Committee Report on Joint Oversight Visit of KwaZulu-Natal & Eastern Cape

NCOP Cooperative Governance & Traditional Affairs

06 November 2018
Chairperson: Mr S Mthimunye (ANC, Mpumalanga) (Acting)
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Meeting Summary

The Committee Researcher and the Committee Content Adviser provided the Committee with insight into section 139(1)(b) interventions  in three municipalities: Enoch Mgijima Local Municipality, Great Kei Local Municipality and Uthukela District Municipality. This was done in anticipation of the Committee undertaking an oversight to the three municipalities the following week. Members were provided with specifics on the challenges that each of the Municipalities faced which ultimately had led to the section 139(1)(b) interventions. In all three Municipalities Administrators had been appointed. A common theme amongst the municipalities was that there was financial mismanagement or a lack of financial management, municipalities had a narrow revenue base and that expenses far exceeded revenue. It went without saying that service delivery at the Municipalities suffered. Members were also informed that the merging of municipalities had also not helped matters. It would seem that the realignment of municipalities by the Demarcation Board was problematic and the merged municipalities were collapsing. 

The Acting Chairperson observed that the Committee seemed to take the same position on the matter as the provincial executive of provinces. Members pointed out that on previous section 139(1)(b) interventions that the Committee had dealt with the chief whip had instructed the Committee not to intervene. The Committee was told not to disagree with provinces. The Acting Chairperson asked to what extent had the Municipalities been supported and what had respective Provincial Departments of Cooperative Governance and Traditional Affairs (DCOGTAS) done thus far. Members asked whether the mergers were the cause of municipalities going under. Members felt it important for the Committee to look into the implications of municipalities merging. It could be done in the form of recommendations or a report which would be useful for the new Committee in the sixth parliament to use as a basis to do a follow up on. All mergers that had taken place should be looked at. The success of the mergers should be evaluated. Members felt that the Committee needed to meet with the Demarcation Board over the matter of mergers. Members should also consider success stories where section 139(1)(b) interventions had worked. It was evident that financial mismanagement was a huge problem but yet Municipal Managers and Chief Financial Officer (CFOs) of the Municipalities concerned were not held accountable. It was common at problematic municipalities for the municipal manager and top management to simply move on to other municipalities after making a mess. There was simply no accountability. The Committee needed to raise the matter of accountability with Members of Executive Councils (MECs) and with the Minister of Cooperative Governance and Traditional Affairs. Members pointed out that the roles of provincial portfolio committees seemed to be non-existent on the matter at hand. What role had provincial portfolio committees played? Provincial portfolio committees ought to be doing oversight at provincial level. In the sixth parliament the role of provincial portfolio committees should be more pronounced. Nor was anything heard about oversight structures of municipalities. The Acting Chairperson pointed out that there were portfolio committees at local level too. He noted that municipalities were collapsing under their watch. Was there perhaps a policy gap on the powers and functions of these portfolio committees? If there was a policy gap then it should be addressed. Members felt that the Committee could not be expected just to rubber stamp things. There was a need to relook at how governance at rural areas was assessed. Rural area municipalities should not be assessed using the same criteria as was used to assess urban area municipalities. There was also a need to revisit the manner in which these types of municipalities were run. For one, people with the right skills should be incentivised to take up positions in these municipalities. Members highlighted the importance of the Committee going through Municipal Systems Act section 47 Performance Reports of the Municipalities concerned. Members added that revenue collection could only take place if proper by-laws were in place. Perhaps there were policy gaps too. Members noted the importance of hearing what MECs had done on the circumstances which the Municipalities found themselves in.  MECs had to brief the Committee on what they had done. It was only when efforts by MECs had failed was section 139(1)(b) interventions invoked. Members also felt that it was the failure of MEC committees in doing their work that had also caused the Municipalities to collapse. It was not the mergers. Members proposed that the Committee hold MECs accountable for work which they should have done. The Committee Researcher and the Committee Content Adviser were asked to draft an addendum to issues that members had flagged.

Meeting report

Election of Acting Chairperson

In the absence of the Committee Chairperson, who was off sick, the Committee elected Mr S Mthimunye (ANC, Mpumalanga) as Acting Chairperson.

Consideration of Joint Oversight visit to Eastern Cape and KwaZulu-Natal Provinces

The Committee Researcher, Mr B Mahlangeni, and the Committee Content Adviser, Mr Nkosama Mfuku, were tasked with providing the Committee with insight into section 139(1)(b) of the constitution interventions  at Enoch Mgijima Local Municipality and the Great Kei Local Municipality in the Eastern Cape Province as well as a section 139(1)(b) intervention at the Uthukela District Municipality in the KwaZulu-Natal Province.

The Committee intended to undertake an oversight visit to the Municipalities the following week.

Enoch Mgijima Local Municipality (Eastern Cape Province)

Mr Mahlangeni stated that the Municipality was in financial trouble and could not pay its debtors. The assets of the Municipality had been seized by the messenger of the court and been sold off. The Municipality could not run its own business. It had not prioritised its expenditures. The Municipality had become dysfunctional because of financial mismanagement. The Provincial Department of Cooperative Governance and Traditional Affairs (DCOGTA) and the Municipality were at odds and were in disagreement. The Municipal Manager of the Municipality was a law upon himself and had an attitude when it came to accountability. The Municipal Manager had gone so far as to take the Provincial DCOGTA to court to interdict it from intervening in the affairs of the Municipality. The Municipal Manager had gone to court without the permission of the Municipal Council. The main problem was the Municipal Manager’s resistance to the section 139(1)(b) intervention. The Municipal Manager had even approached the mayor of the Municipality to come up with another approach other than the section 139(1)(b) intervention. There was no working relationship between the Municipal Manager and the Administrator that had been appointed to oversee the running of the Municipality.  Another problem identified was the implementation of the merger of municipalities that had taken place. Where was the implementation plan? It seemed to be non-existent.

Great Kei Local Municipality (Eastern Cape Province) 

Mr Mahlangeni stated that the Municipality was small. It had a narrow revenue base. The Municipality found it difficult to cover its staff wage bill. The Municipality employed too many people. The salary bill was around R3m a month. No Municipal Manager had been appointed. There was a school teacher acting as the Municipal Manager who had no knowledge of local government. On revenue, the Municipality could not even collect revenue to the tune of R1m. It was thus evident that the salary bill was way more than revenue collected. He said that the Municipality was a sinking institution. Why was there so many staff? What was the skills profile of employees? The Municipality had a problem with service delivery. Residents had lodged complaints around service delivery. The problem was that revenue collected went towards covering salaries which meant that service delivery suffered. The Municipal Systems Act required that municipalities should adopt financial management. The Municipality was also under Administration and the intervention was working. The issue at hand was around the quality of support from the Province versus the quality of the skills of the Municipality. There was yet to be a successful intervention in the Eastern Cape Province.

Mr Mfuku added that the merging of municipalities also did not help. The municipalities that had merged were having problems. The realigning of municipalities by the Demarcation Board was problematic. The merging of municipalities was not working. What was the reason for the mergers? Financial viability was part of the reasoning of mergers but the merged municipalities were collapsing. He suggested that the Committee meet with the Demarcation Board and get to the bottom of the realignment issue. He noted that the Enoch Mgijima Local Municipality had before the merger received an unqualified audit report from the Auditor General of SA but after the merger it had gotten a disclaimer.  

Uthukela District Municipality (KwaZulu-Natal Province)

Mr Mfuku said that the Municipality could not fulfil its executive obligation. An Administrator had been appointed to take over the running of the Municipality. He pointed out that the Municipality had received an unqualified audit report from the Auditor General of SA. The Auditor General had raised five issues. The first of which was that the liabilities of the Municipality exceeded its assets by R2.3m. Secondly that procurement processes had not been followed to the tune of R200 000 in unauthorised expenditure. The third matter was around the Municipality incurring more than R153m in losses related to reckless unmetered connections on water. The fourth was that the Municipality had an institutional shortage of skilled staff and that vacant positions were not filled. The fifth issue was around basic service delivery in that there were huge backlogs, there was ageing infrastructure, poor maintenance of infrastructure, that Municipal Infrastructure Grants (MIGs) were not spent and that there were issues around water quality.

Discussion

The Acting Chairperson observed that the Committee seemed to take the same position as the provincial executive of provinces. To what extent were the Municipalities supported and what had been done thus far by the Provincial DCOGTA?

Mr G Michalakis (DA, Free State) said that it was important to take into regard those who were independent from Provincial Governments and the Executive. He suggested that it would be a step in the right direction for the Committee to hand over to the next Committee in the Sixth Parliament something around the implications of the merging of municipalities. It could be in the form of a report or recommendations. All mergers that had been done should be looked at by the Committee. Members should consider the success rate of mergers and if not succeeding why it was so. The report would shed light on those mergers that were not viable. Members needed to see section 139(1)(b) interventions that worked. Financial management seemed to be the problem with the problematic municipalities. He was concerned that people in municipalities like municipal managers and Chief Executive Officers (CFOs) were not held accountable. When municipalities ran into trouble it was common for municipal managers and top staff simply to move on to other municipalities. There seemed to be no consequences. He gave an example of one of the worst run municipalities in the Free State. The municipal manager had previously been the administrator of a municipality under administration. As administrator he had run the municipality into the ground. He reiterated that there seemed to be no consequences. The Committee needed to raise it with Members of Executive Councils (MECs) and with the Minister of Cooperative Governance that people needed to be held accountable.

Dr H Mateme (ANC, Limpopo) was concerned that the Committee was becoming a portfolio committee of provinces. She asked what the role of provincial portfolio committees were. The provincial portfolio committees should do oversight at provincial level. Nothing was heard of provincial portfolio committees. In the Sixth Parliament the role of provincial portfolio committees should be more pronounced. Nothing was also heard of oversight structures of municipalities. The Committee could not just be expected to rubber stamp things.

The Acting Chairperson asked whether it was felt that mergers were the cause of municipalities going under. Were mergers the cause? He pointed out that there were committees at local government level as well. Municipalities were collapsing under their watch. Was there perhaps a policy gap on the powers and functions of these portfolio committees? The Municipal Systems Act was to be amended. The policy gap should be identified.

Dr Y Vawda (EFF, Mpumalanga) noted that 50% of SA’s population lived in rural areas. Urbanisation was however growing. There seemed to be a focus on what was happening in urban areas. He felt that there was a need to relook at how governance was assessed in these types of areas. These municipalities in predominantly rural areas could not be assessed using the same criteria as was used for urban area municipalities. If a municipality could not run itself then there had to be a government intervention. If not them problems would persist. There was a need to revisit the manner on how municipalities were run. Municipalities needed to have people with the required skills. There should therefore be proper incentives to attract the right people.

Ms G Oliphant (ANC, Northern Cape) said that given that the mergers of municipalities had been done at the behest of the Demarcation Board, it is necessary for the Committee to meet with them so that light could be shed on the matter. The Committee needed to look at the impact that these mergers had. Water was another matter that the Committee needed to consider when it came to municipalities in rural areas. She could not grasp how municipal managers in these problematic municipalities could do as they pleased. It was totally wrong. Chairpersons of portfolio committees of provinces and MECs should be part of discussions. 

Mr M Mhlanga (ANC, Mpumalanga) stated that the Committee needed to go through the Municipal Systems Act Section 47 performance reports of the Municipalities. The issue was around what needed to be done by provinces. There was no need for the Committee to rubber stamp things. He noted that in previous section 139 (1)(b) interventions that the Committee had dealt with the chief whip had instructed the Committee not to intervene. The Committee was told not to disagree with provinces. The Committee needed to scrutinise interventions. It would be difficult for the Committee to make decisions without looking at Municipal Systems Act Section 47 performance reports of the municipalities. He also pointed out that revenue could not be collected by municipalities if there were no proper by-laws in place. Did the municipalities in question have proper by-laws in place? He felt that perhaps there were policy gaps.

The Acting Chairperson asked the Committee Researcher and the Committee Content Adviser to draft an addendum to issues that members had flagged. The Committee was pushed for time and could not entertain responses. The Committee would the following week undertake oversight visits to the concerned municipalities.

Mr J Mthethwa (ANC, KwaZulu-Natal) stated that the Committee needed to hear what MECs had done over the Municipalities. It was only when efforts by MECs had failed were section 139(1)(b) interventions undertaken. The Committee had already gotten notice of intention from MECs. MECs had to brief the Committee on what they had done. Provincial governments had to deal with matters. The oversight visit to the Municipalities was for Members to observe what MECs had done to remedy the situation. There was no need to endorse if the intervention was to work. He felt that it was not necessarily the merging of municipalities that were causing the failure of municipalities. It was the MEC Committees that had not done their work which caused municipalities to collapse. It was not the merger. He proposed that the Committee hold the MECs accountable for work which they should have done.

The Acting Chairperson pointed out that district municipalities supposed to support local municipalities. He asked that the addendum be provided to the Committee.

Mr Mahlangeni said that the addendum would be compiled and that members’ issues would be responded to. He explained that when municipalities merged there was a committee in place to oversee the merger and that a plan for the merger was also in place. When mergers took place there needed to be revised budgets, revised manner of support etc. There was weak oversight by local government. He noted that district municipalities were important but the problem was that they lacked capacity. There was a need for the Municipal Structures Act to be amended. Why was it necessary for a local municipality to request to get assistance?

Mr Mfuku added that section 139(1)(b) of the constitution was to be used as a last resort after all other efforts were exhausted. Role-players such as provincial portfolio committees and MECs etc all had their roles to play in trying to fix things. Section 154 of the Constitution required that provinces and national government should support municipalities. In the Committee’s legacy report it should be reflected that there were instances where section 139(1)(b) interventions had been successful. He provided an example of a municipality in the KwaZulu-Natal Province where a section 139(1)(b) intervention had worked. 

The meeting was adjourned.

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