The Committee was briefed by the North West Provincial Treasury and the Bojanala Platinum District Municipality on the municipality’s misappropriation of R134 million that was incorrectly transferred to it by the North West Provincial Department of Cooperative Governance and Traditional Affairs (NW COGTA). The Committee was informed that both the Municipal Manager and the Chief Financial Officer had been suspended for their role in the misappropriation of funds. Both officials challenged their suspensions and referred the dispute to the Commission for Conciliation Mediation and Arbitration (CCMA). The Council adopted a forensic report implicating both officials and resolved that disciplinary hearings were instituted by the municipality. However, both officials had refused to attend the hearings and lodged an urgent court application to the Labour Court to set aside the hearings. They subsequently lost the case and the hearings have been reinstituted. A political party had also assisted the two employees to lodge a High Court application on the validity of the council resolution which they had also lost.
Another contentious issue raised in the meeting was Bojanala Platinum District Municipality's irregular procurement of R84 million in paid services to five companies. Members were informed that the supply chain management (SCM) process had been manipulated, after its officials had received directives from certain politicians for the municipality to award contracts to these five companies. Members questioned who the alleged politicians were. In response, the municipality indicated that one individual had even been a Member of Parliament when the directive had been given.
Members expressed disappointment at the actions of the two suspended officials and insisted that they should face the consequences for their actions. They requested the municipality provide the total cost of the two court actions, and the costs that each party in the matter paid. Members suggested that the SCM procedures were flouted as the municipality had poor internal controls. They advised the municipality to improve these measures.
In the second briefing, NW COGTA provided the Committee with details on the progress of Section 139(1)(b) interventions in 13 municipalities in the North West that had all been completed. It stated that since the cessation of these interventions, it had noted an improvement in each municipality. In his opening remarks, the Premier of the North West indicated that his Office had received the SALGA report that contended that Section 139(1)(b) interventions had not been successful in the province. The Premier attributed the failures to both the lack of cooperation between the spheres of government and the tendency for government not to take into account the varied challenges faced by distressed municipalities. To better improve the results of its interventions, the provincial government had decided that in future interventions, it would adopt a joint collaborative approach between all spheres of government and other stakeholders.
Due to time constraints the Committee decided to hear from the 13 North West municipalities at a further meeting on 16 September. The Chairperson noted that the NW COGTA report spoke only of achievements of the Section 139 interventions and refer to the challenges. He requested NW COGTA provide a report on the challenges faced by the administrators and the department during all its interventions so the Committee could gain a better understanding of what had occurred.
Chairperson’s opening remarks
The Chairperson indicated that in a series of meetings, the Committee had looked at the progress of municipalities that were placed under Section 139(1)(b) in various provinces. A report would be consolidated on their findings and recommendations. Thereafter it would be tabled in the House.
This had been the first time that the North West was before the Committee this financial year, as two previous meetings had been postponed. The first meeting was postponed due to the untimely death of the former MEC of the NW COGTA, Mr Mothibedi Kegakilwe. The second meeting – scheduled for last week – was cancelled as the Committee was disappointed that the North West had submitted its 72-page document shortly before the meeting. In addition, the delegates expected to attend were not present. In fact, the meeting contained officials who were not meant to form part of the meeting. An apology from the provincial government was received by the Committee, which indicated that the required officials were not present because proper notices had not been sent to them. He asked that the Members accept the apology provided.
He explained that the National Council of Provinces (NCOP) had designated this week as Local Government Week to highlight its oversight of local government. In conducting its oversight function, the NCOP had to ensure that the municipalities in the country were capable and financially stable. Once this process was concluded, the NCOP House would debate the outcomes.
North West Premier’s opening remarks
Premier of the North West, Prof Job Mokgoro, said that due to the damage caused by the Covid-19 pandemic on the country’s economy, the citizens’ need for government had increased. For government to better focus on the developmental needs of communities, ideological debates had to be put to one side. Further, a renewed focus would have to be placed on the local government sphere, as it was the closest sphere to the people.
A recent report indicated that Section 139(1)(b) interventions were not effective in turning around the state of municipalities. He agreed with the report and indicated that the reason for this was the lack of a framework that would provide administrators the assistance to deal with all the problems in municipalities. Municipalities in the NW faced an accumulation of challenges over the years. This had been indicated by the Auditor-General South Africa’s (AGSA) report, which went further and highlighted that municipalities in the NW suffered from governance challenges, weak or poor leadership and non-responsive management. AGSA recommended that to put the municipalities in a better shape, these three challenges had to be addressed. This would ensure that municipalities are better fulfil their constitutional responsibility to provide quality services to the people.
The provincial government favoured the District Development Model (DDM), as the model required that all spheres should collaborate with each other, to better deal with the challenges faced by municipalities. He recommended that the government should not solely rely on Section 139(1)(b) to assist distressed municipalities. Instead, it should use the varied methods that it had at its disposal. It was acknowledged that many in government had not yet recognised the various needs of the people. That is why the provincial government decided that it had to apply different methods to assist distressed municipalities.
Placing focus solely on the financial stability of municipalities also restricted government’s ability to understand the challenges in local government. Municipalities faced a number of challenges and not just one. As such, the provincial government committed to providing assistance to municipalities through a joint collaboration between government and other stakeholders.
The Chairperson appreciated the Premier’s remarks which had set the tone for the meeting.
North West Provincial Treasury on findings on funds utilisation deposited to Bojanala
Head of the North West Provincial Treasury, Mr Ndlela Kunene, briefed the Committee on the final investigative report on the utilisation of funds deposited to Bojanala. A forensic investigation was instituted to investigate why the municipality had not returned an erroneous transfer of funds to it by NW COGTA. The municipality incorrectly used the funds to cover their commitments, such as the payment of R84 million to service providers. The forensic report found that both the Municipal Manager and CFO had irregularly contracted five companies to provide them with various services. This was in contravention of the municipal procurement process. To date, the money received by the Bojanala municipality had not been paid back to the Department.
The Chairperson said that the Provincial Treasury did not indicate what consequence management had been taken against the officials who were accused of wrongdoing.
MEC for North West Provincial Treasury, Ms Motlalepula Rosho, replied that Treasury had provided the NW COGTA with a report that included actions taken against implicated officials. Subsequently, the report was adopted and disciplinary processes ensued. She asked that the municipality officials provide information on the consequence management taken within Bojanala.
Bojanala Platinum District Municipality on R134 million misappropriation
Acting Municipal Manager of Bojanala Platinum District Municipality, Ms Desiree Tlhoaele, spoke to the actions implemented by the municipality on the misappropriation of R134 million. The Council had resolved to suspend both the Municipal Manager and the CFO in October 2019 for alleged financial misconduct. Both employees decided to refer their suspension to the CCMA based on their interpretation that the suspensions were unfair. The municipality hired an independent forensic company to investigate the allegations of misconduct levelled against the two officials and a final forensic report (which implicated both officials) was adopted by Council on the 28 June 2020. Thereafter, a disciplinary hearing ensued, but was continually postponed for various reasons. The employees then lodged an urgent court application to the Labour Court – which was subsequently won by the municipality – to set aside the disciplinary hearing. Having won the court matter, the municipality then reinstituted the disciplinary hearings.
A case of misappropriation of R134 million was opened with the South African Police Service (SAPS) and the investigations were in progress.
Mr E Mthethwa (ANC, KZN) asked who was responsible for the costs associated with the matter referred to the High Court.
Ms S Shaikh (ANC, Limpopo) asked if the municipality could provide the additional recommendations that had been provided by the forensic investigator in the report. She asked why the municipality had not initiated disciplinary proceedings for all the cases. These proceedings should have been initiated once wrongdoing had been found.
Ms Z Ncitha (ANC, Eastern Cape) asked that the municipality provide the Committee with the forensic report, as it was interested in viewing the recommendations. The Committee was disappointed in the poor actions taken by both the CFO and the City Manager. The presentation by the municipality did not assign any responsibility to the Municipal Public Accounts Committee (MPAC) when the wrongdoing had occurred.
The councillors who had given instructions to the SCM on procurement should not have done so. Their mandate was to provide oversight over the procurement processes. She asked the municipality to explain how councillors were able to get involved in the supply chain processes.
Mr S Zandamala (EFF, Mpumalanga) said that the contents of the report were concerning. He asked when the contracts of the accounting officers would be cancelled by the municipality. He also asked who paid the costs for the court applications.
Mr I Sileku (DA, Western Cape) said that the report does not indicate if one of the councillors who had interfered in the SCM process was guilty. Instead it suggested that he might have given the directive for officials not to follow the correct procurement process. The councillor also denied the allegations levelled against him in an interview.
Ms C Visser (DA, North West) said that whilst the Committee had appreciated the good work done by the municipality, it was still concerned by the lack of consequence management.
The report indicated that a certain amount of money was transferred by NW COGTA to the municipality. She expressed disappointment that department officials could make such an error and this spoke to poor controls within the department. She asked what action had been taken by the department.
She asked for the costs of the forensic investigation and who had carried out the investigation.
The Chairperson noted that the municipality said it would review the appointment of the service providers. He asked why they would not simply terminate the contracts.
As there had been similar findings in the forensic report and the AGSA audit report, he suggested that the municipality should abide by both reports. Bojanala was one of the municipalities that had not submitted its annual financial statements (AFS) on time. He asked if their AFS had been submitted yet, and if so, what feedback did they receive from AGSA. Also, had AGSA made similar findings on the irregularly procured contracts?
What was the name of the politician who was responsible for that directive and had he been a Member of Parliament at the time?
Ms Ncitha asked if the municipality had internal auditors.
Ms Tlhoaele explained the two court matters that involved the municipality. The first matter had been lodged as an urgent application at the Mahikeng High Court. The second matter was lodged by the dismissed employees in the Labour Court.
The Chairperson understood that but asked who was liable for the costs of each court process.
Ms Tlhoaele replied that since both the EFF and the two suspended employees had lost their cases, they were both liable for the costs.
The Chairperson asked in what role had the EFF featured in this matter.
Ms Tlhoaele replied that they had lodged the urgent application to stop the disciplinary hearings. The EFF had questioned the validity of the council resolution to suspend the two employees.
The Chairperson asked if the EFF had lost the case.
Ms Tlhoaele indicated that the EFF had lost the case. Since the municipality initiated the disciplinary hearing, it would continue paying the costs.
The Chairperson proposed that the municipality provide the information on the total cost of the two court actions, and the costs that each party in the matter paid.
Mr Mthethwa agreed with the proposal.
Mr Sileku asked why the Municipal Manager and the CFO were not subpoenaed by the municipality to take part in the forensic investigation.
Had the Mayor been aware that there was an erroneous deposit in the municipality’s account and if she was aware, why had she not reported the matter to the department.
The report indicated that five companies had done business with the municipality without following the correct procurement process – the balanced scorecard (BSC) was not applied and both the bid evaluation committee (BEC) and the bid adjudication committee (BAC) were not considered in each bid. He asked the municipality to provide the names of the owners of each company, where they reside and if they had links with either politicians or the administration. What consequence management would the department take against the political leaders responsible for the directives.
Ms Tlhoaele replied that the municipality had since improved its SCM processes, as a result of the recent incident of the municipality irregularly procuring the services of five companies – that were subsequently paid R84 million. The municipality recognised that its SCM had been decentralised between it and the department; hence it decided to centralise the SCM process within the municipality. It also looked at its internal controls, management of the Municipal Regulations on Standard Chart of Accounts (mSCOA) compliance and expenditure. It was also working on implementing the AGSA’s recommendations, which included instituting disciplinary charges against officials accused of procuring services outside the required SCM process. It acknowledged that its internal audit unit was not effective, but it had implemented measures improve its capacity. To ensure SCM compliance, the municipality decided to establish an internal audit unit in February 2020 and a Chief Audit Executive was subsequently appointed. In addition, the internal audit charter had been submitted to the Audit Committee.
The municipality was not at liberty to respond to the question of why it had not subpoenaed the Municipal Manager and the CFO, as the investigation was conducted by an independent forensic company. Both officials had resisted the municipality’s request to hand over their laptops and the municipality had to subpoena them do so. However, once they had received the laptops, they found that all the information had been deleted by the officials. The municipality was in the process of retrieving the deleted data. It had been disappointed with the resistance displayed by the officials to cooperate with the investigation.
Both the CFO and Municipal Manager contracts were scheduled to expire at the end of 2023.
The Provincial Treasury was in the process of reviewing the contracts between the municipality and the five service providers who had participated in the R84 million tender. The municipality ceased its dealings with the service providers and had engaged with Provincial Treasury on whether they were liable to pay an additional R34 million to the service providers – the service providers had claimed this additional amount.
The Chairperson asked if the service providers had claimed that they required an additional R34 million on top of the R84 million that already been paid by the municipality.
Ms Tlhoaele indicated that was indeed the case and that is why the municipality decided to refer the matter to Provincial Treasury – to gain clarity on whether the claim was valid.
The Chairperson said that she had not answered why they were still reviewing these contracts, instead of cancelling them, as they had deemed them to be illegal.
Ms Tlhoaele replied that she had referred to amount paid and the amount still claimed by the service providers. As their services had already been terminated, the municipality did not have to consider the contracts. The municipality prioritised looking only at the invoices.
In the municipality’s audit report, the AGSA had raised the same issues raised in the forensic report. It paid particular attention to some of the invoices of the municipality, and one such invoice – amounting to R17 million – had been found to have been processed irregularly, as there had been an existing relationship with an accounting officer and a politician. The municipality suspected that one of its councillors could have been party to the transaction. Subsequently, the municipality had to provide disclosures to the AGSA, to determine which councillor had been involved.
The Chairperson indicated that the municipality had provided a response on whether Mr Wolmarans had been a Member of Parliament when he had given the officials the directive to divert from the correct procurement processes.
Ms Tlhoaele indicated that at the time of the transaction, Mr Wolmarans had been the Executive Mayor of Rustenburg.
The Chairperson disagreed that he had been the Rustenburg Executive Mayor at the time and asked the municipality to clarify who the individual implicated in the report was.
MEC Rosho clarified that at the time of the incident, Mr Wolmarans had been a Member of Parliament and not the Executive Mayor of Rustenburg.
The North West MPAC Chairperson, Cllr Solomon Davids, explained that an audit action plan had been submitted that would be engaged on by MPAC on 16 September.
The Chairperson asked what the role of MPAC was when all the irregularities had occurred.
Mr Davids replied that the referral of the labour dispute to the CCMA by the municipality employees – as required by Section 134 of the Labour Relations Act – had not been raised either in MPAC or Council. MPAC had only found out about the matter after workers had organised a strike due to the delayed payment of their salaries.
Executive Mayor of Bojanala Platinum District, Ms Fetsang Molosiwa, replied that she had indicated in her affidavit that she had only been made aware by the CFO of the municipality's dealings with the five companies after the employees had engaged in a strike about their salaries. Subsequently, she agreed with the CFO that the money had to be returned to the department. However, since she had not often been in her office due to political commitments – she had not followed up on whether the money had been returned. Recently, the MMC for Finance informed her that the Provincial Treasury had sent a letter to the municipality to deposit R50 million into the Rustenburg Local Municipality’s account, but it could not do so, as it lacked the funds.
The Chairperson asked her to confirm if she had been aware that the five companies had been appointed irregularly and unlawfully and that they had received R84 million for their services.
Ms Molosiwa replied that she had not known of the five new companies contracted by the municipality. She only had knowledge of the three companies that had been contracted by the municipality in 2016 and had renewed their contracts recently.
The Chairperson asked her again if she had been aware of the contracting of the five companies.
Ms Molosiwa said she had not been aware of procurement processes involving the five companies.
Mr Mthethwa suggested that since several of the cases had been referred to the Hawks, the Committee should allow for the court to rule on each matter, before Members delved further into the matters.
The Chairperson agreed with the proposal.
Mr Kunene, Provincial Treasury Head, explained that there had been two concurrent disciplinary processes underway – the municipality’s internal disciplinary process and the investigations by the Hawks on the report submitted by the department.
To obtain the whereabouts of the money paid to the companies an investigator was hired by the Provincial Treasury. The investigator also looked at SCM non-compliance, whether the municipality got value for money and whether the services had been provided. This investigation would form part of the second report provided by the investigator. A third report was in the process of finalisation, and it focused on the consequence management taken by NW COGTA. It had since been concluded and would be provided to the Provincial Treasury MEC, on the findings and, where required, provide recommendations.
An amount of R834 000 had been spent on all three investigative processes by the department. The first investigation – which looked at the irregular dealings between the municipality and the service providers – had been concluded and the Committee was in possession of the report. The second investigation looked at the transfer of money by NW COGTA to the municipality. The third investigation was on obtaining the whereabouts of the money paid to the companies – and the consequence management taken by the municipality. Once the final investigation was complete, the department would submit the report to the Hawks for further investigation.
One of the challenges that the municipality had faced with the investigations of the CFO and Municipal Manager, was that the two had not honoured their commitment to attend interviews. However, since the investigator had submitted all the evidence of their alleged wrongdoing to the Council, the disciplinary cases would still continue and would rely on this evidence.
The department was in possession of all the evidence, which included recordings, documents and exhibits. It had since submitted the evidence to the Hawks. If the Committee requested additional information, the department would provide it.
The Chairperson thanked the delegates for their input during the meeting and indicated that the Committee would await the report on the costs associated with the two court matters. He proposed that the Committee should postpone discussing its recommendations about the Bojanala municipality until after recess in the first week after Parliament reopened. Once the recommendations were discussed, it would compile a report for tabling in the House.
Ms Ncitha agreed with the proposal.
North West COGTA on the progress of the Section 139(1)(b) interventions in the province
Head of the North West Provincial Department of Cooperative Governance and Traditional Affairs, Mr Phihadu Motoko, briefed the Committee on the progress of Section 139(1)(b) interventions by the provincial government. Due to the poor state of affairs in 13 municipalities in the North West, the provincial government had to invoke Section 139(1)(b) interventions in each of them. Administrators were originally appointed for six months but due to the extent of the challenges in each municipality, their contracts were extended for an additional six months. To date, all the interventions had ceased, and the department had received the close-out reports of all 13 municipalities. The department acknowledged the criticism it had received from municipalities that had been placed under administration, such as the fact that interventions were used for political purposes only. To ensure that this did not occur in the recent interventions, the department decided to set clear goals and objectives for the administrators. It was pleased to note that it had seen progress in all 13 municipalities and was confident that each could fully stabilise in the future.
The Chairperson proposed the Committee adjourn the meeting due to time constraints and Members had been involved in meetings the whole day.
Mr Mthethwa proposed that the meeting be postponed to another date. He agreed that the three minutes allocated to each councillor would not be enough to gain a comprehensive picture of the state of each of the 13 municipalities. Especially since all 13 municipalities faced numerous challenges. In the next meeting, councillors would be given more time and the Committee would be able to deal with all issues comprehensively.
The Committee agreed to the proposal.
The Chairperson said the Committee had agreed to postpone this meeting for a later date. However, it had to present a report to Parliament on the situation of all section 139 interventions in municipalities of the province soon. They would get more information on the state of each distressed North West municipality if the Mayors were all present in the next meeting.
The Chairperson said there was no indication from NW COGTA on the challenges it had faced during each of its interventions, instead it only outlined their achievements. It also excluded details on when the interventions were first invoked, and when they were revoked. He asked that NW COGTA provide a report which indicated the challenges faced by the administrators and the department during all its interventions, so the Committee could gain a better understanding of what had occurred. The Committee preferred that the report be submitted next week, as Parliament would be on recess from 18 September.
The Chairperson was displeased with the number of noisy interruptions in the virtual Zoom meeting.
Ms B Bartlett (ANC, Northern Cape) suggested that at the next Zoom meeting individuals who were not invited to the meeting should not attend.
Mr Zandamela suggested that officials should mute their microphones in the following meeting.
Ms Visser suggested that the officials should accustom themselves to the Zoom platform before the next meeting.
The Chairperson said the Committee would address Parliament on what action should be taken against individuals who repeatedly disrupted meetings. All officials present in the meeting were advised to observe the Rules of Parliament and to respect the process.
He proposed that the meeting should take place on Wednesday 16 September. He assured all those present that the Committee would continue to assist the distressed municipalities in the province with their recovery.
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