Constitution of the Republic of South Africa Third Amendment Bill: briefing/hearings

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Justice and Correctional Services

04 September 2002
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JUSTICE PORTFOLIO COMMITTEE

JUSTICE PORTFOLIO COMMITTEE
5 September 2002
CONSTITUTION OF THE REPUBLIC OF SOUTH AFRICA THIRD AMENDMENT BILL: BRIEFING / HEARINGS

Chairperson: Adv De Lange (ANC)

Relevant Documents:

Constitution of the Republic of South Africa Third Amendment Bill, No 33
PowerPoint Presentation Briefing on the Constitutional Amendments
Submission by the Office of the Premier of the Western Cape - Appendix A

SUMMARY
The Justice Committee was briefed on the Bill by National Treasury and the Department of Provincial and Local Government as it is these departments who are motivating the amendments. The Portfolio Committees on Finance and Provincial and Local Government and the related NCOP committees attended the briefing as a chapter of the Municipal Finance Management Bill is dependent on this Bill. The Constitution of Republic of South Africa Third Amendment Bill contains four amendments the most substantial one being included in clause 4 that amends section 139. The amendment gives more power to provinces to intervene when there is a financial emergency in a municipality. The Western Cape Government made a submission and expressed its support for the Bill.

MINUTES
Briefing on the Constitution of Republic of South Africa Third Amendment Bill
The Committee was briefed by Mr Ismail Momoniat, Deputy Director - General: Intergovernmental Relations, National Treasury.

Mr Momoniat advised that the presentation was a joint one by National Treasury and the Department of Provincial and Local Government (DPLG).

The Bill contains 4 amendments:

Clause 1
This clause deals with mixed financial bills. Mr Momoniat told the Committee that the Joint Tagging Mechanism (JTM) requires the splitting of Bills. The JTM called for the splitting of the PFMA into Bills in terms of section 75 of the Constitution - (does not affect provincial interest and section 76(1) - (does affect provincial financial interest). Because most financial legislation cuts across both sections the parliamentary process becomes cumbersome. In the case of the PFMA an amendment Bill had to be introduced to deal with provinces. As a result of this the amendment introduces flexibility for the Minister to follow two options. The first is the current option to spilt the Bills. The second option is to follow the section 76(1) procedure if there is even one provision effecting the provinces hereby preventing splitting of Bills and it strengthens the role of the NCOP. Mr Momoniat said that the amendment does not rule out the current procedure.

Clause 2 and Clause 4
The amendment allows more flexibility for the NCOP. If there is an intervention in terns of section 100(2) or section 139(2) the NCOP must approve the intervention within 30 days and must review it on a regular basis. The amendment gives the NCOP now up to 180 days to review the intervention. The NCOP can however still decide to review within 30 days so no power is taken away.

In respect of section 139(2) the Minister of Provincial and Local government must approve the intervention within 14 days. The amendment increases the period to 40 days. Mr Momoniat submitted that 14 days was to short a time to be able to make an informed decision on such an important matter.

The substantive change in clause 4 is the insertion of a new clause 1. Currently the failure of a municipality to fulfill an executive obligation could result in an intervention. it does not apply to the failure to pass a budget. He submitted that a municipality stops functioning if a budget is not passed. In terns of subsection 1 and 1A the province can now intervene foe an executive failure (1)(a), the failure to pass budget or approve revenue-raising measures (1)(b) and the failure to fulfill any other obligation prescribed in an Act of parliament.

The Chair asked what obligation envisaged in (1)(c) is not an executive power.

Mr Momoniat replied that the clause tried to cover every eventuality.

The Chair asked for an example that could fall under (1)(c).

DPLG and Treasury could not think of an example.

The Chair indicated that it seemed as if (1)(c) covers hypothetical situations and he was not keen to amend the constitution for hypothetical reasons.

Mr Momoniat continued and said that the intervention in terns of 1A is discretionary. The 1B intervention is obligatory in an event of a financial crisis and 1C allows for National government to act if Province does nor fulfill its role.

Clause 3
The clause deals with the change of name to the Northern Province to Limpopo. Mr Momoniat would not deal with this.

He concluded by saying that the amendments to section 139 will empower MECs, protect service delivery and make credit available to municipalities at a reasonable price.

The full briefing is attached hereto. There is also additional information provided putting the municipal financial problems in context. The information has been provided to the Finance Committee on previous occasions.

Before open the floor to discussion, the Chair said that the crux of the matter is the extra power given to provinces to deal with financial emergencies in municipalities. He reminded the members that last year the constitutional framework for municipal loans was amendment and the related legislation was drafted. The amendment being dealt wit now is the flip side - what is going to happen when a municipality starts defaulting on those loans. The Chair said that a municipality is not a company and cannot declare itself bankrupt but must continue to deliver services. The 139 amendments last year had two problems. The first was the inadequate consultation process. The Chair hoped that this problem was sorted out. The second problem was that the amendments were empowering in that provisions in legislation still had to be tested against the constitution. An example is the agency that is established in chapter 11 of the MFM Bill, the amendment to the constitution would still not have allowed that. The amendment this year is a trumping clause in 1B. The intervention has also been narrowed from last year. The whole running of the municipality is not taken over like last year.

Discussion
Ms Camerer (NNP) asked why there were no time frames for provinces to act within in clause 4. She said that there was a time frame in Clause 2.

The Chair replied that the time frames would be included in the MFM Bill.

Mr Swart (ACDP) asked if the new section 1C is needed because national government could intervene.

The Chair replied that strictly speaking it is not needed, it jus makes it more clear.

Mr Swart was also unclear of the concept of the agency.

Mr Delport (DP) wanted to know what exactly 'crisis in financial affairs' meant. He felt that the concept made it difficult to know when an intervention would take place. He thought that it would be better to be dealing with the outcomes rather than the vague concept of crisis in financial affairs.

Ms Taljaard (DP) said that 1B is enabling executive intervention from provinces in the legislative affairs of another tier of government. The debate around the desirability of this has not yet been had. Secondly, she referred to 139(1)(c) that allows for an intervention if any obligation under an act of parliament is not fulfilled. She was concerned that what a treasury norm and standards is has not yet been decided in the context of the MFM Bill and the clause would allow something that is not a norm and standard as envisaged in section 216(1) of the constitution.

The Chair commented that the new section 139(1)(c) also made him nervous because he had his doubts about it.

Mr Carrim A(NC) referred to the increase of the number of days from 30 to 180 in which the NCOP has to approve an intervention. he asked why was there this enormous expansion. Secondly, he said that the object of the Bill was to simplify the NCOP process of review, but he felt the amendments was not simplistic, rather a substantial change in substance.

The Chair replied that the NCOP could still approve the intervention at any stage before the 180 days. For this reason he thought that the amendment was not so bad.

Mr Smith referred to section 139(1)(a) - (c). he asked if it was not possible to simply say that a province may intervene if a municipality fails to fulfill an executive or legislative obligation. This way (a) - (c) is not needed. Secondly, he asked why in 1A is there a discretion for the province to intervene and in 1B the province must intervene.

The Chair thought that it was a good point and asked Treasury to check if it was possible to say in section 139(1)(a) an executive and legislative obligation and then (b) would just refer to the revenue raising measures.

Response
Mr Momoniat said that there was no time lines in any amendment. The only reference to time is when the NCOP must stop the intervention. All other time frames will be in legislation.

1B relates to a serious financial crisis and therefore there is an obligation on the province to intervene. The municipality cannot go bankrupt and there might be a need for an agency to draw up a recovery plan and ensure its implementation. He added that the role of the court is scaled down on that the court is only approached when a mandamus is sought to force somebody to act.

The Chair clarified that the role of the court is not scaled down. The courts traditional role is retained. The political process is allowed to take its course first unlike last year when a court was approached in the first instance and no political decisions were taken.

Replying to Mr Delport, Mr Momoniat said that the scope of the financial crisis is limited in 1B to a serious or persistent breach of an obligation to deliver basic services or to meet financial commitments.

In replying to Ms Taljaard's question about whether the executive should intervene in the legislative functions of another sphere he said that a council is both the executive and legislative power and it is difficult to figure out what is legislative and what is executive.

The Chair said that Ms Taljaard was referring to the separation of powers which was a conceptual thing. But conceptually nobody knows what it is. He said that there is nothing wrong with one level of government intervening in another. The problem might be with the wording. The amendment in 1B calls for the assuming of responsibility. The Chair felt that maybe different wording has to be used. He had no legal problem with the intervention but conceptually the wording did not sound nice.

Mr Momoniat replying to Mr Carrim said that there is no change in power by extending the 30-day period to 180. He said that Treasury can be guided in respect of the amount of time but the 30 days is definitely to short. He also thought that there has been no major change in substance in respect of the NCOP. The only change was the review of the intervention is now made discretionary.

Mr Titus (DPLG) added that with the 1996 constitution the there was no experience with interventions. Now that there is some practical experience it is clear as is indicated by Mr Baba that the NCOP has to go to the municipality to see what has transpired and time needs to be given to deal with the matter effectively.

Mr Aulsebrook (KZN Legislature) commented that 1B creates an obligation to intervene. He was concerned about the cost of the intervention to the province and whether it could become an unfunded mandate.

The Chair replied that issues such as those are not dealt with under the constitutional amendment.

Mr Jeffrey (ANC) asked why in clause 2 and elsewhere the word tabled has been changed to submitted.

Ms Hogan wanted clarity on the procedures to be followed in 1A because if a budget is not adopted the action in 1A does not seem to apply.

The Chair agreed that the mechanisms are not appropriate.

Ma Hogan added that 1C provides that National government can intervene in terns of section 100 if the province fails to intervene. She submitted that the steps in section 100 is not appropriate when solving the problems of municipalities. Also she was not clear if the national government was given the power to intervene in municipalities or when a province fails to act in terms of 1B.

The Chair said that those were good points but felt it was just lazy drafting because all that needs to be said is that national government can act if the province fails to.

Mr Momoniat replying to Mr Aulsebrook said that a recovery plan is what is wanted. If the recovery plan is implemented over time then there should not be an unfunded mandate.

In response to Mr Jeffrey he replied that the word submit allowed for the information to be given to the NCOP even when it was not in session.

The Chair asked Mr Momoniat to find out the difference between submit and table from the Law Advisers.

The Chair indicated that members could raise issues when the Bill is discussed during next week and called for the Western cape to present its submission.

Office of the Premier of the Western Cape: submission on the Bill
The Western Cape was represented by Mr Dowry - MEC for Local Government, Ms Carol Johnson from the Provincial Legal Services Branch and Mr Michael Brevis from the Department of Local Government.

Mr Dowry in an opening comment said that the Western Cape had noted the contents of the Bill, had received a briefing and supports the contents thereof.

The main concern raised by Ms Johnson was that the term 'revenue raising measures' in section 139(1)(b) was very wide. The Western Cape wanted to know if it included credit control as well. The full submission is attached below.

The Chair asked what was the Western Cape actually worried about.

Mr Brevis said that a province would have a credit control policy that is obligatory in terms of the Systems Act. The policy would include measures such as exemptions for the poor. He just wanted to know if this fell within the ambit of 'revenue raising measures' and was not opposed to such a broad interpretation.

Treasury indicated that the credit control policy would be included in the interpretation of the clause.

Mr Delport asked if the Western cape did not feel that the term 'crisis in financial affairs' was introducing uncertainty.

The Chair replied crisis in 'financial affairs' is limited to a serious or persistent breach that affects service delivery and financial commitments. He identified with the concerns of Mr Delport but said that a political decision is made. If the MEC declares a financial emergency when one should not have been declared then the court can step in.

The Chair asked if another level of government or an agency was to pass a budget on behalf of a municipality he asked if Western Cape could provide examples of mechanism that could work.

Mr Brevis replied that the mechanism would depend on the size of the municipality and added that in a small municipality an intervention would be easier than in a metro where a whole new set of issues arises.

Mr Mzizi (IFP) asked why the Western Cape has aid in there submission that national government should not directly intervene.

Ms Johnson replied that the point was that the provincial role should first be identified.

The Chair asked if there had been interventions because no budget had been passed.

Mr Carrim said yes.

The Chair asked what happened.

Mr Momoniat replied that section 10G of the Local Government Transition Act applied but that the act did not help in respect of passing a budget when a council was resolved 2 month before the end of the financial year.

Mr Jeffrey asked if there were reports about the interventions.

Ms Mahlangu (ANC) replied that there were such reports in the NCOP.

Mr Momoniat said that Treasury also did work on this and would make available actual NCOP interventions.

There were no further questions.

The Chair concluded by saying that there are definitely areas that need work. The first is section 139(1)(a)-(c). Treasury will have to look at the wording. The second is the measures under 1B that does not fit with 139(1)(b). The last is the power given to national government in 1C to act in terms of section 100 - here all that needs to be said is that national government must to what province had to have done.

The meeting was adjourned.

Appendix 1

OFFICE OF THE PREMIER

Dear Mr Maduna

WESTERN CAPE PROVINCIAL GOVERNMENT SUBMISSION RE: THE CONSTITUTION OF THE REPUBLIC OF SOUTH AFRICA THIRD AMENDMENT BILL

I refer to the above-mentioned Bill which was published for comment in the Government Gazette of 5 July 2002 (general Notice 1177 of 2002) and I hereby wish to submit the following submission as comment to the said Bill:

Ad clause 1 of the Bill:

1. The proposed amendment seeks to avoid the splitting of a Bill and ensures the added scrutiny by the NCOP of all Bills, such as those which contain even a single provision affecting the financial interests of the provincial sphere of government. The proposed amendment of section 76 is therefore supported.

Ad clause 2 of the Bill:

2. Clause 2 aims to amend section 100 of the Constitution.
3.In our view, one can argue the merits of this clause from two different points of view: firstly that an intervention is a drastic measure and should thus come to an end as soon as possible.
4.On the other hand, one can argue that, in order to effectively intervene in the interests of service delivery, an extension of time frame is required.
5. The proposed amendment of the time frames is, in our view, a matter of practical consideration. The insertion of the word "submitted" is a legal-technical amendment which will mean that notice must be given to the NCOP within 14 days after the date of the actual intervention - this can be done even if the NCOP is not is session.
6. Furthermore, the giving of a discretion to the NCOP to review an intervention does not, in our view, detract from or limit the powers of the NCOP to intervene.
7. We are of the opinion that, from a practical point of view, the amendment is an improvement and will add flexibility to the review process.
8. In comparison to previous drafts of this clause, which allowed for the direct intervention of the national sphere of government into the local sphere of government, the proposed clause 2 now acknowledges the constitutional role which provincial governments have to play vis-à-vis local government. the Western Cape is of the opinion that the proposed amendment should therefore be supported.

Ad clause 3 of the Bill:

9. Clause 3 proposes to change the name of the Northern Province to Limpopo Province. Since the proposed amendment of section 103 is a technical amendment, the amendment is supported.

Ad clause 4 of the Bill:

10. Clause 4 intends to amend the process of provincial supervisions of local government: In general, the Western Cape supports the proposed amendment of section 139. We do however wish to raise these additional comments in respect thereof:

10.1 Subsection (1):
With reference to proposed section 139(1)(b) it is unclear if the phrase 'revenue raising measures' includes, inter alia, credit control measures. It is possible to argue that credit control includes revenue-raising measures that give effect to an approved budget.

The term 'revenue-raising measures' can be interpreted as broad powers which may include the enforcement of revenue-raising, e.g. by way of the implementation of credit control. Although this broad term is acceptable, clarity with regard to the meaning of the term is essential for the application of this section.

10.2 Subsection (4)
We note that this subsection cross-refers to the applicability of section 100. From a technical drafting point of view, it might seem like an unnecessary duplication to refer to section 100 here; as section 100 will, as a matter of course, in any event apply in instances where provinces do not fulfil its obligations.

The principle contained in the subsection is supported, as it takes proper cognisance of the role of provinces within the constitutional scheme. In other words, the national sphere of government cannot intervene directly in the affairs of local government, but must afford the province an opportunity to firstly attempt to remedy the situation.

10.3 Subsection (5)
As both subsections (a) and (c) address the ending of the intervention it is proposed that (a) be incorporated under (c). This will improve the contextual continuity of the subsection.

I trust you will find our submission of value and I thank you for the opportunity to comment.

Yours Faithfully

MCJ VAN SCHALKWYK
PREMIER

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