Property Rates Amendment Bill: Department of Co-operative Governance & Traditional Affairs briefing

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Meeting Summary

The Department of Co-operative Governance and Traditional Affairs briefed the Committee on the Property Rates Amendment Bill (the Bill). The Bill sought to amend Section 89 of 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, up until 30 June 2011. The reason behind the amendment was that thirteen municipalities had not met the cut-off date of 1 July 2009, by which all municipalities that had the power to levy rates were to have compiled and implemented a valuation roll, in terms of the Act. However, twelve of those thirteen had previously been levying rates in terms of the old-order Provincial Ordinances, and unless this extension was granted for them to compile the rolls, they would stand to lose considerable revenue, which would affect their residents. He noted that the reasons for the failure to comply were both political and administrative. There had been substantial consultation on the Bill. The Portfolio Committee and National Assembly had agreed to the Bill. The Department would be returning to the Committee later with more substantive amendments to the Act, which would address the valuation challenges. Members queried the reasons for the Bill, which some felt merely sanctioned poor management and governance on the part of municipalities, who had failed to compile the necessary documents in the five years that the Act had been operative, whilst others queried what steps the Department was taking to interact with the municipalities. Members also questioned whether the Act took precedence over the ordinances, and whether the Bill was no longer dealing with other issues. The Department confirmed that the current version of the Bill dealt with the extension alone.  Members also asked for an assurance from the Department that no further bills giving extensions to municipalities to implement legislation would be brought before the Committee.

The Committee briefly discussed two items that had stood over from the previous meeting, in respect of the Traditional Leadership and Governance Framework Amendment Bill. The Department had been asked to return with details on the costs, and there was an outstanding issue in regard to the Commission. However, a delegate from Mpumalanga confirmed that the province had conceded the point in regard to the Commission and that the Province and Department would be discussing the kingship claims. Another Member felt that since the Committee had agreed with the Department’s suggested wording on the Bill the issue of costs was not relevant at this point. The Committee concluded that both issues were closed and needed no further discussion.

Meeting report

Local Government: Property Rates Amendment Bill [B12-2009]: Department of Cooperative Governance and Traditional Affairs (the Department) Briefing
Mr Mzilikazi Manyike, Executive Manager: Intergovernmental and Fiscal Relations, Department of Cooperative Governance and Traditional Affairs, apologised on behalf of the leadership of the Department for their absence in the present meeting. The Acting Director General and others were attending a meeting with the Portfolio Committee on Co-operative Governance, to brief that Committee on the Department’s Annual Report. He noted that the briefing today would outline specific issues of the Local Government: Property Rates Amendment Bill [B12-2009] (the Bill) while a more detailed discussion of the broad issues would be raised in a later meeting.

Ms Veronica Mafoko, Senior Manager: Municipal Finance Policy, Department of Cooperative Government and Traditional Affairs, undertook the briefing. She noted that the Bill sought to amend Section 89 of the Municipal Property Rates 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, up until 30 June 2011. The reason behind the amendment was that thirteen municipalities had failed to compile and implement a valuation roll, as they were supposed to do in terms of the Property Rates Act (the Act), by the cut off date of 1 July 2009. Of these thirteen municipalities, twelve had previously levied rates under old-order Provincial Ordinances that were in effect prior to the commencement of the Act. These twelve municipalities therefore stood to lose significant revenues, to the tune of approximately R410 million.

The Portfolio Committee on Co-operative Governance and Traditional Affairs had already unanimously approved of the Bill, without any amendments, on the 6 October 2009, and the National Assembly had agreed to the adoption of the Bill on 16 October 2009. National Treasury, the Department of Rural Development and Land Reform, provincial governments responsible for local government and the South African Local Government Association had been consulted on the substance of the Bill. The City of Cape Town Municipality, Matjhabeng Local Municipality, Makana Local Municipality, Gauteng Department of Local Government and Housing, the Institute of Municipal Finance Officers, the Transvaal Agricultural Union and a Mr H du Toit had forwarded comments on the Bill to the Department. Most of the comments received were in favour of the Bill. The Bill had been presented in the interest of securing the financial viability of the affected municipalities.

Discussion  
Mr A Watson (DA, Mpumalanga) said that the Bill was effectively sanctioning bad management and governance in the municipalities concerned. He felt that the submission by Mr Du Toit was correct. Government could, in the Bill, have specifically dictated that municipalities had to comply. He asked if there would be any form of redress for those municipalities who had not introduced valuation rolls in time. The Act had been in existence for five years, and he wondered why the municipalities’ bad governance was being allowed, and what was to be done in future.

Ms Mafoko responded that much thought had gone into the Bill. Certain municipalities had bad practices, sometimes for political reasons, and sometimes for administrative reasons. Most municipalities did not have valuation capacity, so for the most part, the valuations were outsourced. Lack of capacity was only one of the challenges that some municipalities faced. The consequence was that valuation rolls were not introduced in time. The Department had to make a decision about introducing the Bill as it was the communities in those municipalities that were to suffer in the end.

She said that the Department was aware of valuation challenges and was working with valuation practitioners. It had to be borne in mind that the valuators’ skills pool was small, and the issue was a long term one which did not have a quick fix.

Mr L Nzimande (ANC, KwaZulu Natal) felt that it was not only the inefficiencies of those municipalities concerned that were the cause for not introducing valuation rolls in time, but that the reasons were more complex. He was concerned that the Department did not speak about having a full report on the matter. It was hoped that the Department was interacting with those municipalities concerned.

Mr Manyike said that engagement with municipalities was taking place. The amendments proposed for the year 2010 would affect municipalities throughout South Africa. A multi-faceted approach was needed. Some of the issues were technical, whilst others were political. Municipalities differed from one another. A broader approach was needed. There were certain matters that fell within the domain of municipalities and not provinces or national government. The Department needed to have a holistic approach. Mechanisms were in place to deal with valuation challenges.

Mr A Matila (ANC, Gauteng) said that the Department should give the Committee assurances that there would be no further Bills introduced that would make allowances for the lack of compliance. Members were aware that certain municipalities lacked capacity. 

Ms Mafoko said that the Department would be returning to the Committee in the foreseeable future with more comprehensive amendments to the Act. These would definitely not be about extensions. The comprehensive amendments to be brought before the Committee in 2010 would deal with challenges relating to implementation. The amendments would make it easier for municipalities to implement the Act.
 
Mr Manyike also confirmed that the Department intended to strengthen certain provisions of the Act. The idea was to ensure monitoring by provinces and national government. The regulatory framework also needed to be strengthened. A balance was needed between local government, provinces and national government. He said that it must not seem as if national government was micro-managing.  
 
Mr Mokgobi asked about the amendments to be brought before the Committee in 2010 and asked whether these would affect all municipalities or would only apply to some.

The Chairperson referred to ordinances and asked for clarity on what legislative enactments would take precedence over the others. He also asked if the Department, when scrutinising municipalities, should not be considering the revenue base of municipalities as well. Finally, he enquired who did the valuations on the valuations roll, and if these, too, were likely to be affected by the amendments.

Mr Manyike said that once there  was an Act in operation, the municipalities should rate in terms of the Act and not the Ordinances. Municipalities were, in the interim, allowed to rate in terms of Ordinances until the Act applied. Provincial ordinances were only intended to be a transitional system.

The Property Rates Act would contribute towards the revenue base of municipalities. In order for municipalities to be viable, customers of municipalities had to pay their accounts.

He said that the valuations could be done by professional valuators. These could be persons from within municipalities or could be external persons hired to perform the task. The profession of valuators was still to be transformed. It needed to reflect the demographics and gender aspects of South Africa. The Department was grappling with the issue. 

Mr Matila asked how the demarcations of municipal boundaries were going to affect issues around the valuations roll.

Mr Manyike said that demarcations meant that certain parts of municipalities would move to other municipalities. The dates of valuations differed from municipality to municipality. The Department appreciated the question.

Mr Nzimande said that the briefing given today only spoke to the extensions part of the Bill. The Bill also, however, outlined the powers of MECs to deal with the appointment of boards. He noted that the Committee had to make a decision whether the Bill was a Section 75 or Section 76 Bill. 

Mr Manyike explained that there was some confusion. Earlier versions of the Bill had dealt with two issues. The first was about extension of the period of validity of the valuations roll, and the second issue had dealt with the conditions of appointment, and whether MECs had the power to make such appointments. The second issue, however, had been removed from the Bill and was no longer applicable, so that the current version of the Bill dealt only with the extension of the period of validity.
 
The Committee agreed to the Bill in principle. However, in answer to a question from a Member, the Committee Secretary confirmed that the current meeting was intended so that the Department could brief the Committee, and another meeting would be scheduled for the formal adoption of the Bill, when the Motion of Desirability would be read out and adopted.

Traditional Leadership and Governance Framework Amendment Bill: Matters outstanding from previous discussions: Costs and Commission on Traditional Leadership Disputes and Claims
The Chairperson noted that some issues were outstanding from the Committee's meeting on 23 October 2009, which had considered the Traditional Leadership and Governance Framework Amendment Bill. He noted that these were the question of costs, and the Commission mentioned in the Bill.
 
Mr Nzimande thought that the discussion on the Commission issue was closed, and only the issue of costs was outstanding. 
 
Mr Matila felt that both the issues had been dealt with, as almost all the provinces present in the previous meeting agreed on the Bill. The provinces were all currently working on their final mandates.  
 
Mr Watson disagreed and said that the Chief Director representing the Department had skipped issues relating to the Commission in the previous meeting. He was under the impression that discussions would continue in the present meeting.  
 
Mr Matila said that the issue of costs did not affect the process, and the Commission issue was closed. 
 
Mr S Skhosana (ANC, Mpumalanga), Chairperson of the Mpumalanga Provincial Legislature Committee, said that at the beginning of the meeting there had been two opposing views on the Commission. As the meeting had progressed, a point of convergence was reached. He noted that the Chairperson had asked the Committee if members were in agreement. The Committee had agreed. The final mandates was what was outstanding.

Mr Skhosana said that the Mpumalanga Province only had a problem with the dispute in relation to the opposing claims of the kings. The issue did not really have to do with the Commission. He said that in the previous meeting Mpumalanga Province had, both in substance and in principle, conceded the position in relation to the Commission.

The Chairperson said that the provinces and the Department should engage with each other on the outstanding issues. He asked what was to be done about the costs issue.

Mr Matila said that it was a general cost issue. The Committee had agreed to leave the wording as the Department had recommended.
 
The Chairperson declared both issues closed. 
 
The meeting was adjourned.

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