Municipal Finance Management Bill: deliberations

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Finance Standing Committee

15 October 2002
Chairperson: Ms Hogan (ANC)
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Meeting Summary

Proposed amendments to Section 139 of the Constitution were discussed. The Committee continued working through the 13 September working draft of the Bill, discussing the drafting changes made to Chapters 4 & 5.

Meeting report

Mr Momoniat, Mr Glasser, Adv Grove and Mr Pillay represented the National Treasury.

Ms Hogan welcomed everybody and initiated a clause-by-clause analysis of the conceptual document of the constitutional amendment (Section 139 of Act 108 of 1996).

Clause 1:
Ms Taljaard (DP) expressed her reservations on the use of the term exceptional circumstances in clause 1(c).

Adv Grove (Legal drafter: National Treasury) assured her that it was an acceptable legal term, but that he can look at changing it if necessary.

Ms Taljaard was concerned that the clause was too open. She would like to see it more defined as it gives too much power too the MECs.

Ms Hogan argued that the term exceptional circumstances was used for unforeseen circumstances and should not be more defined.

Ms Taljaard again expressed her concern that this leads to unlimited discretion.

Mr Momoniat disagreed with her. He felt it does limit the discretionary intervention.

Clause 2:
Ms Taljaard wanted to change the wording in 2(c) from may to "must".

Mr Momoniat drew her attention to the use of the word must earlier in the sentence and argued they should keep it as it is. Ms Taljaard accepted.

Clause 3:
Ms Taljaard wanted to know how the council could set aside the dissolution in 3(b) if they were dissolved.

Mr Momoniat informed her that this is the National Council. He undertook to make that clearer in the next draft.

Clause 4:
Mr Dorfling asked for clarity on 4(b).

Adv Grove told him that in context it is clear and as this was the Constitution they did not want to go into too much detail.

Clause 5:
Ms Taljaard expressed her concern about combining the legislative and executive functions. She acknowledged that this is a constitutional amendment and therefore it will not be changed but that she was still concerned.

Adv Grove said that it is crucial that this should bind the municipality to the recovery plan because budgeting is a legislative process.

Mr Dorfling wanted the word "until" added to 5(b)(ii).

The Chairperson thought it better to wait for the meeting with the Justice Portfolio Committee next week as they have more legal expertise. She asked Mr Dorfling to keep his suggestion until then.

Clause 6:
The committee was happy with this clause at is.

Clause 7:
No changes were made although it was noted that a choice between may and must will have to be made.

Clause 8:
Ms Taljaard felt that 8(c) does not gel with the rest. She asked what the intention of (c) was and whether it should be there at all.

Adv Grove reminded her of the role the National Council of Provinces has to play as prescribed in clause 1(b).

Mr Powell (Department of Provincial & Local Government) agreed that you have to deal with the intervention and called for an organic law on this in the Constitution. He explained that with organic law he meant a "must law".

General Comments:
Ms Taljaard asked the Treasury and DPLG to report back to the committee on meetings that they are having.

The Chairperson emphasised that the constitutional amendment drafting proposals are from the joint deliberations from the two committees, Finance Portfolio Committee & Justice Portfolio Committee. She added that she would speak to the chairperson of that committee, Mr de Lange, to hear his view on how to continue these discussions. The discussions on the constitutional amendments will start on Monday.

Ms Taljaard requested a discussion on municipal entities, as this concept is very important to her party.

The Chairperson told her they would deal with that after they have dealt with the Revenue Laws Amendment Bill.

Municipal Finance Management Bill
The Committee looked at changes made to Chapters 4 & 5 clause-by-clause.

Chapter 5:
Ms Taljaard asked for clarity about the concept of sole or joint ownership control in clause 24 (3)(b).

Adv Grove told Ms Taljaard that it was clarified in the definitions.

Ms Taljaard added that she foresees difficulties with this issue.

Ms Hogan then asked about security arrangements and Mr Glasser (National Treasury) informed her that it is in the definitions.

Ms Taljaard enquired whether sufficient provision has been made in clause 26 (1)(c) where it says that the debt is incurred with the approval of the mayor.

Mr Glasser reminded her that this applies only to a subclause 2(a)(ii) emergency situation.

Mr Powell asked if the issue of equitable share is covered in clause 27 (2)(d) and whether it is constitutional.

Mr Glasser assured him that it was constitutional.

Chapter 4:
Ms Taljaard wondered whether SALGA (South African Local Government Association) would be happy with clause 23H (3).

Mr Dorfling (SALGA) confirmed that they are very happy with the current wording. He added that SALGA would like the financial information in clause 23H (3)(b) to be shared with organised local government.

Mr Powell (DPLG) supported the principle and added that this would add to intergovernmental relations.

Ms Hogan said that she could not find fault with it.

Mr Pillay (National Treasury) was concerned with the timing issue. Making that kind of information immediately available could lead to distrust and cause problems.

The Chairperson then asked Adv Grove to have a look at the wording of this clause.

He replied that he might add "and when necessary organised local government" to 23H (3)(b).

The Chairperson then asked whether this clause was needed at all.

Ms Taljaard was worried that this clause could be used as an excuse to shirk constitutional obligations.

Adv Grove added that he also did not like the wording of this clause and that he had not drafted it.

Mr Lekgoro agreed that it was badly drafted but that the essence of it is important.

Ms Hogan suggested taking out the words in terms of clause 155 (6) of the Constitution and replacing it with "as envisaged in this Act".

Ms Taljaard made the committee aware that the Intergovernmental Fiscal Relations Act must be added to 23I (d).

Mr Dorfling referred to clause 23J (a) where it says or such earlier date as may be described. He added that SALGA would prefer to see a fixed date and he mentioned the end of February.

Mr Pillay said he would rather want to leave it as it is.

Adv Grove suggested changing the wording to "no later than the tabling of the budget".

The Chairperson asked SALGA whether they were happy and Mr Dorfling answered in the affirmative.

She then asked whether monies flowing between municipalities were completely covered in clause 23K.

Mr Pillay answered that it was not and that he would look into it.

Mr Dorfling had a problem with the date (1 March) in 23K (2).

Ms Hogan asked him what SALGA would propose.

Mr Pillay suggested changing it to "date as may be prescribed".

Mr Dorfling drew attention to the 120 day period as given in clause 23M (1)(a). He asked for it to be shortened to 90 days.

Mr Momoniat admitted to a mathematical error and undertook to change it to 90 days.

Mr Momoniat told the committee that clause 23O was badly written as it is and was still under discussion.

Ms Taljaard asked which Minister was meant in 23O (2)(b).

The Chairperson answered that it was the Minister of Finance.

Ms Taljaard remarked that the wording in 23P (1) was not specific enough. She was referring to financial nature.

Ms Hogan asked if it was necessary to tighten this sentence up.

Adv Grove said that it could do no harm for the parties to report problems that they think is of a financial nature. He felt that more specific language was not needed.

The Chairperson adjourned the meeting.

Appendix 1:

Substitution of section 139 of Act 108 of 1996

 

 

3. The following section is hereby substituted for section 139 of the Constitution:

 

"Provincial supervision of local government

139. (1) When a municipality cannot or does not fulfil an executive obligation in terms of legislation or the Constitution, the relevant provincial executive may intervene by taking any appropriate steps to ensure fulfilment of that obligation, including ¾

 

       

    1. issuing a directive to the Municipal Council, describing the extent of the failure to fulfil its obligations and stating any steps required to meet its obligations; [or]
    2.  

       

    3. assuming responsibility for the relevant obligation in that municipality to the extent necessary¾
    4.  

 

(i) to maintain essential national standards or meet established minimum standards for the rendering of a service;

(ii) to prevent that Municipal Council from taking unreasonable action that is prejudicial to the interests of another municipality or to the province as a whole; or

 

 

     

  1. to maintain economic unity; or
  2.  

 

       

    1. dissolving the Municipal Council and appointing an administrator until a newly elected council has been declared elected, if exceptional circumstances warrant such a step.
    2.  

 

 

 

(2) If a provincial executive intervenes in a municipality in

 

terms of subsection (1) (b) ¾

 

[(a) the intervention must end unless it is approved by the Cabinet member responsible for local government affairs within 14 days of the intervention;]

[(b)](a) it must submit a written notice of the intervention [must be tabled in] to the provincial legislature and [in] the National Council of Provinces within 14 days [of their respective first sittings] after the intervention began;

[(c)](b) the intervention must end [unless] if it is -

(i) not approved by the Cabinet member responsible for local government affairs within 28 days after the intervention began;

(ii) disapproved by that Cabinet member within those 28 days;

(iii) not approved by the National Council of Provinces within [30] 180 days [of its first sitting] after the intervention began; or

(iv) disapproved by the National Council of Provinces within those 180 days; and

[(d)](c) while the intervention continues, the National Council of Provinces must review the intervention regularly and may make any appropriate recommendations to the provincial executive.

 

 

(3) If a Municipal Council is dissolved in terms of subsection (1) (c) -

 

(a) the provincial executive must submit a written notice of the dissolution

to -

(i) the provincial legislature and the National Council of Provinces; and

(ii) the Cabinet member responsible for local government affairs; and

 

       

    1. the dissolution takes effect 14 days from the date of receipt of the notice by the National Council of Provinces unless set aside by the National Council of Provinces or that Cabinet member before the expiry of those 14 days.
    2.  

 

 

 

(4) If a municipality cannot or does not fulfil an obligation in

terms of legislation to approve a budget or any revenue raising measures necessary to give effect to the budget, the relevant provincial executive must intervene by taking any appropriate steps to ensure that the budget or those revenue raising measures are approved, including dissolving the Municipal Council and ¾

(a) appointing an administrator until a newly elected council has been declared elected; and

(b) approving a temporary budget or revenue raising measures to provide for the continued functioning of the municipality.

 

(5) If a municipality commits a serious or persistent material breach of financial commitments described in national legislation, or admits that it is unable to meet those financial commitments, the relevant provincial executive must¾

 

       

    1. in order to secure the municipality's ability to meet its financial commitments, approve a recovery plan prepared in accordance with national legislation, which binds the municipality in the exercise of its legislative and executive authority;
    2.  

       

    3. if the municipality cannot or does not approve legislative measures, including a budget, necessary to give effect to the recovery plan, dissolve the Municipal Council and -
    4.  

      (i) appoint an administrator until a newly elected council has been declared elected; and

      (ii) approve a temporary budget and revenue raising measures giving effect to the recovery plan to provide for the continued functioning of the municipality; and

       

    5. to the extent that the municipality cannot or does not otherwise implement the recovery plan, assume responsibility for the implementation of the plan.
    6.  

 

 

(6) If a provincial executive intervenes in a municipality in terms of

subsection (4) or (5) it must submit a written notice of the intervention to the provincial legislature and the National Council of Provinces.

 

(7) If a provincial executive cannot or does not comply with subsection (4) or (5), the national executive may comply with that subsection in the stead of the provincial executive.

 

[(3)] (8) National legislation [may] must regulate -

 

(a) the [process] processes established by this section;

 

(b) the implementation of this section; and

(c) when an intervention must end.".

 


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