Municipal Interventions, Corruption allegations in municipalities: MEC (KwaZulu Natal) reports

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Meeting Summary

The MEC for Co-operative Governance and Traditional Affairs, KwaZulu Natal, gave a full and detailed briefing to the Committee on the progress of interventions, in terms of Section 139(1) of the Constitution, into the local municipalities of Indaka, Umhlabuyalingana, Okhahlamba and Msunduzi. She outlined, in each case, what the findings of the administrators had been and what steps had been put in place to address them. Her explanations included a detailed analysis of the financial maladministration, instances where legislation had not been complied with, and the turnaround strategies that had been put in place. Systems had been introduced, in particular, to monitor and control expenditure and the cash flow of the municipalities had improved, with substantial steps being taken for better recovery of debt. The administrators were also to prepare adjustment budgets for the 2009/10 financial year in respect of each municipality. She further made the point that exit strategies had been devised to try to ensure that the systems put in place would continue to function properly, once the interventions came to an end on 30 June 2011, and training of and workshops with councillors had been conducted.

The MEC then briefed the Committee separately on the provincial investigations being conducted into Umhlathuze and Maphumulo Local Municipalities. In the Umhlathuze Local Municipality the report noted serious cash flow problems, non-adherence to land sales policies and procedures, which had in turn impacted on the cash flows, gross misconduct by officials, and possible negligence by officials in budgeting. Those officials had also failed to report to the Council timeously and failed to take the necessary preventative measures. There was also the possibility that City Councillors had exerted undue influence on the land sales processes. The forensic report would be tabled before the Council when it returned from recess, and it must provide a response to the Department.

There were allegations of maladministration, nepotism and fraudulent and corruptive practices within Maphumulo Local Municipality, which were received both from private external parties and through municipal officials, via the National Anti-Corruption Hotline. An investigation had been commissioned in terms of the Municipal Systems Act. However, the Municipality had failed to comply with the process of the investigation, and therefore a Section 106(1) notice had been issued calling for compliance.

Members commended the MEC on her full and detailed reports, and indicated that they were happy with the progress. However, they enquired where the money for the interventions emanated, asked whether senior managers to administrate were still being imported from other provinces and noted that the results of the interventions would only become apparent over the next couple of years. They also sought confirmation that the extension of time for the interventions had been duly sought. Members noted the issuing of the Section 106(1) notice to Maphumulo Local Municipality but also suggested that the Committee should investigate the possibility of asking the President to issue a Proclamation to involve the Special Investigating Unit.

Meeting report

Interventions invoked at Indaka, Umhlabuyalingana, Okhahlamba and Msunduzi Local Municipalities: Progress report by MEC for Cooperative Governance and Traditional Affairs, KwaZulu Natal
Ms Nomusa Dube, Provincial Minister for Co-operative Governance and Traditional Affairs, KwaZulu Natal, tabled her report into the interventions into various municipalities.

She sketched the background. The Executive Council approved interventions in terms of Section 139(1)(b) of the Constitution. Ms Dube was authorised to appoint Ministerial Representatives to assume the functions, in terms of Section 51 of the Municipal Systems Act (MSA), to establish and organise the administrations of these municipalities to enable them to achieve the objects of local government set out in Section 152 of the Constitution. These Ministerial Representatives would devise a turn-around strategy for the Municipalities, ratify all the decisions of the municipal councils and committees prior to implementation, ratify all the decisions taken by the Municipal Managers and Section 57 managers in terms of delegated or original authority, and ensure implementation of council resolutions by the administrations. They would further implement a system to control and approve all expenditure, implement all governance systems and procedures, including appropriate councillor oversight mechanisms and ensure implementation of financial systems, policies and procedures. They would ensure proper implementation of the Municipal Property Rates Act (MPRA) and would set out a specific strategy for addressing each municipalities’ financial problems, including a strategy for reducing unnecessary expenditure and increasing the collection of revenue. They would also prepare the adjustment budgets for the 2009/10 financial year in respect of each municipality and review the organisational structures of these municipalities.

She then set out brief progress reports in respect of the municipalities. The intervention of Msunduzi Municipality was instituted on 10 March 2010 and was approved by the Provincial Executive Council. Mr Matla, Mr Ferguson and Mr Sithole were appointed as administrators for Msunduzi. At the expiry of interventions on the 31 October 2010, the council resolved to extend the term of interventions until 30 June 2010.

The Umhlabuyalingana Municipality had improved significantly, and financial stability had been achieved. Internal controls had been implemented to prevent irregular and unauthorised expenditure. The 2010/11 budget was approved within the statutory time frames. A moratorium was placed on all operating expense activities such as travel, subsistence, overtime, functions and sporting activities, and a reserve was built to address the irregularities amounting to R14.3 million. The balance of the 2008/09 unspent grants had been reduced from R7.6 million to R3.6 million and the bank balance currently reflected reserves. The 2010/11 Integrated Development Plan (IDP) was more realistic and aligned to the budget. A performance management system was implemented, and agreements were put in place for all Section 57 employees. In May 2010 a draft organogram was completed for review, which indicated a possible saving of R1.6 million on staff expenditure. With respect to service delivery, the 2010/11 budget had made provision for formalisation of the towns of Manguzi and Mbazwana, the compilation of waste management plans and the improvement of refuse removal services by purchasing a refuse collection truck and bulk refuse skips. There were also plans to establish a kit free Fire Service unit and water and electricity were the top two priority areas named in the IDP. There had been engagement with the District Municipality, Eskom and other role players in addressing problems. In the short term the Department of Cooperative Governance and Traditional Affairs of the Province would be assisting the municipality with the maintenance of pumps and batteries.

In addition, Ms Dube reported that a R9 million project was launched in the previous week in the town of Manguzi, which would assist with service delivery. A new municipal manager was recently appointed and the Department had full confidence in this individual.

Ms Dube outlined the progress at Okhahlamba Municipality. Through the implementation of the recovery plan, the financial position had been stabilized. Financial controls, especially internal controls of monitoring expenditure, had been implemented and were adhered to, and an amount of R3.1 million withheld by National Treasury (NT) had been released. Financial policies, systems and procedures had been reviewed and adopted by Council. The credit control and debt collection strategy had been implemented with renewed vigour in an attempt to increase the collection rate of the Municipality. In respect of governance, administration and service delivery: the oversight committees had been reconstituted, including the Municipal Standing Committee on Public Accounts (SCOPA) and audit committee. The organisational structure had been reviewed and aligned to the powers and functions mandated to the municipality. Okhahlamba Municipality had also embarked on a comprehensive maintenance and upgrade plan of Bergville Town, which included the filling of all major potholes in the town and the renewal of dilapidated buildings. A Rural Maintenance Programme for refuse collection was instituted, and other related maintenance issues were also introduced with the use of unemployed local labour.

Ms Dube noted that although the recovery at Indaka Municipality had been slow, there had been some achievements. Unnecessary expenditure had been curbed and all financial records neglected for a six-month period previously were now up to date. All outstanding creditors were paid within 30 days, in line with the Municipal Finance Management Act (MFMA). All reserves and grants were now cash-backed, with the accumulated deficit reduced to zero for the 2009/10 financial year. The Municipality was able to reinstate the Equitable Share amounting to R4.3 million, which was withheld due to non-compliance in reporting. The Municipality was also able to reconcile and recover outstanding Value Added Tax (VAT) claims to the value of R1.6 million. The 2009/10 Annual Financial Statements were submitted to the Council and Office of the Auditor-General by 31 August 2010, which was an improvement on the past year. With respect to governance and administration, the councillors and management had attended a workshop with the administrator, to create awareness, an appreciation of the overall local government legislative environment, and the need for compliance, accountability and oversight in order to ensure a well functioning and developmental municipality. The organisational review of municipal administration had led to the reduction in the number of Section 57 employees from seven to five. The un-manned Community Services Department was abolished and this function was incorporated into the Corporate Services Department. New positions had been created in different departments.

Ms Dube reported on progress at Msunduzi Municipality. This municipality was currently stable with respect to financial matters. Its achievements included increasing revenue income by activities such as “Operation Pitbull”, which targeted illegal water and electricity connections, and which had achieved recovery of R17 million in two weeks. The cash flow of the Municipality was analysed daily and had improved drastically. The operating deficit was reduced and creditors were paid within 30 days after being screened. She noted that Eskom tariffs were a challenge to the municipality’s cash flow and needed to be addressed with the relevant stakeholders to achieve an amicable solution. This municipality was managing outstanding debt, which had improved the rate of payment, and the supply-chain policy had been revised and implemented. There was ongoing monitoring to highlight any deviations. With respect to governance and administration, a legal framework for the Msunduzi Corporate and Legal Services Department had been developed in order to service both the corporate and operational functions of the Municipality. Various forensic investigations had been conducted into allegations of misconduct and fraudulent activity within the municipality, and following the findings criminal, civil and disciplinary actions had been instituted against the identified staff members. Five senior managers had been suspended, and criminal and civil charges were brought against them. The municipal police and traffic officers were now operating at an optimal level. It was found that the current by-laws were inadequate, but these were now in the process of being reviewed. All service levels had been investigated with a view to improvement. There had been introduction of a Water Management maintenance plan, Electricity Management maintenance plan and a Sanitation Management maintenance plan, to promote proactive steps to ensure proper maintenance in order to optimise services to the community.

Ms Dube summarised the cost of the interventions (see attached presentation for details). She concluded that she had submitted a full report to answer whether these interventions were sustainable, and stressed that this was one of the most important policies. Every administrator at the various municipalities had to develop an exit strategy to ensure that the policies and procedures that were put in place would not be reversed when the new council started. 

Mr A Matila (ANC, Gauteng) commented that four other senior managers were imported from the Western Cape to assist the administrator at Umsunduzi Municipality. He asked whether the cost of interventions went to the salaries of those individuals imported. He also asked whether a request had been made to the National Council of Provinces (NCOP) to extend the term of the administrators until 30 June 2011. He wanted another report from the Department in six months time, although he indicated that he had been satisfied with the current report.

Ms Dube responded that those four individuals were imported from the Western Cape initially, but the Department had now replaced them with individuals from the KwaZulu Natal Provincial Treasury. Local services would rather be utilised instead of importing individuals. She confirmed that there had been the necessary requests made, in respect of all the relevant municipalities.

Mr T Beyleveldt (DA, Western Cape) commented that it was difficult to ascertain the final cost of the interventions when such a short presentation was given. Only in about two years time would the full implications of those interventions be seen.

Mr Beyleveldt asked whether the municipalities had the human resources and financial resources to ensure service delivery, and also enquired where the money for the interventions emanated. He also wanted to know more about the kind of service level agreements with the community.

Ms Dube responded that the money came from the Province, through various programmes in the Province. Money also came from other line departments to ensure that the municipalities were assisted with service delivery. Financial resources also came from the Small Town Rehabilitation Fund and the Corridor Development Fund. 

Mr B Nesi (ANC, Eastern Cape) commented that the right people needed to be appointed with the right skills to ensure proper service delivery. He was very happy with the current report and with what was being done in the Province.

Mr J Gunda (ID, Northern Cape) commented that Ms Dube had explained clearly what progress there had been at the relevant municipalities and he was very happy with the report.

Mr M Mokgobi (ANC, Limpopo) also congratulated Ms Dube on a job well done, and could see that the interventions were moving in the right direction. He noted that he himself had not seen the request for extension, but would find out where it was.

Ms Dube commented that skills would be improved in the future to ensure proper service delivery but this would take time. However, there were already some tangible results that could be seen from the report.

Provincial Investigations at Umhlatuze and Maphumulo Municipalities
Ms Dube presented a report on investigations in Umhlatuze and Pahumulo Municipalities.

She outlined that in respect of Umhlatuze Local Municipality, the MEC authorised an investigation at the Municipality on 10 April 2010. Investigators commenced their fieldwork on 12 May 2010. The first progress report was submitted to the Department on 31 July 2010. The MEC was also briefed. A final report containing the outline of the matters, findings, conclusions reached and recommendations was drawn on 5 October 2010.

This report showed that there were serious cash flow problems. There had been non-adherence to the Council’s land sale policies, possible gross financial misconduct by City officials, possible negligence by City officials in the performance of their duties, and possible application of undue influence by the City Councillors on the land sales processes and procedures. The investigation had been finalised. At the moment, Council was in recess but the Municipality was to table the forensic report before the full Council by the end of January 2011, and provide a response to the Department within 21 days.

In respect of the Maphumulo Local Municipality, Ms Dube said that allegations were made via the National Anti- Corruption Hotline (NACH), from various sources within the Municipality, and by other external parties, that irregularities were occurring within the Municipality. The MEC commissioned an investigation in terms of Section 106 of the Municipal Systems Act on 15 September 2010. This municipality had failed to comply with the process of the investigation. Therefore, the MEC had further instructed the municipality by means of a notice in terms of Section 106(1)(a), which should shortly be in the hands of the municipality.

Mr Beyleveldt commented that it was possible to request that a proclamation be made by the President to involve the Special Investigating Unit (SIU) to assist with the investigations into municipalities.

Mr Nesi suggested that the Committee should adopt the report, and this was seconded by Mr Gunda.

Mr Mokgobi said that while he would also support the adoption of the report, he would like the Committee also to look into the possibility of having a proclamation issued.

The meeting was adjourned.


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