Ephraim Mogale Local Municipality: follow up on dismissal of Municipal Manager and non-compliance with submission of reports to the Committee

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Cooperative Governance and Traditional Affairs

22 July 2021
Chairperson: Ms F Muthambi (ANC)
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Meeting Summary

Video: Portfolio Committee on Cooperative Governance and Traditional Affairs, 22 July 2021

The Committee convened in a virtual meeting with representatives from the Limpopo Department of Cooperative Governance and Traditional Affairs, the South African Local Government Association and Ephraim Mogale Local Municipality for a follow-up engagement with the municipality on the dismissal of the Municipal Manager and non-compliance with submission of reports to the Committee.

The meeting was intended to resolve apparent contradictions that the Committee had detected in reports and engagements with the Ephraim Mogale Local Municipality earlier in 2021. These engagements related to the consequence management actions taken in the wake of irregular investments made by the municipality in the Venda Building Society (VBS) Mutual Bank in 2017/8.

The municipality initially said that they had submitted a report that had been requested by the Committee on 20 April. They referred to an acknowledgement of receipt of the information from the Secretary of the Portfolio Committee. However, in response to questions from the Chairperson, the mayor acknowledged that the municipality had not yet compiled the report they were supposed to submit to the Portfolio Committee on the 30th of April 2021. The municipality outlined the complex litigation related to the sanctioning and resignation of the former Municipal Manager that was still ongoing.

The Committee was concerned about the lack of leadership in the municipality throughout the timeline of the hearings and consequence management actions. The Committee asked about the costs of the hearings and legal proceedings, where the money for the legal opinions following the disciplinary hearing report and the court rulings came from, and the extent to which it was the taxpayer’s money. The Committee wanted to know when the municipality would stabilize its administration and what was holding the mayor and the council back in employing a Municipal Manager and a Chief Financial Officer. The Committee said that contradictory information came from the municipality in every meeting. The Committee was unable to reconcile the information and this hampered its ability to conduct oversight.

The Chairperson said that the Committee would reconvene on the way forward on the matter and the findings would be communicated to all the parties involved. She said that the Committee will also have to formally invite the Treasury to deliberate further on the matter.

Meeting report

The Chairperson welcomed all the Members and the delegations to the meeting and said this was a follow-up meeting which should not take a lot of time, as most of the issues had been dealt with in the past. She said that the Committee had interacted with the Ephraim Mogale Local Municipality (LM) on the 17th of March during its oversight visit to all the municipalities in the [Sekhukhune] District. The issue that was critical then was around the consequence management actions taken in the wake of the investments made in the Venda Building Society (VBS) Mutual Bank. In that meeting, the municipality told the Committee that they referred the matter to the Municipal Misconduct Board and that the Chief Financial Officer (CFO) resigned, while a case was opened against the Municipal Manager who also subsequently resigned after 18 months of litigation. The mayor was emphatic that there was no settlement agreement with the Municipal Manager and that she resigned on her own accord when it became evident that she would lose the case. It was also reported to the Committee that [the municipal] council approved the resignation. The Committee requested the municipality submit a written report on these matters by the 18th of March 2021, but it was not submitted. After the sitting on the 17th of March, the Committee received some correspondence from the former Municipal Manager indicating that the mayor did not respond truthfully to the Committee's questions around the settlement agreement between herself and the municipality, as she was compelled into signing it. She told the Committee that her resignation was a condition of the settlement agreement, and the Committee took these allegations seriously to the extent that it sought a legal opinion.

The Chairperson read an extract from the Powers, Privileges, and Immunities of Parliament and Provincial Legislatures Act section 17 (2) D, which provides that:

  • A person who, with intent to deceive a house or committee of Parliament, produces to the house or committee any false, unfortunate, falsified, or fabricated documents, commits an offence and is liable to a fine or imprisonment of a period not exceeding 2 years or both a fine and imprisonment.

The legal opinion that was provided to the Committee affirmed the fact that misleading a committee or house of Parliament is an offence, and that if indeed the Committee was misled by the mayor, it can formally lay a criminal charge with the South African Police Service (SAPS).

The Committee was advised to afford the mayor an opportunity to respond to the former Municipal Manager’s allegations before deciding on whether Parliament has been misled and whether the act was deliberate on the part of the municipality. The Committee consequently reconvened a meeting with the municipality on the 20th of April 2021 to afford the mayor an opportunity. In the meeting, the mayor indicated that the municipality misunderstood the settlement agreement questions and was under the impression that the Committee was referring to a monetary settlement paid to the Municipal Manager, which is what the municipality meant when it said there was no settlement agreement. It is in that meeting where the mayor tendered an apology for the misunderstanding, and the Committee accepted the mayor's apology, but then, on discussing and probing further on the matter, the municipality reverted to providing contradictory information. The Committee afforded the municipality another chance to clarify the matter by furnishing the Committee a comprehensive report by the 30th of April 2021. The Committee would then compare the information provided against previously submitted information and then determine the appropriate course of action should there be any discrepancies. “Today’s meeting is for the municipality to take the Committee through the report so that the Committee can make a final determination and lay the matter to rest.”

Ms H Mkhaliphi (EFF) wanted to know if there is anyone from the provincial Treasury in the meeting, as they have some things to clarify in the meeting as well.

Ms Shereen Cassiem, Committee Secretariat, said that Treasury representatives were copied in the invitation to the meeting.

Briefing by Ephraim Mogale Local Municipality

Mr Molaudi Mothongwane, Executive Mayor: Ephraim Mogale LM, said the municipality’s records state that on the 20th of April 2021, they submitted the report to the Committee and received an acknowledgement of receipt of information from the Secretary of the Portfolio Committee. [The date of the submission of the emailed ‘Mayor’s Report’ on timelines to the Committee Secretary was 30 April, not 20 April.] In terms of the progress made regarding the issue of the former Municipal Manager (MM), he said that an application had been filed by the municipality for the review of the decision of the chairperson of the disciplinary hearing involving the municipality and the former MM. This was set down for hearing on the 13th of May 2021, and the case number was J1888/2019. The municipality was advised by its legal team that on the 13th of May 2021 the court did not ventilate on the merits of the application. Instead the court issued a directive for the consolidation of the other three applications filed by both parties. There were currently three separate applications filed by both parties at the Labour Court. The following applications were still lying at the Labour Court:

  1.  An application filed by the municipality to review the decision of the chairperson of the disciplinary hearing.
  2. An application filed by the municipality to set aside a settlement agreement entered by and between the municipality and the former Municipal Manager.
  3. An application filed by the former Municipal Manager to have the settlement agreement made an order of court.  

He said that on the 13th of May 2021, the court then issued a directive that parties must file affidavits for the consolidation of all the three separate applications into one. The effect of this consolidation was that instead of the court hearing three separate applications on three separate occasions and dates, the court would now hear one consolidated application once and dispose all the others at the same time. Parties were in the process of finalizing the consolidation and once it was done, the court would set down the matter for arguments on the merits.

In terms of the recovery process [of the funds invested in the VBS Mutual Bank], Mr Mothongwane said that on the 30th of June 2021, the Public Protector issued a report on an investigation into allegations of improper conduct and maladministration by the municipality relating to an investment made with the Venda Building Society (VBS) Mutual Bank. One of the remedial actions issued by the Public Protector was that the acting Municipal Manager must take steps to recover the irregular expenditure in respect of the investment from the person liable for it, as contemplated by section 32 (2) of the MFMA and pursue the municipality’s civil claim for the recovery of the amount of R80 million invested with VBS. The municipality had already issued out summons against the former municipal manager and the CFO at the High Court, sitting in Polokwane, case number: 7897/2020. The matter is defended, pleadings had already been exchanged and closed and the matter was still before the High Court.

Briefing by MEC Limpopo Department of Cooperative Governance and Traditional Affairs (COGTA)

Mr Basikopo Makamu, Member of the Executive Committee (MEC), COGTA: Limpopo, said that the VBS Mutual Bank investment left the municipalities with several challenges, as they had to go through the disciplinary process of senior management. The municipalities had challenges with filling the vacant positions of senior managers, which was unfortunate, as they were starting to improve their audits. The municipalities were also faced with the dilemma of having to pay the suspended senior managers pending their investigations and paying for the services of the acting senior managers who could not commit to the positions permanently, pending the investigations of the suspended senior managers. He said that provincial COGTA had been working closely with provincial Treasury, the South African Local Government Association (SALGA), and the municipalities to ensure that their Financial Recovery Plans are implemented to try and recover the situation.

The Chairperson said that the issue of non-compliance that she was referring to was regarding the information that the municipality was supposed to have submitted on the 18th of March. The Committee asked for a full report to be submitted by the 30th of April and other evidence to the effect that a settlement was reached, which was submitted by the municipality. The issue here is that the Committee must determine whether the information submitted by the municipality is accurate and if there was no settlement agreement reached. The purpose of the meeting was to compare the information that was submitted before, including the information submitted on the 30th of April, to determine any course of action should there be discrepancies.

Discussion

Ms Mkhaliphi said that it looked like there was no coordinated leadership in terms of the VBS Mutual Bank situation in the province because the report that was sent by the Municipality to the Portfolio Committee shows that there is confusion in terms of the settlement agreement between the former MM and the municipality. The municipality wants to recover the money that was lost in the VBS investments, as it caused some service delivery challenges, and at the same time it looked like there was no leadership provided from the onset. This also spoke to the political leadership of the ruling party in the province. The report provided by the municipality also stated that they did not have a municipal manager since 2018 and that they were rotating senior managers to fill in the position. According to their report, it is the municipality who identified and appointed an independent chairperson of the Disciplinary Committee, but when the chairperson provided them a report, it seems that the municipality did not approve of the report, which led the municipality taking the matter to the Labour Court. After the Labour Court gave its ruling, the municipality went to seek a legal opinion. She wanted to know who paid for all these legal processes that were taken by the municipality.

The Chairperson referred Mr Mothongwane to the settlement agreement document titled HMP1 on page 45 paragraph 4 and asked him to clarify what it meant. She also asked him about the report that the mayor was supposed to submit to the Portfolio Committee, as stated in the letter that he sent to the Committee. She wanted to know the contents of that report.

Response by Ephraim Mogale LM

Mr Mokhulwane Molefe, Legal Services Manager: Ephraim Mogale LM, said that the settlement agreement had not been made a court order yet because there were currently three applications at the High Court, as indicated by the mayor before. One of those applications, which was currently at the Labour Court was filed by the former Municipal Manager to have this settlement agreement to be made a court order.

The Chairperson asked whether the document was authentic or not

Mr Mothongwane said that the document was authentic and the people who signed it are officials of the municipality.  

The Chairperson wanted to know what orchestrated the signing of the settlement agreement. She wanted to know whether there was litigation under case J1888/2019 that when both parties realised that the matter can be resolved out of court, they can sign the document. She wanted to know the rationale for signing the document and the name of the person who signed the document. The Chairperson said that she interpreted the document as the solution to resolve the matter of case J1888/2019, as it was signed in October 2020. She wanted to know who signed the document on behalf of the applicant.

Mr Mothongwane said that the municipality felt that it was a waste of money to pay a full salary to the suspended MM when they would also be paying a full salary to the person acting on her behalf and that is when a settlement agreement was reached. The settlement agreement was signed but it was not implemented because when the municipality was about to implement it, they received an instructional letter from the provincial Treasury demanding answers regarding issues of recoveries and other matters. The acting Accounting Officer and another official signed the document. In terms of the issue of the covering letter, he said that in the last engagement with the Portfolio Committee, the acting MM had a connection issue which led him to leave the meeting early and the Committee had instructed the mayor to reprimand the MM. After the meeting, the mayor, together with the legal manager held a meeting with the acting MM and he verbally apologised.

The Chairperson asked whether the municipality reinstated the former MM after receiving the letter of instruction from provincial Treasury.

Mr Mothongwane said that the reinstatement of the former MM to her position was not a decision to be made by council. He said that the Chairperson of the Disciplinary Committee was appointed by the municipality, and he was working independently. Council did a thorough deliberation by valuing the R80 million lost by the municipality against the recommendation of the Disciplinary Committee that the former MM must be taken through a course on investment and that she must be suspended without pay for three months. This was when council decided to review the Disciplinary Committee’s decision by approaching a court.

The Chairperson wanted to know the status of the review of the Disciplinary Committee’s decision in court.

Mr Mothongwane said that the municipality was advised by its legal team that on the 13th of May 2021, the court did not ventilate on the merits of the application, instead the court issued out a directive for the consolidation of the other three applications filed by both parties.

The Chairperson wanted to know whether the municipality compiled the report that they were supposed to submit to the Portfolio Committee on the 30th of April 2021.  

Mr Mothongwane said that they had not compiled the report yet.

The Chairperson wanted to know when the municipality planned to compile the report. She asked if the municipality takes the Portfolio Committee seriously or not, as the report was supposed to be submitted three months before.

Ms Mkhaliphi asked whether the municipality currently had a Municipal Manager or if they were still rotating staff for the position.

Mr Mothongwane said that since the suspension and dismissal of the senior managers [following the VBS Bank scandals], most municipalities ended up working with acting managers or rotating senior managers for the position of the Accounting Officer. Ephraim Mogale Local Municipality had only 2 out of 6 senior management positions that were filled—the Director of Infrastructure Services and the Director of Community Services. The municipality was finalizing the process of appointing a Municipal Manager and had advertised four other senior management positions. The Director of Community Services’ term was coming to an end at the end of October 2021, and as such, provincial COGTA sent a letter to the municipality indicating that the municipality must be prepared to fill that position. The CFO position had not been filled since 2018, as the former CFO was still under investigation for the VBS Mutual Bank investment and the money that was lost. The position of the Director for Planning and Development was filled for a while, “but the incumbent went for greener pastures”. He apologized for the municipality not submitting the report to the Committee.

Mr G Mpumza (ANC) was amazed that the position of the Corporate Services Manager had been vacant since 2018 and that the position of the MM had not been filled. He told the mayor that that this was not leadership. “We cannot allow a situation where critical positions in these institutions remain vacant when we have to render services to our communities, and it is a well-known fact that a vacancy in the position of a Municipal Manager or a CFO is a qualification factor on its own by the Auditor General”, he said. He asked when the municipality would stabilize its administration and what was holding the mayor and the council back in employing a Municipal Manager and a CFO.

Mr K Ceza (EFF) said that the municipality constantly came with several discrepancies and he asked for how long the municipality must be given a second chance by the Committee. “We are not afforded a chance to reconcile this information as we should as the Committee to conduct oversight so that they are able to do their work because the mayor always comes and contradicts himself and then apologizes”.

Mr Mothongwane said that he acknowledged that there had been some discrepancies from the municipality. He then clarified the timeline of events that occurred in the municipality since 2018 until the current meeting regarding the settlement agreement [signed with the MM], filling of vacant positions in the municipality as well as the challenges experienced by the municipality. He said that he did respect and take the work of the Portfolio Committee seriously, as he was elected by the people to his position.

Mr B Hadebe (ANC) said that the term of office for municipalities was coming to an end and asked what the duration of the contract of the new MM, that the municipality was in the process of electing, was going to be.  

The Chairperson wanted to know who was paying for all the legal issues and how much the cost was this far, as the municipality is also going through litigation processes.

Ms Mkhaliphi said that the municipal council made decisions and then did not honour those decisions and always sought legal opinions. She said that the provincial department needed to also explain what was going on in the municipality.

Concluding statement by MEC COGTA: Limpopo

Mr Makamu responded to an allegation by Ms Mkhaliphi and Mr Ceza that factionalism in the ruling party was responsible for [the situation in] Ephraim Mogale municipality and that the provincial COGTA department had not been very “hands on” in the municipalities within the Limpopo Province. Mr Makamu said that when the AG was presenting the 2019/20 Audit outcomes, it was only the Limpopo province that recorded significant improvement, and the AG characterized the improvements as a result of the collaborative work of provincial Treasury, SALGA and provincial COGTA. He added that it would not be correct to assume that the Limpopo province had poorly coordinated governance and factionalism because, in terms of the Systems Act, there are rules and responsibilities that the MEC for local government in the province will be able to follow. The municipality received an unqualified audit opinion, which was much appreciated by a particular level of leadership, and the Portfolio Committee should not shy away from showing the gaps that it saw when doing its oversight. He said he did not agree that factional politics were at play in the municipality, especially because a disciplinary process was enacted, and council became divided because the VBS situation was “like a hot potato in their hands”. Council did not run away from their responsibilities to agree or disagree with the decision of the independent chairperson of the Disciplinary Committee (DC). He said that the Council took their rightful position in making sure that they played the oversight role that was expected of them by the community as its elected representatives.

Mr Makamu said that the municipality needed support to employ a permanent Municipal Manager. He said that he asked the mayor the same question that Mr Hadebe asked when the mayor said that the municipality is in the process of appointing a new MM. He said that the contract of the new MM would be for the 12 months after the election of the new leadership of the municipality, which was acceptable. He added that when the VBS Bank issue happened, no one was experienced in the matter, but it was handled properly. It was not fair for Ms Mkhaliphi to label what happened as a lack of coordinated leadership in the municipality. Out of all the provinces that invested in VBS Mutual Bank, Limpopo was the only one that collectively worked together to ensure that all municipalities within the province took actions against those who were involved and helped them to recover after. 

Mr Mothongwane said that the municipality had stated within its adverts that whoever was interested in applying for the senior management positions, including the position of the MM, their term of office would not exceed 12 months after the local government elections. He said that the municipality invested the R80 million with VBS Mutual Bank in 2017 irregularly. The council became aware of the situation a year after the money was invested. The former municipal manager never charged nor suspended the former CFO until the matter was reported by the financial report. He said that if the former MM had been hands-on in the financial matters of the municipality, surely by the end of 2017 financial year she would have noticed that there was money that was irregularly invested by the former CFO, without her authority. He said that the municipality was working hand in glove with both provincial COGTA and Treasury. In terms of the legal costs incurred during this time, he said that setting aside the settlement agreement cost the municipality R361 928.38. The review of the sanction cost the municipality R726 327 and changing the settlement agreement to a court order cost the municipality R161 701.50. 

Response by former Municipal Manager: Ephraim Mogale LM

Ms Monica Mathibela, former Municipal Manager: Ephraim Mogale LM said that [the issue] would have assisted if the municipality had tabled a comprehensive report on the matter. She said that the issue of VBS had been “ugly”. The matters that the mayor had raised about how money was invested under her watch were misinterpreted. She said she suggested that the mayor revisit the investigations report. “The investigation report is very clear of what I did and what other officials did in contradiction to the money invested in VBS”. In terms of the settlement agreement being made a court order, she said that it was very much upsetting and disappointing that after the ruling by the presiding officer of the DC, the matter was subjected to review. Both parties concurred and disposed of their own affidavits. Before the matter was heard by the court, it was a settlement agreement. “I am so surprised to hear that the municipality is under the labouring mind that the settlement agreement, as it is not yet a court order, that it does not have weight”, she said. “The agreement carries a weight, as it had weight to cut off my employment contract with the municipality, [although] the employment contract is a binding lawful document”.

Ms Mathibela said that after signing the settlement agreement, when they applied for the agreement to be a court order, the municipality brought in an interlocutory application to the court of law. “You cannot make an agreement which has not yet been fully signed as a court order. Both parties must agree and sign, and from there it is taken to the court”, she said. When the municipality brought in the interlocutory application, they were saying that before the court makes the agreement a court order, the court must consider the municipality settling the agreement aside. It cannot be correct to say the settlement agreement cannot be implemented because it is not yet a court order. She said that the municipality was being a judge over her because it was taking the law in its own hands. “After we had signed the settlement agreement, they were supposed to pay after 30 days, but they did not pay. Instead they wrote a letter that Treasury has requested them not to pay and requested 5 days to be able to deal with their matters internally. After the five days, they said that they are not going to pay, and that is when we took the matter to court to say that the settlement agreement should be made a court order. The municipality opposed this and brought in an interlocutory application.”

Chairperson’s concluding remarks

The Chairperson said that the Committee would reconvene on the way forward on the matter and the findings will be communicated to all the parties involved. She said that the Committee will also have to formally invite the Treasury to deliberate further on the matter. She asked the mayor to provide the Committee a supplementary report of the court directives that he referred to and the report that he presented verbally to the Committee by Tuesday of the following week (27 July). She allowed the municipality to leave the meeting.

The Chairperson asked the Director-General of the Department of Traditional Affairs to provide an update on the passing on of the chair of the National House of Traditional and Khoisan Leaders. 

Mr Mashwahle Diphofa, Director-General: Department of Traditional Affairs, said that the news of the passing of [Inkosi Sipho Mahlangu] were received on Friday [16 July] and the department was pleased that His Excellency, the President approved the granting of an official funeral service for Ndabezitha. The arrangements are that the service would take place the following day at the royal place in Machiding, Mpumalanga, which was about an hour and a half just outside Pretoria. With all the COVID-19 restrictions and protocols being adhered to, the maximum number of 50 people would be inside the venue. There was an electronic condolence book that the Government Communication and Information System (GCIS) had opened, and the details would be provided to the secretary of the Committee so that Members who would like to make use of that condolence book can send messages. Out of the 50 that would be attending, the arrangement was that 10 people would be from government, 4 would be traditional leaders, and 36 would be members of the family. In the list that the family had compiled, they had also been generous enough to add other traditional leaders that had worked closely with Ndabezitha. There were discussions with GCIS in terms of access for those who may not be able to go to the service and that would be confirmed during the month, whether it would just be television coverage or whether there would be a virtual link other than television coverage that would be created. Once that had been finalised, the details would be shared with the Committee Secretary.

Ms Mkhaliphi said that the Committee was heartbroken and added that they understood the protocol. She asked whether there were arrangements for a virtual memorial service.

Mr Diphofa said that the issue was also raised by the different provincial houses [of traditional leaders] indicating that they would want to plan for a virtual memorial service after the proceedings are done. So it was something that was on the table. The arrangements for that would be concretised once the Friday service had been done.

Mr Ceza asked the DG to pass on a message to Ndabezitha’s family as quoted from JJR Jolobe. He said that the path of death is an inevitable end for mankind, and as much as that is true, the Committee hoped that Ndabezitha’s struggles would solidify the relationship between the Committee, the department and the National House of Traditional and Khoisan Leaders to resolve some of the issues that Ndabezitha was talking about pertaining to the department taking seriously the issues of traditional leaders. “We hope that this consolidates and binds us together as it has done before to champion the challenges of our people”, he said.

Ms D Direko (ANC) said that the Committee was saddened by the sudden passing of Ndabezitha, as they worked with him and knew that he was passionate about the communities that he served and was passionate about the interests of the traditional leaders. “We hope that as a way of honoring his death, the department will be able to address the issues that he was raising all along regarding the challenges of a traditional leaders and traditional community”, she added. “We also want to thank the family for allowing him to serve the communities and allowing him to be a father of the fatherless and also to be a leader in all areas of his deployment, and as the Committee, we also hope that the family will work very well tomorrow during the funeral and we send our sincere condolences to the family and the members of the traditional leadership family”.

Ms E Spies (DA) said that she would like to convey her condolences to the family for the passing of a great individual and added that sometimes when the people we love are taken from us it is very unbearable, but we can only allow that person to live on by remembering the leadership that he has shown. “Please accept our sincere and deepest condolences and we really hope that the family and loved ones can find peace and comfort in the Lord during this time, and we wish them all the strength during this very difficult time and well wishes for all the arrangements for the funeral”, she said.

Mr I Groenewald (FF+) said that he would like to contribute and voice condolences to the family and added that that the Committee would keep them in their prayers and ask God to take them in his hands and comfort them.

The Chairperson said that Ndabezitha has been a very active leader and strived to transform the structure of the institution of traditional leadership. There were projects that they introduced while dealing with agrarian revolution, gender-based violence and the issues around land rights. “We shall surely miss him, and he shall forever remain in our hearts”, she said.

The meeting was adjourned.

 

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