Municipal Systems Amendment Bill: deliberations

Meeting report

LOCAL GOVERNMENT AND ADMINISTRATION SELECT COMMITTEE
8 October 2003
MUNICIPAL SYSTEMS AMENDMENT BILL: DELIBERATIONS

Chairperson: Mr B Mkhaliphi (ANC) [Mpumalanga]

Relevant documents
Municipal Systems Act of 2000
Municipal Systems Amendment Bill [B49B-2003]

SUMMARY
Members sought clarity on who exactly would assess the performance of the municipality in Clause 6. The Committee expressed concern that Clause 8 was not worded tightly enough because it did not prevent corruption, as it did not allow approval of the bonus by the municipal council. The Department explained the history of the provision and the political decision taken in the Portfolio Committees, which resulted in the current formulation in the Bill. The Committee proposed an amendment which would ensure the municipal council approved the payment of bonuses. Members asked whether the current wording of Clause 12 included all municipal services. The Committee disagreed with the inclusion of the proposed section 93D(1)(a) in the Bill, and suggested that it be removed.

MINUTES
Municipal Systems Amendment Bill
The Chair requested the Department to inform Members of the progress made on the proposed section 93D, as discussed in the previous meeting.

Dr P Bouwer, Department Director: Legal Services, said that he did not pursue the concerns raised by Members any further, because it was not the Department's position but rather a political decision taken by the Finance and Provincial and Local Government Committees.

The Chair read the Motion of Desirability, which was agreed to by Members. He stated that the Committee would now engage in the clause-by-clause consideration of the Bill.

Clause 1
Ms Gabi Gumbi-Masilela, Department Chief Director: Infrastructure and Development Planning, stated that this clause introduced new definitions to the Municipal Systems Act of 2000 (the Act), and took Members through the definitions.

Ms J Kgaoli (ANC) [Gauteng] said that the use of the term "parent municipality" remained a concern, and asked whether Dr Bouwer could not insert a different term.

The Chair reminded Members that the Department stated during the previous meeting that this was a term well established in corporate law, and that a very similar structure was being created within the municipality in the Bill.

Kgoshi M Mokoena (ANC) [Limpopo] said that the Department did not take up the Committee's mandate to propose a different wording at this meeting. Although the Committee did not agree with the term "parent municipality", the Committee would however accept the term as it stood in the Bill.

Dr Bouwer stated that "section 86L" in the definition of "service utility" should actually read "section 86H", because it was the proposed section 86H which dealt with the establishment of service utilities.

The Chair noted that Members agreed with Dr Bouwer.

Clause 2
The Chair sought clarity on the implications of the proposed section 9(2)(a)(i).

Dr Bouwer responded that Section 214 of the Constitution dealt with the Division of Revenue Act, which was passed annually. Thus if a provincial government was transferring a function to local government for which it received funding in terms of its equitable share, this would have an impact on the amount of money that the provincial department would receive in future. As this service was now to be rendered by another sphere of government, in this case local government, that money should then be routed to local government. This provision thus indicated the implications of the assignment on the future division of revenue.

The Chair asked whether the allocation would go to the specific allocation or to the municipal entity itself.

Ms Gumbi-Masilela replied that the function would have to be performed by the municipality, and the allocation would then be made to it. The delivery vehicles would be an internal mechanism within the municipality.

Dr Bouwer added that this provision had nothing to do with municipal entities but merely "firmed up" the provisions aimed at avoiding unfunded mandates, by establishing a process which had to be followed when new mandates for the municipality were created.

Clauses 3-5
The Chair noted that no questions were raised with these clauses.

Clause 6
Kgoshi Mokoena asked who exactly would be assessing the performance of the municipality.

Dr Bouwer replied that the municipality's entire performance management system was currently provided for in a separate chapter in the Act. Section 45 of the Act stipulated that the result of performance measurement must be audited, and this report would also form part of the overall reporting requirements spelt out in the Municipal Finance Management Bill. He stated that the audit would thus indicate what had or had not been achieved, and these would all be public documents.

Ms Gumbi-Masilela added that the municipal council's executive committee would probably assess the overall performance, in line with the audit requirements. These persons would judge both the financial and non-financial performance of the municipality, and both these would be covered in the report.

Clause 7
The Chair noted that no questions were raised with this clause.

Clause 8
Kgoshi Mokoena questioned the need for granting performance bonuses to those municipal managers, when they were already paid such exorbitant salaries.

Ms Gumbi-Masilela replied that the municipal managers were paying themselves these bonuses in any event, without proper assessment or motivation for receiving these bonuses. The Bill now required the payment of the bonuses to be linked to the assessment of the actual performance of the municipality, as well as to the performance of those officials in accordance with their own performance agreements.

Mr R Nyakane (ANC) [UDM] stated that it was not sufficient to simply link the payment of bonuses to the performance of the municipal managers, because performance was a relative term and did not connote any degree of excellence. Exceptional performance could perhaps warrant a bonus.

Mr P Maloyi (ANC) [North-West] stated that he approved of the proposed section 57(4B), because it did tighten up the system. He sought clarity on the difference between this bonus, the thirteenth cheque and the cheques received on their birthday.

Adv Kholong, Department: Local Government Institutional and Administrative Systems, replied to these questions by stating that they were all considered bonuses, but were simply packaged differently.

Ms Gumbi-Masilela added that the thirteenth cheque was part of the birthday package, and the bonuses were provided for in terms of the Basic Conditions of Employment Act. She stated that each company or organisation determined the percentages of bonuses to be paid to managers, and would clearly spell out the criteria which had to be met in assessing the performance.

Ms N Kondlo (ANC) [Eastern Cape] asked whether this provision would incorporate the salary structure revision undertaken by the Department of Public Service and Administration in the two other spheres of government.

Adv Kholong said that government was currently engaged in a Single Public Service programme, which sought to effect this kind of alignment around conditions of service, amongst others. He stated that some of these provisions would definitely be looked at when the stage was reached at which the Act would have to be reviewed.

Mr L Lever (DA) [North-West] asked who exactly would be evaluating the performance of the performance of these officials. The situation must be avoided in which the municipal manager and the managers under his supervision evaluated each other's performance, and then grant each other "cross bonuses". He asked whether the Department's intention was to require the Minister would regulate this matter via regulations, or should an objective criterion for evaluation would have to be dealt with in the Bill.

Adv Kholong replied that the principal here was that the mayor would evaluate the municipal manager, and the municipal manager would evaluate managers accountable to him. It was thus a system that cascaded downwards, and there was no "cross pollination".

Ms Gumbi-Masilela added that the spirit behind the amendment was that the municipal council would either setup a committee that would evaluate the assessment of the performance of the municipality as an entity, and would align this with the assessment of the managers. The municipal council would also set standards and norms to gauge exceptional performance in the form of percentages, instead of the inflated monetary figures. She stated that the problem with including it in the legislation was what exactly must be included, but the provision could be tightened if the Committee so wished.

Mr Lever stated that he accepted Ms Gumbi-Masilela point that an exhaustive list of the criteria to be used in the evaluation could not be included in the legislation. There was at least some demonstrable need for some standardisation here, because the political representatives must have a role to play in assessing bonuses. He stated that he would be satisfied if the Department promised to bring this to the Minister's attention for inclusion in regulation.

Ms Gumbi-Masilela stated that she noted Mr Lever's concern.

Mr Maloyi sought clarity on what would happen after the evaluation process by the municipal manager and mayor. He asked whether those officials would then immediately award those bonuses, or would their recommendations be forwarded to the municipal council for final decision.

Ms E Lubudla (ANC) [Northern Cape] asked the Department to explain the criteria that were used over the years to determine the bonuses to be paid to municipal workers.

Ms Kgaoli stated that the paying of bonuses to municipal managers was of concern, because they were already paid such huge salaries. She sought clarity on who exactly determined the salaries to be paid to municipal managers. This provision must be seriously considered by this Committee, given the experience with the Mafikeng municipality.

Secondly, she stated that she would be satisfied if a panel were to review the performance of the municipal managers, as granted this power to the mayor alone would open up the door for corruption.

Kgoshi Mokoena stated that the Committee's visit to the Northern Cape in May exposed the kinds of corruption in awarding these bonuses that had to be prevented in this legislation. He doubted whether the proposed section 57(4B) actually prevented this type of abuse, and requested that it be formulated tightly.

Ms N Kondlo (ANC) [Eastern Cape] agreed with Kgoshi Mokoena that the current wording of the proposed section 57(4B) did not prevent corrupt practices, and suggested that it even armed officials to perpetrate acts of corruption.

Secondly, Ms Kondlo stated that the Act stipulated that the municipality must publish the salary scales and benefits of municipal managers and officials before 31 October each year, and asked whether this was aimed at allowing the public the opportunity to disagree with the salaries and benefits.

Dr Bouwer replied to the Member's concerns by stating that Section 67 of Chapter 7 of the Act required the municipality to put in place a proper personnel administration system, which included the "monitoring, measuring and evaluating of performance of staff. He stated that the Act thus gave the municipality itself the responsibility of coming up with its own systems. In its context Clause 8 of the Bill dealt specifically with municipal managers, and Section 57 did require that a separate performance agreement be concluded annually. The bonuses dealt with in the proposed subsection (4B) would be paid under that performance agreement. Dr Bouwer stated that if one read Sections 57 and 67 of the Act together, the entire evaluation processes in each would complement each other.

He stated that the initial draft of the proposed subsection 4B, as it was contained in the Municipal Finance Management Bill, was not to the Minister's liking. During the deliberations in the Portfolio Committee discussions, Treasury insisted on a much tighter provision than was being proposed by Members today. Dr Bouwer stated, as a result of the political process in the Portfolio Committee and an understanding reached with the South African Local Government Association (SALGA), the formulation with "more loose wording" currently contained in the Bill was decided upon. The performance agreement read together with the Act would determine how this process would unfold, and would spell out who would be responsible for evaluating the municipal officials.

Dr Bouwer emphasised that the proposed subsection 4B did not really introduce the payment of bonuses, but it instead provided stronger regulation of this practice by stipulating that bonuses could only be paid at the end of the financial year and only after the evaluation of the official's performance.

Adv Kholong added that in 2001 the Minister published draft guidelines, which were further endorsed at the SALGA National Conference held in 2002.These guidelines essentially set out systems and mechanisms to be followed by municipalities on questions dealing with remuneration and bonuses, and how they were determined. This policy was supposed to be followed by all municipalities throughout the country. A committee would have to be setup by the municipality to evaluate the structure and challenges in the municipality, and would then decide on the appropriate remuneration to be afforded to the municipal manager.

He stated that there were very effective laws in place in South Africa which successfully combated corruption. The case referred to by Members involving the Mafikeng municipality was one such success, and the municipal manager was currently facing 42 counts of corruption. The Department has thus put systems in place to guard against such offences, and to deal effectively with obvious transgressions.

Adv Kholong emphasised the point stressed by Dr Bouwer that the proposed section 57(4B) tightened the system of remuneration and the award of bonuses. It would not be prudent to decide against the payment of any bonuses for municipal officials simply because there had been corruption in this area, as bonuses were also very important incentives for constant or improved performance. He urged Members to look broadly at the systems government had put in place that were aimed at discouraging corruption, as well as allowed municipalities to be effective in delivering services.

Ms Kgaoli said that the Committee was not against the payment of bonuses. A provision had to be included in this clause which referred to the Minister's pronouncement on this issue, as well as to the guidelines pointed out by Adv Kholong.

Mr Lever agreed with Adv Kholong that there were laws applicable here and also agreed that the proposed sub section 4B did tighten up the award of bonuses. Eighteen months had passed since the problem in the Mafikeng municipality was identified, 142 fraud counts had been lodged, the municipality was in a severe crisis which had resulted in functional bankruptcy as none of the municipal services were being delivered. He proposed that a sub clause be added to read "such evaluation shall be carried out by a representative committee of the council concerned", as this would then ensure a political overview of the bonus.

Ms Gumbi-Masilela replied that Section 66 of the Municipal Finance Management Bill contained its own requirements which required the municipality to report to the municipal council on payments such as salaries and benefits awarded to municipal officials. This provision clearly placed a responsibility with the municipal council to consider the amounts and agree or disagree with them, in line with the performance agreement. This would be included in the individual performance contracts of municipal managers.

Ms Kondlo stated that the municipal manager and mayor might even be at loggerheads, and the mayor could then decide not to grant the municipal manager a bonus even though he deserved it. She asked whether any provision was included in this Bill which guarded against this kind of discrimination, or which provided a grievance procedure.

Ms Gumbi-Masilela responded that the dispute resolution mechanism would also be contained in the individual performance contracts of municipal managers. She stated that, in the scenario sketched by Ms Kondlo, the municipal council would become the next conflict resolution mechanism. The guidelines could include a provision which required a Committee to conduct the assessment, and would then specify the procedures to be followed.

Mr P Matthee (NNP) [Kwazulu-Natal] asked whether the Constitution or any other piece of legislation would prohibit the evaluation of the municipality's performance at a provincial level, so that the performance of municipalities could be measured against each other. This would be an important early warning sign as it could unearth serious under-performance, which would be very important.

Ms Kgaoli proposed that the phrase "in terms of the guidelines set by the executive member" be inserted at the end of the proposed subsection 4B, which would refer to the Minister's guidelines mentioned earlier by Adv Kholong.

Adv Kholong said that this was "a chewable suggestion" except for the fact that guidelines were not enforceable, and it could thus not be inserted into legislation. He proposed that this matter be included as part of the Committee's Report on the Bill, so that the Department could consider the concerns raised by Members. The Corruption Act and the Prevention of Corruption Bill currently being processed by Parliament imposed a fifteen year sentence on the unlawful payment of bonuses that were not due. The proposed subsection 57(4B) thus had to be considered within the broader realm of the Act, and assured Members that this problem was currently being administered.

Ms Gumbi-Masilela added that Section 72 of the Act already allowed the Minister to provide guidelines on matters such as salaries and benefits, and asked whether Members would be satisfied that that provision sufficiently covered this issue.

Dr Bouwer added that the Act clearly stipulated that guidelines were not binding, and Chapter 7 of the Act was the only chapter in which Parliament deliberately split up the provision to set out matters which could only be done by regulation and those which could only be effected via guidelines. He stated that Ms Kgaoli's proposal would actually elevate guidelines to the status of regulations, which would contradict the approach adopted in the Act.

He said that the earlier wording of the proposed subsection 4B was worded much tighter, and it was on that basis that the Minister disapproved of the formulation. The earlier version of the provision stipulated that bonuses based on performance may be awarded to a municipal manager only after an assessment of:
(a) the official's performance against the audit report on the financial statements, and the report of the performance audit performed in terms of section 45(b); and
(b) the council's response to those audit reports

Dr Bouwer stated that this formulation was unacceptable to the Minister, and it was not included in the tabled Bill. The formulation was debated extensively in the Portfolio Committee and SALGA raised several concerns with this tighter approach, and the current formulation in the Bill was the result of those political deliberations. He stated that the tight formulation would not be acceptable to the Department, as a matter of Ministerial policy. This did not mean that the Committee could propose amendments.

He stated that an explanation of the origins of the Bill would provide clarification for Members. Originally the bulk of the Bill was contained in the Municipal Finance Management Bill, and that Bill only contained a schedule in which it amended a few minor provisions in the Act. An important policy decision was taken that provisions affecting local government should be amended via proper local government legislation, and via the correct channels. The decision was thus taken to separate all those provisions from the Municipal Finance Management Bill and process it as a separate Bill. Dr Bouwer stated that his references to "the original wording" was thus to the wording in the Municipal Finance Management Bill and, when those provisions were championed by the Department in the Bill, certain interventions occurred. He stated that it was in that context that the Minister was uncomfortable with the tight formulation proposed in the Municipal Finance Management Bill. The current wording was as a result of the political decisions taken in the Portfolio Committee, and was perhaps not as tight as the Treasury formulation. He stated that it was thus not a provision drafted by the Department.

Ms Gumbi-Masilela explained that SALGA's concern was that the same tight wording as was originally proposed was not applied to the other two spheres of government, but only to local government. This was related to the issue raised earlier by Mr Matthee, and SALGA questioned whether national government evaluated and compared different provinces.

Ms Kgaoli stated that the initial, tighter wording was much better, and should be included in the Bill. She stated that she has heard the concerns raised by SALGA, but stated that that did not mean the Committee should simply concede to SALGA's wishes. Members appreciated the Minister's concerns, but the tighter formulation had to be included in the Bill.

Kgoshi Mokoena and Mr Lever agreed with Ms Kgaoli.

Adv Kholong proposed that the phrase "and the council's approval of that evaluation" be added at the end of the current proposed subsection 4B. He suggested that this would cover the concerns raised by Members by ensuring that the approval would be given by the council, and not by the individual municipal official.

The Chair noted that Members agreed. He proposed that the annual report and the report of the Office of the Auditor-General be included as well.

Mr Lever stated further that he did not agree with the justification proposed by SALGA that the three spheres of government should not be treated differently. They were different spheres with different requirements, and each had its own needs.

Secondly, he reminded the Department that it was the NCOP that evaluated the interventions, and it had seen many of these, and had learnt that issues such as those covered in the proposed subsection 4B that were the root causes of the mismanagement and corruption within municipalities. It was for this reason that the Committee was proposing the tighter formulation.

Thirdly, he stated that SALGA was affiliated to the NCOP, and if it had chosen to make its input at the Portfolio Committee and not to this Committee then it must accept the views imposed by this Committee.

Clause 9
Mr Matthee stated that it was impossible for Members to process the Bill without copies of the Act, especially clauses such as this one. The Committee must be provided with copies of the Act.

The Chair noted the concern. He noted that no questions were raised with this clause.

Clause 10 and 11
The Chair noted that no questions were raised with these clauses.

Clause 12
Kgoshi Mokoena requested the Department to provide examples of the types of "external mechanisms" that could be used.

Ms Gumbi-Masilela replied that this could include the use of consultants, contractors or generally any persons that did not form part of the specific business unit of the municipality in question.

Mr Matthee asked whether this included all municipal services, or whether it was limited to specific services such as police services.

Dr Bouwer replied that Chapter 8 of the Act dealt with municipal services, and it included provisions the dealt with the contracting in of municipal services using an external mechanism. He stated that all the kinds of external mechanisms that could be used were outlined in that chapter, and they included a separate municipality, a municipal entity, other organ of State, community-based organisations (CBO's) or any other private company.

He stated that the Bill now introduced a new Chapter 8A which dealt with the governance aspect of municipal entities specifically. Dr Bouwer stated that he tried to point out during the previous meeting that Members should not confuse the governance relationship with the service delivery agreement, which were dealt with in Chapter 8 and the new Chapter 8A respectively. Chapter 8A allowed a municipality to establish a municipal entity not only for delivery of a municipal services, but for other functions of a municipality as well. The example used by the Portfolio Committee was for the provision of IT services. This was allowed by the proposed section 86J(1)(a), and dealt with the governance relationship as to the reasons for establishing a municipal entity. The use of a municipal entity for service delivery would be dealt with by Chapter 8 of the Act. Dr Bouwer stated that these two issues must not be conflated.

Clauses 13 - 18
The Chair noted that no questions were raised with these clauses.

Clause 19
The Chair asked the Department to respond to the request made during the previous meeting that Multi-Jurisdictional Service Utilities (MJSU) be limited to adjacent municipalities alone.

Ms Gumbi-Masilela replied that this would be restricting some of the activities, such as the RED's, which would be servicing more than one municipality which might not be adjacent.

Mr Lever stated that he was of the opinion that this provision would allow smaller municipalities to be assisted to reach economies of scale, and there was thus no need for restricting the provision to adjacent municipalities.

Ms Gumbi-Masilela said that a variety of factors would be considered here by the municipal entities to assist municipalities in sharing the costs involved.

Clauses 20-25
The Chair noted that no questions were raised with these clauses.

Clause 26
Kgoshi Mokoena stated that Members agreed with the majority of this clause except the proposed subsection 93D, because it was awaiting the Department's response to the concerns raised by Members during the previous meeting.

Ms Gumbi-Masilela replied that the Department would check its mandate on that provision.

The Chair noted that the same concern had to be addressed in the proposed subsection 93I.

Kgoshi Mokoena stated that since the proposed subsection 2(b) granted the mayor may at any time call the Board of the municipal entity to account for its actions, for whatever reason, there thus was no need for the proposed subsection 1(a) which allowed a municipal representative to sit in on Board meetings as a non-participatory observer. He stated that Committee thus suggested that the proposed subsection 1(a) be removed from the Bill, and the consequential amendments to the proposed subsection 93I also have to be effected.

Dr Bouwer responded that the consequential amendment to this proposal would see the deletion of the proposed subsection 93I as well, because that provision dealt exclusively with municipal representatives in terms of the proposed section 93D(1)(a).

The Chair noted that Members agreed with Dr Bouwer.

Clauses 27 and 28
The Chair noted that no questions were raised with these clauses.

Clause 29
Kgoshi Mokoena asked whether there was any appeal procedure that could be followed if the person was dissatisfied with the decision taken.

Dr Bouwer said that Item 14 of the Schedule to the Act stipulated that the proposed section 14A would form part of the overall disciplinary process contained in the Act. This provision was added because the municipalities required clarity as to the disciplinary steps they were allowed to take. It also had to be remembered that the steps listed in the clause were not obligatory, because it stated that the municipality's steps "may include" those listed. The municipality itself would then have to decide which of these would be preferable, in consultation with the unions of course.

Ms Kgaoli asked whether it would be wise to transfer a person who had been found guilty to another post, as was provided in the proposed section 14A(2)(a). She stated that this would surely allow that person to commit the same offences in the new post.

Dr Bouwer replied that there might be certain transgressions of the Code of Conduct that could be unique to a specific post. Thus, for example, if an official had been found guilty of misusing council vehicles, he could still be transferred to another post which did not involve the use of vehicles. He stated that a person found guilty of fraud or corruption would however not be transferred from one section to another.

Clause 30-32
The Chair noted that no questions were raised with these clauses.

The meeting was adjourned.