Section 139 (1)(b) Interventions at Indaka, Imbabazane and Abaqulusi municipalities: briefing by KZN Department of Cooperative Governance and Traditional Affairs

Meeting report

Intervention at Indaka municipality
Ms S Maharaj, Cogta KZN Municipal Governance Manager, noted that the Select Committee had previously been briefed on the reasons for the intervention at Indaka. The briefing would deal with progress and the challenges that had motivated the Executive Council to extend the intervention at Indaka. Based on progress made and the challenges that were still apparent, the Executive Council had resolved on 28 November 2012 to extend the intervention at Indaka municipality until 31 December 2013.

Prior to December 2012, the Ministerial representative had reported a healthy cash flow balance. Outstanding creditors had been paid. Summonses had been finalised against the former municipal manager and former Chief Financial Officer (CFO) for irregular, fruitless and wasteful expenditure. Although all the necessary policy frameworks were in place, there had been a lack of implementation.

During the period remaining, it would be necessary to ensure that that the municipality was capacitated and that the organisational structure was suitably aligned and weighted to deliver services and to fulfill its constitutional objectives. The recruitment of municipal officials at all levels would commence, based on identified critical posts. All outstanding matters in respect of performance management and reporting had to be finalised. A sustainable infrastructure plan and rural development strategy had to be finalised for implementation by the municipality. A comprehensive exit plan and monitoring mechanism for the implementation of the plan had to be developed during the period if the municipality was to implement an exit strategy with support from the Department, outside of an intervention.

Discussion
Mr J Gunda (ID, Northern Cape) said that there were serious issues. It was clear that the councillors had tried to do things on their own, but could not. He asked if it would be possible to provide a report on the challenges within the next four months. With regard to service delivery, there was a problem with the councillors themselves.

Mr Lionel Pienaar, General Manager: Municipal Administration & Governance, KZN Cogta,  replied that it was possible to provide such a report. The challenges were related to the refusal of councillors to deal with irregular expenditure in terms of the Municipal Finances Management Act (MFMA).  Indaka had been bankrupt, but at least it had R60 million currently. The challenge now was to use those funds properly. Budget preparation was crucial. There would be a report on the use of the funds for service delivery.

Intervention at Mbabazane municipality
Ms Maharaj noted that since the election of a new council there had been numerous challenges at the municipality, particularly with councillors staging walkouts at council meetings due to various disagreements. The disagreements were inter alia about the termination of the municipal manager’s contract of employment. An unlawful meeting had been held which had endeavoured to remove the Mayor and Speaker from office, and to elect new office bearers and a municipal manager. An unlawful state of affairs had prevailed. The MEC had instituted High Court litigation to restore a state of legality. The court’s judgment had declared the contract of the former municipal manager void, as well as all resolutions passed by the council from June 2012 to the date of the court order. The respondents had filed an application for leave to appeal, to suspend the operation of the judgment pending the appeal. The delay in respect of the High Court matter had resulted in the perpetuation of unlawfulness and instability.

An intervention in terms of Section 139 of the Constitution had been triggered, because the municipality had not fulfilled an executive obligation. The Provincial Executive Council had resolved to intervene on 23 January 2013. The purpose of the intervention was to ensure that the municipality met its Constitutional objectives within the imperatives of legality and participatory democracy. A recovery plan had been drafted and introduced to the council.

Discussion
Mr M Makhubela (COPE, Limpopo) remarked that relationships looked good enough to proceed, but visits to the region suggested otherwise. What was the reason for this?

Mr L Nzimande (ANC, Kwazulu-Natal) said that there had to be a definite answer from councillors about legality and court decisions. The Committee wanted to see those issues challenged. The question was what councillors were currently doing. Litigation could destabilise the municipality. There were forces that drove instability. He referred to the shooting incident involving the Mayor. It had to be known why that had occurred, in the interests of stability.

Mr Pienaar replied that the court had judged that an appointment by an unlawful council was invalid. The MEC had had judgment granted in her favour. There had been an appeal against that. The MEC had taken the matter to the High Court, and had asked that the original judgment be implemented. The appeal process was going nowhere. The appeal had been to delay implementation of the original judgment. The safety of political office bearers had to be secured.

Mr Makhubela asked what had caused delays with the appeal.

Mr Heinz Kuhn, Cogta Legal Adviser, replied that the court had granted leave to appeal and to implement the order. The order had removed the illegal council that was appealing. The council then no longer had access to municipal funds to take the appeal further. Cogta could not take the matter further.  The appeal would lapse.

Mr Pienaar added that contracts between the unlawful council and senior managers were invalid. The Ministerial representative had advised that the decisions made by the unlawful council be assessed. Declaring contracts void would have had implications for innocent third parties. Cogta  had to bear the cost of providing legal advice to the Ministerial representative.

Mr B Nesi (ANC, Eastern Cape) said that the situation seemed to be fine, but the question was whether issues were being resolved. There seemed to be political issues. A visit to the area had indicated that things were not satisfactory.

Mr Pienaar replied that there were political tensions in the area. Cogta had visited the area in support of the interventions. He himself had spoken to the council on three occasions. Cogta had tried not to compromise the decision-making ability of the council. Things had at least progressed to the point where councillors could sit down together without staging walkouts.

Mr J Joseph (DA, Western Cape) remarked that the council seemed unable to decide about the appointment of a Municipal Manager and a CFO.

Mr Pienaar replied that it had become possible to recruit senior managers and a Municipal Manager.

Mr Joseph asked about the role of Cogta.  Who else, besides Cogta, were part of the recovery plan?

Mr Pienaar replied that the future role of Cogta would be to stabilize the council in terms of administrative processes. There was an Acting Senior Manager in place. Stability had to be established in council decision-making. Labour issues had to be finalised, for the proper recruitment of managers. Cogta would oversee interventions. The Provincial Council had established a sub-committee of Cabinet.  MECs of Finance and Economic Development sat on a quarterly basis. It was a new concept. The Provincial Executive played an oversight role.

Mr Joseph asked if the intervention would be indefinite.

Mr Pienaar replied that the Provincial Cabinet had not set a termination date. The Cabinet sub-committee received quarterly reports. When objectives had been achieved and stability had been restored, there could be a resolution to close out the intervention.

The Chairperson remarked that the municipality had to build capacity, and that the council had to understand its role. The Committee would make recommendations.

Mr Pienaar replied that generic roles and responsibilities had been drafted. There was a handbook for councillors.  Procedure manuals would be implemented.

Intervention at Abaqulusi municipality
Ms Maharaj noted that the municipality had received a disclaimer audit opinion for 2011/12, regressing from a previous unqualified opinion. There had been deficiencies in financial management and performance management, and a failure to fulfill executive obligations. There had been irregular expenditure of R15 million, and unauthorised expenditure of R19.1 million. Fruitless and wasteful expenditure had amounted to R618 087.

There had been disagreements in council about the filling of the post of Municipal Manager (MM). The municipality was without an MM or acting MM from 31 January 2013, to 5 March 2013, which was a statutory violation. The Provincial Executive Council had resolved on 20 March to intervene at the municipality in terms of Section 139 of the Constitution.

Discussion
Mr Makhubela referred to irregular expenditure of R15 million, and unauthorised expenditure of R19 million. He asked about the purpose of lawful appointments.

Mr Pienaar replied that there had been a regression in respect of the Auditor General’s (AG) outcomes. The province had gone from an unqualified audit, and had then received a disclaimer. Irregular, unauthorised and fruitless expenditure had occurred because MFMA prescriptions had not been followed.

Mr Joseph asked about the Treasury’s stance on the recovery plan, and whether support would be withdrawn.

Mr Pienaar replied that there would be no financial consequences at the National Treasury level. An “operation clean audit” process had been set in motion. There was high level support for issues picked up by the AG. External resources would be used. There was no senior management echelon in place, and no Municipal Manager. There was no technical services director. The MEC or Ministerial representative could make appointments. There were political tensions in the council. It was hard to appoint people in acting capacities. People were leaving the service and gaps were not being filled. Cogta had spent R6 million on a grant, but it was not being utilised. There was no one qualified to sign off building projects. Development applications could not be approved. There was a Director of Corporate Services and a CFO in place, and there would soon be an Acting Director of Technical Services. Cogta supported the council’s recruitment efforts.  Help had been rendered with advertising and screening, but ultimately, the appointment decisions had to be made by the council.

Mr Makhubela asked what had actually happened with irregular, fruitless and wasteful expenditure, and what had caused it.

Mr Pienaar replied that the AG report had indicated serious issues. A disclaimer had been issued because there had been insufficient documentary evidence to support financial statements. It would be established how it had happened, and how to deal with it. He could not elaborate further at the meeting, as the audit team was still investigating the matter.

The Chairperson concluded that with regard to municipalities, there had to be uniformity across regions and provinces.
 
The Chairperson adjourned the meeting.