The Select Committee on Cooperative Governance and Traditional Affairs met to discuss the Notice of Intervention in Kannaland Local Municipality, which followed several years of poor audit reports. The most recent audit finding for the financial year ending June 2016 was adverse, and the municipality had confirmed that it was unable to meet its financial obligations due to the serious financial crisis.
The Committee heard that in such a case, the Provincial Executive may promptly request the Local Government Finance Recovery Service to prepare a financial recovery plan and intervene in terms of section 139(5) of the constitution, which relates to the financial affairs of a municipality. However, it must submit a written notice of the intervention to the relevant legislature and the National Council of Provinces (NCOP) within seven days after the intervention had begun.
The Content Adviser said that the notice of intervention had been received by the NCOP on 21 December 2016, fourteen days after it had begun, so it did not comply with the procedural requirements. The appropriate remedy in that case was a declaration of invalidity of the intervention by the NCOP, since the procedural requirements had not been met. He suggested that the Select Committee recommend to the NCOP to disapprove the intervention. The Municipality’s serious financial position could still be addressed by providing support in terms of section 154(1) of the Constitution, instead of the invocation of section 139(5) intervention. He proposed that the Select Committee undertake a fact finding visit to Kannaland Local Municipality.
Members agreed that an inspection in loco was very important, as it would enable them to get first hand information and determine if an intervention was required. It was argued that the Western Cape Government had acted within the constitutional time requirements, and the Committee needed to be careful so as not to make “fools of themselves.” Members asked why the Committee had received details of the intervention only four months after it had been received.
The Acting Chairperson said that as part of the way forward, they needed to note the laid table of the notice by the Provincial Government of the Western Cape, the progress report tabled by the MEC and the committee needed to resolve that they would undertake an oversight visit to Kannaland so that they satisfy themselves as members of the committee of the challenges raised.
They recommended that the Committee advise the province to resubmit the intervention notice, and asked if they should conduct an inspection in loco before they asked for the resubmission.
Analysis of Intervention in Kannaland Local Municipality
Mr Nkosana Mfuku, Parliamentary Content Adviser: Select Committee on Cooperative Governance and Traditional Affairs said that the Kannaland Local Municipality was a Category B municipality situated within the Eden District in the Western Cape Province. It shared its borders with the Central Karoo District to the north and the Winelands District in the east. It was one of the seven municipalities in the district, and was responsible for basic service provision to the towns of Calitzdorp, Ladismith, Vanwyksdorp and Zoar, as well as the surrounding farming communities.
On 7 December 2016, the Provincial Executive Council (PEC) of the Western Cape resolved to invoke the provisions of section 139(5)(a) of the constitution on Kannaland Local Municipality. This intervention was similar to discretionary intervention in the case of a serious financial problem. The seriousness of the problem had resulted in a crisis which called for mandatory application of more intrusive remedial steps. The intervention would entail both executive and legislative measures, the latter requiring dissolution of the Council. The intervention entailed that the Member of the Executive Council (MEC) would drive the process by imposing a recovery plan that was aimed at securing the Municipality’s ability to meet its obligations to provide basic services, or its financial commitments.
Mr Mfuku said that in the 2012/13 financial year, the Municipality had received an adverse audit opinion from the Auditor General (AG), meaning its financial statements had been misrepresented, misstated and did not accurately reflect its financial performance and health. Then, in 2013/14 and 2015/16, it had received a financially unqualified opinion with findings, meaning the financial statements contained no material misstatements, but findings had been raised either reporting on predetermined objectives or non-compliance with legislation, or both of these aspects.
Mr Mfuku said that for an intervention to take place at a the municipality as a result of a crisis in its financial affairs, or where it was in serious or persistent material breach of its obligations to provide basic services or meet its financial commitments, or admitted that it was unable to meet its obligations for financial commitments, two sets of conditions had to prevail. Firstly, there had to be a serious and persistent breach of its obligations to provide basic services and secondly, a serious and persistent breach to meet its financial commitments. The most recent audit finding for the financial year ending June 2016 was adverse, and Kannaland Local Municipality had confirmed that it was unable to meet its financial obligations due to the serious financial crisis. In such a case, the Provincial Executive may promptly request the Local Government Finance Recovery Service to prepare a financial recovery plan. It was noted that the recovery plan would be imposed by the PEC and approved by the MEC for Finance only once it had been prepared and finalised in accordance with the provisions of section 139(5)(a)(i) of the Municipal Finance Management Act (MFMA).
The procedural requirements were that, when a provincial executive intervened in terms of section 139(5) of the Constitution, which related to the financial affairs of the municipality, it must submit a written notice of the intervention to the relevant legislature and the National Council of Provinces (NCOP) within seven days after the intervention had begun.
Mr Mfuku said that the notice of intervention had been received by the NCOP on 21 December 2016, fourteen days after it had begun, hence did not comply with the procedural requirements. It was clear that in deciding the constitutional status of the intervention process undertaken by the MEC, it could be strongly argued that section 139(5), as instituted in Kannaland Local Municipality, was not procedurally correct to the extent of its inconsistency with the constitution and the non-fulfillment of the conditions of section 139(6)(b) of the constitution rendered the provincial executive without jurisdiction. Consequently, the decision to intervene was procedurally incorrect.
The appropriate remedy in that case was a declaration of invalidity of the intervention by the NCOP, since the procedural requirements were not met, and he suggested that the Select Committee recommend to the NCOP to disapprove the intervention. This approach was critical in guarding the integrity and efficiency of the intervention process.
Mr Mfuku concluded by suggesting a way forward. It could be acknowledged that the Municipality was in a precarious financial position and there were evident signs of poor administration and governance which had affected the financial status of the municipality, as well as service delivery. A view was held that those challenges could still be addressed by providing support to the Municipality in terms of section 154(1) of the Constitution, instead of the invocation of section 139(5) intervention. He further suggested that before the Select Committee could recommend the NCOP to approve or disapprove the intervention as stated elsewhere in the analysis, it was proposed that the Select Committee undertake a fact-finding visit to Kannaland Local Municipality in order to receive a briefing on the circumstances that had led to the provocation of section 139(5) of the Constitution, as well as the progress made in addressing the challenges in the Municipality.
The Acting Chairperson remarked that the presentation was clear.
Ms B Engelbrecht (DA, Gauteng) asked for confirmation concerning when the intervention would start. She said the correspondence stated: ‘Notice that the Provincial Executive on the 7 December resolved to approve steps’. She asked on what date the intervention would start. She the requested the Western Cape Government to give an official response as to why they had neglected their duties, as they were six months behind the requirements for constitutional Intervention.
(Ms Engelbrecht reversed this statement in a later comment)
Ms G Manopole (ANC, Northern Cape) remarked that the Select Committee had in the previous year made a ground-breaking decision and was commended on it. An inspection in loco was very important as it enabled them to get first hand information and determine if an intervention was required.
Mr D Ximbi (ANC, Western Cape) concurred with Ms Manople regarding the inspection in loco in order to engage with the MEC and other stake holders.
Mr M Mhlanga (ANC, Mpumalanga) said that they needed to write a memo to the MEC in order to get an explanation regarding the flaw. He supported the motion that the intervention proposal be resubmitted.
Ms Engelbrecht said that she had not had a detailed look at the document (Provincial Intervention in terms of S139(5) of the Constitution of Kannaland Municipality), and as a result she had made a comment earlier about the Western Cape neglecting its duties, which she was now reversing. She had noticed, however that it was dated 21 December 2016, and this meant that the document had been received in December, so the Western Cape Government had acted within the constitutional requirement of seven days. The Committee needed to be careful so as not to make “fools of ourselves,” as they had acted within seven days and followed the ruling in terms of section 139(5) of the constitution. Why were they following it up only now? They were the liable parties for not following up and taking action.
Mr M Chetty (DA, KwaZulu-Natal) said that they were all in agreement on the legalities of what had been presented and that they should stick to it in order to avoid embarrassment. In terms of paragraph 4.4 of the document, which stated that in the event that the Acting Chairperson was in agreement with the proposal outlined above, letters had been prepared to the provincial Minister, the Acting Chairperson of the Committee and the Clerk of Papers, for signature. It was already in place and procedurally they were covered. He agreed that an inspection in loco should take place, as agreed earlier.
The Acting Chairperson asked if members were in agreement that they take the route proposed by Mr Chetty and Ms Engelbrecht in terms of not pursuing the time frame that they thought had not beenfollowed.
Ms Manopole asked Mr Mfuku to clarify the question posed to him regarding the dates.
Mr Mfuku responded that the intervention had started on 7 December 2016 and the MEC’s letter was dated 21 December 2016, which was 14 days later. The issue of procedure was important, as such matters were contested in court. The Select Committee was guided by the Constitution in terms of interventions (Section 139(5)). He agreed that an inspection in loco be conducted and that the MEC should be invited.
Ms Engelbrecht asked why the Committee had received the intervention only now, which was four months after they had received it.
The Acting Chairperson said that Ms Engelbrecht’s question was a new matter.
Ms Manopole agreed with the Acting Chairperson that Ms Engelbrecht’s question raised a new issue.
The Acting Chairperson said that they were now on the same page. He said that as part of the way forward, they needed to note the tabling of the notice by the provincial government of the Western Cape, and to note the progress report tabled by the MEC. The Committee needed to resolve that they would undertake an oversight visit to Kannaland so that they could satisfy themselves as Members of the Committee about the challenges raised.
Ms Manopole said that the progress report the Acting Chairperson had mentioned had been forwarded only to him, so she could not note a progress report that she had not seen. They needed to make a recommendation on the procedural flaw. She recommended that they advise the province to resubmit the intervention process. She asked if they should conduct an inspection in loco before they asked for the resubmission.
Mr Mhlanga said that they should render some advice to the Kannaland Municipality and then wait for the resubmission.
Ms Manopole said that when the Committee went to Makana Municipality previously, some flaws had been picked up. She said that nullifying the report and conducting an inspection in loco would cause problems, based on the past approach taken.
Mr Chetty said they could not regularise an irregular act, and agreed with Ms Manopole.
Ms Engelbrecht asked the content adviser what the difference was between a section 139(5) and a section139(6), as both of them were mentioned in the documentation.
Mr Mfuku replied that section 139(6) was not an intervention but a procedural matter that followed the section 139(5) intervention. It was hence a procedure.
The Acting Chairperson commented that the Members were noting the report on the intervention. The notice for intervention had been submitted late, and based on that the Committee would compile a report highlighting all these matters to the NCOP, recommending that the NCOP write formally to the provincial government of the Western Cape. He was advised that the report would be tabled at the following meeting.
The meeting was adjourned.
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