Municipal Systems Bill: discussion

Meeting report

PROVINCIAL AND LOCAL GOVERNMENT PORTFOLIO & SELECT COMMITTEE: JOINT MEETING
26 June 2000
MUNICIPAL SYSTEMS BILL: CHAPTERS 4 AND 5

Documents handed out
Financial and Fiscal Commission submission
Power point presentation on Chapter 5 - text outline only [if power point version is required, email [email protected]]
Department’s Draft Reply to Submissions on Chapter 5
Department’s separate responses to each of the chapters of the Bill
[if this document takes too long to download, e-mail [email protected] for it to be e-mailed to you]

SUMMARY
The Financial and Fiscal Commission made a submission on the Municipal Systems with its focus on the financing of municipal services. Thereafter the Committee discussed the FFC’s proposals on Clauses 14, 55 and 110.

In respect of Clause 14 the committee agreed that additional functions should be allocated to local government only if the municipality has the capacity to perform the functions. They agreed that funds must be made available to perform the function. If a particular function/mandate is unfunded, then it should be clear that a municipality has a right to refuse to perform the function.

Clause 14 provides that the FFC may be requested to make an assessment of the financial implications of the assignment of additional functions to a specific municipality. The FFC suggested that a generalised costing norms approach be applied to municipal service delivery. The Chairperson thought that it may be unfair to make a general costing norm applicable to all municipalities as some municipalities are more poorly resourced than others.

The Afternoon session focused on Chapters 4 and 5. Slight changes were made to Chapter 4. Chapter 3 and 4 will be interchanged. A sub-committee has been formed to deal with very technical matters in the Bill.

In discussing Chapter 5, members were uncertain as to how integrated development plans (IDP) for municipalities would be properly implemented given the lack of capacity facing many municipalities. Other problems raised regarding implementation were a lack of financial resources and availability of expertise.

To combat these problems, the department is investigating two forms of assistance. First, establishing national IDP grants that would give financial support to municipalities in developing their plans, and secondly, providing expertise through a Planning and Implementing Management Support Centre (PIMSC) to help municipalities manage their IDP. Members were wary of involving consultancy firms, since training by them often created a dependency on such firms.

Mr Bhabha (ANC) stated that a more developmental approach was needed to implement an IDP. It was proposed that a staggered process be used, whereby councillors would be expected to reach certain benchmarks within a specified period of time before moving to the next stage. Members felt this method would be too problematic, but were in favor of a staggered approach based on achieving goals related to capacity building.

MINUTES
Financial and Fiscal Commission submission
Mr Murphy Morobe from the FFC made a submission on the Municipal Systems Bill. Dr Hildegarde Fast, a researcher with the FFC was present. Delegates from the Department of Provincial and Local Government were also present.
The Committee discussed the various proposals made by the FFC.

In their submission the FFC made various suggestions. These include:
- That the term ‘’municipal services’’ should be defined in Chapter 1.
- That the definition of ‘’financially sustainable’’ should be revised.
- That a costed norms approach be applied to municipal service delivery.
- That Section 156(1)(a) of the Constitution should be referred to in Clauses 14(1) and 14(2) of the Bill (in addition to the other references made to the Constitution).
- That Section 110 of the Bill be revised to close the loophole where landowners can evade paying certain land taxes upon transfer of property.

For a full discussion of these proposals, see submission.

Discussion of FFC submission
Clause 14 - Consultation when additional functions and powers are assigned to municipalities
Mr Bhabha (ANC) said that Clause 14(2) of the Bill which reads:
‘’an MEC initiating the assignment of a function to municipalities in a province by way of provincial legislation in terms of Section 104(1)(c) or 156(1)(b) of the Constitution …’’
created the impression that the MEC had the discretion to give powers to the municipality.

The true position in terms of Section 156 (4) of the Constitution was that a municipality is entitled to administer a matter listed in Part A of Schedules 4 and 5 if it can prove that it has the capacity to do so. The discretion to give them the function does not lie with someone else. Also Section 156(1)(a) of the Constitution gives the municipality power to perform functions in respect of matters listed in Part B of Schedules 4 and 5.

Mr Bhabha said that in light of Section 156 of the Constitution, Clause 14(2) of the Bill is ‘’wrong’’ because it creates the impression that ‘’ it is someone else’s discretion’’ to grant powers to the municipality.

Mr Bhabha then made reference to the FFC’s comments on Clause 14(3) of the Bill. The Clause reads:
‘’the Cabinet member or MEC initiating the assignment, … must take appropriate steps to ensure sufficient funding for the performance of the assigned function … if: (c) that duty falls outside the functional areas listed in Part B of Schedule 4 or Part B of Schedule 5 to the Constitution or is not incidental to any of those functional areas; …

The FFC contends that the clause only deals with the assignment of powers which fall beyond the scope of Part B of Schedule 4 and 5 of the Constitution.
They said that there is a ‘’significant grey area’’ in respect of the powers which fall within the ambit of Part B of Schedule 4 and 5 of the Constitution and suggested that a reference to Section 156(a) of the Constitution (which refers to Part B of the Schedules 5 and 6) be incorporated into the section.

Mr Bhabha said that he did not see any grey area as Part B of Schedule 4 and Schedule 5 already lists the original powers vested in the municipalities so these were already dealt with.

Mr Smith (IFP) referred to the FFC’s submission that Part B of Schedules 4 and 5 should be included in Clause 14 (2) and (3) and asked why there was a need to include them (as Sections 99 and Section 126 of the Constitution already deals with this).

The Department explained that the Part B functions are functions which the municipality must take on whether they have the capacity or not. Part A functions are not obligatory and involve administration of a matter that relates to local government.

Mr Bhabha said that there were instances where larger cities were already performing some functions for smaller municipalities who had fewer resources than them. They were not receiving funds from the government to do this. These bigger municipalities could argue that they were being penalised for performing the functions of other municipalities because they were not receiving funds. The way things were being done was that they could only get funds for performing functions from "on top’’.

An opposition party member noted a concern about unfunded mandates in relation to Clause 14 of the Bill. She said that the wording should make it clear that the municipality can refuse to perform a function because of a lack of funds.

The Chairperson agreed, saying that the drafters should explain that the municipality can say ‘’tough luck’’ if they did not have the capacity to perform the function. Section 156 of the Constitution states that a municipality can take on the administration of Part A matters of Schedule 4 and 5 if government and the municipality agree that it has the capacity and that the matter would most effectively be administered locally. It was not obligatory to take on such a function. He said that the Department must ensure that the clause should spell out that the municipality had the right to say ‘’no".

Mr Bhabha said that they must look at Section 126 of the Constitution which deals with the assignment of functions. In terms of this section it seems that there is no right to impose functions on the municipality. There must be consensus by the municipality to take on the function.

The Chairperson highlighted these issues:
1) the committee agreed that powers and functions should be allocated to local government only if they have the requisite capacity
2) funds must be made available to perform the function, and
3) it should be clear that a municipality has a right to say no.

Mr Bhabha suggested that they construct Section 14 of the Bill so that two scenarios are referred to:
- those municipalities which have the capacity, and
- those municipalities which do not have the capacity.

Clause 14(4) – Financial and Fiscal Commission assessment of the financial implications of the assignment of a function
This clause provides that the FFC may be requested to make an assessment of the financial implications of the assignment for the municipality concerned. The FFC has recently adopted a costed norms approach to the delivery of social services by provinces. This approach suggests the manner in which national norms and standards can be costed. The FFC suggested that the same approach be adopted for municipal service delivery.

Mr Bhabha said that this was a fair request because it would not be feasible to expect the FFC to get involved in every little town.

The Chairperson asked if it was fair to use a general costing norm which would be applicable to all municipalities as some municipalities were more poorly resourced than others. He said that costing depends on the capacity of the municipality in question.

The Department said that the FFC had a valid point and agreed that it would be technical and complicated to discover how much it would cost each municipality. They said that they still wanted the FFC to have a look at the sphere of financial implication.

Mr Bhabha said that what they needed was individual costing within the norms of a broad FFC framework.

The Chairperson said that the Department would have to come back to this.

Clause 55 – Delegation of certain powers to councillors or officials disallowed
The FFC proposed that Clause 55(c) of the Bill which reads: ‘’a delegating authority may not delegate to a councillor or official the power to make –
(c) investments on behalf of the municipality;
be amended to read:
‘’make investments outside of the investment policy framework of the municipality’’.
The reason for this proposal is that in metropolitan areas it is not unusual for officials to make investments of up to R 15 million on a daily basis. If the clause remains as it is then it will be very impractical.

Mr Bhabha said that this a fair and practical proposal.

Clause 110 – Restraint on transfer of property
This clause deals with the fact that a registration officer may refuse to transfer immovable property unless a clearance certificate is produced. The clearance certificate shows that all municipal fees, surcharges, taxes and rates have been paid. The FFC said that there is a loophole in this section in that people could evade paying these taxes if they formed a close corporation and then transferred the property as shares in the close corporation. In this instance no clearance certificate was required for registration. They suggested that this section be revised to close this loophole.

The Department replied that it is easy to require a clearance certificate when property is transferred because the transfer must be registered with the Registrar. When shares are passed there is no Registrar involved so it is difficult to require a clearance certificate.

Mr Smith felt that adding this requirement would be highly impractical because it would affect not only municipal tax evaders when transferring property but also genuine close corporations and those entities listed on the stock exchange. Imagine they had to get a clearance certificate every time they transferred shares.

Afternoon session
Chapter 4: Municipal Powers and Duties
Clause 13: General empowerment
The Chair noted that the South African Local Government Association (SALGA) had submitted a newly worded version of the clause. The committee agreed not to accept the proposal.

Mr Bhabha (ANC) stated this clause attempted to define a municipality as a corporate entity, but felt that the definition needed to be broadened to include a municipality as being a juristic person. The DP and IFP were in agreement. The Department had no objections to expanding the definition, although they believed it was not necessary.

Mr Smith (IFP) stated that Section 99 of the Constitution needed to be added to 13(1), since it dealt with the assignment of functions to municipal councils. The committee agreed.

Ms Borman (DP) felt the terms "subject to" in 13(1) were problematic because it implied that the Constitution was subject to the Municipal Structures Act. She argued that the Constitution was subject to no other legislation.

The Department responded that Sections 156 and 229 of the Constitution which address the powers and functions of a municipality were subject to the division of powers outlined in 155(3)(c) of the Constitution, and not to Chapter 5 of the Municipal Structures Act. The intent of the clause was to state that all the powers and duties conferred to municipalities in this Bill through the Constitution must be exercised in relation to the division of powers between local and district municipalities outlined in Section 83 of the Municipal Structures Act.

Clause 14: Consultation when additional functions and powers are assigned to municipalities
The committee did not address this clause again as it dealt with very technical matters. The clause will be delegated to a sub-committee consisting of the Chair, Mr Bhabha (ANC), Mr Smith (IFP), and two members from the Department of Provincial and Local Government for discussion.

Clause 15: Executive and legislative authority
This clause deals with the delegation and sub-delegation of decision-making on behalf of the executive and legislative authority of the municipality. Mr Bhabha (ANC) noted this clause created an exclusion whereby the executive and legislative authority cease to have decision-making power of a matter, but instead hand it over to a functionary of the municipality. He felt that such a delegation of powers should be done "subject to" Clause 54 of this bill, and not "in terms of" as was stated. The committee agreed.

Mr Solo (ANC) sought clarity on 15(2). 15(2) deals with the right of a municipality to exercise executive authority in other municipalities by way of a written agreement. He questioned if this agreement was applicable across all categories of municipalities, or among similar municipalities. Mr Bhabha (ANC) replied that this clause provided for municipalities to delegate the power to perform a function to a more capable municipality. Currently, it deals specifically with horizontal agreements between similar municipalities, but special provision would be made for vertical relationships. It was decided the clause would be delegated to the sub-committee for further consideration.

The NNP and the DP argued that 15(3)(b) was unconstitutional since it puts an obligation on municipalities to "undertake" social and economic development.

The Department responded that undertaking could refer to a municipality spending funds allocated for social development by development programs, and therefore, pertains more to furthering social and economic development than making it obligatory. The ANC agreed that "undertake" must remain, because it was incumbent on municipalities to perform such development.

Ms Borman (DP) stated that 15(3)(d) needed to be rephrased as it was not clear what the distinction was between the administration and regulation of "its affairs" and the affairs of local government. The Department responded that the clause was taken from section 151(1)(3) of the Constitution, but recommended that they change the wording to "its internal affairs" to clearly denote what is meant. The committee agreed.

Mr Smith (IFP) argued it was problematic in 15(3)(f) for a municipality to have the power to exercise authority over regulating municipal services that are provided by service providers other than the municipality. He felt the use of the term "regulate" was incorrect, since a municipality had no power or right to regulate service providers such as Eskom. Mr Bhabha (ANC) agreed, and suggested that they use "monitor, and where applicable regulate". The Department commented that it was not even necessary to include any mention of the regulation of services by a municipality, since it was covered in greater
detail elsewhere in the Bill. The Chair believed it was necessary to include for "political reasons", with the suggested change.

It was agreed by the committee that 15(3)(h) would include the word "developing" in reference to a municipality’s budget.

The Chair asked the Department why Chapter 2 and Chapter 4 of the Bill could not be combined. Ms Manche, Acting Deputy Director General, responded that Chapter 2 addressed what the powers and duties of municipalities were, whereas, Chapter 4 dealt with how these powers are applied. The Chair thought it was not structurally correct to have Chapter 3 on public participation precede a Chapter on how powers would be applied. The committee agreed, and it was decided that Chapters 3 and 4 would be reversed.

Clause 16: Legislative procedures and Clause 17: Publication of by-laws
The committee agreed to these clauses as stated.

Clause 18: Standard draft by-laws
There was some debate as to whether Clause 18 should be included in the Bill. The IFP felt that it was very presumptive to have pre-written by-laws, as it would mean that councillors would be making decisions on behalf of the public, long before the public was made aware of the issue. The Department stated the drafts would only take the shape of a pro forma by-law, and would not be specific to any issue. The Chair stated that the clause would have to remain as part of the Bill.

Chapter 5: Integrated Development Planning
Mr Elroy Africa, from the Department of Provincial and Local Government, gave a brief overview of the principles informing the Chapter.

He addressed the following principles as guiding the IDP:
· the need for a strategic planning instrument and management instrument for local government
· the need for a single municipal planning process that is multi-sectoral in nature
· attempts to link budget and policy
· attempts to change the way local governments do business
· geared towards delivery and implementation
· refers to an interim period and not extended period of time
· community and citizen participation is essential to its success

He then outlined the structure of the Chapter. Part 1 deals with the adoption of an IDP by municipalities within a prescribed period after the start of its elected term, and gives effect to a co-operative government between all three spheres of government. Part 2 outlines the minimum core components of the IDP. Part 3 deals with how municipalities go about implementing their IDP, the role of the MEC, and the process by which conflicts are resolved. Part 4 deals with the status of the IDP and relevant regulations.

Finally, Mr Africa identified capacity, financial resources and expertise availability as problems that would hinder the implementation of IDP.

Discussion
The Chair asked for clarity on the difference between Mr. Africa’s reference to a mega-plan and a meta-plan.

Mr Africa replied that a mega-plan was overarching in nature, whereby the IDP was at the centre and other programs were connected to it. The programs would still retain their distinction even though they are a component of the IDP. Under a mega-plan, all programs collapse into one consolidated plan, and thus do not retain any distinction.

Mr Smith (IFP) queried whether councillors would be able to understand the difference between the two systems. He was also not sure if the difference between the two plans was in the process or the product, implying that the IDP may have the same end result regardless of which plan was implemented.

The Chair admitted that much more clarification on the IDP was needed. The issue before the committee was beyond the legislation - what was being done to ensure that the IDP was implemented. Mr Africa said the department was analysing two separate forms of assistance to aid municipalities in implementing an IDP. First, they are working on national IDP grants that would give financial support to municipalities in developing their plans, and secondly, they will provide expertise through a Planning and Implementing Management Support Centre (PIMSC) to help municipalities manage their IDP. He stated the concept of grants was still being designed, but that their focus was more on capacity-building rather than handing out money.

Mr Bhabha (ANC) was critical of involving consultancy firms, since training by them created a dependency on such firms. He also advised that many municipalities lacked the capacity to carry out their IDP, and that it was important that these matters be considered very seriously. Mr Africa remarked that PIMSC would provide a multi-faceted support service which would facilitate capacity building. It was expected that PIMSC would sit as part of the district municipalities.

Mr Bhabha (ANC) stated that municipalities would have to take a more developmental approach to implementing an IDP. He proposed that IDPs be implemented in a staggered process, whereby councillors would be expected to reach certain benchmarks within a specified period of time before moving to the next stage.

The Chair was wary of accepting a staggered process, but identified that a more simplified process was necessary without detracting from what the IDP aimed at achieving.

Mr Smith (IFP) supported the staggered approach but suggested that it be based on capacity-building instead of timelines. In this form, councillors would establish, for example 10 basic Category 1 goals, and once achieved would move onto Category 2 goals. The Chair was more agreeable to this proposal.

Mr Beukman (NNP) criticised both the department and the committee for not having a clear plan on what the IDP was intended to achieve, or where it would take municipalities. The ANC denied the claim stating that the IDP was well structured to that end, but that there needed to be more focus on the implementation side.

The committee was in agreement that it was necessary to see how a municipality had successfully implemented an IDP. The Department was asked to provide such an example.

The meeting was adjourned.