Metsimaholo Municipality Section 139 intervention: Free State MEC briefing

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Meeting Summary

Video: Select Cmte on Coorp Governance & Tradtnal Affairs, Water & Sanitation,Human Setlmnt. 12:06:2020
Audio: Free State MEC of COGTA on notice of intervention in terms of section 139 (1) (b) of the Constitution in Metsimaholo Local Municipality 

The Select Committee was briefed by the Free State Department of Cooperative Governance and Traditional Affairs (COGTA) on the current situations in the three municipalities placed under administration. Both the Metsimaholo and Maluti-a-Phofung Local Municipalities had been placed under section 139 (1) (b) of the Constitution, and the Mangaung Metropolitan Municipality had been placed under section 139 (5) (a) and (c). Their municipalities’ respective Executive Mayors and Municipal Administrators gave their versions of events as well. All three municipalities had overarching challenges in service delivery and financial management.

Filling the vacancies of section 56 and 57 managers and an inability to hold municipal Council meetings were major challenges at the Metsimaholo Local Municipality. It had been unable to function without its key managers and could not conclude its business, such as adopting its Integrated Development Plan process, due to Council meetings being disrupted. Members questioned why dissolution had not been considered, and wanted to know what would be done to curb political interference in the municipality.

The Committee was displeased by the limited implementation of a financial recovery plan at the Mangaung Metropolitan Municipality. Members raised further concerns about its budget, service delivery and lack of cooperation with the team deployed by the National Treasury. The Committee welcomed the fact that it had been servicing its Eskom debt.

The Committee was deeply concerned about the situation at the Maluti-a-Phofung Local Municipality. The administrator and Member of the Executive Council (MEC) had conflicting views on the events that had taken place there. It had major challenges regarding an uninterrupted water and electricity supply, and in servicing its debt to Eskom. It had a ballooning R5.2 billion debt to Eskom, and current a account of almost R100 million, yet despite Eskom’s efforts to assist, payment remained inconsistent. Members raised concern over the administrator’s terms of reference, the high wage bill and illegal salary increases in the Municipality. The Committee questioned the impact of the intervention aimed at improving the functionality in the Municipality, as the situation appeared hopeless.

The Committee decided it would expedite its report on the Free State municipalities, and the Chairperson would apply for Parliamentary permission to do oversight in the province in the coming weeks in order interact with stakeholders in the municipality. This was important, as the National Council of Provinces’ (NCOP’s) role required it to review instances where section 139 was invoked by provincial governments.

The Committee called on the provincial Executive to strengthen its support for struggling municipalities placed under intervention according to section 154 of the Constitution.

Meeting report

Chairperson’s opening remarks

The Chairperson welcomed Members, the Free State Member of the Executive Council (MEC): Department of Cooperative Governance and Traditional Affairs (COGTA), and Mr C Smith (ANC), Chairperson of the Portfolio Committee in the provincial legislature, and Executive Mayors. He said an invitation had been extended to Eskom as well, as it played critical part in the purpose of the meeting, and would be able to clarify important issues.

The meeting was part of a series of meetings the Committee was having with provinces to discuss the invocation of section 139 of the Constitution. The Mangaung, Metsimaholo and Maluti-a-Phofung municipalities had been isolated due to the nature of the issues and challenges experienced.

On Tuesday, the Committee had had a fruitful meeting with KwaZulu-Natal, and it hoped to engage with three or four other provinces before it went on recess. This was important, as the National Council of Provinces’ (NCOP’s) role required it to review instances where section 139 was invoked by provincial governments. Time would be allocated to each municipality, and the Committee would engage with each municipality.  

The MEC would be given an opportunity to give an overview on the three municipalities, and thereafter each municipality had been allocated an hour for presentation and engagement. It had been arranged with municipalities that presentations would take 15-20 minutes each to allow time for engagement by the Committee.

After the MEC’s overview, Eskom would also brief the Committee on the status of payment in municipalities, and whether there was improvement or not. Part of the major problems for the three municipalities was their relation to Eskom, particularly the non-payment. This was important, as it spoke to the viability of the municipalities to pay creditors. He commended the Committee for all its hard work and commitment.

Metsimaholo Local Municipality (MLM)

MEC’s briefing

Mr Thembeni Nxangisa, MEC: COGTA, Free State (FS) welcomed the opportunity to brief the Committee on the constitutional procedural and substantive matters relating to the issuing of the notice of intervention in terms of section 139 (1)(b) of the constitution, especially Metsimaholo affairs. Section 160 (d) of the Constitution enjoins that a municipal council may employ personnel necessary for the effective performances of its functions. Section 156 of the Municipal Systems Act (MSA) expands on the above point by addressing the appointment of managers directly accountable to the Municipal Manager.

In the case of Metsimaholo, since the election in 2017, it had not appointed such managers. It did not have a Chief Financial Officer (CFO), Technical Director, Director of Community Services, or Director of Corporate Services since 2017, when the council was reestablished. To make matters worse, the Municipal Manager (MM) had been suspended for a period of two years.

The municipality had been operating with middle management for some time now, acting as section 56 managers, and in some cases some were acting as MMs, which meant they were now accounting officers. The municipality’s policy on acting appointments barred the appointment of anyone appointed below section 56 as a MMs, and it had therefore violated its own policy. The practice in Metsimaholo was in contravention of the Constitution and at least two very important pieces of legislation -- the MSA and the Municipal Finance Management Act (MFMA) -- as well its own policy on acting appointments.

In attempts to address this impasse, an official had been sent to the municipality as an acting MM in terms of section 154 of the Constitution. The work of the acting MM had been made very difficult by some officials, who wanted the abnormal process of appointing people against the municipality’s own policy to continue -- even going to court with some of the municipality’s councillors. This happened for a period of three months until the acting MM’s contract ended on 17 February 2020.

The FS Executive Council felt it had no option but to invoke section 139 (1)(b) of the Constitution in the affairs of Metsimaholo local municipality. At its meeting on 11 February, the decision was taken, and on 20 February, the MEC went to the Municipality with the team to explain the resolution of the executive taken on 11 February.

Communication with the NCOP, the Minister and the FS Legislature was signed on 25 February, and the information was dispatched to the different stakeholders subsequent to that meeting, as required. The Minister had responded and sent the concurrence letter signed on 23 March about the invocation of section 139 in Metsimaholo.

The Committee was requested to note that the invocation of section 139 was being contested by some members of the municipal council. In this regard, there was a matter before the courts for 18 June, where the invocation of section 139 would be contested.

He had tried to capture the brief, and had therefore requested the Head of Department (HOD) to make a detailed presentation and summary, especially around Mangaung. As there had been a previous briefing on Metsimaholo, it would be covered briefly and a summary would be given on the two other municipalities.

The Chairperson asked if he was correct on the background information -- that the local government elections had been in 2016, and the municipality was dissolved in 2017, and what had been mentioned was from 2017 to date.

The MEC said the Chairperson was correct.

HOD’s comments

Mr Mokete Duma, HOD, FS COGTA, said the presentation covered the purpose, background issues of governance, vacancies, council meetings that had collapsed, vacancies, alleged political interference, financial management, collapse of service delivery and challenges.

After the 2016 local government elections, the municipality became a hung municipality -- it was functioning under a coalition, but was then dissolved and re-elections were conducted on 29 November 2017. There had been no outright winning party, and it was again a hung municipality, but this time led by the South African Communist Party (SACP).

Ever since the re-election, there had been numerous governance, administrative, service delivery and financial challenges which had compelled the provincial executive to invoke section 139 1(b).

The council meetings were convened, but not did finish their business. The Integrated Development Plan’s (IDP’s) process plan was not adopted at the meetings that were convened, because they did not finish their business. Various council meetings were held but abandoned, and business matters were not completed. All these occurrences led to the provincial government’s intervention.

There were vacancies in the Municipality, as the MEC indicated. After the local government elections, Mr Steve Molala had been appointed as the MM, but was placed on suspension by the new Council and had been on suspension since then, with numerous court processes taking place that had not been concluded yet. Therefore, the Provincial Department had had to provide assistance and accountability officers.

There were vacancies, and section 56 managers had not been appointed at the Municipality. Posts were advertised, and interviews had taken place, but appointments had not happened. During these recruitment processes, the Municipality incurred more than R600 000 in costs for the advertisements of the unfilled positions.

On 9 July 2019, the Council had resolved to appoint Ms Maria Ramovha as Acting Municipal Manager for an undisclosed period, while appropriate intervention was sought from the MEC of COGTA.

The Chairperson said Members had reviewed the presentation, and requested a summary of its key issues in totality.

Mr Duma said that there were issues that Ms Ramovha said she was investigating, but she stepped on the toes of officials and was immediately removed in her acting capacity.

Of most importance was that when the MEC went to present on the decision of the Executive Council, after the meeting ended, the councillors convened another meeting where they deliberately violated and nullified the decision of the Executive Council to intervene, and in that process appointed new members to fill in those positions, against the regulations as interim measures issued by the Minister. Regulations 17 of 2017 had been nullified by Constitutional Court, and due to this, the Minister had issued interim measures that had to be used.

The councillors did not take kindly to the intervention in the municipality and were not cooperating with the team sent there. There were currently court processes, and the Provincial Department had gone to court in March and been provided with an interim order. It would be going again on the 17th of this month, where it was expected that the court would issue a permanent order.

The reason for going to court was for the Department to let the councillors know it was using its right to support the municipality, and the rejection of these processes reflected an element of defiance to the Constitutional provisions which accorded certain powers to the MEC. That was where the Department was at this stage.

The current issue was that the less the councillors recognised the team sent to the municipality, the bigger the problem would become. Currently, the Municipality stood to lose more than R110 million, which was grant money it could not use because there no managers. The team sent to the municipality had been meant to salvage the situation, but without the approval of the councillors, certain processes could not be completed.

If the matter could not be resolved, alternative measures of the intervention had to be considered, like section 139 subsection 7, where the national Department had to enter, or section 139 subsection 1(c), where the entire council would have to be dissolved. The Department was cautious about following this route, as the country was on the eve of the local government elections and therefore it might not be a wise move to dissolve the municipality. However, those who had the authority would then decide, as it was not the Department’s right to decide what was right for the municipality.

The Chairperson asked the Administrator to give an account of the situation in the Municipality.

Administrator’s remarks

Mr Tebogo Manele, Administrator: MLM, in line with the MEC’s and HOD’s presentations, said he came to Metsimaholo in November 2018, firstly as the acting MM under section 154 of the Constitution. When the decision was taken by the Provincial Executive Council on 11 February, he was appointed as an Executive Council representative. He had been in the Municipality as a representative since 20 February.

A number of events had taken place since he came to the Municipality. The intervention had been supported by the Executive Council because the Municipality had failed to resolve two issues:

  • The case of Mr Molala, the MM who had been on suspension for more than two years whilst earning a full salary; and
  • It had failed to appoint section 56 and 57 managers and appointed middle managers to act as MMs, which was against the law and its own policy.

He requested the NCOP support the intervention, as the Minister had already done so.

One of the conditions of the intervention was that the Executive Council representation had to work closely with the team on the “Back to Basics” programme, and provide the Minister and Executive Council with quarterly reports and a closing report. It had compiled a quarterly report which had already been shared with the MEC.

Executive Mayor’s remarks

Ms Lindiwe Tshongwe, Executive Mayor: MLM, said that she agreed with the reports presented by the MEC and HOD, as well as with the intervention that was in place. The last Technical Services Director had resigned when there was the crisis of not having an acting MM.

A letter had been written to the then MEC, and the MEC had sent a team to check the qualifications of the manager appointed then. The municipality was reporting all its steps when appointing both the acting MM and acting directors. The municipality had sent letters up until 9 July, when the Council had considered the report of the committee that was busy with recruitments, and had rejected it. This meant there were no appointments made on 9 July.

The Municipality had then requested that the MEC to advise and send a secondment. The MEC had been able to respond and send the secondment, but it was unfortunate that when MEC tried to assist the Municipality there had been disruptions to the extent that the MEC himself tried to meet the councillors and the leaders of all the political parties. Some political party leaders did not attend the MEC’s meeting.

Thereafter, the MEC had said COGTA would assist the Municipality with support, which was granted in November, but the councillors had rejected the support as it had not worked until this intervention. Since the MEC’s intervention, the Municipality had been stable. The Covid-19 state of disaster had assisted in stabilising the municipality administratively although, as reported by the MEC and HOD, there was still serious political intervention by councillors who did not agree with the intervention.

The councillors did not agree with the support and the intervention, but she and some other councillors had been comfortable with it, as it was a hung municipality, and it allowed the municipality to render services to the community.

The Chairperson asked what the Mayor’s understanding of the municipality being under administration according to section 139 was.

The Mayor said she understood that the MEC intervened in the Municipality, as it had sent the team of the administrator because it was without a MM. The powers of the administration had been taken over by the administrator. She also understood that currently with the terms of reference (TOR) which had not yet been finalised, the Council still had its powers and could still approve the budget and policies and by-laws.

The Chairperson asked Eskom to give a statement on the Municipality from its perspective.

Eskom’s remarks

Ms Agnes Mlambo, Group Executive: Eskom, said Metsimaholo had no issues with Eskom and the account was being serviced well.

Discussion

Ms Z Ncitha (ANC, Eastern Cape), said the presentation slide on the collapse of service delivery indicated that there had been a total collapse. The spending was not in line with what was expected. For example, in the last two months it had spent only on the Programme Management Unit (PMU), and not on any projects. What did this mean? The lack of a Technical Director and CFO was worrying.

The challenges listed in the presentation were pointing to the fact that there was no Municipality, as there was political interference on projects and contracts. There was regression in audit outcomes, which had been unqualified before. These were serious challenges, and she would like the Mayor or Administrator to comment on whether there had been any progress.

She asked for clarity on the unauthorised expenditure R241.6 million which had not been investigated.

Mr G Michalakis (DA, Free State) said finances had been a cause for the Department’s interventions, but he did not think it was a reason, as it was one of the most financially stable municipalities in the FS. Its Eskom and Rand Water accounts were paid, and 97% of creditors were paid in 30 days, therefore finance could not be an issue. The Municipality was not functioning because it could not hold municipal Council meetings. The Mayor had said that since the interventions started, the Municipality had been stable, but was it stable if it could not have municipal council meetings for an entire year?

He asked if the MEC was aware that the Speaker himself sometimes collapsed meetings by walking out. What would the MEC do about this?

He requested that the MEC provide an indication of how many acting MMs the municipality had had over the last two years. He had counted as many as five.

He asked if the acting administrator was at some stage the office manager in the MM’s office, and what had made him qualified to be the administrator of a municipality.

Ms C Visser (DA, North West) said the acting administrator was first appointed acting MM on 18 November 2019 without Council approval, before it was placed under section 139 administration, and this was irregular.

Who had paid the salaries of persons sent to municipalities to assist in terms of section 154?

Had criminal action been taken against Steven Molala regarding the municipal infrastructure grant (MIG) project administration? The Municipality did not have to wait for a report, as the criminal investigation was a completely separate process. Why was the intervention taking so long, and was he receiving a salary whilst under suspension?

Mr S Mfayela (IFP, KZN) said that he was puzzled, because according to the report, the meetings were disrupted by the councillors. It appeared to be an organised disruption of meetings. He asked the MEC and Mayor, according to the law that governed councillors’ behaviour, what could be done to address the matter. The Mayor had said some councillors did not accept the section 139 intervention. What steps had been taken to address this matter with councillors?

Mr I Sileku (DA, Western Cape) said that he was glad that the Mayor had agreed with the HOD’s and MEC’s presentations, and the allegation that there was political interference in the Municipality.

When and how had the COGTA committee in the Province been informed about this intervention?

The municipality had been unable to sit for a year to make Council decisions. Why had the province not dissolved the municipality?

On acting positions, he asked for the qualifications of the acting MM and CFO to be provided.

Ms S Shaikh (ANC, Limpopo) asked what support had been given to the Municipality by the provincial COGTA before the section 139 intervention, as it was a hung municipality.

Regarding the vacancies, she said the appointment of the MM and CFO was appreciated, but wanted to know when the other section 56 managers would be appointed.

The MEC had taken a decision to invoke section 139b, and had received the concurrent letter from the Minister, so why did it then go to court?

Mr S Zandamela (EFF, Mpumalanga) said it was worrying that municipalities were repeatedly invited to address the Committee on the same issues. There was a lot of political instability from which challenges stemmed. He asked the MEC why the Municipality had not been dissolved.

Mr E Mthethwa (ANC, KZN) referred to the issues of service delivery, and asked if the MEC thought the administrator could turn the situation around, and how long it would take. If not, why did the MEC not apply for section 139 (c) so that service delivery was no longer compromised, especially considering that the current intervention had not been accepted. Who was the municipality expecting help from if it defied the province?

Mr K Motsamai (EFF, Gauteng) asked the MEC when the Metsimaholo forensic report would be tabled. The Mayor had said the municipality was functioning, but there was no service delivery. How was it functioning?

The Chairperson said the first Municipal Council had been elected on 3 August 2016, and had been dissolved, with a new Council elected in November 2017. The same problems were recurring -- there was political inference and in-fighting, while service delivery was being neglected.

He asked if it was it not an excuse that section 139 (1) (c) could not be invoked, because of the political ambitions of people. The term of office for the Council was five years, and he questioned whether there was an element of blackmail because elections were approaching. Was the MEC saying the people of Metsimaholo should rather suffer because the elections were approaching?

MEC’s response

Mr Nxangisa, in response to the Chairperson’s last question, said the intention was to support the Municipality and find possible ways to assist it so it could become functional. That was why the MEC/Executive Council had gone all the way to consult even with individual political parties to make them aware it was in the interests of the Metsimaholo citizens to get the municipality functioning.

With the support of the Mayor, the provincial COGTA had been able to reach out to many parties which had agreed to work with the provincial Department. Therefore, after many meetings not taking place, the October meeting had then been held. It was about the people, and the gripes had to be secondary. That was why the route of dissolution was not taken. He noted the Committee’s view on dissolution, and accepted it. There was no political interference regarding this approach, as the main aim was to get the Municipality functional.

He was optimistic that the situation would change, and the provincial Department had assisted the Municipality a lot with section 154.

It was agreed that vacant positions would have officials in acting positions until they were filled. The directive the MEC had given to the team was to find ways to advertise and appoint permanent people with immediate effect, because the delay would cause the municipality not to function properly.

He said the salary of the administrator was paid by the provincial COGTA. According to the law, the receiving municipality had to bear the costs, but it had agreed that the municipality should not incur the costs. Therefore it had been paid by the provincial COGTA, despite this not being required by law. This was to make it clear that the intention was to support the Municipality so it could become functional.

It was true there had been a total collapse of services, and there was no technical functionality at all. A Technical Director and CFO had not been appointed, but officials had since been appointed in acting positions until the vacancies were filled permanently.

He agreed with Mr Michalakis that finances were not an issue, and the report was not saying it was either. There was a lot of maladministration, such as unauthorised expenditure, wasteful expenditure and poor performance in the municipality. It had regressed with its audit opinion, so it could not be said that it was in a good financial state.

The financial state was not about the amount of money it had, but how the money was utilised to pay creditors, and the control mechanisms to generate income. The functionality was the issue, and therefore the Municipality had to be helped.

He said there were many acting MMs, and the team could provide the numbers. In the case of MLM, by law it was not allowed to have managers who were not section 56 managers act as MMs. In MLM, this had occurred even though its own policy did not allow it as well. He had found this situation inappropriate.

It was true that Mr Manele had been working in the office of the MM, and his details would be provided. It did not mean he lacked the academic qualifications, and it was not a prerequisite for him to be in the office of the MM to get a position. If the Members felt strongly on the matter, they could advise the provincial Department.

On the criminal charges against Mr Mohlala, the MM, he said according to the terms of reference the issue had to be resolved. The former MM had won the case and the municipality had launched an appeal. Lengthy legal processes were under way. The team had been requested to finalise the matter, and it was important as the state’s money could not be used to pay an official who was at home. The issue had to be addressed swiftly.

Meetings were disrupted by councillors. A report had been written requesting what had happened at the Council meeting regarding Schedule 1 of the Municipal Finance Management Act (MFMA). Action was required by Councillors concerning disciplinary processes.

The reason why the provincial Department had gone to court was because after February, when the decision to put the Municipality under administration was communicated, some Council members had held a caucus Council meeting and made decisions contrary to the intervention.

The Council had then instructed another individual to act as the MM. The team was supposed to resume its work, but had been stopped by this individual, so legal action had to be taken. Provisionally, the court had agreed with the provincial Department that it was correct, but the matter still had to be closed.

The team would attend to the forensic report. He had not received any indication at the moment and was not sure what the team would say on the matter.

The provincial Department had currently assumed the responsibility to fill the vacancies temporarily, but had instructed that adverts be put out. The only thing stopping the adverts being issued immediately was to seek legal advice on the previously advertised short-listed positions.

He asked the Chairperson to allow the HOD and team to respond to the remaining questions.

The Chairperson said he would not allow it, as there were time constraints and other municipalities deserved a fair chance to present. The Executive Mayor had to respond to questions next.

Executive Mayor’s response

Ms Tshongwe said that it was true that the Municipality was financially stable and fulfilling its obligations, such as payment of third parties, employees and service providers. The problem started with interest that was shown, because there was a lack of accountability officers.

She said there had been four acting MMs. The challenges started with the acting MM, as indicated by the HOD. All acting managers were appointed for a period of three months, and this was specified in the letters of appointment. It started with Maria Removha, who was appointed from 9 July 2019 to October 2019, and had disputed the appointment. No acting MM had been appointed for more than three months.

On 9 July, the Municipality had written to the MEC requesting secondment or advice, because there had been differences between the appointed acting officials and the current officials, which had been deepened by councillors. This had created two groups who fought against each other, and it had reached the stage where one group would take leave days. That was where the administrative instability had started. These groupings and officials fighting could not continue, so the MEC’s assistance had been requested in the letter.

On councillors causing disruptions, she said it was true that the code of conduct was never applied. She said it was not correct that the Speaker had deliberately closed off meetings.

The Chairperson requested that the Mayor not go into detail, due to the time constraints. He said the Chairperson of the NCOP had received a letter from the MEC to place this Municipality under section 139 (1) (b). According to the Constitution, the decision had to be approved or rejected within 180 days, and the Committee would have to go to MLM to make an assessment based on this. It would seek permission to go to the MLM to for oversight.

The Committee would have to do this in order to make a decision on whether it approved of the intervention made by the Province. He did not want to go into detail on the matters raised, as they had been noted and would be dealt with later. Due to time constraints, the meeting had move on to Mangaung municipality.

Mangaung Metropolitan Municipality (MMM)

MEC’s briefing

Mr Nxangisa said Mangaung had been placed under section 139 (5)(a) and (c) subsequent to a letter written by the Deputy Minister of Finance, where a number of issues had been raised, such as the inability of the Municipality to spend grants properly, multiple court cases with Bloem Water, as well as being downgraded by the Moody’s rating agency and becoming bankrupt. The municipality could also not get cash back on projects assigned to it. There were challenges involving overtime claims which were too huge, and involved industrial action.

The National Treasury (NT) was working closely with MMM, as it reported directly to the NT. The Municipality had developed a turnaround strategy, which it had created itself without using consultants. However, it could not implement one item of the turnaround strategy on its own. The NT team sent to work with the Municipality had been continually ignored and there was no cooperation. The team felt that the Mangaung administration had displayed a level of arrogance and did not adhere to the law as required, as it was not reporting adequately to the NT. Subsequent to this, it advised that the Municipality be placed under administration.

The team deployed had been led by Adv Mzwakhe Mofokeng, and there had been stability since the team had been deployed. The team was able to pay creditors and workers monthly, as there were stages previously where it had been threatened that workers’ salaries would not be paid. The municipality was stabilising and was beginning to provide services to communities. Mangaung had an issue of non -collection of refuse, but the team was working on the matter.

HOD’s remarks

Mr Duma said the MEC had covered briefly what was happening at MMM, and the provincial Department was monitoring the implementation of the financial recovery plan. Things were shaping up quite well.

The Moody downgrade had been lifted, as some payments had been made to the banks, as well as to Bloem Water, and there was a commitment to service debts. Service delivery was still lagging behind. The war room would sit on 23 June to review progress made and create strategies to fast track matters.

Executive Mayor’s remarks

Ms Olly Mlamleli, Executive Mayor: MMM, said the new Council found that there had been an application in 2014 for a R5 billion bond with a number of projects attached, but it was never taken through, although the service delivery projects attached to it were still sustained. Therefore the projects were unfunded, as there was no R5 billion. The projects were not dropped, and this was most likely because service delivery was needed. People would not understand why they did not receive services.

According to all the reasons the MEC mentioned for the municipality not spending properly on grants, the grants were utilised to pay salaries and other departments. The Urban Settlements Development Grant (USDG) and Integrated Public Transport Network (IPTN) grant were important. The Municipality was now at the centre of implementing a rapid transport grant used for salaries, which was not its intended purpose.

The other reason for the Municipality being placed under administration was that budgets were unfunded and overestimated, not taking into account that most of the residents were poor. There had been a dispute with Bloem Water, as it was overcharging for raw water. There was also a dispute on drought tariffs. As settling the dispute was critical for the consumption of water, the bill was being settled. There was a new payment plan to pay for water consumed.

The Moody’s downgrade was not a pleasing situation, but the Council was happy as there had since been administrators. A second report had been received and the municipality was stabilising. The Municipality had managed to make payments without using the equitable share, and was improving its collection rate, but unfortunately this had been disturbed by the Covid19 pandemic.

Regarding overtime management, it was had been found that overtime was not properly managed. A report was being submitted to Council to review the overtime policy, and it had been agreed with the workers and unions that more than 40 hours of overtime was not allowed. Where there were pressing times, overtime had to be pre-approved.

The MMM had not hired consultants for its financial recovery plan as it had worked together with other state entities, but the challenge was that the implementation was inadequate. The administrator and team were assisting to ensure implementation and reporting. There would be a service delivery war room on 17 June with the NT and national COGTA to address implementation. There was reporting to NT every month.

On administration, she said the issue had been taken to Council and acknowledged. It was waiting for terms of reference, as the MEC had said there were disputes with the City Manager. Every time there was change there was discomfort, but she was meeting with the administrators and the City , and encouraging them to work together.

The debts with the banks were being serviced. There had been threats of the municipality not paying salaries, but there was no record of it not paying.

It was true that service delivery had been affected in the area of waste management but the matter was being addressed with the assistance of other departments and the private sector.

The Chairperson said the MEC had not mentioned when the intervention measures were invoked.

Eskom’s remarks

Ms Mlambo said that Mangaung account was up to date, with a payment plan for arrears in place, which would be fully settled by the end of July.

The Chairperson asked what the total arrears were.

Ms Mlambo said it was R119 million at 22 May, and this was the amount that would be settled by the end of July. Its current account would be paid in full even though it was late.

Discussion

Mr Michalakis referred to the Mayor’s comment about municipalities not understanding why services were not delivered, and said that there was only one reason why services were not delivered and that was a deficit of leadership. The Mayor was the leader of the Municipality and was supposed to give the guidance and leadership to ensure municipal services were delivered. If services were not delivered, it was on the Mayor’s account.

On the recovery plan, he said that there was a plan in place, but the administration had to implement it. Why was the Municipality unable to implement its own plan?

Section 87 of the MFMA required electricity distributor Centlec to table a preliminary budget in January every year, and then the Municipality had to table this together with the budget before Council. This was not done this year. Was the Mayor aware that because the Centlec preliminary budget was not tabled with the main budget, section 87 of the MFMA had been contravened?  

He questioned the reliability of the budget, considering the current budget did not make provision for overtime and that the collection rate would be lower than expected.

The budget was silent on the impact of Covid-19, the downgrade to junk status, cost containment measures and financial recovery plan. He asked the Mayor to indicate why the budget was silent on these key factors. He thought that any municipality under administration was not allowed to pass such a pathetic budget.

Ms Visser requested that the Committee receive a copy of the Municipality’s financial recovery plan and long-term financial strategy plan by Monday 15 June.

The salaries in last four years under the current Mayor had increased from 24%, to 30% of the budget. This was around R4 billion more per year in salaries. Who were all these people appointed, and what did they do?

She asked the MEC why the government’s debt to the municipality of R380 million had increased to R1.5 billion over the time Mayor Mlamlei was in office. The municipality was under the MEC’s administration -- why was it not the first to pay its debt?

Ms Ncitha said service delivery had been indicated as a major challenge, and a war room had been mentioned to address the challenge as well. She requested that the Municipality provide its plan on service delivery.

Was the Municipality cooperating with the NT, as the MEC had said there had been no reports tabled as regularly as expected?

Mr Sileku requested written information on the amount of debt currently, and before the intervention at the Municipality. He requested the same information for Bloem Water as well.

The NT was placing emphasis on cost containment, but the presentation mentioned it only once. He requested proof of cost containment measures in place.

He asked the Mayor if she agreed that it would not be necessary to increase rates and taxes as planned if the salaries were cut and government paid its R1.5 billion.

He agreed with Mr Michalakis that the budget should not be approved, as it defeated purpose of service delivery.

Mr Zandamela said the MEC saying he did not know why there had been a downgrade, was concerning. He was concerned, as the Mayor could not give a clear account of what was happening in the Municipality. He therefore requested that the Committee go on an urgent oversight visit in light of the new regulations. It seemed there were the same problems with the municipalities that had presented.

Ms Shaikh questioned why the recovery plan had not been implemented, and why there was a lack of cooperation with the national team. Who was in charge and were consequences taken against officials?

The Chairperson said the Provincial Executive of the FS had invoked section 139 (5) of the Constitution around December last year. In terms of the Constitution, it was meant to inform the NCOP about the invocation within seven days, but to date there was no evidence of this submission. He asked why there was no record of this section being invoked.

If the NCOP had not been informed, it was a contravention of the Constitution which was quite a serious matter. The date the measure was invoked had not been given. He requested clarity on the matter.

MEC’s response

Mr Nxangisa said the Executive had sat on 19 December 2019 to consider the letter from the NT, and had taken the decision to agree with the NT on the invocation of section of 139 (5) (a)(c). On 24 December, the decision had been unanimously approved by the Council. The records would be provided.

The municipality was responsible for a turnaround strategy which it had developed on its own under the supervision of the NT. Metros reported directly to the NT on finances, but it was a municipality that accounted and reported to the Provincial Department.

It was not true that he did not know why there had been a downgrade, and the information was included in the report. Moody’s had downgraded the Municipality due to its financial instability and inability to fulfill its obligations. He apologised if he had not covered the issue sufficiently in his briefing.

On Covid-19 and businesses, he said there were packages arranged by the national government to deal with various areas, and R20 billion would be available to assist municipalities institute their constitutional mandate. During the Covid-19 period, municipalities would not have collections as normal, but were still expected to provide services.

On the provincial government’s debt, he said the Executive had agreed that a plan of payment for municipalities had to be created. The province did not owe Mangaung R1.6 billion, as it was a consolidated debt with the national departments. The amount the Province owed the Municipality was in the region of R400 million, and a payment arrangement had been made. The Executive had agreed that national departments had to be pressured to pay in order to alleviate the level at which municipalities provided services.

Executive Mayor’s response

Ms Mlamlei, in response to Mr Michalakis, said he had perhaps misunderstood her. There was a bond of R5 billion with projects attached, but when the bond was dropped, the projects had still been sustained. The people had been informed about the projects, but did not understand why they were not happening because they knew about the R5 billion. There was no way as an Executive Mayor that she could not understand the situation, and where there were challenges the residents were informed. She was relating the gap between the R5 billion bond and the projects being sustained without the bond. The Municipality had to borrow R500 million to ensure outstanding infrastructure projects in the city were paid for.

The board would sit on Monday to review the draft Centlec budget, and as soon as the board submitted it to Council, it would become encapsulated. The Municipality was a 100% shareholder, so Centlec could not be independent.

In response to the comment that the budget was silent on Covid-19, she said the budget would be adjusted. As per the regulations for Covid-19, reprioritization of funds and the request to reprioritise USDG and IPTN funds had been sent to NT, and the Municipality was awaiting a response. The Metro Covid-19 Council was reporting to the Covid-19 Provincial Council.

On the implementation of the financial recovery plan, she said that there was a war room to monitor implementation. She had not said that the plan had not been implemented at all, but rather that it had been inadequately implemented. The implementation was being pushed with speed, and that was why the administrators had not created a new plan. The current plan was being improved. The Member had requested a copy of the recovery plan by Monday, but she hoped the Chairperson would overrule this request and advise the Municipality in this regard.

On the salary bill, she said the norm was 30%, but it was currently at 27%.

The Municipality had gone to the local government sector education and training authority (SETA) for assistance with learnerships, and from 1 July the Metro police would be starting, so a number of learnerships had to be prepared for candidates to be available.

There was a service delivery programme, but it changed from time to time due to different situations. She was proud to say that she was trying to ensure that the city remained clean, as informal traders were increasing the refuse collection issue. The Municipality, with its Local Economic Development(LED) department, would allocate informal traders space with certificates and catered space. It was still a teething problem, as there was a threat of congestion, but these were some of the things the Municipality was doing.

Service delivery was being carried out, and the Municipality had received support from the Deputy Minister, the national Department and the private sector.

The MEC had not said the Municipality did not report -- section 71 and 72 reports had been submitted. There had been delays two years ago, but she was strict on this now, as well as dealing with over budgeting and committing funds that were not available, because that was what had caused problems.

It was still a problem that the Province owed the Municipality money, but there was a payment plan.

Administrator’s response

Mr Mzwakhe Mofokeng, Administrator: MMM, said that the team was operating in a difficult environment, but the battle was being won.

The salary hike from 24% to 30% was informed by acting allowances that were found when the team entered, but it had since been scaled down. Acting allowances had been cut down by almost R3 to R4 million monthly.

On the issue of government debt, the Municipality was receiving monthly payments from the provincial government from April/May.

Moody’s had given the Municipality a stable rating. It had been downgraded twice, but had managed to get out of the two downgrades and stabilise.

The only current challenge was the issue of the MM, who was not cooperating well with the intervention team.

The Chairperson asked if the MEC wanted to return to the final point.

Mr Nxangisa said he would return later as he had requested the HOD to trace the letters.

Chairperson’s summary

The Chairperson said that to give a preliminary summary, he understood that Mangaung was placed under administration by the provincial government after it was instructed to do so by NT, as there was a crisis that warranted intervention. Mangaung was important, as it was the only metro in the FS, but it was also the capital of the FS and had a historical and political significance in the country’s history, and therefore the situation was worrisome.

If the NCOP had not been informed, the intervention would have been null and void and would be a fruitless expenditure, and someone had to be responsible if the NCOP had not been informed. If this were the case, it would be assumed that there was no administration and intervention. He was happy that the Committee would be informed by Monday if procedure had been followed. The Committee was important, as it ultimately recommended the interventions to the House, and if anything went wrong the image and reputation of the Committee would come into disrepute, as it would appear it was not observing protocol and the Constitution. It was a serious concern for the Committee, as it had to advise the House accordingly on all municipalities.

He said the next municipality had to present. He added that this year it would be the second time that it interacted with Maluti-a-Phofung Municipality, as it was called in February. He saw there was a new administrator and team. He did not know what had happened to the previous administrator.

With all the information at his disposal, it seemed that things were getting worse in Maluti-a-Phofung. That was why it was important for them to appear before the Committee so that interventions could be made.

Maluti-a-Phofung Local Municipality (MAPLM)

MEC’s briefing

Mr Nxangisa said he would brief the Committee on the latest information concerning the Municipality. Mr Blake Mosley-Lefatola had taken up a position in the office of the Presidency, and had therefore resigned as the administrator. Mr Amos Goliath had taken over from Mr Lefatola, as he had been working closely with the team. Mr Goliath was therefore well versed in the programmes and the intervention, and had been chosen for the position as someone completely new would have required training.  

He wanted to express a slightly different opinion, which was that from his perspective the municipality was doing extremely well. There had been previous instabilities in the municipality, which he would not go into detail on, but they now were an issue of the past.

The financial standing of the municipality was improving very well, the MM and CFO vacancies had been filled, and they were waiting on a technical director position to be filled. It had closed ranks with the workers, and the union was working closely with the administrative team. Things were beginning to shape up. The political leadership was also working closely with the team.

The continuous challenges of the Municipality were related to Water and Electricity. These challenges had been explained numerous times. The Municipality had begun collecting refuse and had purchased two trucks before Mr Lefatola left. Refuse was being collected not in a very close sequence, but regularly. The roads were also being repaired. A detailed update report had to be written for the Committee so that it was abreast with what was taking place. Things were fine concerning governance, as activities were taking place as expected. He was confident the only challenge was with water and electricity.

The main problem with Eskom, other than owing it close to R4 or R5 billion, was that the Notified Maximum Demand (NMD) was very low, and did not cater to the community. Now and again the electricity had to be switched off to manage the power, and this frustrated many people. He and relevant stakeholders had had a meeting with Eskom to address the matter, and it had been agreed that the money had to be found to pay the entity.

The Provincial Executive, at the instruction of the Premier, had requested that ways be found to assist the municipalities to pay Eskom, especially around the NMD. To mitigate the issue, the Municipality had gone to the extent of procuring additional transformers to replace those that had burned out. Electricity had been a problem.

The large power users had been given to Eskom to audit and subsequently collect from. The users audited, which were supposed to pay, were not doing so regularly and the Municipality similarly was not doing so.

There was a huge problem of illegal connections and irregularities in the selling of electricity in the Municipality. He hoped the Hawks and Special Investigating Unit (SIU) investigation would provide clarity on the matter. The current MM, CFO and team’s efforts were to eliminate this weakness and provide an uninterrupted supply of electricity.

On water, the Minister of the Department of Water and Sanitation had intervened and given the Municipality more than R2.3 billion. R220 million had been made available immediately to deal with water reticulation, pipe defects and water treatment. The remainder of the amount was to increase the capacity of water supply from Sterkfontein to Maluti-a-Phofung, which in essence was going to be a permanent solution so that there would never be such a problem again.

There had been immediate interventions, such as tankers and water tanks, and in addition to this, boreholes had been dug. These interim measures were continuing. The Members had previously been informed that the municipality’s biggest dam, Fika-Patso, had been closed, but subsequent to this the dam level had increased to 40%. The problem emanating from this was frequent pipe bursts as a result of theft and aging infrastructure. The repair process left many people without water, but the issue was currently being attended to.

The Municipality’s biggest weakness was waste water treatment, and all seven plants were not working. Only one in Harrismith was partially working. These were all the service delivery issues in MAPLM.

The Municipality was billing and in some instances people had been given incorrect bills, therefore the system was being repaired and bills corrected to increase revenue.

There had been a tussle between the administrator and the Speaker, but there had been an intervention to the point that there was a kind of harmonious relationship, even though it was not the best -- but they were tolerating each other. It had been explained that it was a workplace and not a place for anyone to flex their muscles unnecessarily.

He felt that the intervention had worked and the Administration’s sell by date had been reached, and the Municipality had to be allowed to function on its own.

Administrator’s remarks

Mr Amos Goliath, Administrator: MAPLM, said he had submitted his report. He had been appointed on 1 April, and at the meeting the MEC had indicated that the former acting MM, Mr Tebogo Mopelwa, and the acting CFO, Mr Leslie Mahuma, would stay as support members of the team. He had subsequently had resistance from the Troika, who had insisted they leave the municipality with immediate effect.

The MM and CFO had arrived on 26 March and assumed responsibility on the 27th without informing his predecessor, Mr Lefatola. Mr Lefatola’s TOR required that he ratify all resolutions of Council and therefore he had to wait for Mr Lefatola to ratify the resolution of Council to appoint them. This was only received on 8 April, and appointment letters were issued to the Mayor, MM and CFO. He had also furnished the Mayor, the MM and CFO with copies of his terms of reference as the Administrator, and copies of their appointment letters.

There had been several altercations with the Troika, who had demanded Mr Mopelwa and Mr Mahuma leave the premises of the Municipality with immediate effect. The MEC had made an attempt to intervene to deal with the tension, but had later indicated that Mr Mopelwa and Mr Mahuma had to leave the municipality and prepare their close-out reports from home.  

It was clear to him that the MM and CFO, like the Troika, did not intend to cooperate with the Administrator, as they took decisions in isolation without consulting him. An example of this was that they had reversed decisions of his predecessor to suspend some managers and shop stewards who had been disruptive at the workplace without consulting him.

He had been called to a meeting by the office of the chief whip of the Mayor, and at the meeting the legitimacy of section 139, as well as his legitimacy as an administrator, had been questioned. The interpretation of the Troika was that when the new MM and CFO were appointed, section 139 1 (b) was automatically no longer applicable in the municipality.

The MM at one occasion indicated that Administrator’s terms of reference were not legal, as they encroached on the MM’s work. After the meeting with the Troika, there was a heated debate that ensued, and later the Troika had told the political leadership that he had sworn at them. There had been no swearing, just threats made to him by the Speaker and Mayor that he should leave the MAPLM as he was trying to run a parallel administration in the municipality.

When he realised that all his efforts to explain the implications of section 139 1(b) would not bear fruit, he had referred them to the MEC. He had asked them to sort out the matter with MEC, and they had felt this was arrogant of him to do. He had then left the meeting, as there was no agreement on the interpretation of section 139 1(b). He was later forcibly removed from his office in the Municipality’s building by the Speaker and the Chief-Whip, as well as security staff.

A day after the appointment of the MM and CFO, the then acting CFO had received a call from the bank that there were people at the bank claiming to represent the Municipality, and who insisted that the signatories of the municipality’s bank account be changed. He subsequently, as the Administrator, had written to the bank and asked it to wait for his instructions on who the signatories would be.

He said that he had been part of the intervention since 2018, and for the sake of financial control, his predecessors had been signatories of the bank accounts. He subsequently indicated to the bank that he would also be a signatory, with the MM. This was also reflected in the terms of reference of the joint intervention team. After the two gentleman left, the tension was not reduced and it escalated to a new level, and he was therefore forced to withdraw as a signatory on the bank account.

He had explicitly indicated in his appointment letters what the MM and CFO’s salaries would be, but on the day of payment when the batch came to him to be approved, he noticed that the CFO’s salary had been increased from R1.1 million to R1.5 million, and the MM’s salary had been increased from R1.4 million to R1.9 million. No one had interacted with him as the Administrator about the increases, and he had no documented proof as to who had approved the increases. He had subsequently informed the MEC, the COGTA HOD, the Auditor General and the relevant law enforcement agencies.

On the MAPLM’s relationship with Eskom, he said the Service Level Agreement (SLA) had been signed on 19 May, and this had enabled Eskom to start the installation of the new meters.

The SLA with Sedibeng Water Services dealt with the drought intervention package from the Minister of Water and Sanitation, and was not in place yet. There had been several meetings, and the Municipality was awaiting a draft SLA.

Regrettably, some of the decisions taken by his predecessor had been reversed by the MM without his involvement. When he had  attempted to complete the recovery action plan which was part of the turnaround strategy of the joint intervention team -- which was also the result of a court order between the team and the Harrismith Business Forum -- the CFO had refused to provide him with information on the municipal finances, and therefore his April report could not include information on the financials. He had provided the Committee with the recovery plan.

There had been a strategic session that was attended by the MEC and Deputy Minister of COGTA some time ago which had been interrupted by the shop stewards of the unions which his predecessor had suspended, but which were just reinstated by the new Municipality.

On institutional capacity, he was happy to report that there was a MM, a CFO and now an electricity managers for QwaQwa and Harrismith.

Revenue had dropped in the month of May. March had seen the best collection rate, as it had been at R60 million, compared to R21 million in February and R22 Million in January. Collection was at R28 million for April, which could be partly ascribed to the Covid-19 lockdown.

An SLA had been signed with the Eskom, and some assumptions had been made by his predecessors on the income that would be derived if there was cooperation with Eskom to replace the meters of the 1 008 large power users. The assumptions were based on the fact the first 14 meters replaced derived a revenue of R6 million, but because it knew that not all 1 008 would give the same revenue, an estimate was made that would give the Municipality an average revenue of R 3 million. This might be an over-estimation, but it would be revised once Eskom had installed the first 100 meters. At that rate it was calculated that by November 2020, the Municipality would be able to collect R129 million from large power users and by the end of June 2021, it would be able to collect R278.

The Municipality had been engaged by the Development Bank of SA (DBSA), the NT and COGTA to participate in a Public Social Partnership (PSP) model to fast track repairs to infrastructure, which would include the infrastructure the MEC had referred to. It would increase the capacity of wastewater plants and lessen the reliance of QwaQwa on the Fika-Patso Dam.

The Municipality had managed to have its first management meeting on 10 June. He had been well received, and the meeting had gone well.

The major risks for the Municipality were the uninterrupted delivery of potable water, electricity disruptions, servicing of Eskom, municipal cash flow, political interference in administration, the Harrismith Forum, pending legal action if the Municipality did not live up to the settlement agreement in 2018, which could lead to section 139 (5) being invoked or Eskom to taking over the entire function of electricity in the Municipality.

The team was in court to today with an urgent application for an interdict against the Municipality for not managing the NMD. One of the primary reasons why the NMD could not be managed was that more than 70% of prepaid clients did not buy electricity, as they had bypassed their meters, therefore the NMD was exceeded. This also put a strain on the infrastructure of the Municipality and Eskom, which had led to Eskom disconnecting the Municipality. The matter had been postponed until 19 June and the Municipality had to file papers by Monday, 15 June.

There was another court application from a company in Harrismith, to strip the Municipality of its electricity licence due to the unreliability of the electricity supply.

He said that if the section 139 (1)(b) intervention was to continue, the role of the section 139 (1)(b) intervention in a Municipality had to be clarified, as there were many questions about it. The MM did not agree with the existence of an Administrator, and there was also a legal opinion of the Province that questioned the legitimacy of how the intervention had been engaged.

The Chairperson said the Administrator’s report had been totally different to that of the MEC and called on the Mayor to speak.

The MEC requested that the HOD speak, unless the Chairperson was happy with the report presented.

The Chairperson said it was not a question of happy. In May, the Committee had been deeply worried about MAPLM, and it had resolved that it would have an oversight visit, but this had been interrupted by the lockdown regulations. Based on what the MEC and the Administrator had said, the Committee would request a special dispensation from Parliament to visit MAPLM. He would be guided by the Members, but based on listening to the presentations, an oversight visit had to be made soon, in the next coming weeks.

HOD’s remarks

Mr Duma said that confusion had been caused by the TOR of Administrators given by COGTA. COGTA had had to draft generic references. However, after that the state law advisors had indicated that the TOR were not consistent with the MFMA and the Constitution. Thereafter, all the municipalities were in the process of reviewing their TOR so that they could be presented so that they could be followed. In Gauteng, the similar template of TOR was still used, and that was why some cases had been lost. The case for Sedibeng had also referred to things done previously.

On the issue about signatories on the Municipal bank account, it had been withdrawn based on the state law advisor’s advice, as it was inconsistent with the MFMA which stated the signatory had to be the MM. The only thing that was required was the mechanism to monitor expenditure. The response to the matter had been done on the advice of the state law advisors.

The Chairperson said there were bigger issues than bank signatories, but the matter would be returned to once Members had reflected.

Executive Mayor’s remarks

Ms Masechaba Lakaje, Executive Mayor: Maluti- a-Phofung, said she aligned herself with the report of the MEC and nothing else.

Eskom’s remarks

Ms Mlambo said that she had submitted a presentation, but would address only the key points in the presentation.

The Chairperson asked her to pick up from where she had left off in the last presentation in February. He asked her to start on the R5 billion MAPLM owed, and move forward from there.

Ms Mlambo said that MAPLM dominated the municipal debt of Eskom. In Eskom’s countrywide top 20, seven of the municipalities were in the FS. The seven municipalities made up almost R12 billion of the R28 billion of the top 20. MAPLM was number one of the pack of seven, sitting at R5.2 billion.

The last report had highlighted that MAPLM was not paying its full current account, and as per the court order, there were customers paying Eskom directly and it was collecting. Over and above that, the SLA was signed and according to the SLA, 100 meters would be installed for large power users. To date, 59 had been installed and it was projected to be completed by the end of July.

All the initiatives to assist the Municipality to manage the growth of the debt were highlighted.

Last year alone, the debt had increased by more than R1 billion. Eskom emphasised that in all its engagements, the priority was payment of the current account, which was about R72 million for May, excluding interest and penalties.

Eskom had 12 of customers paying it directly, as per the court order, but this amounted to around R5 million of the billed current account. The intention was to continue collecting the funds for the 100 customers. It would do the meter readings and send invoices, and the 100 customers would pay Eskom directly. The projected amount was yet to be quantified.

Eskom had asked MAPLM to pay its current account upfront, as this would give it a break while it sorted out its issues. The NMD had also been limited to assist the Municipality and control the growth of the account. It had also assisted the Municipality to promote the culture of paying for services.

The debt had been set aside, and for a portion of the debt the interest had been suppressed. Eskom had gone the court route to enforce payment, and there were a couple of pending court cases.

The bill was being issued timeously and accurately. MAPLM had been given 30 days to make payments. The Municipality had also been engaged as part of stakeholder partnering, and that was why the SLA was in place.

Unfortunately, the Committee had to note that despite all the assistance to date, the debt had increased by R1.5 billion in one financial year.

Slide 8 of the presentation showed the history of the bill, the overdue debt from January 2019 to date, and the current consumption, which ranged from R75 million to R173 million. For the payments, there was not one month where a payment of close to R20 million had been received. If an amount close to R10 million was received, it had been on only three occasions. The amounts included direct payment customers. On average the payment received was in the range of R7 million against a current account, excluding interest, of almost R100 million a month. The NMD penalties were due to consumption beyond what was contractually consumed. This had unfortunately created technical issues in the infrastructure, where the 132 Kilobit line was running at 140% more than it was designed for. Considering this overload, it was a matter of time before it would pack up. The same applied for sub-stations, and this was where penalties came from.

Eskom gave MAPLM the opportunity to manage load reduction by giving it a call every time the NMD was exceeded, to do its own load balancing. Considering winter, it would take at least an hour to reduce the load, and this was why the NMD penalties had been R9 million for May.

Eskom was now immediately cutting off the electricity when the NMD was exceeded, to allow the Municipality to reduce the demand and then be switched on again. She emphasised that it was not a disconnection, but an interruption allowing for management of the load. If this did not happen, the MAPLM was at the risk of being dark, and if there was equipment failure at Eskom, which was financially strained, there was a risk that repairs could not happen and electricity be restored. Eskom was currently not doing repairs, and if there was failure it would have to search for materials and scramble for resources. This was its way of assisting the municipality to prevent further damage to the network and equipment.

Eskom continued to engage with the Municipality, and it had indicated that it was prepared to give MAPLM a three month break, but only if it serviced its current account. MAPLM had made an offer that the July bill payment would be made in full, from its equitable share. MAPLM was engaging the provincial government and treasury for assistance while the meters were installed so that it could service its current account.

It was unfortunate that despite all engagements and attempts to assist the Municipality, there was no more than the R10 million received predominately from the direct customers. In one month, the Municipality had paid only just over a R1 million against a current account of almost more than R100 million, with interest.

Discussion

Mr Michalakis said he had huge respect for Mr Goliath’s integrity, which he had for Mr Lefatola as well. He took his hat off for how Mr Goliath did his work and had presented to the Committee. The MEC had indicated that the Municipality might be able to function on its own soon. In his opinion, if he listened to Mr Goliath’s version and perused his report, they should for as long as constitutionally possible keep the MAPLM out of the hands of the Troika.

The person actually steering the Municipality in the right direction was Mr Lefatola, and the current Administrator was doing an excellent job. What the Troika was up to had to be questioned -- why was it working against him?

Last time MEC was before the Committee there had not been time to answer the question, so he wanted to put the question first. Two mayors had overseen the MAPLM’s decline over the last decade -- Ms Sarah Moleleki and Mr Vusi Tshabalala -- and had both been redeployed to the legislature. Mr Tshabalala was the Chief Whip and was chairperson of the finance and public accounts committee in the province. Time had run out before the MEC could give a clear comment and commitment as to why to date there had been no consequence management embarked on. There was also no commitment to embarking on a full forensic financial investigation into the maladministration of the municipalities. He wanted to know if the MEC was willing to embark on an independent forensic audit, and if not, why not.

A consultative committee had been established on Eskom debt in a court order of 2018. This committee had consisted of the provincial and national COGTA. Were the minutes of the meetings available? Could it be indicated what recommendations had been made by the national COGTA, and whether these recommendations had been implemented? If so, how far was it with the recommendations?

On 26 March, the Council had appointed a new MM and CFO. If this was correct, it was irregular because the Municipality was under administration. He wanted an assurance that this had not been done. If it was irregularly done, he wanted to know what intervention would be made to overturn the Council decision.

Mr Mthethwa referred to the debt owed to Eskom, and said he did not see any speedy recovery happening. What was the source of income for these municipalities, and were there industrial areas? Eskom had mentioned users who paid it directly -- was this not jeopardising the Municipality’s income? If so, the turnaround plan had to be reviewed, as he did not see the Municipality improving soon.

He asked if Eskom had an indigent policy and if it catered for the poor.

Ms Visser said she agreed with the two colleges before her. Mr Lefatola was an excellent administrator whose close out report said there had been a “request and insistence by political leadership for payment to be made to service providers who were irregularly appointed. Explanations by the acting MM that such cannot be done as it was illegal and not in conformance with the law were not well received by the political leadership at all. It was as if the political leadership expected the joint intervention team to proceed with all the wrong and suspect practices of the past and blissfully continue with municipal mismanagement and maladministration that was happening prior to the intervention.” The new administrator’s report supported this. What did the MEC make of this?

Why was the provincial government’s outstanding debt to the Municipality not paid yet?

Mr Lefatola’s closing report was a road map to recovery for the MAPLM. It was an excellent document, yet the Committee had not been supplied with it although it was dated 19 April 2020. Had the new administrator read the report, and did he agree with the contents? If not, what did he propose? She requested a strategic plan on the implementation of these recommendations. She noted a set date of Monday 15 June for it be received. If there was no such plan, he had to be pushed to do so and provide it to the Committee.

Mr Sileku said he was concerned, as the MEC and Administrator had presented conflicting reports. It was painful to find a political leader saying she aligned with the position of MEC as if it were a rally, when she had to take accountability and responsibility.

He requested that the Municipality provide a report or plan to address electricity theft.

When he heard that all the decisions Mr Lefatola had taken had been reversed after he left, he did not understand how the MEC had allowed such irregularities in a municipality where he had appointed an administrator to assist. One could not adhere to a municipality, and sacrifice one’s own administrator.

The Troika body had said it did not want two individuals appointed by the MEC to be part of the Municipality, and the MEC had succumbed to the pressure of the Municipality and let go of these individuals. Why had the MEC done this?

For an MEC to say the Municipality was ready to operate on its own, considering its debt increase to Eskom even when there was an administrator and the highest debt to Eskom in the province, was worrying. Was it not a reckless decision for an MEC to make? He was very concerned, and the Committee had to carry out oversight at the Municipality to get a view of the situation from other parties, as conflicting views had been presented in the meeting.

Mr Zandamela said he was also worried about some of the things said by the MEC.

MAPLM had been under administration since 2018, and there had to be an investigation as matters were not right there. He requested that the forensic report be submitted to the NCOP.

He asked the MEC to comment on the safety of the administrators.

There were contradictions between the reports of the MEC and the Administrator. Based on the Administrator’s remarks, the forensic investigation report was required to be provided to the Committee.

The MM and CFO salary increases had to be investigated and addressed.

Ms Ncitha referred to the challenges in the MEC’s report, and said there was a critical issue of the employees’ compensation budget, which was sitting at 68% and which included overtime, yet the municipality had an unfunded budget

She asked what the MEC would do about the illegal salary adjustments. She wanted the MEC and the Administrator to comment on what they would do about this.  

The Chairperson said he was deeply disappointed by the developments in MAPLM. The Administrator had been appointed by the provincial Department, in accordance with the TOR. The TOR had to pass the test of legality. Given the experience of the past, it was not the first time the FS had appointed an administrator. He did not understand why the MEC’s report was totally different to that of the Administrator, who was his appointee. Who else was reporting to the MEC, as the Administrator’s report had to be what the MEC presented to the Committee?

Since the inception of the Committee after February, it had been deeply disturbed. The view of the Committee was that the MAPLM was the worst municipality, because it had an unfunded budget and the normal standard for salaries was 30%, but for MAPLM it was 68%.

There had been an administrator, Mr Lefatola, who in the view of the Committee was doing exceptionally well to address the situation. He had compiled a report with conclusions and clear cut recommendations, yet things had gone back to business as usual.

The case of the bank account signatories and the Council appointments of the MM and CFO had happened under the watch of the MEC. Why did these things happen without intervention, when the MEC was meant to monitor and support municipalities according to section 154 of Constitution? The administrators, together with the team, got paid a lot money to do their work but their work had been reversed without any form of justification.

The Municipality owed R5.3 million to Eskom, and it paid only small portions monthly to Eskom while interest was incurred. MAPLM was in a deep crisis. The conflicting reports provided made the situation appear hopeless. There was a crisis, with service delivery challenges and people protesting in MAPLM. The DWS was also assisting the MAPLM. There was a massive intervention by national government to address MAPLM, but there was no hope that the situation was being corrected.

He was concerned that the MEC did not get his reports from the Administrator, as it was something that would further deepen the crisis at MAPLM. He did not see hope for situation improving until all these issues were addressed. 

What the Committee had said in February was that it had to go to Maluti-A-Phofung, and if one of the recommendations was the dissolution of this municipality, that had to be the case.

Municipalities such as MAPLM had to have law enforcement to investigate the criminal mess in MAPLM. In terms of the MSA section 106, there were developed processes and a team appointed to investigate irregularities and maladministration in MAPLM. He did not get a sense that this was a way forward for the provincial Department.

All that was heard was that people were fired haphazardly, and administrators were fired by people who should be in the Intensive Care Unit (ICU). A municipality placed under section 139 1 (b) meant it was in ICU, and there was no patient in ICU who could prescribe to a doctor. It was worrying that intervention by the provincial Department was not straight forward in MAPLM.

These were serious issues that had to be addressed appropriately.

He believed that out of this meeting the Committee would agree to have an oversight visit to MAPLM to review the situation with all the numerous stakeholders in order for it to make appropriate recommendations.

MEC’s response

Mr Nxangisa said that the NCOP had been informed about the intervention in Mangaung. The information had been sent to the Chairperson, as well as to the Committee secretary. An email had been sent on 7 January to the Chairperson, and at the same time it was sent to the Minister and Provincial Legislature.

The Chairperson said that it would be further investigated.

Mr Nxangisa said he welcomed the Chairperson’s strong words on cautioning and encouraging the provincial Department. Mr Lefatola had done a sterling job and an extension to his term had been requested, but unfortunately he had been deployed to the Presidency. Mr Goliath had done a good job working with Mr Lefatola, as well as the entire team.

He had fallen short in the tussle, and it had been resolved when he tried to explain to all the people involved. It was a workplace, and it was about ensuring services were given to the people. He invited the Committee to visit MAPLM and then attest to some of issues raised. There was a serious personality problem, and it was true that there had been an exchange of vulgar words. On his intervention, he had implored everybody to be calm and attend to community issues. There had been personality issues, as the interaction had been different with Mr Goliath. Differences were normal in a working environment, as well as different conceptualisations of certain issues, so achieving an understanding was important. He was confident that the matter was being resolved, even though it was not smooth sailing.

An electricity master plan had been funded for the Municipality. From his viewpoint, the electrical problem in MAPLM could not be solved by a section 139 intervention, but by a functional municipality. The solution was in the master plan, and involved interactions with Eskom and other stakeholders.

Illegal connections did not occur only in residential areas, but was also in business and industrial areas, which had been discovered through an audit. The matter was being addressed, and there was a light at the end of the tunnel. The Hawks and SIU were already investigating, so it would be a duplication and waste of resources to conduct another investigation. His view was that the Committee should rather ask to be made abreast on the progress of the SIU and Hawks. instead of requesting a further investigation.

The consultative committee meeting minutes could be provided. There had been several interactions with the Harrismith Business Forum, and certain undertakings had been made.

The appointment of the MM and CFO was not illegal, as it had been done through the normal processes of recruitment of the Municipality, and had adhered to the regulations for section 56/57 managers. Whether the commencement of the appointed candidates was before or after concurrence was an example of the point that was being made, as there was no clear stipulation of it in the regulations. He noted it as a serious point, and it would be considered moving forward.

MAPLM had industries, farms and big businesses which were a source of income, besides the residential clients. The economic hub of the FS was also established in MAPLM. There was a range of income that could be levied in the Municipality. The inability of the MAPLM to generate revenue was a shortcoming but the team was addressing the matter.

The report of Mr Lefatola had been spot on, and it had been engaged with. He received the Administrator’s reports every month, which he presented to the Executive and they were thereafter discussed. The Troika was involved in the reports and a common report was created, because context was important. The weakness was that the reports had been leaked in certain instances before there had been engagement.

On illegal electrical connections and izinyoka (tampering with electrical connections), he said the electricity master plan was in place, and it had been agreed that all meters would be replaced in the residential areas and Eskom would deal with the large power users. Illegal connections were a challenge and the municipality had to pay an exorbitant amount. Faceless people were utilising the electricity recklessly.

He said that he had not succumbed to pressure from any other level. He worked closely with the team and engagement was robust, so that everyone owned up to the product.

The Eskom debt was still under discussion. The first round of discussion had been held, and the Executive had taken a decision from the Premier’s directive to find ways to help MAPLM to pay Eskom and apply for an NMD. Eskom had indicated and even given a quotation on what was required to apply for an NMD. The condition was that it needed to be prepaid, even if it gave the MAPLM an NMD. It remained a big issue, and there would be further discussion. The penalties and interest were high, and it was in the interest of Eskom to engage with the Municipality to find an amicable solution.

The safety of administrators had initially been an issue, but it was no longer the case. There was no one under threat at the moment. He would discuss this with the Chairperson if he had to disclose it. There was no problem in MAPLM, and it was safe. The Administrator was not going to MAPLM after the altercation because of personality issues, and not because of a structural or work related issue.

On the salary increase issue, the HOD had written a letter that the increase had to be reversed immediately as it was irregular, so it had been attended to.

The Municipality’s structure was bloated. The report mentioned officials who were employed in December and paid huge amounts, and some were even called assistant general workers. This was a huge problem, and there was another problem of people being promoted illegally with their salaries hiked. The team was addressing the matter.

In the report that the MEC received from the Auditor General (AG), it was acknowledged that after the employment of the MM and CFO in MAPLM, progress was seen and control measures had been put in place.

The progress he observed therefore came from various stakeholders’ accounts, and he was at the Municipality bi-weekly to assess the state of progress.

The MEC said he agreed with the Chairperson that it was not the first time an intervention had been made, and that the TOR were there. The process had to be reviewed, as it had been legally challenged and therefore advice was sought from the state law advisors. All TORs had been reviewed, and even the national guide was not legally sound. Therefore, it was not difficult for the Administrator to understand that he could not be a signatory on the bank account when there was a CFO and MM as an accounting officer. In other municipalities, the administrators were not signatories, as there were systems in place to account. The province was serious about fiduciary responsibility. This issue was not a big one, but was a personality issue.

The TORs were being reviewed, and would be provided thereafter.

On section 106 of the MSA, he said that he took note and that there was a turn-around strategy, and it was doing well. The financial recovery plan was doing well -- it was meeting NT requirements, therefore it was receiving the equitable share. The issues raised by the Chairperson would be attended to.

The Chairperson asked the Mayor to comment on the Troika’s role.

The Mayor was not available to comment.

Chairperson’s closing remarks

The Chairperson proposed that the report about the FS be expedited. He would facilitate the team in the office to facilitate the report with all the recommendations.   

He would engage with his principals, both the Chief Whip and House, to get approval to visit the FS and deal with the matter urgently in the next coming week or two. It was key that a report be created based on the discussions, with conclusions and recommendations about what had to be done in the three municipalities.  

It was important that Eskom be stabilised and supported in all ways, because without it the country would be doomed. The Committee wanted to engage with the FS legislature in future to share information about what was happening in the province.

The Eastern Cape and Limpopo municipalities would present the following week, and North West was also in the pipeline.

The meeting was adjourned.

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