Constitution of the Republic of South Africa Third Amendment Bill: discussion

Meeting report

JUSTICE PORTFOLIO COMMITTEE
11 September 2002
CONSTITUTION OF REPUBLIC OF SOUTH AFRICA THIRD AMENDMENT BILL: DISCUSSION

Chairperson: Adv De Lange (ANC)

Relevant Documents:
Constitution of the Republic of South Africa Third Amendment Bill, No 33-2002

SUMMARY
The Committee discussed the amendment to Section 139 in clause 4. It was decided that Section 139(1)(c) would be deleted. A member suggested that that Section 139(1)(b) be incorporated into Section 139(1B). Members were in favour of this. The exact wording of 1B is not finalised as discussion is yet to be completed and members still have unresolved issues in respect of the principles involved. Discussion will continue on Monday, 16 September 2002.

MINUTES
The Chair informed the Committee that the discussion would only be on Section 139. He felt that the other amendments could be held in abeyance. He highlighted some of the issues:
- Do we need Section 139(1)(c)
- Do we need a discretion for the MEC in 139(1) to approve a budget
- If 139(1)(b) is retained, what consequential amendments would be needed to 1A.
- Dissolution under both 1A and 1B
- The principle of having an Agency
- The change of the NCOP period from 30 to 180 days.
- The desirability of 1B

The Chair noted that these were not the only issues and members could raise anything that they thought was an issue.

Before discussion started members raised a few preliminary issues.

Ms Taljaard (DP) raised two issues. The first was the practical difficulty experienced in the Finance Committee as a result of not having a final draft of Chapter 11 of the Municipal Finance Mangement Bill. The second issue was the desirability of a having Section 139 as a trumping clause. The concern was that it conflicted with other sections of the Constitution specifically Section 160(2) that states that a municipality's power to approve budgets may not be delegated.

The Chair replied that the three Chairs are mindful of the practical problems.

Mr Smith (IFP) wanted to know whether an opinion on the constitutionality of dissolution would be forthcoming.

Mr Titus (DPLG) replied that when the Municipal Structures Act was challenged in the Constitutional Court the objection to the dissolution clause was dropped from the heads of argument by the applicant. As a result the Court did not pronounce on that. He said that it was DPLG's view that an amendment to Section 159 of the Constitution by Act 65 of 1998 provides the authority for dissolution. The new 159(2) and 159(3) reads:

'159(2) - If a Municipal Council is dissolved in terms of national legislation, or when its term expires, an election must be held within 90 days of the date that Council was dissolved or its term expired.

159(3) - A Municipal Council, other that a Council that has been dissolved following an intervention in terms of Section 139, remains competent to function from the time it is dissolved or its term expires, until the newly elected Council has been declared elected.'

Mr Titus added that the opinion is that the MEC can dissolve a municipal council.

The Chair commented on the desirability of an overall trumping clause. He said the reason the Bill was sent back last year was because the proposed Section 139 would have been an empowering clause. The legislation at the time envisaged that the agency take over everything and this would have been unconstitutional. For this reason Treasury was told to change the Constitution.

Ms Taljaard had difficulty with changing the existing architecture between the spheres of government. she said that the difficulty was compounded by the fact that there is no clarity as to what the MEC may do.

The Chair replied that the power of the MEC wont be circumscribed because the test is in the Constitution. The legislation can facilitate the decision of the MEC by providing indicators as is listed in the new chapter 11 draft. If the MEC does act the court will decide if the constitutional test has been passed. He emphasised that the MFMB is the guide and the test is in the Constitution.

There were no further preliminary issues and the Chair opened up the floor to discussion.

Mr Delport (DP) commented that with a very superficial reading of chapter 11 he was concerned that the chapter was still unconstitutional even with the proposed new Section 139.

The Chair replied that in Section 139 the phrase of 'notwithstanding Section 160(2), would solve the problem, but he said this was not the way the Constitution is drafted. He thought the member had a made a vital point but wanted to start discussing the amendments so that members can raise specific problems.

Mr Smith (IFP) proposed that Section 139(1)(c) be deleted because it is not needed and nobody could explain why it is there.

The Chair asked if there was anybody who wants it in.

Mr Powell (DPLG) replied that both departments would accept that Section 139(1)(c) is not needed.

Nobody objected to the deletion of subparagraph (c) and the Chair said that it would be deleted.

Mr Smith proposed that Section 139(1)(b) be deleted. He thought that SALGA's concern was valid in that passing the budget was a legislative act. The consequence of the non-approval of a budget was that the executive was unable to act. If there was an executive failure it would be covered in Section 139(1)(a).

The Chair said that in the meantime while one waits to act on the executive failure more and more judgments are taken against the municipality and property is attached. The Chair said that he hears the argument but that it does not address the damage that is done until the executive failure.

Ms Hogan agreed that the failure to pass a budget could fall under 1(a). she continued and said one needs to interrogate why there was a failure to pass a budget. A political deadlock can be one cause. The other cause, as is in most cases, the Council is just dysfunctional as a result of the crisis that the Council is in. The remedial measures therefore have to differ depending on the what led up to the failure. She said that only in some cases, not all is an intervention in a legislative function an interference with the autonomy of local government. If the failure to pass a budget is caused by a political deadlock then an intervention would be problematic, because in this instance the council as the legislature is expressing a political will. Ms Hogan agreed that under Section 139(1) subparagraph (b) is not needed, but under the circumstances in 1B it was a different matter.

Mr Momoniat (Treasury) stressed that the failure to pass a budget was a legislative failure not an executive failure.

The Chair replied that people are arguing that eventually the executive fails.

Mr Momoniat reiterated that it is Treasury's view that the reference to legislative failure is needed.

Mr Carrim (ANC) said that Mr Mohamed Baba is the most experienced person when it comes to interventions and he had indicated on previous occasions that Section 139 in its current form is not sufficient. He added that the intervention in 1B is quite harsh and that maybe a softer form of legislative intervention in section139(1) could prevent 1B from taking place. At the end of the day one does not want the heavy intervention of 1B so 1B would only kick in once section139(1)(b) fails. All that Mr Carrim wanted to add to the debate was that by keeping in 1(b), the intrusive 1B could be prevented.

Mr Delport commented that he was in favour of incorporating (1)(b) into 1B. His rationale was that when no budget is passed then there is already a financial crisis. If however (1)(b) was kept where it is, he suggested that the wording be aligned because (1)(a) speaks of a failure to perform an executive obligation, but (1)(b) does not make reference to an obligation. The member did not like the different language being used.

Ms Taljaard submitted that nobody has yet answered the separation of powers argument and wanted (1)(b) to be deleted.

The Chair replied that the separation of power is exactly what the Constitution says it is. What the committee was doing was making amendments that will influence what how the Constitution views the separation of powers. He said that it was not a question of separation of powers but whether the member or her party agreed or not.

On Mr Delport's suggestion, the Chair said that it was a good one. If (1)(b) is the cause of a financial crisis as envisaged in 1B then the MEC would step in. The Chair suggested the following wording for Section 139(1B):

' If a municipality, as a result of a crisis in its financial affairs, is in a serious or persistent breach of its obligations to provide basic services or to meet its financial commitments, or the non-approval of a budget or revenue raising measures, the relevant provincial executive must intervene by taking effective steps to resolve the crisis …,

The Chair added that one of the options available to the MEC should be to refer the problem to the agency and that should also be incorporated under what the MEC must do.

Mr Smith reminded that the wording of (1)(b)(a)(ii) had to change.

In respect of Section 139(1B)(a)(ii) the Chair agreed that the wording needs to be changed and proposed it should read something like:

' take the necessary steps to cause the approval of the budget or in exceptional circumstances dissolve the Council.'

Mr Felix (SALGA) commented that failures in a Council can be as a result of various reasons viz.:

- technical and administrative problems due to a lack of capacity
- external problems outside the control of Council
- and hung councils,

He said that hung councils has been done away with because of the change form a 75% majority to a simple majority. He wanted the members to keep in mind the changing environment of local government.

The Chair replied that the issues referred to would be discussed in the Finance Committee under the MFMB.

Ms Hogan commented that if Section 139(1B) is redrafted as per the Chairs suggestion the MEC would be able to facilitate the budget being passed.

The Chair referred to Section 139(1B)(a) and said that it is not clear that it is the municipality that is responsible for implementing the recovery plan in the first instance. He asked the members to think of 1B as a whole and whether it was to open ended as to what the MEC can do. At the moment it says that the MEC must take effective steps, including; which suggests that he can almost do anything. The members had to specifically think about what the MEC must do.

Mr Smith felt that it was not necessary to include (1)(b) in 1B because legislation could say that a financial crisis could include not passing a budget.

The Chair disagreed because 1B was very specific.

Mr Smith referred to a late submission by the Prof. Steytler, Community Law Centre - UWC. He submits the following in respect of Section 139(1)(b):

' the passing of the budget and the raising of revenue are the most important legislative acts of a municipality. The Failure to do so has dire consequences for a municipality. However, the Local Government Transition Act, Section 10G makes specific provision for the failure of a municipality to adopt a budget - the municipality manages on the basis of the previous budget. A similar provision should be included in the Municipal Finance Management Bill. Then intervention in this core competency would not be necessary.'

A possible argument for the inclusion of this ground is when the failure to approve a budget is part of a financial crisis. Non-approval of budget alone should not be a ground for intervention.'

Mr Smith wanted to know why a municipality could not spend in terns of the previous budget as suggested by Prof. Steytler.

Ms Hogan said that at National and Provincial Level the direct charge mechanism in the PFMA is used. It allows spending to take place until the budget is approved. The spending is a direct charge against the revenue fund of the state or the province.

Mr Momoniat commented that Section 10G of the LGTA was declared unconstitutional . Secondly there is no direct charge mechanism for local government and finally provinces needed a one page act to allow them to spend until the budget is passed. The same would apply to national this year. He said that it was the approach of the Treasury that there cannot be spending until the budget has been approved by a new Council. He suggested that a legal opinion be sought to see if there could be spending without an approved budget. If the opinion says it is permissible then the failure to pass a budget could be dealt with in legislation.

The Chair said that he would have liked Prof. Steytler to send the submission earlier and attend the hearings because he says that an intervention when the non-approval of a budget is part of the financial crisis is fine but does not like an intervention in this legislative function to prevent the financial crisis. The Chair would have liked to question the Prof. on this.

Ms Taljaard said that the definition of basic services and essential services still needs to be sorted out . Until there is clarity on the definition of basic services the reach of 1B is not clear.

The Chair replied that whatever words are used, somebody would still have to interpret it.

Mr Carrim had no problem with the phrase ' breach of an obligation to provide basic services.' He continued and said that in the Systems Act an obligation to 'provide access to at least a minimum level of basic services' is referred to. He did not know if the wording in 1B would open up the door for anyone to go to court to say that they are not getting basic services.

The Chair replied that the phrase would probably be interpreted to mean that there has to be an existing obligation to provide the basic service. The Chair did not see a problem with the wording.

Ms Hogan was concerned that there were no softer mechanism in 1A. The province had to either issue a directive or assume responsibility in terms of Section 139(1A)(a) and (b) respectively.

The Chair said that under (a) the province could bail out the municipality, i.e. pay a debt.

Ms Hogan said that the province cannot bail out the municipality. It could lead to fiscal collapse.

The Chair replied in terms of the amendment it could.

Ms Hogan said that the committee would have to return to debate the bail out by a province of a municipality but for now she just wanted to know about SALGA's concerns that there should be assistance before a crisis.

The Chair read the end of 139(1). It says that the relevant provincial executive may intervene by taking any appropriate steps to ensure fulfilment of that obligation, including: …
He said that the appropriate steps would be included in legislation and would include the mechanism for support and assistance.

Ms Hogan was satisfied that SALGA's concerns are catered for.

The Chair added that courts will also look at what has been done under 139(1). The courts would not take lightly to an intervention without assistance and support having come first.

Mr Smith submitted that the words 'as a result of a crisis in its financial affairs' in 1B should be deleted. His rationale was that a failure to provide basic services could be caused by something other than a crisis in the financial affairs and at the end of the day the persons receiving the services suffer the same consequences.

The Chair replied that the suggestion widens 1B. On the other hand it is not really widened because the problem must lead to a breach of financial commitments or to provide basic services.

Ms Taljaard thought that the suggestion would broaden 1B. The fundamental rationale of Treasury was the Financial Watch to minimise risk in the system. She felt that the suggestion could lead interventions that has nothing to do with preserving the integrity of the financial system.

The Chair said that theoretically it will probably broaden 1B but the emphasis is on a serious or persistent breach. So if the reference to a crisis in the financial affairs is deleted there could be a intervention because of political reasons.

Mr Felix commented that an executive obligation needs to be defined because at local government level a whole range of processes take place.

The Chair replied that it cannot be defined because it is a legal term and is determined on a case by case basis. The SARFU judgment would be the authority for what the different functions are. He added that a further distinction would be between an administrative function and an executive function.

Mr Felix was arguing for a minimalist approach.

The Chair replied that legislation must create the necessary consultative mechanisms for the municipality to tell the province that something is not an executive obligation when the province wants to intervene.

Mr Leeuw (SALGA) wanted to know if the reference to basic services referred to present basic services or basic services that municipalities would have to provide in the future.

The Chair replied that 1B does not create a legal duty on a municipality to provide any kind of basic service.

Ms Hogan suggested that 1 should refer to a failure of the municipality to deliver in terms of the Integrated Development Plan (IDP) because this is what the municipality has said that it will deliver.

The Chair replied that it would broaden the section because the IDP was a political process.

Ms Hogan disagreed because the IDP says what the municipality must do.

The Chair commented that 1B only refers to failures of obligations that the municipality has.

Ms Hogan wanted to know what kind of obligations.

The Chair replied contractual obligations. Examples are the non-payment of salaries as listed as an indicator in chapter 11.

Ms Hogan said the IDP is part of the Systems Act and the budget of a municipality and that a contractual relationship exists because it is the municipalities promise as to what it will deliver.

The Chair asked why widen the clause to include the political plan of a municipality.

Ms Hogan replied that basic services can include much more that what is in the IDP.

Due to time constraints the Chair said that the issues has to be held over until the next discussion. He said that many issues had been raised and that he did not know where the discussion is at. he found the discussion very useful but wanted to start pulling together everything. He advised that the whole of Monday the 16^th is set aside for discussion. He asked members to come on Monday, not just with problems, but with possible solutions so that specifics can be debated. The other issues in the section he thought was easy to deal with. The question of the 30 day increase to 180 days was fine. The Chair thought that the amendment to Section 100(2)(c) in clause 2 should rather stay as 'must' rather than change to the proposed amendment of 'may'. Also 1C can be easily disposed of. He advised that before Monday he would meet with the Departments to come up with suggested drafts that reflect all the suggestions and alternative wording made by members.

The meeting was adjourned.