Local Government: Municipal Property Rates Amendment Bill [B12-2009]: Minister's & Department's briefing

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Cooperative Governance and Traditional Affairs

13 September 2009
Chairperson: Mr L Tsenoli (ANC)
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Meeting Summary

The Minister of Co-operative Governance and Traditional Affairs led a delegation from the Department to brief the Committee on the Municipal Property Rates Amendment Bill, 2009. The Minister highlighted the importance of political leadership in the Department's interactions with Parliament on the budget, annual reports and legislation, since this would accord Parliament the status it deserved, and set the political direction as a governing principle for the relationship between Parliament and the Department.

The Minister assured the Committee that the Department would present its strategic plan for the five year term in the coming week and that this would become the framework from within which the Committee could determine the Department's mandate and its accountability. However, at this meeting the Department would highlight certain issues arising out of a report on the state of municipalities in South Africa, relating to the failure of some municipalities to comply with legislation on property rates. Plans were also under way for an indaba in the form of a national summit on the state of local governance in South Africa. It was hoped that all political parties and stakeholders would agree on principles that would govern the Department's work. The Department also had plans for a broader review of legislation, including the Constitution, in order to deal with matters of administrative and executive authority in relation to cooperative governance and traditional affairs.

The Department then briefed the Committee on the Municipal Property Rates Amendment Bill (the Bill). The Minister had stressed that there was a need to pass the amendment in order that municipalities who had formerly had the power to fix rates should not be adversely affected. This Bill sought to amend the Municipal Property Rates Act (the Act) so as to extend, by two years, the period of validity of valuation rolls that existed before the commencement of the Act. There were seventeen municipalities that had failed to implement the provisions of the Act by the required date of 1 July 2009, in relation to compiling and implementing a valuation roll. Twelve of these 17 municipalities had previously been able to levy rates under old provincial ordinances. If the extension was not granted, they would stand to lose substantial income, which would have an adverse effect on service delivery.

Members asked why some of these municipalities, particularly Matjhabeng and Polokwane, had failed to comply with the law. Members also raised their concerns about the possible repercussions of the retrospective application of the law in light of the Bill of Rights, and asked if there were any pending legal cases which would be affected. The State Law Advisers gave a full outline of the facts and the view on this.

It was noted that the Bill had not been tagged. For this reason, it would not be able to consider the Bill at this point. The Committee also resolved to visit the two municipalities, Matjhabeng and Polokwane to ascertain why they had not been able to comply with the law.

Meeting report

Briefing by the Minister of Co-operative Governance and Traditional Affairs Mr Sicelo Shiceka
Hon Sicelo Shiceko, Minister of Cooperative Governance and Traditional Affairs, stressed the importance of political direction when budgets, bills and annual reports were presented to Parliament by the Department. He stated that all these activities had do be done politically as opposed to being done administratively, which meant that either he or his deputy had to lead the delegation from the Department of Cooperative Governance and Traditional Affairs (the Department) in Parliament. Parliament was the source of approval for the budget which was essential to the functioning of the Department, and also the place where the necessary laws for the Department were passed. The Ministry wanted to ensure that Parliament was accorded the status it deserved, and this principle would define its relationship with Parliament.

He assured the Committee that the Department would soon present its strategic plan in the coming week, to provide the Committee with a framework from within which the work of the Department could be evaluated. It would guide the Department’s work for the next four to five years, would be a framework from which it would operate, and would form the basis upon which the Committee could hold the Department accountable. There were several critical aspects of the Department’s work, including the need to define the concept of co-operative governance and how it related to the work of other departments and the different spheres of local, provincial and national government. The Minister believed that this was a very important function which enabled government to work in a co-ordinated way to produce maximum benefit and utilise resources effectively. The other critical aspect related to the establishment of the Department of Traditional Affairs that would stand on its own and bring dignity back to the traditional leaders of South Africa. The Department was currently working to ensure that the new mandate was executed and would brief the Committee from time to time about its activities.

Minister Shiceko noted that there had recently been a report on the state of municipalities. Section 46 of the Municipal Systems Act required that Members of Executive Councils (MECs) had to obtain reports on the state of municipalities in their areas of jurisdiction, and then report to the National Department, who in turn would report to Parliament. The approach that had been taken in the past was that reports were obtained from officials and the provinces. However, in future officials would be required to undertake proper investigations of what was happening on the ground, since some of the reports had not been accurate, which resulted in the wrong information being fed through to Cabinet. In future, the information gathered for the state of municipalities reports would provide an accurate picture of municipalities in South Africa.

The Ministry was hoping to arrange for a national summit or indaba, where there would be discussions on the state of local government in South Africa, so that they would be able to ensure that all work was governed by a set of values. It was hoped that these values would cut across different parties as the Minister asserted that it would be wrong to politicise local governance or engage in petty politics at the expense of service delivery to the people of South Africa.  The polarisation that currently prevailed in South Africa should be done away with, and South Africans should spend their time not fighting against something, but fighting together to advance the benefit of the nation. This meant that it would not matter whether a municipality was under the ANC, the DA or any other political party, because all would be driven by these values.

The Minister told the Committee that the Department would engage with various stakeholders to determine the values that were required. He and the Department hoped that everyone would rally together to reach common driving goals. The Department hoped that this process would enable a turnaround strategy for municipalities by the end of the year, with sufficient consensus to drive them. The Department wanted to take this to a local level, and say that every municipality had to present at least a draft turnaround strategy, which would be owned by the people in that area, from many different sectors, with a structure that would monitor the implementation of this strategy. The marginalisation of South Africans from governance had to come to an end, and this included white South Africans who felt that affirmative action had displaced them.

The Department required three things. Firstly, there must be agreement on the value systems. Secondly, there would be amendments required to the Constitution and perhaps also to other legislation. One of the fundamental areas where the Constitution had to be amended was on the issue of separation of power into administrative and executive authority. The Minister preferred a situation where everything was in one place, and where corporate governance principles were applied. The Department felt that the appointment of Section 57 managers would need review.  In addition, everybody who was employed had to be part of an institution or professional body so that they could be held accountable for any wrong doing by their relevant professional body or institution, which should have the power to act against members who violated the code of conduct and/or ethics. This was already in place, for example, at the Law Society, who could deal with misconduct of attorneys. This would be a way to professionalise government.

The Department was, however, concerned about the willy-nilly manner in which people were being dismissed. For example, currently a person could disagree with someone on something, then take the matter to a council and mobilise other members to pass a vote of no confidence. The Department felt that such matters had to be handled by independent adjudicators, who would be able to objectively state whether a person was right or wrong, in order to protect employees from abuse of power by persons in positions of responsibility. The Department wanted to engage with the Committee on these issues to find solutions.

The Minister spoke about the challenges and weaknesses in municipalities. The Department did not want to hide anything from the Committee, and the Minister urged the Committee also to bring matters to their attention. The Minister believed that the Department on its own would not be able to solve every problem but they could only succeed if it worked as a collective with the Committee.

The Minister noted that the Department was presenting the Municipal Property Rates Amendment Bill and would also be presenting on the Traditional Leadership Governance Framework Bill in the NCOP later on in the week. The Department would also come with amendments to the Municipal Systems Act. The Minister explained that the Department had recently lost a court case in KwaZulu-Natal on the issue of regulation. The Department had been trying to enforce a basic minimum qualification for certain positions, following appointment of a municipal manager who only had completed standard 8 at school. The MEC had intervened in the matter, but the provincial government was not successful in the court application. The Department wanted to strengthen areas to ensure that these weaknesses were addressed and that the intentions of the lawmakers were clearly addressed in the regulations.

The Minister then respectfully requested that the Committee agree to the amendment of the Municipal Property Rates Act (the Act). He said that the reason for the amendment was that there were about seventeen municipalities in South Africa that had not managed to implement the new Act, and, in consequence, had  no revenue collectable from rates and taxes. The Department was asking that the Act be amended to allow these municipalities a two-year extension of the time within which they must comply with the requirements of the Act. The Department was committed to assisting the municipalities to be compliant through specific interventions. The question was what would happen in the interim. The Department was suggesting that these municipalities should be permitted to use the old legislation to enable them, as a transitional measure, to collect revenue. He appealed to the Committee to give careful consideration to the matter. These municipalities stood to lose over R400 million worth of revenue if the defect was not addressed. He said that Matjhabeng in the Free State and Polokwane in Limpopo accounted for over two thirds of the R400 million, which was a substantial amount of revenue that these municipalities could ill-afford to lose, since they were already under pressure.

The other issue that the Department had been trying to present, but on which Cabinet had not agreed, had been the issue of the valuation system and the fees that were paid to valuers, particularly in KwaZulu-Natal, which were far too low, meaning that the municipalities could not persuade valuers to participate. The Department was suggesting that provinces to be given the flexibility to determine the fees. However, Cabinet had said that this was not correct and that there should be a uniform national system.

The Minister noted that the Department would do a comprehensive review of all its legislation, particularly since legislation must be responsive to the challenges of the times, be organic and living and be fully appreciated by those whom it served. The Property Rates legislation would be comprehensively reviewed. The Department of Rural Development and Land Reform was very interested in this review and had written submissions in relation to these matters. Farmers and traditional leaders were also interested.

Municipal Property Rates Amendment Bill, 2009  (the Bill): Department of Cooperative Governance and Traditional Affairs (DCOGTA or the Department)
Ms Veronica Mafoko Senior Manager, DCOGTA, said that the Minister had touched on the key strategic issues and she would now provide the Committee with the details. Ms Mafoko stated that the Bill was approved by Cabinet on 12 August 2009, and sought to amend the Municipal Property Rates Act (the Act) so as to extend the period of validity of valuation rolls that existed before the commencement of the Act, by a further two years. The Act had required all municipalities who had the power to levy rates to have complied with all the provisions of the Act and implemented a valuation roll, by 1 July 2009. However, seventeen municipalities had been unable to do so. Of these seventeen, twelve municipalities had levied rates before, in terms of Provincial Ordinances that were in effect prior to the commencement of the Act.  These municipalities stood to lose significant revenues, to the tune of approximately R410 million.

The Bill sought to amend Section 89 of the Municipal Property Rates Act, by extending the period of validity of valuation rolls that were in force before the commencement of the Act by two additional years, until 30 June 2011.

The Department, after publishing the Bill for public comment, had also consulted with National Treasury, the Department of Rural Development and Land Reform, the Provincial departments responsible for Local Government, and the South African Local Government Association (SALGA)

Comments were received from seven interested parties, namely the Matjhabeng Local Municipality, Makana Local Municipality, Gauteng Department of Local Government and Housing, Institute of Municipal Finance Officers (IMFO), City of Cape Town Metropolitan Municipality, the Transvaal Agricultural Union (TLU) and Mr H du Toit

The Bill had been supported by the first four parties mentioned. The City of Cape Town Metropolitan Municipality had noted the Bill and offered no comments. The Transvaal Agricultural Union did not support the Bill because it held that amending the Act would not address the fundamental causes of the inability of municipalities to comply with the provisions of the Act, pointing out also that municipalities had ample time within which to comply with the Act. The Department felt that although there were some valid points, the failure to rescue these municipalities, who had been able to levy rates previously, could result in their losing significant revenues that would otherwise fund the delivery of services, and this would be to the detriment of communities.

Mr H. du Toit did not support the Bill because he was of the view that the implication of doing so was that negligence on the part of municipalities would be sanctioned, and allowed to continue for two years. He proposed that, as an alternative, a municipality that published its valuation roll out of time must rebate ratepayers, by charging 50% of the rates, on the basis of the previous valid valuation roll, until the valuation roll was published in terms of the Act. The Department did not support this proposal. Issues around rebates, including the size, were for the decision of the municipality. National government could not, in terms of the Act, dictate the rebate structures of any municipality. In addition, the Department’s response to the Transvaal Agricultural Union also applied here.

The Department thus felt that the Bill should, after due consideration by the Committee, be passed, in the interest of securing the financial viability of the affected municipalities.  

Discussion
Mr M Nonkonyama (ANC) commented that the issue of retrospectivity was a concern. Laws should legislate for the future. If a law was said to apply retrospectively, there was the potential that it could affect rights if there were legal disputes or cases pending. He asked if the Department was aware of any actual or prospective legal disputes.

Ms Mafoko responded that this was an issue with which the Department had been grappling. The Department had been hoping to bring this legislation through much earlier. It had engaged with the State Law Adviser around whether the retrospective effect of the legislation was legal or whether it encroached on any rights. The Department believed that it was possible, and would then approach National Treasury. Some of the municipalities had projected incomes, which had been done through illegal valuation process, and the Department would have to find a way through such challenges to try to assist them, perhaps at adjustment time. However, this would require an exemption from the Minister of Finance. It would be difficult but it was something that the Department was discussing with National Treasury.

Mr Fanie Louw, Chief Director (Executive Manager): Legal Services, DCOGTA, responded that the Department was not aware of any pending action or dispute at all regarding this matter. As all members were aware, the current provisions had expired on 30 June 2009, and if the Department did not make the amendments retrospective, then all of the rates due from 1 July until the Act came into operation would all be invalid or illegal. There was very little choice if the Department wanted to protect the revenue base of municipalities.

Mr Nonkonyama responded that it was important to bear in mind the Bill of Rights, and this had to be balanced with the need to protect municipalities.

The Minister responded that there were no rights that would be entrenched, because these were rates that would have been paid anyway. The issue arose from an administrative glitch. During implementation it would be possible to look at the mechanism, to ensure that it did not become too steep for the individual consumer. But if one was to promote a society that understood rights, society must be aware that there were also responsibilities, such as paying all the rates that were required by government.

Advocate Yolandi van Aswegen, Principal State Law Adviser, Office of the Chief State Law Adviser, stated that the State Law Advisors had looked into the question of retrospectivity. The operation of Section 89 had lapsed on 2 July 2009. The State Law Advisers thought that commencement of the Bill on 1 July 2009 would not be problematic. Clause 2 of the Amendment Bill contained a transitional arrangement, to cover any actions that might have been done in a period that might have been missed, so that there would not be any vacuum, but it there were actions performed during that period, then they would also be validated.

Mr Nonkonyama referred to the Minister's earlier indication that there was a need to overhaul the Act, together with any other municipal laws, and that the question of valuation in rural areas faced some major challenges. This was one of the issues that was still pending. He asked the Department to give some clarity.  

Ms Mafoko responded that the Minister had touched on this when he had mentioned that the Department would be coming with comprehensive amendments.

The Chairperson stated that members would be given sufficient time to tackle those issues when the Department tabled the amendments in future.

Mr T Botha (COPE) commented that given that the municipalities had not been able to implement this Act for the past two years. He asked what measures were to be taken now to ensure that within the two year extension there would be mechanisms put in place to ensure compliance. He commented that non-compliance could result from lack of capacity. It might be that the municipalities not implementing the Act had not had the qualified personnel to undertake the valuation of properties in those areas.

Ms Mafoko responded that the Minister had mentioned that the Department would support the municipalities. The Department had begun to engage National Treasury on the budget issue, and one of the most important issues was to deal with exemptions and to try and address the municipalities' budgets appropriately. However there were many other reasons why the municipalities did not comply, including issues of procurement. Many municipalities did not have in-house valuation capacity, and this was a scarce skill which they had to procure. However a lot of municipalities had not attended to the valuations in be done comprehensively and properly in time for the purposes of the Act. For example, in Polokwane the municipality had not appointed a valuer until the end of 2008, which was very late. The other issue was planning. The Department had provided guidelines to the municipalities, so they could work backwards from the date when they needed to implement the Act, and from when the valuation roll needed to be in place, to figure out the actions that must be taken. If one thing was not done on time, there was a roll on effect.  There were a number of issues that required intervention, and this was something that the Department was working on, by putting together some sort of support programme. The initial matter to be deal with was the budget issue, because that was the immediate urgency for the municipalities, and the Department would need National Treasury's support on that. They had committed at an official level but they would also be engaged at a political level as well.

Mr Botha asked the extent to which the Act took into account the disparities between the different communities, and asked whether these rates were uniformly applied in terms of the valuations.

The Chairperson responded that this matter was not on the table at the moment for consideration by the Committee, although the Department was free to respond to it. The Committee would be coming back to deal with those matters in future.

Mr J Matshoba (ANC) asked the Department how it did the consultation.

Ms Mafoko responded that consultation had been done through the Cabinet process, where the Department had consulted with any interested parties within the Executive. The Department had engaged with other departments at an official level, and obviously through Cabinet as well, at a political level. The Department had consulted with other spheres of government; there were official engagements with provincial counterparts every quarter, as well as ongoing contact and discussions around the Act. SALGA was also represented at an official level and were consulted through that process. The publication of the Bill in Government Gazette allowed the public to engage with it.

The Minister responded that there was a basic requirement to consult with the broad public by way of publication in the government gazette. However, he stressed the importance of ensuring that all people, particularly in the rural areas, were informed of these developments. He admitted that consultation still reflected an urban bias. However, this particular amendment had not required extensive consultation. The capacity of provinces was extremely weak when it came to raising awareness. It was thus critical that the national Department must have a foot print in the regions, to promote the functionality of the municipalities in these regions, so that they would have early warning systems. The Minister informed the Committee of the development of information technology (IT) systems that would revolutionise governance by delivering information for decision-making in real time. There had to be intervention that allowed national government to respond to certain things if this had not been done by the provincial government. At this point there was no legal instrument to allow national government to do so. The current legislation was inadequate, and there had to be an instrument through which provincial and local government would forfeit their responsibilities if they failed to undertake the work. There was a need for sharper laws that pierced through bureaucracy to enhance service delivery..

Mr W Doman (DA) asked, with particular reference to Matjhabeng and Polokwane, what had been the reason for the non-compliance, and whether any interventions could have been made, in order to assist the municipalities so that they would not be sitting with these extensions.

Ms Mafoko responded that in Polokwane there was a problem with the procurement process and she had already spoken about that. In Matjhabeng, there had been a long-standing failure to implement the Act, including two previous matters. The Department was working with the municipality to advise them on how to implement the legislation. This municipality had insisted on carrying out the valuation in terms of the old ordinance, and they did not want to do a full valuation in terms of the Act. The Department had advised Mathjabeng repeatedly that the ordinance was not appropriate, and that they did not have to compile a valuation roll in terms of the Act, and eventually National Treasury had also become involved at an official level to inform the municipality that it could not increase the rates in its budget. The only other option would be intervention, but the time was not yet appropriate.

Mr Mzilikazi Manyike, Executive Manager, DCOGTA, added that it was unfortunate that a procurement system was something within the exclusive competence of the municipality. If there was delay in the issuing of tenders, then the timeframes would move, and those had affected those two municipalities, especially Polokwane. It was important that there was a time span to adjudicate. If there delays, then timeframes would shift again, causing further delays. He also informed the Committee that some of the matters around procurement were pending court matters that the Department could not comment upon until they had been concluded.

Chairperson asked whether the Transvaal Agricultural Union (TLU) had made any proposals to accompany their comments on the Amendment Bill.

Ms Mafoko responded that TLU did not offer a solution.

Mr Manyike submitted that it had suggested that the Act should have a punitive action, to hold councillors liable to ensure that there was compliance.

The Chairperson asked whether the Department had a list of these seventeen municipalities that it could make available to the Members. He asked if they were linked in any way to Project Consolidate beneficiary classification.

Ms Mafoko responded that such a list was available. These were municipalities from all of the provinces except the Western Cape, Mpumalanga and KwaZulu-Natal.

The Chairperson submitted that the Bill had not been tagged, and the Committee was therefore unable to consider it yet. There would a brief meeting on it later.

The Chairperson asked the Committee if there was a need for additional public input on the bill.

Mr M Nonkonyama responded that the Parliamentary procedures required that the Bill should be published for public comment. Perhaps the legal advisors could clarify this, although politically speaking there was no problem.

The Chairperson stated that the decision to consult belonged to the Committee itself. He suggested that the Committee visit the two municipalities to get to the root of their non-compliance. The implementation of legislation and its evaluation must be based on observations in the municipalities. The Committee would finalise the Bill after it had been tagged.

Other business
The Committee briefly discussed the issue of a Cape Town walk-about arranged by the Ministry of Human Settlements.

The meeting was adjourned

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