Umvoti Municipality: KwaZulu-Natal Mec briefing; Re-Determination of the Boundaries of Cross-Boundary Municipalities Bill: adopt

Meeting report

PROVINCIAL AND LOCAL GOVERNMENT PORTFOLIO COMMITTEE
24 May 2005
UMVOTI MUNICIPALITY: KWAZULU-NATAL MEC BRIEFING; RE-DETERMINATION OF THE BOUNDARIES OF CROSS-BOUNDARY MUNICIPALITIES BILL: ADOPTION

Chairperson: Ms N Ntshulana-Bhengu (ANC)

Documents handed out:
Department presentation on Bill:
Map of Area 1
Map of Area 2
Map of Area 3
Map of Area 4
Map of Area 5
Map of Area 6
Map of Area 7
Map of Area 8
Map of Area 9
Map of Area 10

Gobodo Forensic Audit Report

SUMMARY
The KwaZulu-Natal Member of the Executive Committee (MEC) for Local Government and Traditional Affairs related the circumstances surrounding the sale in execution of a certain Mr Mkhize's property within the Umvoti municipality. Details of the Gobodo Forensic Audit Report initiated by the provincial government were elucidated and the position of the province regarding local government was clearly expressed.

Members raised numerous questions on a review of outdated legislation within municipalities; the status of Department monitoring mechanisms; the nature of the relief envisaged; allegations of improper conduct within the municipality; the relevance of local government practice to national government priorities, and the need for an extensive audit of local government systems.

The Committee also unanimously adopted the Re-determination of the Boundaries of Cross-Boundary Municipalities Bill.

MINUTES
The Chairperson stated that Members had to consider the Re-determination of the Boundaries of Cross-Boundary Municipalities Bill together with maps provided by the Department highlighting certain problematic areas before commencing with the scheduled agenda. She reminded Members that the purpose of the exercise was to consider the relevance of the proposed legislation and assess the practicality of the prescriptions.

Mr S Mashudulu (ANC) stated that the Bill should be viewed as part of an ongoing process to reflect changes at the local government level due to certain factors such as demographics and economic alterations. He stated that the legislation should be seen as an administrative measure rather than a party political debate.

Mr W Dorman (DA) stated that his party was satisfied with the technical adjustments but asked whether certain changes involved provincial boundaries such as Rooipoort which appeared to have shifted into Gauteng from Mpmumalanga. He asked whether the Department could confirm that changes would be confined to areas within existing provincial boundaries.

Mr M Nonkonyana (ANC) stated that the present Bill envisaged by local government expanded on the Cross-Boundary Municipalities Act of 2000 that prescribed the concurrence of various legislatures involved. He asked whether the Department could provide an assurance that all affected people were consulted prior to the finalisation of the demarcation process. He reminded Members that issues of change were sensitive and asked whether provincial legislatures had consented to the envisaged changes.

Mr M Swathe (DA) asked whether Groblersdal would remain within Limpopo or had been transferred to Mpumalanga.

The Chairperson stated that Members had a duty to gather valuable community information during constituency work that could be placed against the input of the Department to assess the relevance of the responses provided and determine whether people were consulted. Such prior research activity would enhance the processing of Bills and enable effective oversight.

Adv S Kholong (Department) agreed with earlier statements that demarcation activity was an ongoing process that had to reflect changing circumstances. The intention of the legislation was to alter municipalities within provincial boundaries. Future legislation might deal with the adjustment of provincial boundaries. Available findings of the Surveyor-General’s office had been used to assist in demarcation activities and he confirmed that people in affected areas had been consulted in accordance with the requirements of the Demarcation Act. He replied that concurrence from provincial legislatures had been obtained.

Mr B Solo (ANC) noted that earlier complaints involving parts of the Gauteng boundary had been resolved and he commended the process for addressing these issues including controversy between the Johannesburg Metro and Ekurhuleni.

Mr S Vundisa (ANC) asserted that the Municipal Demarcation Board (MDB) had failed people in not entertaining all complaints and queries.

Ms L Mashiane (ANC) stated that the MDB needed to provide their definition of consultation to Members as confusion reigned. Meetings had been arranged at locations far removed from communities which resulted in poor attendance. Numerous people in her constituencies were expressing apathy towards the process and a number of proposed integrations seemed inappropriate.

Ms M Gumede (ANC) noted a positive development that occurred in the Northern Cape where a community had been returned to its original municipal district after many years and expressed praise for this.

The Chairperson reminded Members that each political party should have held study groups on the Bill and adopted a party position prior to the meeting to expedite the process. Members should attend all Committee meetings to understand the procedure in place and avoid questions dealt with previously. Members should decide whether to vote on the Bill now or arrange for a follow-up meeting with the MDB to address new concerns.

Mr Mashudulu declared that the ANC's position on the matter was clear and involved input from the branch level up to the provincial general councils. He recommended that Members hold a five-minute caucus to finalise positions. Ms Mashiane opted to withdraw her earlier statement and concurred with the idea of a caucus.

Mr M Likotsi (PAC) referred to previous examples of demonstrations around demarcation following perceptions of lack of consultations. He asked whether the Department could verify that all aspects of the Act in question had been adhered to in the interests of stable local government.

The Chairperson replied that most demonstrations were as a result of misperceptions around the duration of the consultation process. Interventions by the Minister allowing for further input had restored calm in previous cases. She asked whether all complaints from communities had been adequately addressed. She instructed Members to hold a five-minute caucus to solidify positions and determine whether further consultation was necessary.

Adv Kholong stated that previous cases of unrest had related to ward delimitation that was a separate process. He reminded Members of the budgetary constraints experienced by the MDB that had curtailed activity to some extent and prevented a visit to all wards. Consultation had occurred at the district level.

Members engaged in a five-minute caucus.

On their return, the Chairperson stated that the ANC stood by the decision to continue with the processing of the Bill and a final vote. She stated that Members had decided to consult with particular areas highlighted as problematic.

Mr Swathe stated that the DA had agreed to continue with the process.

Mr Likotsi stated that the PAC would support a continuation but remained skeptical about the level of consultation in certain areas.

The Chairperson stated that a quorum had been reached and the motion of desirability was read out and adopted. The Bill would be debated in the National Assembly on 2 June 2005.

KwaZulu-Natal MEC’s briefing
Mr M Mabuyakhulu stated that the purpose of the meeting was to present a report compiled by Gobodo auditing firm on the events surrounding the sale in execution of Mr Mkhize's property in the Umvoti municipality. He had initiated an investigation in accordance with Section 106(1)(b) of the Municipal Systems Act due to allegations of irregularities that had arisen in the media. Gobodo had been appointed on 24 January 2005 to investigate events and other irregularities that arose during the course of the investigation. Additional time had been allocated to the firm following a request for extension. The report would be sent to all municipalities detailing conclusions and recommendations. The Umvoti municipality would be given 21 days to present the report to a full council meeting and adopt relevant corrective measures. A public meeting would be convened in the municipality to provide an account of the process and resolutions reached. This would assist in reducing poor perceptions of the municipality and local government in general.

Gobodo Forensic Audit Report
Mr Buckley (Director, Gobodo) provided a chronological account of the entire process highlighting key developments. He stated that the firm had enjoyed free access to all documentation involved and interviews had been conducted. The initial summons had been served on Mr Mkhize in 2001 as a result of rates defaulting. Mr Mkhize had managed to pay a significant amount of the monies outstanding at the time of the sale in execution. R2900 had been owing in December 2003. Summons had been served on third parties and doubt remained as to whether Mr Mkhize was aware of the planned sale in execution. Detail was provided on the auction purchase by Mr Chetty and the intended recipient of the property ab initio. He referred to the alleged involvement of Mr C Naidoo, a friend of Ms Khan. He confirmed that the house in question was sold to Mr Dhlamini in August 2004 at considerable profit to Ms Khan, a portion of which was used to finance a BMW motor vehicle. A key consideration was whether Mr Mkhize knew of the impending sale. A tacit agreement had been in place between the municipality and Mr Mkhize to repay the debt due to the act of various payments and acceptance thereof.

He referred to an irregularity in the process of sale as a notice had been placed in the local media 20 days before the sale, which was a contradiction of prescribed regulations. A court of law could determine that this failure resulted in an invalid sale in execution. The father's claim that his son was the intended purchaser of the house was not feasible as Mr C Naidoo had been the designated beneficiary up until 26 January 2004. An investigation of other cases within the municipality did not indicate a widespread problem and the present case should be viewed as an anomaly. Any member of the public could participate in a public auction but the decision of Ms Khan to continue with the sale in execution despite a history of repayments was highly inappropriate. He stated that the Legal Resources Centre had been engaged to assist Mr Mkhize in securing redress.

Mr Mabuyakhulu stated that his office would recommend to the Umvoti municipality that disciplinary measures be taken against Ms Khan. Ms Khan as the credit controller had misled the municipality and the province had to insist on a parallel investigation to counter that initiated by the municipality. He hinted that the KPMG investigators could have been restricted by the terms of reference drawn up by the municipality but noted that the KPMG report reached a conclusion of no irregularity that was incorrect. He proposed that KPMG reflect on the implications of this finding and make the necessary adjustments in future. He confirmed that Mr Mkhize would be initiating a court case to secure restitution.

The Chairperson noted that Members had recently interacted with certain roleplayers including Nel and Stevens, the municipality, the Sheriff and the Chetty family where serious issues had been raised. She added that Members were saddened by the actions of the municipality towards Mr Mkhize. The municipal management had been unable to resolve the matter timeously and prevent the sale in execution from occurring. Management efforts following the sale were also inadequate despite complaints from Mr Mkhize. The credit controller's role as referee and player was unacceptable and indicated an over-inflation of designated power. KPMG should have asked for an extension to the allotted investigation time to ensure a sound process. The recommendation of KPMG that Ms Khan be reinstated went beyond the original brief and was highly questionable. She referred to a SANCO meeting held shortly after the sale with the municipality where it was claimed that KPMG had exonerated the municipality before an investigation had taken place.

Discussion
Mr Mashudulu expressed appreciation to SANCO and the media for pursuing the matter and maintaining public attention on the case. He also noted the value of the Gobodo investigation in reaching correct conclusions. A fundamental challenge lay in reviewing outdated legislation currently in use by municipalities. He added that the Department had to ensure that sound monitoring mechanisms were in place to oversee municipalities while protecting the independence of local government as prescribed by the Constitution. SALGA had a duty to establish the extent of the problem and initiate corrective measures. Professional firms such as KPMG should not engage in questionable reports that compromised their reputation and condoned irregular and corrupt practice.

Mr P Smith (IFP) referred to the Gobodo Report that advocated relief for Mr Mkhize and asked how this could be attained.

Mr Mabuyakhulu responded that appropriate relief involved a return of the property in question through legal action. A remedy could also be proposed by the municipality prior to a court case being initiated. He reiterated that the provincial government was determined to seek justice on behalf of Mr Mkhize. The plight of the Dhlamini family would also have to be considered.

Mr Nonkonyana expressed satisfaction with the "real" forensic report as opposed to the KPMG version. He claimed that the case provided an opportunity for government to show that the Municipal Systems Act was effective. He asked whether Gobodo had seen the KPMG report and, if so, their evaluation thereof. He stated that the KPMG report had made no mention of Mr C Naidoo, nor had any party informed Members of this material fact during submissions. He referred to a letter sent to Nel and Stevens by Ms Khan instructing the attorneys to destroy references to C Naidoo after the issue had surfaced in the media.

Mr Buckley had seen the KPMG report but noted that they had had no access to certain crucial files that could account for some discrepancies. Inconsistencies in monies owed could not be explained and he noted that warrants of execution issued by the attorneys had not reflected the correct amounts owing. He confirmed that Mr C Naidoo was the original intended purchaser of the property as evidenced on documentation obtained from the Sheriff. He confirmed that Ms Khan never indicated on the deed of sale who the intended beneficiary would be implying an attempt to conceal the purpose of the purchase. He stated that confusion over the street number involved might have existed but the erf number would eliminate any anomaly.

Mr J Mchunu (KwaZulu-Natal MPL) stated that the KPMG report could be regarded as wasteful expenditure due to the conclusions reached. He informed Members of the Umvoti municipality manager's intention to resign and accept a golden handshake that could intensify controversy. He proposed that a broader investigation be launched into the Umvoti municipality. Letters sent to attorneys from the municipality had indicated an interest in the property for some time. The municipality's CFO had not signed the rule 38 security which was improper and required further investigation.

Mr Solo reminded Members of their duty to assist the poor and vulnerable and to provide every assistance to ensure that the Mkhize case reached a positive outcome. The principles of Batho Pele tended to be ignored by certain municipalities and he asked whether the right individuals were involved in local government.

Mr Dorman stated that the Umvoti case had provided valuable lessons for Members despite certain reservations expressed by some parties in the beginning. He welcomed that legal aid would be provided to Mr Mkhize and proposed that Members discuss the case after the court finding. He praised the role played by the provincial government and the MEC in adopting a hands-on approach and concurred that the principles of Batho Pele had been ignored. He suggested that delegation to junior officials within municipalities be reconsidered and noted certain racial undertones in the present case. He added that the inclusion of the indigent within the local government system remained unresolved and advocated that Mr Dhlamini also receive free legal assistance in his predicament.

Mr Mchunu noted the co-operation generated between political parties within the Committee to address the matter in a positive manner. A deliberate attempt to take the property from Mr Mkhize had been made while the municipality continued to extract monies. He regarded this as a criminal act that warranted serious intervention. He asked whether the Sheriff had operated in the correct manner and whether the municipality had suspended further sales until the issue was resolved.

Ms Gumede stated that the amount of money paid by Mr Mkhize to the municipality did not tally with the amount reflected in the municipal records. She asked what other expenses were involved and the amount of interest paid to the attorneys.

Mr Mtalane (SANCO) asked whether the Department had placed a moratorium on similar sales in execution until a review of legislation had occurred. He stated that the Gobodo report indicated severe shortcomings within the municipality such as authorisation procedures and retirement bonuses. Irregularities also existed regarding staff salaries and leave policy. Ms Khan had been seen driving in the municipality on the day of the previous Committee meeting to which she had been invited. Her excuse for not attending was that she was ill.

Cllr. Ntuli (SALGA) stated that the Committee process had been an informative exercise and asked what steps could be taken to address the widespread abuse of local government policy. He recommended a review of credit control policy and suggested that sales in execution not be delegated to junior officials within municipalities. Local government practice should remain within overall national government objectives, policies and constitutional principles. An audit of municipalities was underway to determine the status of policies and important socio-economic issues. A report would be compiled detailing recommendations at the completion of the audit.

Mr Buckley responded that Mr Mkhize was presently residing within another house in Umvoti. He replied that the sale in execution in question should never have taken place and the suspension of further sales was the correct decision. The crucial legal question to consider was whether Mr Mkhize knew of the intention to sell his house as summons had been served on third parties. He replied that the recovery of arrears contained certain costs to the attorneys involved and this accounted for the discrepancy between the amounts paid by Mr Mkhize and received by the municipality.

Mr Mabuyakhulu stated that the provincial government would act in accordance with the findings of the Gobodo report as opposed to the KPMG report. He added that a considered view of the allegations of a retirement package for the manager would be taken following further investigation in terms of Section 106
(1)(b) of the Municipal Systems Act. He confirmed that 17 such investigations had been conducted in KwaZulu-Natal during 2004/05 that contained a significant cost factor. He stated that the provincial government intended to restore faith in local government and guide certain municipalities in understanding constitutional principles without encroaching on municipal independence. A review of old-order legislation was underway in KwaZulu-Natal and certain ordinances would be repealed in consultation with central government and other stakeholders. Provincial government would continue to promote a culture of payment for services but claimed that legislation should be enforced in a caring manner. The rights of the indigent had to be considered while promoting effective local government.

The Chairperson declared that certain crucial questions remained which required further research and investigation such as the role of credit control departments within municipalities. Credit controllers had to better manage the process of debt collection to prevent the accumulation of large amounts owed. She referred to a recent call in the budget vote debate to re-establish the Masakhane campaign that sought to promote a culture of payment for services rendered. This could be initiated in conjunction with an adequate indigent policy. She expressed appreciation for the quality of the Gobodo report and confirmed the Committee's intention to pursue the matter of inconsistent application of the law within the Umvoti municipality. She thanked SANCO for their involvement in the case and communication with the Committee. She referred to a study by the Financial Service Commission reviewing the current revenue collection model and advocated that service delivery standards should not be linked to revenue collection. A common standard of delivery should be created irrespective of the economic level of various regions. She noted the unity of political parties around this issue that was encouraging, and thanked the media for their dogged determination in researching the matter and placing vital issues in the public eye.

The meeting was adjourned.