Local Government: Municipal Demarcation Bill: deliberations

Meeting report

CONSTITUTIONAL AFFAIRS PORTFOLIO COMMITTEE
29 May 1998
LOCAL GOVERNMENT: MUNICIPAL DEMARCATION BILL [B36-98]: DELIBERATION

Documentation Handed Out:
Cape Municipal Council Submission (Appendix 1)
Banking Council Submission (Appendix 2)
Prof. Robert Cameron's proposal for Section 25
Local Government : Municipal Demarcation Bill B36-98
(This bill can be found at http://www.polity.org.za/gnu/gnuindex.html)

The main concern of the discussion revolved around section 26 of the Bill, which is seen as unconstitutional. The Bill is failing to provide the criteria as spelt out in section 155 of the Constitution of South Africa. Thus, section 26 is not sufficient. The Minister is seen to have too many powers regarding this matter.

Cape Municipal Council and their legal representatives were asked to return in the afternoon to present their submission as all the necessary representatives were not present in that meeting.

Prof. Robert Cameron of UCT's Department of Political Studies gave his comments on the Bill. He said that he was in support of the National Demarcation Board. He stated that a hybrid system would not be permissible and also believed the demarcation criteria to be too cumbersome and too many. He presented his proposal on section 25 in the Bill.

He said that section 25 criteria must embody the goals:
1) to implement the policy
2) to make them shorter.
Regarding s25a it should reflect the main objective and policy of the Local Government White Paper in order to change the settlement patterns established during Apartheid. Sections 25b and c, the municipal settlement patterns, are clear but must be viable economically and financially. Concerning sections 25 e, f, o, p, g, functional boundaries are looked at and the policy objectives underpinning these boundaries.
f : transport planning
h : overlaps with ‘e’ due to constitutional provisions and there was a need to keep it separate.
i : existing service areas must be taken into account as it may mean reordering boundaries in 2 years. e.g. Jo'burg boundaries are impractical as they cut through service areas.

Prof. Cameron expressed concern with the powers of the Minister and believed that section 26 needed to be tidied up. He also recommended having one board for 1) cost reasons and 2) specialised people were needed on the board.

Prof. Cameron viewed Section 22a as problematic as the Board must take into account policy guidelines. Issue: policy criteria and non-policy criteria.
Section 155.4 must take into account the need to provide service in a equitable manner and ‘need‘ must be distinguished as a criteria. Prof. Cameron addressed the problem by drawing boundaries in a different manner. All are in execution of s155.4 of the Constitution.

The IFP regarded the boundaries as an issue due to the existing boundaries of the tribal authorities. The IFP concern is about rural areas being incorporated into the cities. The IFP expressed the need that these boundaries should not tampered with unless agreed to by the relevant tribal authority. Another concern by the IFP is that the Minister can change policy objectives when he sees fit. They wanted to know why should policy objectives be determined by the Minister. They are calling for neutral policy. Also they felt that section 26 might not be constitutionally correct.

M. Bhabha (ANC), Chairperson of Select Committee of Constitutional Affairs and Public Administration, stated that the Committee might be impinging on the independence of the Demarcation Board if they instruct the Board to ignore the traditional boundaries. The Chairperson, Mr Carrim, asked what the objective was regarding the current boundaries. The IFP stated that history and customary laws were two things that make them special. The Chairperson responded that the above two reasons were all contested.

Mr Titus, Director-General of the Department of Constitutional Development and the deputy Director-General, Dr. Olver, agreed with Prof. Cameron that a distinction must be made in Clause 22 between policy and criteria. Also, section 25(n) had caused uneasiness.

Mr Watson (NP) asked whether municipal boundaries should coincide with magisterial boundaries. It was decided that provincial boundaries should take precedence over traditional boundaries.

Prof. Cameron went on to focus on criteria reflecting policy. He said that s25(a) is the pivot around which future demarcation will occur. He said they must rationalise local government by using s25(a) as a criteria. A need existed to make the criteria as scientific as possible. He suggested that the criteria should be sorted out before looking at policy. (page 7 of his submission shows his perception of the relationship between criteria and policy).

Regarding the relationship between structure and criteria, what came first? Prof Cameron suggested that the criteria should inform structure. However there was a need to examine the criteria, implement them and then see what occurs on the ground. He suggested that the Board recommend the structures. Thus criteria should inform structure. Prof. Cameron said that the criteria should be operationalised and politicians should not determine them as it was a very technical and scientific matter that should not be politically motivated. This should be left to the Board to decide.

The meeting moved on to examine the contents of the Bill to establish agreement. All the parties agreed on the definitions. In Chapter 1, with reference to Status, questions were raised about the independence of the Board (3.b)

Concerning Function, a question was asked about whether there was a link between the function of the Board and the application of the criteria. There was a need for an amendment as the Board must apply s24 and s25. Sections 155.3(a) and 3(b) of the Constitution both use the word ‘criteria’. There was a need for national legislation to define the types of structures to allow for provinces to decide and define the meaning of types of categories.

The number on the Board should be between 11 to 15 people and should be limited according to workload. Also regional diversity does not mean provincial diversity. The idea is not to have one person per province but rather a clear spread from all over the country.

With regard to qualifications, the IFP were pushing for a person to be included on the Board with special knowledge of traditional leadership and boundaries. Prof. du Toit (ANC) stated that it was not the Board's job to represent interests or culture but the ANC would consider the IFP request.

The meeting adjourned.

Minutes of the afternoon meeting to follow.

Appendix 1: Cape Municipal Council Submission

SUBMISSION

TO: THE PORTFOLIO COMMITTEE ON CONSTITUTIONAL AFFAIRS (NATIONAL ASSEMBLY)

RE: LOCAL GOVERNMENT: MUNICIPAL DEMARCATION BILL, B36-98

BY: A M BREITENBACH

ON BEHALF OF THE CAPE METROPOLITAN COUNCIL

DATE: 29 MAY 1998

INTRODUCTION

1. The Cape Metropolitan Council ("CMC") is concerned that the basic premise of the Local Government : Municipal Demarcation Bill, 1998 ("the Demarcation Bill"), is constitutionally suspect.

2. Local government will be very vulnerable if unconstitutional local government demarcation legislation is passed.

3. The CMC is engaged in a series of discussions with the Department of Constitutional Development about the constitutionality of the Demarcation Bill and the attendant Local Government : Municipal Structures Bill ("the Structures Bill"), which was published for comment on Friday 22 May 1 998. Where appropriate I shall refer to these Bills jointly as "the Bills".

4. The CMC's basic concern is that the Demarcation and Structures Bills ascribe to the Minister and the Demarcation Board roles in the process leading to the establishment of municipalities which are not compatible with the Chapter on Local Government in the Constitution, in particular sections 155(2), (3)(a) and (b), (5) and (6) and 160(5).

SECTION 155 OF THE CONSTITUTION

5. A noticeable feature of the Demarcation Bill is that although it aims to "provide for criteria and procedures for the determination of municipal boundaries by an independent authority" (the wording of the long title and the requirement imposed by section 155(3)(b) of the Constitution of the Republic of South Africa, 1996 (hereinafter "the Constitution")), it does not simultaneously, at least in respect of non-metropolitan areas, "establish the criteria for determining when an area should have a single category A municipality or when it should have municipalities of both category B and category C" (the requirement imposed by section 155(3)(a) of the Constitution).

6. The A, B and C categories for municipalities are established by section 155(1) of the Constitution, which provides:

"There are the following categories of municipality:

(a) Category A: A municipality that has exclusive municipal executive and legislative authority in its area.

(h) Category B: A municipality that shares municipal executive and legislative authority in its area with a category C municipality in whose area it falls.

(c) Category C:. A municipality that has municipal executive and legislative authority in an area that includes more than one municipality."

The Constitutional Court described these categories of municipalities as follows:

(a) self-standing municipalities, (b) municipalities that form part of a comprehensive coordinating structure, and (c) municipalities that perform coordinating functions. In the terminology of existing legislation the third category would include structures such as regional and metropolitan councils."

Certification of the Amended Text of the Constitution of the

Republic of South Africa, 7996 (1997)1 BCLR 1 (CC) at par 77

Section 155(2) of the Constitution provides that national legislation must define the different types of municipality that may be established within each of the categories listed in section 155(1). As will be explained, the way in which this is done in the Structures Bill may be constitutionally impermissible. The Structures Bill differentiates between "types" of municipalities on the basis of their systems of executive government (i.e. whether they have executive committees, executive mayors or neither). In addition, in the case of metropolitan municipalities, the existence or absence of "area committees" is a further ground of differentiation.

9. In terms of the Constitution, once national legislation has defined the different types of municipalities in each category, the provinces are then empowered to select the types of municipality to be established. Section 155(5) provides that a provincial legislature must determine the different types of municipality to be established in its province.

10. Section 155(6) provides that once the provincial legislature has selected the types of municipality to be established, the provincial government must establish municipalities in its province in a manner consistent with the national legislation enacted in terms of sections 155(2) and (3).

THE ROLE OF THE MINISTER

11. As explained earlier, section 155(3)(a) of the Constitution provides that national legislation must:

"establish the criteria for determining when an area should have a single category A municipality or when it should have municipalities of both category B and category C"

12. Clause 26 of the Demarcation Bill gives effect to the requirement in section 155(3)(a) of the Constitution. Clause 26 is, however, confined to incipient metropolitan municipalities. The clause provides both criteria (the constitutional requirement) and a procedure (a decision by the Minister) for the "recognition of metropolitan areas".

13. The reason why clause 26 of the Demarcation Bill is confined to metropolitan municipalities is that clause 7 of the Structures Bill limits Category A municipalities to metropolitan areas. It is envisaged that "megacities" will be the only Category A municipalities.

14. Clause 8 of the Structures Bill limits Category C municipalities to non-metropolitan municipalities.

15 Once the Structures Bill is passed, therefore, those of the current metropolitan councils - Category C-type municipalities - which survive must be re-established as Category A-type "megacities".

16. It is significant, however, that unlike clause 25 of the Demarcation Bill - which contains the list of "factors to be taken into account" by the Demarcation Board when determining municipal boundaries

- clause 26 is not merely a list of criteria. It is couched in the form of an empowering provision, that is a provision which authorizes the Minister to "recognise" an area as a metropolitan area. Although the Demarcation Bill does not say so in terms, the clear implication is that once the Minister has "recognised" an area as a metropolitan area the Demarcation Board must determine the outer boundaries of the area.

17. In effect, therefore, the Minister takes the ultimate decision as to whether and where a megacity should be established (without actually determining the exact outer boudaries).

18. The question which arises is whether the Demarcation Bill's conferral of this power on the Minister is compatible with the Constitution.

19. The CMC is concerned that the Minister's role unduly, and so unconstitutionally, restricts the provincial legislatures' power to determine the different types of municipalities to be established in their provinces (section 155(5)) and the provincial governments' power to establish municipalities in their provinces (section 155(6)).

USING EXECUTIVE COMMITTEES AND AREA COMMITTEES TO DEFINE "TYPES"

20. As explained earlier, the Structures Bill differentiates between "types" of municipalities on the basis of their systems of executive government, that is whether they have executive committees, executive mayors or neither. As explained, in the case of metropolitan municipalities the existence or absence of "area committees" is a further ground of differentiation.

21. The practical effect of the Bills' choosing this typology is that provincial governments, not municipal councils, will decide on the type of executive structure that municipalities will have and, in the case of megacities, whether they must have area committees.

22. The CMC is concerned that by dictating to a metropolitan municipality that it must, say, elect an executive committee and elect or appoint council members to area committees,the provincial government will be encroaching on the institutional integrity of the local sphere of government in breach of the Constitution.

23. In addition, the CMC is concerned that using executive committees and area committees as the basis for differentiation between different types of municipality in the Bills is beyond the competence of the national legislature.

24. Section 160(5)(b) of the Constitution provides that "national legislation may provide criteria for determining ... whether Municipal Councils may elect an executive committee or any other committee". The difficulty is that not only does this legislation not contain any criteria of that sort but it pre-determines which municipal councils must elect executive committees and area committees.

25. Section 160(5)(b) of the Constitution strongly suggests that the existence or otherwise of executive committees or area committees cannot be used as the basis for determining, in terms of section 155(1), the types of municipalities to be established.

THE ROLE OF THE DEMARCATION BOARD

26. By divorcing the typology of municipalities from the more obvious factors for differentiation, namely the nature of the areas which municipalities serve (urban or rural) and, in the case of urban areas, the nature and levels of their development and interaction with the surrounding urban areas (cities, large towns, small towns, farming centres), the Bills, indirectly, also enhance the role of the Demarcation Board.

27. It is necessarily implicit in the Demarcation Bill that, save in the case of the siting of megacities (a matter which clause 26 entrusts to the Minister), it is the Board which decides what municipalities' core cities or towns will be, whether they will be large or small, urban or rural, or mixed.

28. The CMC is concerned that this inflated role for the Demarcation Board is out of sync with the scheme of section 155 of the Constitution. It is implicit in section 155 that the Demarcation Board performs its demarcation function after the provincial legislatures have selected the types of municipalities to be established in their provinces and after the provincial governments have selected the core cities or towns for the municipalities or towns and whether they will be large or small, urban or rural, or a mixture of the two.

29. In other words, the CMC is concerned that section 155 of the Constitution presupposes that the provincial governments' power to establish municipalities entail a significant element of choice as to the siting and size of municipalities, and the interactions between them (in the case of Category B and C municipalities). The Bill largely negates this freedom of choice and evinces an unwarranted, and probably unconstitutional, "top-down" approach.

MINISTERIAL DEMARCATION POLICY OBJECTIVES

30. This approach is exemplified by clause 25(n) of the Demarcation Bill which provides that one of the factors to be taken into account when the Demarcation Board determines municipal boundaries is "any demarcation policy objective determined by the Minister by notice in the Government Gazette in consultation with the MECs for Local government after SALGA has been consulted".

31. The CMC feels, for two "technical" constitutional reasons and one substantive constitutional reason, that clause 25(n) may well be in conflict with the Constitution.

32. The first technical reason is that section 155(3)(b) requires that the criteria for the determination of municipal boundaries be embodied in "national legislation". Although "national legislation" is a term defined in section 239 of the Constitution to include "subordinate legislation made in terms of an Act of Parliament", the term clearly does not encompass "national policy". There is a clear distinction both in the Constitution and elsewhere between "legislation" and statements of "policy", even if the "policy" in question is published in the Government Gazette.

33. The second technical reason is that the constitution lays down a special procedure for "national legislation" that affects local government (see section 154(2) of the Constitution). The device of using ministerial policy in this key area of the demarcation process could be held to be an attempt to circumvent the procedural protections afforded municipalities by section 154(2) of the Constitution.

2.1 The substantive reason is that section 155(3)(b) provides that municipal boundaries must be determined by "an independent authority". It may be suggested that the requirement that the Board consider Ministerial "policy objectives" when determining municipal boundaries threatens its independence and undermines both the requirement in section 155(3)(b) and provisions of the Bill such as clause 3(b) and (c). It is to be noted that this objection will endure even if the contents of clause 25(n) are removed from the list of factors and located elsewhere in the Demarcation Bill.

CONCLUSION

34. As explained earlier, the CMC is involved in discussions with the Department, and its legal advisers, regarding the constitutional matters addressed today.

35. The CMC is aware of the urgent need to establish a Demarcation Board.

36. In view of the constitutional difficulties which attend the Demarcation Bill, the CMC suggests that for the present Parliament limit itself to enacting those provisions in the Bill which establish the Demarcation Board and provide for the appointment of members of the Board. This course would ensure that legislation is promulgated which is constitutionally unassailable. It would also permit the Department to pursue further discussions with the interested parties.

A M BREITENBACH

Chambers, Cape Town

29 May 1998

Appendix 2: Banking Council Submission

BANKING COUNCIL

Oral submissions to Portfolio Committee on Constitutional Affairs

Parliament, 29 May 1998

The property of a bank consists mainly of loans, i.e. rights which the bank has against debtors. (Deposits are liabilities on a bank's balance sheet.)

These loans have a value - they can often be sold or discounted to third parties on various markets.

It is our view that this property is protected under section 25 of the Constitution. If Government were to substitute itself as creditor in place of an existing creditor, this substitution would - in our view - constitute an expropriation and be governed by section 25(2).

When two existing municipalities merge, the rights are not transferred. Instead, the creditor's right against an existing debtor is substituted for a right against the new debtor. If A and B are both municipalities, and A has assets exceeding liabilities of Rm 100 while B has liabilities exceeding assets of Rm 900, then the merged entity will have liabilities exceeding assets of Rm 800.

Clearly a bank which had an outstanding loan against A is in a far worse position in respect of the merged entity.

In our view this constitutes a deprivation of property in terms of section 25(1) of the Constitution.

The requirements are thus that the deprivation should be (i) in terms of a law of general application and (ii) not arbitrary.

In our view the Bill might not comply with these criteria, for reasons that (I) the criteria according to which the Board is to make its decision does include any consideration of the rights of creditors (this must necessarily result in a arbitrary decision as it effects the creditor's rights) and (ii) the deprivation may take place by way of a regulation under 32(2)(b) of the Bill which will be of "specific" rather than "general" application.

32 (1)The MEC for local government of a province may make regulations [regulating] dealing with the legal, practical and other consequences which arise when a municipality is wholly or partially incorporated, combined with or superseded by another municipality, including regulations -

(a) providing for the transfer of staff from one municipality to another and the retrenchment of staff;

(b) providing for the transfer of assets and liabilities from one municipality to another and the disposal of assets and liabilities; and

(c) limiting, extending or otherwise regulating or withdrawing the application of any existing by-laws, regulations and resolutions of a municipality to or in any specific area.

(2) Regulations made under subsection (1) may apply-

(a)generally to all, or any specific category of boundary determinations in the province concerned; or

(b) to a specific boundary determination.

(3) The transfer or retrenchment of staff in terms of a regulation made under subsection (1) must be effected in accordance with the Labour Relations Act, 1995 (Act No.66 of 1995).

(4) A transfer of assets and liabilities in terms of a regulation made under subsection (1) must be effected with due regard to any rights of creditors.

(5)[4](a)On production of a certificate by a municipality that immovable property was transferred to it in terms of a regulation made under subsection (1), a registrar of deeds must make such entries or endorsements in or on any relevant register, title deed or other document to register that property in the name of that municipality.

(b) No duty, fee or other charge is payable for a registration in terms of paragraph (a).

COMMENTS ON THE DEMARCATION BILL

Chairperson, honourable members and local government stakeholders, I wish to express our gratitude to the committee for the opportunity to participate in this

important process.

Honourable members, the future boundaries of local authorities will have significant consequences for a wide range of interests, it is therefore absolutely vital that this process be well managed and regulated in an open and transparent manner.

We, as financial Institutions, involved in this sector, accept the need to establish, through legislation, clear criteria and well defined procedures for the determination of municipal boundaries. We therefore support the establishment of the Municipal Demarcation Board, and further endorse section 3 of the Bill, that such a body should be impartial and independent, and that it must perform its functions without fear, favour or prejudice. We are supportive of the unique features of this Bill which, we believe create a sound platform for an inclusive, transparent and interactive demarcation process.

What then are these features?

Section 3 which establishes the principle of impartiality, sections 6 and 8 which ensure that the Board is constituted in a manner which gives effect to this principle, sections 24 and 25 which limit the discretion of the Board by imposing certain objectives and considerations and, finally, sections 27 to 29 which provide for public participation. These features must not only be maintained, but should be strengthened through appropriate amendments. The amendments we have proposed should go some way to ensuring that the demarcation proce$6 has both integrity and legitimacy.

What then are our concerns with the Bill?

Firstly, section 5 of the Bill does not expressly grant the Demarcation Board unhindered access to any information, from any municipality, that is relevant to its work. We believe that this is a major weakness that needs to be addressed. The Board simply has to be empowered with relevant, accurate and up to date information in order for it to do its work properly. With regard to financial information, it is important that the Board makes its determinations on the basis of accurate and reliable financial information.

The Bill should further place a duty on municipalities to provide accurate up to date information to be verified by the Chief Executive Officer. It must also be in a format that allows for realistic and accurate assessment of those municipalities' financial position.

Such information could include audited financial statements, budgets, internal reports to council, an analysis of revenue by source, a cash flow forecast, Auditor General's report, debtor and creditor's age analysis, a list of liabilities and an analysis of revenue by source etc.

We further believe that this matter is so important that appropriate sanctions for non-compliance should be included in the Bill. The onus should be placed squarely on the accounting officers of municipalities to give accurate and updated financial information.

We propose that section 5 (h) be amended accordingly.

Secondly, while the Bill contains many commendable provisions aimed at achieving impartiality, limitations on discretion and community participation, these good measures can be easily circumvented with respect to demarcation of municipalities in all the major urban centres. In respect of these, the Minister may - in effect - undertake demarcation by proclamation. This power is limited only by the fact that the Minister needs to consult with the persons and entities mentioned in that section. There is no duty to act impartially, there is no duty to take into account all the many relevant factors which have been prescribed for the Board, and there is no provision for public participation in the process.

We believe that section 26 is anomalous to the spirit of the legislation and contradicts the statement in section 4, namely that "the function of the Board is to determine municipal boundaries for the whole of the territory of the Republic11. Section 26, undermines the authority and integrity of the Board and could reduce the demarcation process to a mere sham. It is disturbing that there are no clear and certain functions for the Board in urban areas.

We propose that all the limitations and measures that underpin the impartiality and integrity of the demarcation process, should apply equally in urban areas to prevent the demarcation process being dictated by political imperatives.

Proposal

In relation to this issues, we propose this amendment:

The minister may, on the recommendations of the Demarcation Board, recognise an area as a metropolitan area, by notice in the Government gazette.

This amendment will still retain the Minister's role and discretion, but this will be subject to the Board's recommendation.

Thirdly, whether or not metropolitan areas should be run on a "mega-city" basis or

on a decentralised basis has been a topic of many political debates. While the Development and Public Finance Forum does not wish to support either of the two options, we are not in favour of legislation which is inherently predisposed to either alternative. We believe that section 25(j) is inappropriate as it pre-empts the determination of the Board by declaring a mega-city without the benefit of expert determination by the Board and public participation and scrutiny.

Our members have considerable financial exposure by way of mortgage finance in all the metropolitan areas. Their interests will be prejudiced if demarcations are determined by ideological preference rather than what is most viable in the light of local circumstances.

We propose that section 25(j) be amended appropriately.