA does not hedge foreign exchange ﬂuctuations.

SALGA is seldom exposed to this type of risk. Whenever the risk arises it is normally on the incurrence of per diem for international travel. The organisation’s policy on international travel allows for payment of USD 215 per day. As the allowance is denominated in foreign currency, SALGA is exposed to currency ﬂuctuations on payment based on the ruling spot rate. Furthermore, an infrequent

230 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 incurrence of a foreign currency denominated expenditure relating to Microsoft product suite licences, the organisation is also exposed to this risk as it settles these expenditures at the ruling spot rate on payment date.

Due to the infrequent nature and magnitude of the expenditure management does not employ any hedging mechanisms against this risk.

Price risk

The entity’s exposure to price risk is limited to the effect that inflation has on the market prices for goods and services ordinarily procured by the organisation. The risk arises when the entity’s revenue does not escalate at a similar or better rate that the prevailing market conditions. This is rare since the entity’s major source of revenue is its membership levies which, due to the basis of deriving the levy amount normally escalates at a rate higher or equivalent to the prevailing inflationary trends.

Other than membership levies adjusted annually, there are no special mechanisms employed by management to manage this kind of risk other than pursuing a fair market value/price through a ‘dip-stick’ in the market viz. sourcing formal price quotations and open tenders per the organisations supply chain management (SCM) policy.

37. GOING CONCERN

We draw attention to the fact that at 31 March 2015, SALGA had accumulated surpluses of R 109 241 562 and that the entity’s total assets exceed its liabilities by R 111 501 128 indicating that the organisation is solvent.

The annual ﬁnancial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to ﬁnance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

The ability of SALGA to continue as a going concern is dependent on a number of factors. The most signiﬁcant of these is the recognition of SALGA by the Minister of Co-operative Governance and Traditional Aﬀairs (CoGTA) in terms of the Organised Local Government Act, 1997 as the sole voice of local government.

38. EVENTS AFTER THE REPORTING DATE

There are no material facts or circumstances that have arisen between the reporting date and the date of approval, which affect the financial position of SALGA as reflected in these annual financial statements.

39. FRUITLESS AND WASTEFUL EXPENDITURE

Opening balance - - Fruitless and wasteful expenditure 2 107 1 453 Less: fruitless and wasteful expenditure recouped (2 966) (2 656) Over-recovery of fruitless and wasteful expenditure 859 1 203 Less: fruitless and wasteful expenditure (condoned) - - - -

Fruitless and wasteful expenditure amounting to R2 107 (2014: R1 453) was incurred during the ﬁnancial year. SALGA requested credit notes and were granted for fruitless and wasteful expenditure incurred in the current and prior years amounting to R 2 966 (2014: R2 656). The net eﬀect is that there is an over-recovery of fruitless and wasteful expenditure in the current year of R 859 (2014: R1 203). 231 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 40. IRREGULAR EXPENDITURE

Opening balance - 37 090 372 Less: amounts condoned by National Treasury - (9 352 841) Less: amounts condoned by Accounting Authority - (27 737 531) - -

41. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL INFORMATION

The SALGA budget is prepared on an accrual basis which is comparable with the financial statements. The original budget for the 2014/15 was approved by the Accounting Authority on 30 January 2014. The first adjusted budget for 2014/15 was approved by the Accounting Authority on 9 January 2015 and the final adjustment budget for 2014/15 was approved with the annual financial statements on 26 May 2015.

The budgets mentioned above cover the periods 1 April 2014 to 31 March 2015. The budget is prepared on the accrual basis using a classiﬁcation based on the nature of expenses in the statement of ﬁnancial performance.

232 actual final budget and Difference betweenDifference 42,092,987 (2,869,140) Budget 31-Mar-2015 Final Approved Final 98,987 98,987 - (21,214,841) (270,128,329) (12,222) - - 700,000 700,000 1,043,088 997) (1,877,592) 368,832 (1,508,760) 403,342 Budget 31-Mar-2015 Adjustments Original Approved - - - 350,000 350,000 (350,000) 41,560 - 41,560 41,560 - 40,000 40,000 - 40,000 - 330,811 - 330,811 330,811 - 845,509 - 1,800,000 1,800,000 (954,491) 1,120,323 2,589,879 5,509,690 1,120,323 1,800,000 - 1,120,323 2,700,000 6,207,306 4,500,000 6,207,306 - (3,617,427) 1,009,690 21,281,983 13,130,438 6,794,400 5,151,445 3,615,574 10,409,974 - 10,872,009 5,151,445 7,978,993 26,904,000 26,904,000 - 26,904,000 - (7,429,746) (4,217,607) (3,212,484) (7,430,091) 345 429,100,083 397,569,314 34,500,000 432,069,314 (2,969,231) (54,437,100) (82,689,984) 30,053,382 (52,636,602) (1,800,498) (88,348,538) (88,384,465) (4,177,422) (92,561,887) 4,213,349 (62,572,575) (11,909,639) (49,023,626) (60,933,265) (1,639,310) 18,702,423 266,384 4,258,402 4,524,786 14,177,637 39,223,847 28,744,000 13,348,987 Actual 502,736,351 438,259,159 51,464,561 489,723,720 13,012,631 (484,033,928) (437,992,775) (47,206,159) (485,198,934) 1,165,006 31-Mar-2015 Total revenue Total Administrative Expenses Indirect programme costs Indirect programme Depreciation and amortisationDepreciation expense costsFinance (1,105,418) Other expenses Total expenses Total Surplus for the period Surplus for Sponsorship and donations revenue non-exchange from revenue Total Other revenue from exchange transactions exchange Other from revenue revenue Investment transactions exchange from revenue Total - FS Dept of CoGTA Grant recognised 463,512,504 409,515,159 38,115,574 447,630,733 15,881,771 Grant recognised – LG SETA (PBCDP) SETA – LG Grant recognised (LDW) SETA – LG Grant recognised – CLGF Grant recognised – GIZ Governance SupportGrant recognised Grant recognised – LG SETA (CB) SETA – LG Grant recognised 1,743,088 Grant recognised - EC Dept of Local Gov - EC Dept of Local Grant recognised sponsorship – LA Health Conditional (CIP) SETA – LG Grant recognised 98,987 - Actual 31-Mar-2014 Restated in Rand Figures 417,811,486 (32,779,260) (195,757,092) Personnel (270,140,551) (248,913,488) (4,996,936) (952,680) (88,702,476) (55,598,270) (378,786,714) 39,024,772 Revenue transactions exchange from Revenue 362,244,562 14,737,347 6,661,582 Rendering of services - membership levies 383,643,491 Revenue from non-exchange transactions non-exchange from Revenue 25,999,000 and subsidies - CoGTA grants Government 1,435,273 40,000 1,513,377 3,767,406 34,167,995 - - - - - 1,412,939 South African Local Government Association Government Local South African Government Act, 1 Local the Organised ito Management Act, 1999 and recognised Finance (Schedule 3A public entity the Public ito 2015 year ended 31 March for the Annual financial statements Notes to the annual financial statements in Rand Figures 233 South African Local Government Association (Schedule 3A public entity ito the Public Finance Management Act, 1999 and recognised ito the Organised Local Government Act, 1997) Annual financial statements for the year ended 31 March 2015 Notes to the annual financial statements Figures in Rand 2015 2014 Explanation of variances between actuals and final approved budget (variances greater or equal to 10 percent)

y Other revenue from exchange transactions - the positive variance is attributable to over recovery for the convening of SALGA governance structures with more delegates attending than expected as well as the recovery of costs for the TASK job evaluation that is being rolledout to member municipalities; y Investment income - the positive variance is mainly due to improved cash holding as a result of membership levy collections being realised early due to the early settlement discount strategy adopted as well as the better rates negotiated with our bankers; y Grants recognised LGSET CIP; CB; PBCDP - the negative variance is attributable to unrecognised grant revenue due to programme roll-out for the portfolio based capacity building programme (PBCDP) lagging behind initial projections as a result of the delayed release of the grant funding. Other programmes were also affected by the release of the grant funding; y Sponsorships and donations - the positive variance is largely due to sponsorship realised for the hosting of SALGA governance structures exceeding expectations; and y Finance costs - the positive variance is due to the finance cost incurred on finance leases being lower than budget due to assumptions being higher than the average 9 percent implicit rate.

Reconciliation between budget and statement of ﬁnancial performance

Reconciliation of budget surplus/deficit with the surplus/deficit in the statement of financial performance:

Net surplus per the statement of ﬁnancial performance 18 702 423 39 024 772 Adjusted for: Fair value adjustments (700 000) 2 000 000 Less: positive variance in revenue (5 033 636) (9 259 844) Less: positive variance in expenditure (61 665) (18 852 765) Less: positive variance in non-operating income or expenditure (8 382 336) (2 944 889) 4 524 786 9 967 274

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