State of Abaqulusi Local Municipality: stakeholder engagement

Meeting report

KZN COGTA - Status of Abaqulusi Local Municipality

Background:

• The Abaqulusi Municipality was put under intervention in terms of section 139(1) of the Constitution in February 2019. The KwaZulu-Natal Provincial Executive Council resolved that the Member of the Executive Council (MEC) for COGTA be authorised to appoint a Ministerial representative.
• The municipality subsequently launched a high court application challenging the decision of the Executive Council to retain the intervention at Abaqulusi Municipality. On 8 April 2022, the court granted interim relief in favour of Abaqulusi LM, pending the outcome of the review. Regarding the interim order, the Department remained interdicted from implementing, retaining, reviving or renewing an intervention at Abaqulusi LM in terms of section 139(1) (b) of the Constitution until the review application was determined. The date of the review hearing was still awaited. Over the years, the Provincial Government has noted a growing tendency by some municipalities to resist Section 139 interventions by approaching the courts, including Abaqulusi municipality, to the detriment of communities.
• On 2 November 2022, the Executive Council resolved to extend the intervention in terms of section 139(1)(b) of the Constitution at Abaqulusi municipality for a further period, to 30 April 2023. COGTA also deployed experts in the field of municipal finance in support of the Executive Council intervention in the municipality.
   

High level overview of status of municipality:

• The Council and Council Committees remained stable.
• The municipality had filled all senior management positions.
• The municipality had approved an unfunded budget for the 2022/2023 financial year, which was a concern for the financial stability of the municipality.
• The municipality had improved its audit outcome to unqualified.
• As mentioned above, it was also common cause that the municipality had launched a high court application challenging the status of the intervention at the municipality, and that the court had granted interim relief in favour of Abaqulusi LM, pending the outcome of the review. The Provincial Executive Council was thus interdicted and restrained from implementing, retaining, reviving or renewing an intervention at the municipality and appointing and/or placing of any Ministerial representative to assume responsibility for, or take authority over, any obligation or affair of the first applicant; and implement any extension, prolonging the period of operation of, revision or expansion of the intervention. The Department had filed an application for leave to appeal the decision of the court in May 2022. In November 2022, the high court dismissed the appeal application; however, the date of hearing of the review application was still awaited.
• A Section 106 investigation was finalised and the report was presented to the Abaqulusi Council on 27 May 2021. The municipality filed a court application challenging the process followed during the investigation. The matter was pending in court.
• COGTA had deployed financial experts at Abaqulusi Local Municipality as a part of support to distressed municipalities. Financial Experts support the municipality with the implementation of the audit action plan. This involved portfolio of evidence (POE) preparation; compilation of interim financial statements (IFS) and annual financial statements (AFS); addressing unauthorised, irregular, fruitless and wasteful (UIFW) and skilling supply chain management (SCM) employees on the prevention of UIFW expenditure; revenue enhancement strategies; and skills transfer to the budget and treasury offices (BTOs).
• The municipality was unable to allocate funding from its own revenue for the projects in road, water, electricity and sewerage, as the impact of the drought in the previous financial year, where the municipality had to provide water without receiving any revenue for water, had severely impacted on the finances of the municipality.
   

Conduct variance: Councillors against the Speaker:

• The utterances attributed in the recorded video were viewed in a very serious light and, if true, were at variance with the conduct of a Speaker of Council entrusted with the duty of upholding the Code of Conduct for Councillors.
• In light of the above, the Department had directed that a Special Council meeting be convened within seven days of receipt of the letter, for the Council to consider the allegation and to refer the matter to the Rules/Ethics Committee or a Special Committee established in terms of item 16(1)(b) of the Code of Conduct for Councillors to investigate, and to make findings and recommendations to the Municipal Council on this matter.
• Further, the Municipal Council was directed to consider the Rules/Ethics Committee report within 21 days and to report the outcomes to the MEC.
• Conduct variance: Councillors against the Mayor:
• In light of the allegation, the Department had addressed a letter to the municipality requesting a report on the authenticity of the allegation and advice on steps taken or steps to be taken by the municipality to address this matter. A response was still awaited from the municipality.
• The Department had since learned through media reports that Councillor Maphisa had been suspended by his political party, pending the disciplinary inquiry.
• The Member of the Executive Council (MEC) would not hesitate to take steps to implement corrective measures in terms of the Code of Conduct for Councillors, by appointing person(s) to undertake these investigations and to make findings and recommendations on appropriate sanctions, should the municipalities fail to take steps in terms of the Code of Conduct for Councillors.
   

Conclusion:

• Abaqulusi remained one of the municipalities supported in terms of section 154 of the Constitution, since it was one of the municipalities categorised as dysfunctional in the province.
• Although there had been some improvement based on the support provided, it was clear that the municipality had not advanced beyond the triggers that had resulted in it being placed under intervention. The support could also not be sustained because the Provincial Executive Council was interdicted or prevented from implementing intervention measures until the review application was finalised. The section 106 investigation report prepared by the Department had also been challenged by the municipality in court. It clearly showed that the municipality seemed determined to use courts to delay or prevent the Department from undertaking its functions.
• The municipality had serious cash flow and other complex financial challenges, which were stubborn and required extraordinary measures. As indicated, the municipality also approved an unfunded budget for the 2022/2023 financial year, which was a concern for the financial stability of the municipality. The municipality was also failing to spend its grants.
• It would also appear that the office-bearers may have engaged in acts which may be at variance with the Code of Conduct for Councillors, which may further destabilise governance in the municipality.
   

KZN Treasury - PC: Cogta Status of Abaqulusi Local Municipality

KZN PT support:

• KZN Provincial Treasury (PT) provides continued support to AbaQulusi Local Municipality with the implementation of the budgeting framework.
• Financial management support was offered to the municipality to assist with the 2021/22 Municipal Finance Management Act (MFMA) audit, but the municipality declined the support. The chief financial officer (CFO) indicated that COGTA had been providing support since October 2021, and felt that the support would be a duplication of scope.
• Financial overview for 2021/22:
• The operating deficit of R158.7 million in 2021/22 was a regression from the operating deficit of R18.4 million in the prior year.
• The net cash position of R21.5 million in 2021/22 reflected an increase of R4 million as compared to the prior year's R17.6 million. However, the cash coverage ratio remained the same in 2021/22, at 0.4 months as in the prior year.
• The current ratio of 0.95 in 2021/22 was below the recommended norm of 1.5 to 2:1, as per MFMA Circular No. 71.
• Operating grants comprised up to 28 percent of the municipality's total operating income, indicating that the municipality was not entirely reliant on operating grants to fund its operations.
• Electricity losses increased from R34.8 million in 2020/21 to R52 million in 2021/22, and water losses also increased from R8.8 million in 2020/21 to R9.5 million in 2021/22.
• The municipality had spent only 89.7 percent of the capital expenditure budget for 2021/22, a decrease from the prior year when the municipality exceeded the budget by 94.6 percent.
• The debtors collection rate on billed revenue had increased from 86 percent in 2020/21 to 94 percent in 2021/22. However, the net debtors' days also increased from 136 days in 2020/21 to 141 days in 2021/22.
• The municipality took an average of 96 days to pay its creditors in 2021/22, which was an increase from the prior year of 50 days. Section 65(2)(e) of the MFMA requires that creditors be paid within 30 days of receiving the relevant invoice or statement.
   

2022/23 mid-year assessment report - key findings:

• As at the end of the December 2022 (mid-year), the municipality should have generated and
• spent approximately 50 percent of the approved budget based on the straight line
• projection.
• The municipality had under-generated revenue on the following line items:
• Service charges (water revenue) generated R21.1 million, or 35.7 percent against the
• approved budget of R59.1 million;
• Service charges (refuse revenue) generated R11.8 million, or 43.5 percent against the approved budget of R27.1 million; and
• Interest earned (outstanding debtors)  generated R6.5 million, or 10.1 percent of the approved budget of R64.8 million.
• The municipality had reported an overall underspending on total operating expenditure at R304.9 million, or 43.5 percent against the approved budget of R700.5 million.
• Low spending was also reported for total capital expenditure budget. The municipality spent R19.7 million, or 35.2 percent of their approved budget of R55.9 million.

Remaining/ongoing challenges:

• As per the MFMA Section 72 report, the municipality indicated the following:
• There were challenges with adherence to cost containment measures that could hamper service delivery in the second half of the year if the municipality did not have savings to implement the planned project;
• The fact that the municipality was experiencing ongoing cash flow challenges was highlighted, and needed to be taken into account when approval was considered for specific initiatives;
• Municipal departments continued to bypass the CFO for financial input or confirmation of budget for certain projects, which negatively impacted the reprioritisation of funds during the adjustments budget

Key success factors:

• The municipality had implemented a budget funding plan approved by the Council and submitted to the National and Provincial Treasuries on 4 November 2022.
• The implementation of the budget funding plan was being reported to Provincial Treasury on a monthly basis.
• As per the MFMA Section 72 report, the municipality indicated that no additional funding would be made available to municipal departments during the adjustments budget process, in line with the approved budget funding plan.
   

Auditor-General: 2021/22 tabling briefing document

Trends in audit outcomes:

• The municipality's audit outcome had improved compared to the previous year, but all assurance levels were not providing the required assurance. Weaknesses in internal controls and risk areas had not been responded to, resulting in material misstatements and instances of non-compliance. The quality of the annual financial statements and performance reports remained challenging for the municipality. There were a number of non-compliance findings due to a lack of measures taken to prevent a recurrence of these findings. The oversight structures had not adequately monitored the implementation of the audit action plan on an ongoing basis, and held the management accountable for unsatisfactory progress.
• Common areas of non-compliance with key legislation were:

Procurement and contract management

• Some goods and services with a transaction value of below R200 000 were procured without obtaining the required price quotation.
• Quotations were accepted from bidders who did not submit a declaration on whether they were employed by the state or connected to any person employed by the state.
• Some of the goods and services of a transaction value above R200 000 were procured without inviting competitive bids. Deviations were approved by the accounting officer even though it was not impractical to invite competitive bids.
• Some of the contracts were awarded to bidders who did not submit a declaration on whether they were employed by the state or connected to it.
• Some of the contracts were awarded to providers whose tax matters had not been declared by the South African Revenue Service (SARS) to be in order.
• Tenders which achieved the minimum qualifying score for functionality criteria were not further evaluated.
• Some of the contracts above R30 million did not include a condition for mandatory subcontracting to advance designated groups.

The performance of some of the contractors or providers was not monitored on a monthly basis.
 

Expenditure management

• Money owed by the municipality was not always paid within 30 days.
• Reasonable steps were not taken to prevent irregular expenditure amounting to R58.24 million, as disclosed in note 48 to the annual financial statements. The majority of the irregular expenditure was caused by a competitive bidding process not being followed.
• Reasonable steps were not taken to prevent fruitless and wasteful expenditure amounting to R23.63 million, as disclosed in note 47 to the annual financial statements.
• Reasonable steps were not taken to prevent unauthorised expenditure amounting to R152.12 million, as disclosed in note 46 to the annual financial statements. The majority of the unauthorised expenditure was caused by overspending on budget votes.
• Financial statements
• The financial statements submitted for auditing were not prepared in all material respects in accordance with the requirements of the MFMA. Material misstatements of property, plant and equipment, investment property, cash flow statements, statements of comparison of budget information with actual information and fruitless and wasteful expenditure identified by the auditors in the submitted financial statements, were subsequently corrected, resulting in the financial statements receiving an unqualified audit opinion.

Council message:

• Timely implementation and monitoring of audit action plans at the appropriate level of management was required.
• Processes must be implemented to prevent irregular, unauthorised, fruitless, and wasteful expenditure.
• Adequate record keeping processes must be implemented to ensure that records are complete, relevant and accurate, and information is accessible and available to support compliance with laws and regulations.
• Adequate reviews must be performed by management on the financial statements submitted for audit to prevent material findings being identified by the audit team.
   

SA Local Government Association (SALGA) on state of Abaqulusi Local Municipality

KZN debtor customer group:

• There was an increase in the total debt owed to the municipality by the consumer group of an amount of R40.58 million, particularly in relation to households from 2020/21 to 2021/22.
• The households had raised a debt of 16% in 2022/23 compared to 2021/22, from the services they received from the municipality.
• Proposed revenue enhancement strategy:
• It was clear that Abaqulusi Municipality was challenged to achieve its operational objectives over the long term.
• The municipality needs assistance to develop and implement a revenue enhancement strategy that would talk to billing, revenue collection, information systems, distribution losses, ageing infrastructure and meter management.
• The municipality needed assistance to create standard operating procedures (SOPs) on collection practices or revenue collection.

Support by SALGA: Local Economic Development (LED):

• Without LED, the debt trap would continue. Abaqulusi was a recipient of SALGA's Geo-Spatial Intervention Project, with Phase 1 successfully completed
• The benefit to the municipality was that the Geographic Information System (GIS) was an essential tool that could assist municipalities in analysing spatial data and trends, which could inform better decision-making relating to planning and economic development.

Abaqulusi land on Ingonyama Trust Board (ITB) land:

• There were only two relatively large concentrations of rural settlements within the Abaqulusi Municipal area -- Hlahlindlela and Khambi.
• Both settlements were developed on Ingonyama Trust land, and land rights in these areas were administered in terms of traditional and customary laws.
• The major agricultural practices were crop production, occurring mainly in the highveld areas and fertile valleys of the major rivers that run through the area, cattle farming ranching and game farming.

National DCOG on state of Abaqulusi Municipality

Introduction and background:

• The Department of Cooperative Governance (DCOG) said the Abaqulusi Municipality had been placed under intervention in terms of Section 139(1)(b) of the Constitution in February 2019. The KwaZulu-Natal (KZN) Provincial Executive Council had resolved to authorise the MEC of COGTA to appoint a Ministerial representative to resolve the main challenges that had led to the intervention.
• In April 2022, the intervention was extended for a further period, to 31 October 2022 or soon thereafter.
• The municipality had launched a high court application challenging the status of the intervention, and the court had granted interim relief in favour of the municipality, pending the outcome of the review. The province had filed an application for leave to appeal the decision of the court in May 2022. In November 2022, the high court dismissed the appeal application; however, the hearing date was still awaited.
• The Section 106 investigation was finalised and presented to Council in May 2021, and the municipality filed a court application challenging the process followed during the investigation. The matter was pending in court.
• The State of Local Government Report presented by the Minister to Cabinet on 30 June 2021 categorised the Abaqulusi Local Municipality as a dysfunctional municipality due to it experiencing political, institutional/governance, financial and service delivery challenges. In June 2022, the municipality was re-categorised from dysfunctional to medium risk.

Summary analysis of Section 139(1) intervention:

• The municipality was still unstable due to fluctuations in its performance across the different pillars.
• The adoption of unfunded budgets had an impact on the financial stability of the municipality.
• There was also an emerging challenge concerning political administration. The attempted shooting of a councillor also affected the stability.
• Other challenges included insufficient financial resources to cover monthly expenses, loss of income and a high rate of debtors.
• The municipality was unable to allocate funding from its own revenue for the projects in road, water, electricity and sewerage as the impact of the drought in the previous financial year, where the municipality had to provide water without receiving any revenue for water, had severely impacted on the finances of the municipality.
• It should, however, be noted that the municipality had achieved an unqualified audit opinion for 2021/22.
• A major improvement was the unblocking and launching of the Mondlo electrification project.
• The municipality had been able to revive the functionality of the Risk Management Committee, and risk management activities were a standing item in all Audit Committee meetings.

Implementation of District Development Model(DDM):

• The Zululand district had developed the DDM One Plan, which was submitted to the DCOG in the 2021/22 financial year.
• Following the One Plan quality assurance process, the district was in the process of updating the plan, based on the comments provided.
• The DDM political hub, technical hub and clusters had been established. However, due to political challenges within the district, the political hub had not been able to meet to endorse the updated One Plan.
• The DCOG had developed the draft South African Economic Recovery Plan (ERP) for municipalities in response to Covid-19. Districts were expected to develop localised municipal ERPs, and these need to be integrated into the district DDM One Plan. The DCoG, working with the province, would continue to provide support to districts to ensure that the LED and ERP plans were incorporated into the updated One Plans.
• The DCOG was also working with the Department of Women, Youth and Persons with Disabilities (DWYPD) to ensure that the priorities of the National Strategic Plan (NSP) on gender-based violence and femicide (GBFV) were integrated into the DDM One Plans.

Recommendations:

• It was recommended that the Portfolio Committee:
• Note the status of the Section 139(1) intervention in Abaqulusi local municipality.
• Note that the DCoG would continue to work with the province and other sector departments to monitor progress on implementing the municipal support and intervention plan (MSIP).

Zululand District Municipality - COGTA Engagement on State of Abaqulusi Municipality

ZDM Infrastructural Interventions:

• The ZDM had provided assistance to the Abaqulusi LM in maintaining and refurbishing their schemes.
• Six boreholes were currently installed in wards 12, 13 and 15.
• Approval of Protocol Agreement between ALM and ZDM:
• A joint executive committee (EXCO) meeting was held in June 2022, and approved the extension of the protocol agreement for a further 24 months, effective 1 July 2022.
• Four technical meetings had already taken place, leading to the service provider's appointment to deal with the feasibility of the section 78 assessment.
• The draft terms of reference for section 78 were awaiting approval by the joint EXCO.
• Key deliverables were the Workplace Skills Plan (WSP) needs assessment and status quo report, and the final report with recommendations for the rightful WSP function within the Abaqulusi LM.

Water Tanker Operations:

• Seven water tankers had been allocated to cover 18 wards.
• Water has been supplied, using water tankers from July 2022 to date.
• Total expenditure amounted to R10 979 852.
• Abaqulusi-led empowerment:
• The ZDM had hosted the Empower Youth programme which targeted unemployed youths, matriculants, graduates and dropouts at Cecil Emmet Hall from 26  to 28 January 2023. It targeted hosting 500 people daily, but the event was oversubscribed across all three days, hosting at least 800 youths daily.
• For the Abaqulusi Early Childhood Development (ECD) programme, 230 successful applications were awarded
• 25 firefighters from Abaqulusi would be enrolled for fire and rescue operations at National Qualifications Framework (NQF) level four.

Abaqulusi Local Municipality - status update
 
Section 71 Report:

• Revenue collection was at 85%.
• Debt owed by the municipality was R55 755 745.
• Debt owed to the municipality was R278 756 853. This was for all its services and consumers.
• Government departments’ debt to the municipality was R36 289 545.
• Challenges in service delivery:
• Challenges in service delivery included financial constraints, shortages of resources, ageing infrastructure, load-shedding and skills shortages within the municipality.

Discussion

Mr G Mpumza (ANC) said the outline of Cogta’s presentation had raised an issue of political and administrative instability. It was possible this had been the determinate decision by Cogta to invoke Section 139(1)(b). In other reports by both the municipality and the district, the Committee had been informed of the utterances by the Mayor and the Speaker in public. These utterances were seriously toxic to the political and administrative stability of the municipality. As part of the monitoring and the right to sanction the councillors' code of conduct, at what stage did one actually intervene for deviant political individuals in the municipalities? In all municipalities categorised as dysfunctional, the dominant factor that triggered this dysfunctionality was political infighting by councillors within the municipalities. At one stage, they had intervened to restore stability in municipalities. Why were they tolerant of these toxic relationships in municipalities that political leaders brought about? The Auditor-General (AG) had raised a serious matter on procurement, and (the utter violation of the provision of the law, where goods and services valued at R200 000 were not subjected to price quotations as required by the MFMA. This could not be an innocent act. What remedial action had the municipality and Cogta undertaken to address this situation, besides receiving the AG’s report? If they never took remedial action to address this situation, this would continue to be a matter of milking the municipality through delinquency by deliberately deviating from the legal norm.

The Council had said it needed a report. Council committees were stable. The municipal manager (MM) bragged that it had a credible funding plan from its budget approved by National Treasury. The report indicated that the municipality had adopted an unfunded budget, and that was an indictment on the credibility and capacity of the MM and the finance officer. These were people instructed by the law to prepare a credible budget, and now they presented an unfunded budget. Were they aware they were flaunting their fiduciary duties outlined in the MFMA? They had been called upon to prepare a credible budget, but had prepared an unfunded one. Bragging to the Committee about having a finance plan, was an indictment to that administration. It made the Committee question whether it had the required skills. If so, it would not have prepared and presented an unfunded budget to be adopted by the Council. It had misled the Council. He asked the mayor and the Speaker what remedial action they had taken against the administrator for presenting an unfunded budget, leading them towards bad governance. Adopting an unfunded budget was bad governance.

The Committee had been told that COGTA had brought the Section 106 investigation to the municipality, but had been challenged. The AG had cited that there were a number of irregular, fruitless and wasteful expenditures. The MM said it dealt with consequence management through the financial board. Why had they challenged this, instead of dealing with the investigation by taking it to court? What signal was the municipality sending when it decided to use municipal finances to challenge the provincial intervention in court? These interventions were meant to help the municipality, and instead, it took Cogta to court. What did it say to them? What were they defending when they took all these matters to court?

Ms G Opperman (DA) said the MM had said the municipality did not need an administrator, while it was one of 66 dysfunctional municipalities. On slide six of the AG's overall message, one could see that a lot of remedial work needed to be done in the Abaqulusi municipality. Why had they been recategorised, given that they had not progressed beyond the reasons why they had been put under administration in the first place? There were unmetered and illegal connections for water and electricity that resulted in around 50% to 85% of losses in electricity. The electricity was basically free. What plans were in place to mitigate this risk? How did they plan to resolve this financial loss? It had filed a court application against the extended Section 139 intervention and Section 106 investigation report. What had the legal cost of this been? Who was liable?

She asked Cogta what could be implemented to strengthen their internal controls to prevent long court cases from dysfunctional municipalities while communities suffered from non-service delivery. What could be done to prevent the resistance to intervention from municipalities? Intervention was not interference. The court had granted it interim relief. Did they go to court after receiving interim relief? It had filed another court case for the Section 106 investigation report. On which grounds did the council file that court case on 27 May 2021? Which of the findings in the report aggrieved it enough to turn to the courts? How would they turn around the deficit in their operating expenditure? What plans did they have in place to reduce the unauthorised expenditure of R486 million? The AG had said 100% of those cases had not been investigated.

Ms P Xaba-Ntshaba (ANC) said one of the reasons for the last intervention in the municipality was that it had acted beyond its authority by performing and incurring costs for the water function without an agreement with the Zululand district, which was the water services authority. Did the municipality eventually enter into agreement with the district on this? A progress report on the intervention in the municipality recommended it cede its water and sanitation function to improve functionality. What were the municipality’s resolutions on this? Previously in ward two, there had been delays in implementing an electricity project funded by the DCOG because of challenges around the procurement of service providers. Have these delays been resolved? Based on the Section 106 report the municipality had challenged in court, the Public Service Commission (PSC) had also filed certain allegations for the municipality’s attention -- had the municipality acted on these allegations?

Ms H Mkhaliphi (EFF) agreed with the Chairperson that there were a lot of presentations, but it was too much information. She agreed with the MM that the things raised by Cogta national, the Cogta provincial MEC for finance, and the AG, were all the same. They all pointed in one direction. Committee members were correct in saying this municipality was one of 66 dysfunctional municipalities in the country, and from all the presentations, she did not know how to help this municipality. The MM had been thrown under the bus by the acting mayor, who had said he was called very late yesterday by the secretary of the Committee. It was understandable how there could be a misalignment in the Abaqulusi presentation -- it was because of the issues in the municipality. The secretary of the Committee had sent the communication for the presentation, and what had occurred at the municipality a few days ago could be the cause of why the Committee had not received the presentation in time. The MM should always be ready when he was wanted as an accounting officer to appear before the Committee and explain what had happened in the municipality. The MM had said it did not want the interference or intervention of the Constitution of South Africa. The AG had clearly said that despite some improvement, the municipality’s internal controls remained its weakest point. It could not reject intervention by the province when it was a dysfunctional municipality. It was not whether it wanted intervention or not -- it was because it wanted services for the people. The municipality had so many service delivery protests, which meant people were hungry for the services to satisfy their basic needs.

The DCOG had informed the Committee that Abaqulusi had moved from dysfunctional status to medium risk. It needed to share with the Committee what measures it had used to arrive at that decision. The municipality had taken the matter of Section 139 to court. Mr Mpumza had been correct in asking why it had to take this matter to court. She knew the municipality was aggrieved, because it wanted an extension from April to October. Were they satisfied, because the AG had highlighted they still experienced internal control weaknesses? Why did they have to take the very same little resources that they did not have as Abaqulusi municipality, and contest the intervention in court? She wanted a clear response from the DCOG on what the status was. It had lost an appeal at the provincial and national levels, and the courts had granted the municipality interim relief. Where were they now? It could be a fight between the DCOG and the municipality, but the poor citizens were suffering on the ground. These people wanted water and basic services.

The MM said he could not hear what Ms Mkhaliphi was saying.

The Chairperson asked how he could be helped, because he was expected to respond to some of the questions.

Ms Mkhaliphi asked if he could check with other Abaqulusi members if they could hear.

The Chairperson asked the Committee secretary to try and check. The questions affected the municipality, so it had to hear them and respond. If Abaqulusi was not present, he asked for the questions to be directed to the rest of the delegation in the meantime.

The MM said he was struggling on his side, and could not hear anything on all the gadgets he was using. He could see that someone was speaking, but could not hear anything. He had spoken to the secretariat, who had confirmed he was audible. He could not get all the questions Members were asking, so he would log off and log on again.

The Chairperson said the Committee could continue asking questions. He would take notes so in the end, they could be summarised for the municipality if it was reconnected.

Ms Mkhaliphi said she did not know how to could continue, because some of the questions were directed to the municipality.

Mr K Ceza (EFF) said this was the first time he had heard that all the gadgets were not working, so they should unmute the gadgets. It could not be that all the gadgets were synchronised not to hear the questions at the same time.

The Chairperson said he did not want to make any assumptions for now, until someone could establish what the technical problem was. He asked Members what they should do in this case, when the municipality could not hear the questions being asked.

Ms Mkhaliphi suggested the Committee move on to the other presentations.

A staff member of the Portfolio Committee said she had spoken to the municipality, which had said it had information technology (IT) problems, and was waiting for its IT specialist to sort it out.

The Chairperson asked the Committee to consider Ms Mkhaliphi’s proposal to proceed. He suggested Members took notes to relay what had been to the municipality. He asked if anybody supported this.

Mr I Groenewald (FF+) was worried that if the Committee proceeded, and asked questions to other departments and the municipality could not hear those questions and only the feedback, how would they be able to confirm or not confirm what the answer was from those municipalities? The Committee was present to speak to that municipality. Was there a way they could connect to them by phone? It could connect the MM that way so he could hear the questions asked, and respond to them.

The Chairperson and the officials noted this. It could be done. This would ensure the MM could hear. This was in addition to what Ms Mkhaliphi had said.

The MM said he could now hear.

The Chairperson allowed Ms Mkhaliphi to continue.

Ms Mkhaliphi said there had been a back and forth between the provincial or national Cogta and the municipality, and the matters had been taken to court. The municipality had taken the Department to court for wanting to extend the intervention. The Department had lost its appeal. While they were doing that, because they were also protected by the laws of South Africa, they should remember that people were suffering. People were suffering while political parties were flexing their muscles. That was why the MM had said it had experienced service protests in certain wards. People did not care whether the municipality or Cogta were right or wrong; they were only worried about service delivery. It should be borne in mind that everyone in the meeting was not there for themselves -- they were there to represent people and were expected to ensure services were delivered.

Another disturbing matter was that there had been an investigation because of Section 106. Instead of the municipality implementing those recommendations, it challenged Section 106 in court. That was disturbing. It should share why it did this, instead of saying what it did or did not agree with, and what it needed to implement. At the end of the day, it needed to implement the things that helped fight corruption, which was very disturbing and could not be allowed. The MM had mentioned money that had been written off, which was a lot. He had used COVID-19 as a justification, but that would not sit well with the Committee. As a municipality, it could not go to the Council and request it to write off funds. That was where corruption was protected. The financials that needed to be investigated, should be investigated. The AG correctly said there was no consequence management in this municipality. The AG had pointed things out, and the municipality would have done it if it was serious about fighting corruption. It should not use its influence to make decisions, because it knew it was protected by the law. The Committee could not agree with this.

One of the reasons mentioned by the provincial Cogta on why it had decided to put this municipality under Section 139, was that it had failed to spend the grants. The province should say why the municipality had failed to spend the grants. As a province, it was meant to help the municipality prepare and monitor the grants, and ensure they were well spent. The people who benefited should be those on the ground. What had they done? There was an issue in Cogta’s presentation about paying the suppliers, and the MM also touched on this. According to the law, suppliers had to be paid within 30 days. The provincial Cogta had told the Committee a different number of days, which exceeded the 30-day stipulation. Could they get clarity on this?

SALGA was supposed to help the municipality. If there was political interference or infighting within the municipality, SALGA could only do so much. The Committee had heard its recommendations, but were those recommendations realistic? These municipalities were dysfunctional but were now categorised as medium risk, showing a slight change. While dealing with the issue of intervention, there were other negative developments with the mayor, who was reportedly on sick leave. The Committee knew that the mayor was not on sick leave. He was interfering with the procurement issues. There was the issue of the Speaker of the same municipality. The Speaker had done to the funeral of a certain councillor and stated that clearly, without fear or favour, it would hire someone.

This municipality was in a negative spotlight. In the absence of political leadership, what needed to happen to it? The provincial Cogta should tell the Committee. Mr Mpumza was correct in saying the expectation was that if a person who did the presentation was not an accounting officer in the form of the MM, he was a political head as a mayor. The mayor was currently suspended by his political party. Who was providing the political leadership in this municipality? The acting mayor had failed to do the presentation, which meant there was no political leadership. The provincial Cogta should tell the Committee how to have sustainable intervention in this municipality. Through all those things, although the MM was disorganised with the presentation, he tried his best under the circumstances. In the absence of political leadership, the municipality would experience the same challenges going forward. This would occur until it was clear who the political leadership was and who would steer the ship. Even if the provincial Cogta wanted to intervene, the municipality would reject the intervention, because they were the leadership of the municipality. Simultaneously, they failed to convince the Committee that they could move forward with all the challenges they faced. At the end of the day, the people of Abaqulusi wanted service delivery.

SALGA had said the municipality owed Eskom R3 billion, but Costa’s chief director had said that during this period, there was no specific amount owed by the municipality to Eskom. It was hard to decipher the truth. The municipality had spoken about it too -- one of its challenges was the amount it owed to Eskom. What was the way forward? Everyone could say something, but the municipality should come clean and tell the Committee how to resolve the Eskom problem.

Mr Ceza said the Department had noted it was a dysfunctional municipality, and had also noted some of the issues raised by Mr Mpumza on inter-governmental relations (IGR). It had said it was a protracted process. What was the nature of the protracted process in that Act? This propelled it to use public funds to go to court. What was the nature of that? There was animosity between the province and the municipality over Sections 106 and 139. The fundamental rule of that Section was that it empowered the provincial executive to intervene in the affairs of a municipality that did not fulfil any executive legislative functions in the Constitution. Did the municipality have some proposals to amend the current Section 106 of the Municipal Systems Act and Section 139 of the Constitution? The people of Section C protested about road construction, water and electricity, lack of employment, and housing in the community. They cited one transformer built for the people, but did not have the capacity to sustain the entire community. Had they developed a plan to implement another strategy to put more transformers into that municipality to solve the lack of electricity? Political interference did not only contribute to instability, it also said a lot about the lack of visionary leadership to reimagine local government. It set the wrong precedent in that community about nepotism, corruption and cronyism. Those were cross-cutting issues in dysfunctional municipalities.

Regarding Section 118(1)(b) of the Constitution, which dealt with the community, the municipal service agreements and partnership agreements, the Municipal Systems Act stated that these agreements should be public so the residents could keep track of who, what, when and how many companies were contracted to deliver services and how they were paid. Municipalities generally did not follow this Act by not making this public and accessible to all. Could they outline their municipal service agreements in light of the procurement process they had chosen as municipalities in dealing with transparency in their municipality?

Sections 153 and 154 of the Constitution outlined how municipalities should be supported and what they should do. The AG had spoken about the investigations, maladministration and lack of consequence management, with investigations dating back to 27 May 2021. How long should one wait for the outcomes of those investigations? The pattern was that, across municipalities, the MM’s office would sit in on these investigations. As one saw here, those investigations were interdicted via the courts, and public funds were compromised. There were other acts in the legislation that could be exhausted. It could not continue without having exhausted some processes before going to the courts.

SALGA had spoken about the R3 billion owed to Eskom. It referred to the interest rates for paying this back. The rates being charged were 30%. What was the name of the company that dealt with interest in South Africa? Did it have competition? Would the interest rates not be forced down in relation to the prices of interest, and therefore a reduction in the companies using interest rates as a financial means to pay their own debts, so people could access the required services?

On the issue of gender-based violence (GBV), what had the Department done with the mayor who was implicated in sexual misconduct? How had it contributed to the in-sourcing of general workers, artisans and engineers in the municipality? This would be based on the assumption that the coordination itself would solve the problems of local government. How were they going to solve the underlying problems of local government? These problems put dysfunctional municipalities in a precarious position.

The District of Zululand had spoken about water tankers, and he agreed that the process was not viable and unsustainable. What were the contingency measures to provide sustainable and portable water to that community? The engines that propelled water to communities used electricity. If there was load-shedding, residents could not cook, drink or do anything involving water. What were the contingency measures to keep water running there? They had heard the engines got shut down during load-shedding, so it had to have a backup plan. What was that backup plan? Those were the issues he wanted to raise.

Mr X Msimango (ANC) said the Committee needed to know the amount of money spent on challenging this intervention. In his understanding, when the municipality was provided with the right to challenge certain decisions imposed on it, as a leader in the municipality, one had to base one's decision on whether it was worth it or not. In many cases, money was spent on challenging certain decisions or verdicts in court, as opposed to using that money for service delivery to benefit the communities. How much had they used?

The second matter concerned the issue raised by the executive mayor of Zululand, who had said it needed to allow the municipality to operate on its own and remove the Section 139 intervention. For as long as the municipality did not have its house in order, why must one remove the Section 139 intervention? The Section was there to assist. The municipality had been identified as dysfunctional. In all the presentations, nothing suggested it had improved enough for it to operate on its own. It needed to get its house in order to entertain such requests. If the houses were not in order, municipalities could not demand the intervention be removed. It did not make any sense.

Mr Groenewald said the provincial Cogta had put forward a lot of criteria on why this municipality was under administration. Had it fairly applied these criteria to all the municipalities in the province? If so, how many municipalities were under Section 139? He asked the MEC why there were outstanding amounts from the government for service delivery from the municipality. He could not see why the province had a problem paying its bills. There had been mention of a Section 106 report, which the Committee did not have. He asked if the MEC could send it to the Committee. He proposed to the Chairperson that every time there was a municipality meeting with the Committee and there was a Section 106 report, it came to the Committee beforehand so it could do an effective oversight.

He asked the district how many projects had been finished in this financial year and handed over to the local municipality. If there were not any or only a few, he asked if it could give a reason why all of them had not been done as proposed.

Addressing the local municipality, he said it was by law that all municipalities had to have a master maintenance plan in place. He had heard that the Municipal Infrastructure Support Agent (MISA) was also assisting the local municipality. Do they have a master maintenance plan in place? If so, did they comply with this plan as the strategic document within the municipality?

Across all municipalities, where there was a deficit at the end of the year, the bigger the deficit, the more problematic it was to make it up in the next financial year. There were cost containment measures within a municipality. What were the mayor, Speaker and MM doing to ensure those measures were being implemented? The local municipality deficits were growing every year. How were they going to stop that? At the end of the day, decay was not a slope going down continuously by 10% -- it was a slope that went down exponentially, from 10% to 20% to 50% and so forth, until nothing was left. This was seen in so many municipalities in South Africa. When the decay was that much, there was no way there was enough money to turn that municipality around, even with the grants it received. What was the local municipality doing to stop that? It was evident that service delivery was poor within the local municipality. Who was responsible in that municipality? Could it give the Committee a commitment on when it would deliver services?

Ms S Buthelezi (IFP) said the municipality owed Eskom R68 million, and now owed it R51.9 million as of November 2022. What measures did the municipality have in place to curb this debt from increasing? She asked the municipality to advise on when the AG's report containing recommendations on fruitless and wasteful expenditure for 2021/22, would be adopted and implemented. How had the municipality sustainably implemented the recommendations from the intervention? What plans did the district municipality have in place to repair the existing water and sanitation infrastructure, and gradually phase out the use of water tanks? Considering the instability from the allegations of misconduct against the Speaker, she asked the municipality to advise why the report presented to Council was yet to be adopted. Could the municipality advise in which key areas it had vacancies? What plans did they have in place to address the shortage of skilled workers?

The Chairperson said the Committee had to move to responses. It was best to start with the municipality as he was sure more questions would be directed to the municipality. This was the case unless he was guided by Cogta and the Provincial Treasury. He started with the provincial Cogta.
 
Provincial Cogta's response

Mr Thando Tubane, Head of Department (HOD), KZN Cogta,  responded to the question on what measures it had implemented to deal with issues of alleged misconduct concerning councillors. He cited two instances in the municipality, which had been covered in the report. The first was the mayor’s conduct, where it had brought the allegations against the mayor to the Speaker of the Council. It had told the Speaker these were serious and recommended that it activated its rules committee. The committee was responsible for the investigation. It had received a call from the municipality that it was acting on it. There were also allegations against the Speaker, and had communicated with the mayor and the MM. It was a breach of the code of conduct, so it was requested that the mayor bring this to the Council's attention. This was to ensure a proper investigation could commence. That was its approach when it received these allegations. It did not know the truthfulness of these allegations, but had referred them to the office of the Speaker. He was allegedly in contravention of the code, so it had engaged with the mayor. There were other instances where it had done the same. In this instance, the municipality had indicated that both matters were being attended to. Recently, it was told the mayor was on special leave of some kind, and that the deputy mayor had assumed his responsibilities.

The other question was about the breaches of supply-chain management, and what Cogta was doing in that space. When the municipality did not challenge the intervention, the ministerial representative brought forth serious allegations of misconduct relating to procurement and recruitment, contravening the MFMA. That warranted an investigation in terms of Section 106. The decision was on that basis. There was a litany of these allegations, and it had to act on them. It had compiled the full report, but the Council sought an interdict when it attempted to table it. The interdict was granted, and Cogta was not in a position to proceed to table the report, because the matter was before the courts. Similarly, with the administration of the Section 139 intervention, it had explained to the municipality it was not recording the required outcomes of these interventions. It had even changed the administrator in that municipality. It had felt the person it had sent was not fully effective and had brought in someone else to do introspection, and it would be possible the results would be different.

When it tabled the extension report advising the municipality that the provincial executive Council had extended the intervention, it took the decision to court again. The Section 139 intervention was suspended. Cogta's presence in the municipality was through Section 124, where it continued to support the municipality. In the presentation, the MM had indicated that it deployed a team to assist it during the audit and attributed to some of its achievements through the support it received. It had intervened on the issue of service delivery. Aside from the protests that took place, some protests had occurred before. These protests necessitated intervention by the Department. It had provided electricity to certain communities, but had indicated to the municipality that it had limited resources and could not roll out electrification projects. It had stuck to the commitments it had made, and implemented them.

The municipality had adopted an unfunded budget despite the engagements the Department had with all municipalities that had the same challenge. In this instance, it had worked together with the Provincial Treasury, because it had alerted the Department to the problems in the municipality. They had jointly engaged these municipalities. Despite the efforts Cogta and the Provincial Treasury had put together, the budget for this municipality remained unfunded. There were consequences. Why would the municipality budget for money it does not have? That was the point of departure. The situation was better than when the original budget was prepared. It had engaged in serious discussions and processes. It had sent its teams, together with the Provincial Treasury. It was not the only municipality that had provided an unfunded budget. It had taken the political approach of pleading with the municipalities. If the municipalities had unfunded budgets, their audit outcomes would be compromised. It was not good practice to budget for something they did not have. The Department was working closely with the Provincial Treasury, as the municipality would be doing its books before the end of the financial year.

How does the Department get to the stage where it categorises these municipalities as functional, dysfunctional etc.? On a quarterly basis, its team from local government, representatives from other business units and the Provincial Treasury, had quarterly assessment engagements with all municipalities. They had an assessment template that they filled out with the municipalities. They produced evidence on certain issues. They would indicate where they disagreed. Its monitoring and evaluation unit would analyse the information and rate the scoring. That was how it got to the stage where it identified what category the municipality fell under. It knew through a range of indicators. If a municipality scored well, then it would be considered functional. These indicators gave it insight into the kind of support required. It could mobilise support. MISA had an extensive intervention in Abaqulusi. This included water and other infrastructure. It was apparent the municipality desperately needed that support.

On the amounts said to be owed to Eskom, in 2018, this municipality owed this entity a significant amount. The Department had developed a payment plan, facilitated together with Eskom. There were eight municipalities owing Eskom at the time. The municipalities stuck to their payment plans and the money was paid. He was not sure whether the amount owed to Eskom was a current debt. In his recollection, the municipality had been able to stick to its plan and the amount had been paid in full. The Department could be guided if that was a grey area and the municipality had disputed it.

On Mr Ceza’s question on why the municipality did not engage in IGR exercises and had resorted to going to the courts, alternative dispute resolution mechanisms could, to some extent, be explored by the lawmakers. This would be necessary when dealing with spheres of government. With the current IGR framework, despite its applicability, numerous matters still landed up in court. Every step it sought to correct or challenge, Cogta would be served with court papers. It was possible it needed to look into the IGR framework and introduce alternative dispute resolution mechanisms so that the courts were the last option. The frustration was that a municipal council ruled by a particular political party would lose control, which would frustrate every effort that would allow the reconstitution of the Council. The courts of law were being used as an instrument, and one party would challenge the decisions taken.

There were serious issues raised in this report on why the municipality resisted the Section 106 implementation. It should not be that in 2023, the municipality still had elementary SCM challenges. It boggled his mind how it could have findings from the AG that three quotations were not obtained. Perhaps it could have been a finding 15 years ago, but not now. When these things happened, one had to ask why they were happening, and that it was possible they warranted further scrutiny. There had been contraventions of the Municipal Finance Management Act (MFMA), where there had been pre-payments. This could not be done. Services and goods were paid for, but it could not pay for what it had not received. This was what the investigation had sought to uncover. The Department was not in a position to implement this report. It was uncertain whether it could table it to the Committee, and needed to be guided. This matter was before the courts and could not be taken any further unless exhausted by the courts of law.

The Chairperson asked the Provincial Treasury to speak if there were any issues.

Ms Carol Coetzee, Head of Department, KZN Treasury, apologised on behalf of the MEC, who could not be there because of a family emergency. She said Mr Tubane had covered all the questions, and she did not want to repeat anything.

The Chairperson asked the AG if there were any issues.

Mr Siphephelo Mhlongo, Audit Manager: AGSA, said there were no issues from the AG.

The Chairperson asked DCOG if there were any issues.

DCOG's  response

Mr Mpho Mogale,  Acting DDG: LG Operations and Support, DCOG, said the Department noted the original statements made by the municipality and the responses by the Provincial Cogta. It had come closer to appreciating the engagement. It was not right for the first line of defence to be the courts. Ms Opperman had raised the issue of the time taken by the courts, which impacted and paralysed the operations of the municipalities. These were the things it assisted with. It was in consultation with the Committee as Members of Parliament to deal with this matter. It was going to get closer to finding a way of resolving it. He appealed to the Abaqulusi Municipality that a spirit of cooperation was needed. It knew it was independent and a sphere of government, but it also knew DCOG was entrusted with the responsibility to support it. When the support did not yield results, it had to implement remedial measures. It was the spirit they needed to embrace as leaders of their people, and they were doing this on their behalf.

It would come closer to resolving this matter to the best of its ability.

SALGA's response

Mr Sabelo Gwala, Operations Director, SALGA, said SALGA’s responsibility was primarily to support, advise and represent the municipality. One of the issues it vehemently raised was that MISA was responsible for setting tariffs. The quickest way to circumvent a tariff was to charge a flexible interest rate to the customer. Interest resulted in people paying above what they originally owed. The National Energy Regulator of SA (NERSA) mandate did not regulate the customer relationship between Eskom and its customers, who were the municipalities. Municipalities did not have an ombudsman who could help in this case. It always said interest charges needed to be closely analysed.

Then there was the situation where Section 139 was imposed, suggesting the municipality was not acting or making governance corrections. A desirable outcome was where the municipality acknowledged the occurrences brought to its attention, investigated them, and suspended those implicated. Where investigations were done, those who could interfere with those investigations for precautionary reasons, were suspended. It would not fault the municipality for doing so -- it was actually commendable when such things occurred.

If SALGA was saying this municipality was under administration because it had fruitless and wasteful expenditure, how many municipalities would it put under administration if this was the case? It was certainly not the only municipality that was facing the same challenges. Concerning the municipalities currently under administration across KZN, did they not have irregular expenditure? If they did, why could a municipality not make the argument that it now had controls in place and demonstrate that it could run its affairs independently, therefore it did not support the implementation of Section 139. That case could still be made, even if it had irregular expenditure. A majority of municipalities would have to be put under administration if it were to use that as the only litmus test to assess whether a municipality should or should not be under administration. Concerns should arise when there is no progress on these indicators at municipalities running their own affairs.

The Chairperson said he understood SALGA had a responsibility to represent municipalities. He did not want it to use this opportunity to raise that point, unless he was responding to questions. He understood that the reasons for Section 139 interventions could not be based on fruitless and wasteful expenditure. If that were the case, it would affect all municipalities. The Constitution specified the reasons for intervention, and it could not be fruitless and wasteful expenditure. They would be outlined and given to the municipality. It would question why the municipalities were not performing some of their duties, and provide a justification for intervention. He did not want to unnecessarily trigger a debate now. If there were any issues raised about SALGA which had not been responded to, he would allow it to respond.

Mr Gwala apologised to the Chairperson, and said he had responded to the issue of interest raised.

Zululand District Municipality response

Mr Thulasizwe Buthelezi, Mayor of the Zululand District Municipality, said many of the questions directed to Abaqulusi were based on why it would seem to be wasting taxpayer’s money to challenge matters in court. There was a legal precedent, because the reports by Cogta were flawed, especially the Section 106 report. In other provinces, Cogta was there to support municipalities. In KZN, it used Section 139 as a method and tool to usurp the powers and disrupt the functionality of certain municipalities. These municipalities were those that were not politically aligned with the ruling party. He asked if the Committee could give SALGA more time to deal with these issues, because, as an independent body, it dealt with them independently.

On the issue raised on the AG, he found it strange that Cogta had not applauded Abaqulusi for improving its audit outcome from unqualified to qualified, in spite of the interference by Cogta. It had improved its audit outcome in all material aspects. He thought it was a commendable achievement and a reason for the intervention to be dropped, so the municipality could flourish and function on its own.

Abaqulusi Municipality's response
 
Mr Zwelihle Dlamini, MM, Abaqulusi Municipality, said there had been an emphasis on one question directly asked to the municipality, which was about the implementation of Section 139. The first one was in 2005/06, the second in 2009/10, the third in 2019, and the fourth in 2020/21. During all these years, there had been no improvement until 31 October 2021. The following day had been the elections for the new administration. Since then, there has not been any physical administrator, hence this improvement for the first time. That was why there was always this question about Section 139. Its necessity was questioned when there was improvement and systems were in place. Everybody attested to these improvements. The AG’s report attested to this. Section 154 had been accepted and was welcomed. The municipality would not be where it was, if it were not assisted by the financial experts from Cogta with Section 154. It had the relevant personnel and had done its job with the municipality, which had led to the position it was currently in. He asked why it had to add another administrator for Section 139, because they had failed for ten years.

For the Section 106 report, two conflicting reports were presented to Abaqulusi. The one had nothing to do with finances -- it had to do with employment processes. It had ten items flighted there. The next report had 14 items. He asked which report the municipality should consider. Both of them had come from Cogta, and both were conflicting. There had been a lot of issues until the matter was taken to court, which had been to ascertain why it had two conflicting Section 106 reports, instead of one. Were they not done by one company or service provider? The municipality should have one report to be disseminated to all relevant parties.

The financial experts were moving out on 15 March, and he asked if Cogta could help it further as it wanted them to be with it when it started its early financial statements. It was compliant when it came to financial issues. There was not a doubt -- all compliance issues had been resolved. It pleaded with Cogta to continue helping it in that regard. It was aiming for a clean audit this financial year.

He asked how Abaqulusi could be categorised as a dysfunctional municipality when it had made major progress in just one year without Section 139. It had made major progress by moving from one level to another in the audit outcome. On the issue of water provision resolution, there were talks about that and agreements it had with the Zululand District Municipality. It had the infrastructure and the council resolutions of both parties, and was still busy with the assessment of Section 17. It had the infrastructure and personnel. It was exploring all avenues and was pulling up its socks. Its infrastructure was old, and it needed funding to improve further.

The protests in wards 2, 3 and 4, had been caused by the intervention of Cogta, which had come to a halt. Unfortunately, it ended in the face of other community members, which caused them to become disgruntled. It was in talks with Cogta and Eskom about addressing and prioritising the issue to stop the protests.

About the mayor, the only thing he had on his desk was the leave form signed by the mayor. Everything else about him was just rumours, because he did not have any paperwork. Neither political parties had written to him, but Cogta had. It had established the committee, as mentioned earlier. All the committees investigating the conduct of these two councillors were in place. The only thing on his desk was the mayor’s leave form.

Abaqulusi did not owe Eskom anything. It was unfortunate that it had a challenge with Eskom taking a bulk of its equitable share when it had to augment what NERSA had created between the municipality and Eskom with the tariffs. It had already paid R30 million to Eskom for something it could not recover. It was a deliberate move by NERSA, because it had never been resolved. It dates back as far as 2007, but was never resolved to date.

The IGR was approached on Sections 106 and 139. Section 139 always came before Section 154. That was why it was always an issue for the courts. The IGR had never worked and had never shown any results. When it came to payments owed by departments, they had dragged their feet, because the IGR was a platform for dragging out the payment processes. That was how Abaqulusi viewed it, because this was always the practice.

On the Mondlo protest for water and transformers, the municipality had a problem with the transformers. It wished for a good samaritan to buy transformers for Abaqulusi. It had three in the town supplying the whole of Abaqulusi, but two were down at the moment. In Mondlo, there was one that was repaired. It needed an extra one, because people were building homes around the area of Mondlo, which once catered for a certain number of people. It was now stretched, and the municipality did not have adequate infrastructure for this. It had submitted requests and applications to various departments about this, but the response was not promising. For several years it had received promises that the matter would be looked at, but subsequently, it was not. This included all other infrastructure in Abaqulusi, which was pre-1994. It was meant for a specific community size. The census numbers since then have more than tripled.

Regarding the unfunded budgets, the Treasury used a formula for all municipalities that ticked the box automatically -- it was a scientific tool. The budget it presented to the Treasury had gone through that process and all the boxes were ticked by its tool. It was surprised, when it was said the budget was unfunded. It questioned how this had happened, because it was done according to the guidelines from the Treasury. The Treasury had said that the municipality’s budget, upon completing that process, had been taken to another process, and this additional process was not given to other municipalities. It was told it could not have access to the tool. It had an unfunded budget declared by the Treasury after it went beyond the first phase. The unfunded budget was created by the second undisclosed process from the Treasury. It had to come up with a funding plan which became credible, based on the very same unfunded first assessed budget, with some modifications.

He did not know the amount of money spent disputing Sections 106 and 139 in court. He needed to ascertain that and send it to the secretariat of the Chairperson. It welcomed the spirit of cooperation that the DCOG had spoken about. That was why it was happy with the financial experts still helping it with all its financials and systems. One of the Members had said Abaqulusi owed R3 billion to Eskom, but that was false -- it did not owe anything. The fee it was paying was more than it could collect because of the system imposed on it by NERSA, and Eskom was using that. Perhaps parts of the unfunding came from there. Perhaps it had to fork out money the same way it did by paying the R30 million, which could have gone a long way in service delivery support.

Cogta's follow-up response

Mr Tubane said it had not been his intention to come back after the presentation, but he felt compelled to bring one or two matters to the attention of the Committee. He spoke the truth whenever he attended this Portfolio Committee and other oversight structures. It was disturbing that anyone would come before the Committee and seek to mislead the body. It was utterly incorrect and misleading to say the interventions undertaken by the Department in the province were purely political and targeted a particular political party. It was categorically denied and was not true. Currently, it has Msunduzi Municipality (ANC) and Mpofana Municipality (ANC). Before the change in the political landscape in 2021, uThukela was ANC-led and when the transition occurred, the intervention was still in place. For someone to tell the Committee these interventions were selectively targeting a particular political party was simply incorrect, and was not supported by facts.

The MM had corrected the issue of the Eskom debt. The municipality could not dictate the terms of the intervention when it suited it. The interventions had come as a package, which included financial support and experts who went to the municipality. This was done during the time of the intervention, which the municipality challenged. It could not pick and choose what it wanted as a form of intervention.

Follow-up discussion

Ms Mkhaliphi said she thought Mr Tubane would cover the response from the MM, who had said the reason it had challenged the Section 106 report was because there were two conflicting reports. As the Committee, its role was to get clarity for it to form a view. It did not have to pick sides, but speak truth to power. What was the real reason for the Section 106 report?

She referred to what the MM had said about the intervention being used against the municipality for political reasons. The Committee was responsible for listening and noting these issues, returning to the drawing board, and identifying where it could intervene. It needed information from the National Cogta, because it was the body that was directly accountable to the Committee. The MM had outlined the dates of how long the interventions had lasted. It seemed the administrator meant to intervene in Section 139 had not been helpful. The Committee needed a clear report. This issue was raised not only in Abaqulusi, but in other municipalities too. The last time the Committee did oversight in Mpumalanga, it had raised the very same issue. Section 139 was not the only mechanism helping the situation on the ground. She noted Mr Tubane’s point that it should avoid using politics where no politics was needed. Its job was to focus on the issues at hand, especially if there was a lack of service delivery. She proposed the Committee meet with the Department on 24 March to engage on all the other issues that demanded attention.

She agreed with Mr Tubane that the truth should always be spoken. It should also respect the committees of Parliament if it wants to resolve the issues affecting the poorest South Africans. A political leader needed to take the Committee through what was going on in that municipality. It could not keep quiet when the MM said all he had on his desk was the mayor’s leave form and did not know about other matters. It meant he was undermining the Committee and the Members' intelligence, because they knew what was happening. Its job was to ask direct questions. She asked if the people elected to lead the municipality were assuring the Committee there would be no problems with service delivery. It could not be managed by the MM, saying all he had on his desk was a sick leave form. The Speaker had spoken against the laws of South Africa -- the Municipal Structures Act and the Municipal Systems Act -- at a funeral. He had made those unfortunate statements. The MM had not even commented on any of that.

The Committee had asked a number of questions. The MM could not say that because of COVID-19, the municipality had decided to write off a huge amount without any justification. It used COVID-19 as a justification. That money was meant for service delivery for the people on the ground. The municipality should not be quick to hide behind political interference. If there was indeed political interference, it should be raised as an issue on its own. National Cogta should tell the Committee why the provincial Cogta was using politics instead of the law. The Committee could neither afford nor allow it to be managed.

Mr Mpumza said he could have missed the response by the municipality on two questions. On this matter, the absent mayor should have presented the report. On the flouting of the procurement and contract management by the municipal administration, what remedial action had been taken by the executive mayor? The AG had indicated internal controls were absent. There was a question about asset management, and whether the leadership of the municipality appreciated the strategic function of asset management in running the institution and imposing tight internal controls. Did the municipality have the capability of asset management within its organisational structure? Had they actually deployed competent people to develop an asset management policy? The municipality had said it had ageing infrastructure. This sounded like thumb-sucking, because that ageing infrastructure would be informed by the quality management of the assets indicating that at a certain time, the useful value of a certain asset would have expired. This would have informed the Council to begin budgeting for refurbishment and the management of such assets, but in this instance, it was in the dark because the AG had said there was a lack of internal controls.

DCOG's follow-up response

Mr Mogale noted the proposal that National Treasury was expected to provide a report on this matter. the DCOG embraced this and would do its part in convening the two parties. It was coming into the space with an open mind. It was the national government department, and wanted to hear both sides of the matter. It would then advise on the basis of those engagements, and report back to the Committee.

Closing remarks

The Chairperson said the Committee had spent a lot of time on this engagement. One of Parliament’s primary responsibilities was to make laws and ensure such laws were executed with understanding, so that people did not jump to the courts and demand that they interpret the law for them. Those given the responsibility should first understand the laws they were implementing. There should be a common understanding of Section 139. If anybody alleged it was being abused, they should receive a hearing and the information should be collected so it could see how Section 139 was being abused.

There were proposals to have Section 139 reviewed. There was no politics about the Constitution. Section 139 said that “when a municipality cannot, or does not fulfil an executive obligation, in terms of the Constitution or legislation, the relevant provincial executive may intervene, by taking any appropriate steps to ensure fulfilment of that obligation, including issuing a directive to the municipal council describing the extent of the failure to fulfil its obligations, and stating any steps required to meet that obligation.”  It did not talk about politics, it spoke about the Council fulfilling its own obligations. If the allegation that this Section was being abused, the municipality and the district should substantiate them, so the Committee understood what it was dealing with.

He clarified that it was not only Section 139 -- it had Section 154 to provide support to municipalities. Section 154 was something that should be ongoing. Both the national and provincial government had to provide that support. That should also be clarified to the municipality. In reality, as acknowledged by everybody, people should not begin to claim improvements in the Abaqulusi municipality. It was acknowledged that it had moved from an unqualified to a qualified audit outcome, and he commented that it was the first among the dysfunctional municipalities to display improvement. The concern was the sustainability of that improvement. The MM had said he had no figures for the legal costs for the court actions on Section 139 and Section 106. The Committee wanted that information, and if it could receive it before 24 March, it would be very happy. Any other information asked for by the Members should also be provided in the same timeframe.

Mr Tubane said Ms Mkhaliphi raised a question about the two Section 106 reports. The Department had sanctioned only one report, and that had been sent to the municipality. There was only one signed report. The municipality needed to provide the other report to the Committee.

The Chairperson said the issue of the Section 106 reports required one, or both, reports to be submitted to the Committee. Although some of these matters were before the courts, it would not prevent the Committee from engaging with them, because they emanated from the laws he was talking about.

He thanked everybody who had participated in the session. It now knew more about the state of Abaqulusi, and would know more once it received the outstanding reports.

The meeting was adjourned.