Izinduna unfunded budget, with COGTA Minister

NCOP Finance

12 February 2019
Chairperson: Mr C De Beer (ANC; Northern Cape)
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Meeting Summary

The KwaZulu-Natal Finance MEC briefed the Committee about the Izinduna budget in the presence of COGTA Minister. The initial audit confirmed that KZN has 3 100 Izinduna. The issue at stake is that following the President’s proclamation in 2014, Headmen were to be remunerated on a salary of R80 875 backdated to April 2013. With no Treasury certificate, this has remained an unfunded mandate. This is made worse in KZN where the traditional authority is distinctively different from other provinces and has a plethora of Inkosi, Izinduna, Amakhosi and other traditional authorities. Numerous pleas to national government to relieve the province of the burden of paying for this unfunded mandate has fallen on deaf ears. As a result, the province is paying R334m per annum and yet the back pay portion as yet unpaid is over R1.1 billion. It has to be noted that the KZN legislation of 2005 states that Izinduna are voluntary. To fund the payment of Izinduna, money is being cut from Education, Health and Transport budgets in KZN which is now impacting on service delivery.

Members urged COGTA, National Treasury, and the Judiciary to work together to put forward a framework that can incorporate all the issues to assist the Committee. Amendment legislation is needed. Others raised the alarm that the back payment is a very serious matter because these people have expectations that they are owed that. This is a time bomb we are sitting on that will surely explode one day.
 

Meeting report

The Chairperson said the remarks, made in previous meetings by the KZN MEC of Finance about the unfunded mandate for the payment of Izinduna that KZN Province has to pay out of the provincial fiscus with no additional allocation from national government, have to be taken seriously. The Committee is wrapping up its work in the Fifth Parliament as the NCOP will adjourn on 29 March 2019. On 28 March 2019, it will deal with the Division of Revenue Bill in the NCOP plenary. The content of this meeting will form part of the Legacy Report that will guide the next NCOP members of the Select Committees for Finance and Appropriations. He hoped members have received the documents to be deliberated upon today from the provincial Department of COGTA KZN which at its core is the history on the matter of Izinduna. Today’s meeting is work in progress that has being discussed at the national Budget Council and Budget Forum which are structures of the Minister of Finance. Today we have to know where we are at and plot a way forward. Having read the documents, there is an Inter-Governmental Relations Act and it is not a nice thing to learn that one sphere of government has taken another to court.

Izinduna budget: KZN Finance MEC briefing
Ms Belinda Scott, KZN MEC for Finance, declared that the issue at hand is not only the remuneration of Izinduna but the whole pact of unfunded mandates of which Izinduna is just one of three. Other matters relating to the traditional sector will be handled by the COGTA MEC and include unfunded mandates for the implications of the Traditional Courts Bill as well as the tools of trade. An additional matter is the DPSA levies dealing with a higher quality of service to civil servants that had to be implemented by the province; for that alone the province had to spend R6 billion of money that it does not have. She gave a background to the issues at stake.

Background
- The first Presidential proclamation was signed in February 2014 that lzinduna should be remunerated
- While this proclamation was signed by the President that determined the amounts the lzinduna should be remunerated, no funds were added to the provincial fiscus to pay for this
- The remuneration of Izinduna is thus an unfunded mandate
- All efforts to secure funding for this unfunded mandate from the national fiscus have failed, and seems that the province is expected to deal with this unfunded mandate from within the provincial fiscus which has placed a great burden on KZN, especially in view of the fact that KZN has lost a cumulative amount of R32bn in equitable share funding over the past seven years (partly due to data updates on the equitable share formula and partly due to National Treasury's fiscal consolidation plan).
- Subsequent to the announcement of the recommendations of the Independent Commission on the Remuneration of Public Office Bearers in August 2011, letters were addressed by the KZN MEC: COGTA to the Chairperson of the Commission (then Judge Seriti), and by the Premier to the President, requesting the President delay the signing of the determination due to the fact that KZN did not have the funding available to pay lzinduna the recommended amount
- In October 2012, a meeting to clarify the KZN challenges about lzinduna was held in Pietermaritzburg between the then Premier (Zweli Mkhize), MEC (Nomusa  Dube-Ncube) and a delegation from the Independent Commission on Remuneration of Public Office Bearers, led by Dr Pearl Sithole. The result of this meeting and letters written by the Province was that the 2011 recommendations by the Commission were not approved and the determination of the salaries of lzinduna was not made by the President
- Between October 2012 and 2014, the Province engaged in the process of clarifying the category of lzinduna in question, which is lzinduna zeziGodi. KZN conducted an initial audit at the time which confirmed 3 100 such lzinduna
- On 18 February 2014, the President, following recommendations made on 18 December 2013 by the Remuneration Commission, issued Notice No. 9 of 2014 in the Government Gazette in accordance with the provisions of the Act, stipulating that Headmen must be paid an annual salary of R80 875, backdated to 1 April 2013
- For KZN's 3 100 lzinduna, this translated into R246m, whereas KZN had only budgeted approximately R32m to cover a stipend of R1 300 per month to the 2 100 lzinduna who serve on Traditional Councils and a R200 reimbursement allowance for other members of traditional councils for attending quarterly meetings
- The determination was later reduced from R80 875 to R79 364 applicable from April 2013, which meant that KZN had to budget an amount of R246m from April 2013

Impact on Provincial Budget
Despite numerous pleas for assistance, and even lodging an inter-governmental dispute, no financial assistance has been forthcoming to assist the province with this unfunded mandate of R333.8m per annum, and the backpay portion of R 1.1 bn (which has not been paid due to the inability to afford this amount)

The backpay amount has been recorded in KZN COGTA's books as a contingent liability and, as this amount is nearly equivalent to the department's annual budget, the Auditor-General raised this as an audit finding due to the threat this amount poses on the department's going concern status

The remuneration of the lzinduna has had a severe impact on KZN's budget:
- The decision taken was to fund this bill by expecting KZN COGTA to pay 50% of the amount by reprioritising funds from within their budget.
- The balance of 50% was proportionately cut from all remaining budget votes with Education, Health and Transport bearing the brunt of the cut.

Ms Scott said that the first presidential proclamation that Izinduna should be remunerated was signed in February 2014 and it also determined the amount they should be paid. The proclamation talks about Headmen but the crux is that the proclamation of Izinduna in Zulu law is very different to the Headmen in the proclamation. For historical purposes, the actual proclamation does not talk about the Izinduna but rather Headmen. Many provinces have Headmen but not KZN and these Headmen have been paid historically since 1994. KZN never had Headmen and when this proclamation was made the province was not concerned because it did not apply to KZN because they never had Headmen. When the proclamation came out, the Izinduna wanted to be paid this money. It was then that the province started a program to identify who Izinduna are from the perspective of finance. It has been very difficult because there was no fixed number because the Amakosi can hire or fire Isinduna at will.

COGTA then had to undertake a verification exercise only to discover that some of the purported Izinduna did not exist, some had died and some are employed in the public service as teachers, policemen and some were even business people. It was a more difficult process than was anticipated. This is a very big issue in KZN because over 3 000 people who have never had a salary were identified as Izinduna in KZN. The cost of paying them since December 2016 was prohibitive. After working out what they have to be paid in 2017/18 financial year, the only way they could be paid a little was by splitting the payment 50/50 between COGTA and other departments. The problem now is that KZN faced cuts of up to R500m from its 2018 budget allocation. This has been debilitating and is now impacting on service delivery. The monetary value of the unfunded mandates is massive. The province was told that it had to pay the Izinduna through legislation passed by Parliament and this has now automatically created an expectation. These pieces of legislation are unconstitutional because they do not have Treasury certificates.

Ministry of Cooperative Governance and Traditional Affairs comments
Dr Zweli Mkhize, COGTA Minister, stated that he met this issue many years ago when he was the KZN Premier. The then Minister of Finance when confronted with this issue, wrote a letter to the Commission judge reporting that it paying Izinduna was challenge to the fiscus. The COGTA Minister of COGTA at the time did a submission that the matter could proceed. A list comprising of 7 500 was added to the payroll on the basis that they were all Izinduna after some pressure groups threatened to take the matter to court. The mechanism for determining appointment, monitoring, dismissal and supervision was not looked at strongly so when the letter came from KZN, the matter was brought to the Ministers of Finance and COGTA to find a way to deal with it. The Minister of Finance responded in writing that there were pressures to the fiscus but never came to the judge to offer any additional funding. The COGTA Minister then took the matter further by stating that although the proclamation has been issued, from where would the funding come? The situation is such that we all know the constraints of the province but everyone seems powerless because of the constraints to the fiscus. The point now is that although the determination cannot be legally faulted, administratively there ought to be an arrangement to pronounce on the additional resources that are needed. The matter still needs to be revisited at this top level.

When there was a bargaining chamber agreement, an increment was determined but all the provinces were told to find their own way to deal with it. It is now become a situation where provinces have the additional burden of having to find the resources themselves. This meeting honestly cannot come up with any solutions but it will take a pulse of the outcry happening on the ground. The problem when dealing with national finance is that if you have to deal with something like this, the money has to be taken from another department’s budget to fund it, and this cannot be determined at this meeting. The most important outcome of this meeting is for the Committee to be able to outline in their report the constraints. It is important for the COGTA and the Finance Ministries to sit and iron out the important elements of this issue.

Deputy COGTA Minister, Obed Bapela, added that KZN COGTA has consistently raised the matter unlike other provinces that seemed to have found some solutions on their own. KZN has massive number of people, over 3 000, who are affected, unlike other provinces that have relatively few headmen to deal with. He agreed with the Minister that an engagement between the Finance and COGTA Ministries will go a long way in finding resolution as the bills will keep climbing higher, the more it is delayed.

KZN COGTA MEC comments
Ms Nomusa Dube-Ncube, KZN COGTA MEC, said that when the proclamation was issued, it was thought that KZN also had Headmen like other provinces. Indeed, KZN had Headmen who were inherited from the Eastern Cape when that part was ceded to KZN. When the judge looked at each province there was the name Headmen for every province. When the Headmen from Eastern Cape came into being in KZN, there was the expectation that they were already paid as all other Headmen in the Eastern Cape. It has to be noted that the KZN legislation of 2005 states that Izinduna are voluntary. Comparing that legislation to the national one, and then looking at the various categories of institutional traditional leadership, one can see we have the Kings, the senior traditional leaders and different leadership institutions. This is what got conflated in the process and the judge said all provinces have Headmen and should continue to be paid an amount that was determined by them as well.

Ms Dube-Ncube said it was then that the matter was raised by KZN in Parliament and with the Minister at the time to relook at the issue because KZN does not have Headmen except the 26 inherited from the EC who have continued to be paid. It was then that an inter-governmental dispute was declared with the then Minister who is now the Minister for Public Enterprises. It must be noted that the national legislation also determined how they arrived at the title of a Headmen. It had to be through family tree, there must be a recognition process but that is not the case in KZN as that only applies to senior traditional leadership. With Izinduna in KZN, there is no family tree but merely appointees by the Amakosi and they could at any time be dispensed with as well. That is why KZN ended up with Izinduna that are teachers, policemen, business people who are all voluntary. We have raised the issue at Parliament that whenever they look at the traditional institutions, they have to remember that the Constitution clearly states that each of the traditional customs and traditions are distinct and must be noted. Therefore one piece of legislation cannot be applicable to all traditional customs in SA.

Minister Mkhize clarified that the matter involved way more than the Ministers and that it is not their fault because it is very complex and has to be noted that the determinations are law.  In the past, Izinduna used to be part of a local government structures pre-1994 which no longer applies so there are variations in terms of responsibilities. Adding to the complicated political dynamics is that in the same space, the new local government structure will add a councillor everywhere there is an Inkosi. To try and equate Inkosi and a councillor is huge politics in the area because in terms of the communities, Inkosi is senior but in terms of the legislative authority, the councillor is the one that sits. This complicates matters in that when traditional authority is taken into account, the councillor is subject to the Inkosi but in municipal council, Inkosi has no status because they come in as a traditional house that only has advisory powers. Then the municipal council is a set of ward committees whose status in the community’s eyes is the same as the Indunas. What we have to try and do is synchronise all these structures. The Izinduna are not the lowest structure in the traditional hierarchy. Below them are Amapolisa who act almost as court messengers.  This matter is very complex and changing the various dynamics will be difficult because we are trying to align two institutional frameworks that are not necessarily compatible. The Minister pleaded for a bit of patience while government will do what it can to resolve the issues. We are only talking about Izinduna and not the next layer above which is the kingships. Eastern Cape does not want to talk to COGTA because they feel that the Department is making things easy for other provinces and more difficult for them. Eastern Cape has six kings and a few others are in dispute. Limpopo also has the same issues. It is quiet for now because there are court cases in motion but after those cases are decided, these matters are going to return the Department’s desk. In a nutshell, the role of the headmen as traditional leaders is primarily concerned with the development of the communities in traditional areas, and they have a big role to play in representing traditional people in government and in delivering services to the rural communities.

KZN Finance MED, Ms Scott, agreed that this matter is very complex and wanted the Minister to discuss the way forward on the unfunded mandate with the MEC. There are to be the traditional courts of law and the tools of trade and they will come with a huge price. These are all potential unfunded mandates and the presence of the Minister here today is a great assistance. This unfunded mandate is difficult because of the number of Amakhosi that KZN has.

Discussion
Mr T Motlashuping (ANC, North West) said that when he read the documents he thought it was an easy matter but after the Minister explained the complexity of the matter, he realised how deep the crisis is. Some of the issues raised here needs COGTA, National Treasury and the Judiciary to work together to put forward a framework that can incorporate all the issues, then this Committee will do facilitation. This problem cannot remain unresolved knowing that it has being in the works since 2014. He proposed a framework be established as a first step. Legislation is urgently needed to limit the number of Amakhosi to be appointed.

Mr J Mthethwa (ANC, KZN) said the issue is a boiling one. It is worrying because of the time left for this Parliament to rise for the elections and then probably a new Minister, unfamiliar with the issues, might take over in the new Parliament and everything will start afresh again. This matter needs to be put to the attention of the national ministries for a thorough discussion as a matter of urgency. The Office of the President should also be made aware too. Some of the problems in KZN were decisions made by the Presidency and this matter cannot be resolved without its involvement. The back payment is very serious indeed because these people have already started counting that they are owed so much. This is a time bomb we are sitting on that will surely explode one day.

Mr M Monakedi (ANC, Free State) proposed in the interim for COGTA and National Treasury to come together to find a solution to the unfunded mandates. It is understood that KZN Provincial Treasury is under pressure to find the money to pay for these unfunded mandates at a time when money is tight. Minister Mkhize should be given the opportunity to look into the matter properly, and hopefully they can come up with legislation that will ensure that identification of traditional leaders, headmen, their numbers, affordability, who appoints Izinduna and headmen, the members of traditional council and all other issues raised today can be dealt with. This should be part of the long term strategy.

In summation, Ms Dube-Ncube, KZN COGTA MEC, welcomed the input from Members and urged them saying that this matter needs urgent attention because it cannot be left on the back burner forever. What is needed is movement towards amending legislation that deals with the matter; this is what needs to be done. With the leadership of the Minister and Members present here today, we need to move, clarify and amend and clean up the necessary legislation to move forward. The matter of the Traditional Courts Bill raised by Finance MEC Scott should also not be forgotten because it creates more cost implications from court secretaries to judicial court members, advisers, paralegals and many others. It begs the question whether Members of Parliament apply their minds when they come up legislation? This is important because of the financial pressures the country finds itself in. Here we are talking about what used to be a voluntary community system but now we have ward committees who want to be paid. How can you pay Induna when a ward committee is not paid?

COGTA Deputy Minister Obed Bapela said that as a country, choices were made at the time of the negotiations and we came up with a constitutional model of a representative and participatory democracy. We have embraced this model and we have to find the mechanism to make it work despite the challenges. The Traditional Courts Bill is still with the Portfolio Committee of Justice and has not yet gone to the National Assembly and NCOP. The issues raised by yourselves today will be communicated to Members when it comes to the NCOP. The fiscus is challenged now because the economy is not growing.

The Chairperson thanked everyone for their contribution and stated that these will be captured in the Committee Report. He said Minister Mkhize is well positioned in this portfolio seeing that he was the KZN MEC for Finance, then the KZN Premier and now COGTA Minister. The Minister has the knowledge and expertise and institutional memory on this matter. He reminded Treasury staff present that the budget process in Parliament will start in June and when the new Parliament is inaugurated after the elections, and the issues raised here today should not be forgotten.

The meeting was adjourned.

 

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