ATC150225: Report of the Select Committee on Cooperative Governance and Traditional Affairs on the Intervention in Makana Local Municipality, in terms of Section 139(1)(B) And (5) of the 1996 Constitution, dated 25 February 2015
NCOP Cooperative Governance & Traditional Affairs, Water and Sanitation and Human Settlements
Report of the Select Committee on Cooperative Governance and Traditional Affairs on the Intervention in Makana Local Municipality, in terms of Section 139(1)(B) And (5) of the 1996 Constitution, dated 25 February 2015
1. Background
1.1 On the 28 August 2014, the Council of Makana Local Municipality resolved for intervention and made an appeal to the MEC for Local Government and Traditional Affairs in the Eastern Cape Province to institute section 139(1)(b) of the Constitution.
1.2 The Municipal Council resolved to accept the proposed intervention per resolution made at the Special Executive Council meeting held on the 10 September 2014. The Provincial Executive then delegated its authority to the MEC responsible for Local Government and Traditional Affairs to invoke section 139(1)(b) and (5) of the Constitution of the Republic of South Africa, Act 108 of 1996.
1.3 On the 27 October 2014, the MEC for the Department of Local Government and Traditional Affairs tabled a notice of intervention to the Office of the Chairperson of the National Council of Provinces (NCOP), which informed the NCOP of the decision of the Provincial Executive Council to intervene in Makana Local Municipality in terms of section 139(1)(b) and (5) of the Constitution.
1.4 The Chairperson of the NCOP subsequently referred the notice of intervention in terms of Rule 101, to the Select Committee on Cooperative Governance and Traditional Affairs, for consideration and report. Further noting that the intervention has been submitted to the NCOP in 42 days after the intervention began. On the 25 February 2015, a multi-party delegation of the Committee conducted an oversight visit to Makana Local Municipality.
2. Objectives of the Oversight Visit
2.1 The main objectives of the oversight visit were to determine whether procedural requirements have been met and also to verify whether the provincial executive has used its discretion appropriately before the Select Committee can recommend approval/disapproval of the intervention to the NCOP. Through the deliberations and interaction with internal and external stakeholders, the Select Committee wanted to determine how the Provincial Executive intends to restore the fulfilment of the relevant obligations and ensure fulfilment in the long-term. The aim being to ensure intergovernmental checks and balances aimed at guarding the integrity and efficiency of the intervention process.
3. Multi-Party Delegation
3.1 The multiparty delegation of the Select Committee composed of the following Members of Parliament and officials: Hon T Wana, Eastern Cape (ANC); Hon JWW Julius, Gauteng (DA); Hon M Chetty, KwaZulu-Natal (DA); Hon LPM Nzimande, KwaZulu-Natal (ANC); Hon SJ Thobejane, Limpopo (ANC); Hon MT Mhlanga, Mpumalanga (ANC); Hon GM Manopole, Northern Cape (ANC); Hon TJ Mokwele, North West (EFF), Hon DL Ximbi, Western Cape (ANC); Mr TM Manele (Committee Secretary); Mr N Mfuku (Content Advisor); Mr N Mangweni (Administration Assistant); Mr B Mahlangeni (Committee Researcher); Ms J Thorpe (Committee Researcher); Ms T Matthews (Committee Researcher); Mr T Gubula (Media Officer).
4. Overview of the Oversight Visit to Makana Local Municipality
4.1 On the 25 February 2015, the delegation of the Select Committee on Cooperative Governance and Traditional Affairs had interaction and consultative meeting with the internal and external stakeholders of the Municipality. The stakeholders the delegation interacted with included the Mayor, senior official of the Provincial Department of Cooperative Governance and Traditional Affairs, the Ministerial Representative and representatives of the Organised Labour Forum, Rhodes University, Makana Civil Society Coalition, NAFCOC and the Unemployed People’s Movement.
5. Presentation on the Justification for Intervention in Makana Local Municipality
5.1 The Provincial Department of Local Government and Traditional Affairs briefed the Members of the Select Committee on the background of the constitutional intervention and the resolution of the Eastern Cape Provincial Executive Council, dated 10 September 2014, to intervene in terms of section 139(1)(b) and (5) of the Constitution. Its presentation focused on the constitutional, procedural, substantive matters related to the intervention and the terms of reference of the Ministerial Representative in Makana Local Municipality.
6. Constitutional, Procedural and Substantive Context of Intervention
6.1 When a provincial executive intervenes in terms of section 139(1)(b) of the Constitution, as a procedural requirement, it should be remembered that within 14 days after the intervention has begun, it should notify the Minister for Cooperative Governance and Traditional Affairs and the NCOP of the intervention and request approval. The intervention will end automatically if the Minister does not approve the intervention within 28 days, and the NCOP within 180 days.
6.2 Equally, in terms of section 139(5) of the Constitution which relates to a crisis in the financial affairs of the municipality, the provincial executive must submit a written notice of the intervention to the relevant legislature and the NCOP, within 7 days after the intervention has begun.
6.3 With regard to the intervention in Makana Local Municipality, procedural and substantive requirement have not been met. In particular, requirements of section 139(2)(a)(ii) and 139(6)(b) of the Constitution were not met. By implication, the intervention is invalid to the extent of it being inconsistent with the Constitution.
7. Presentation by the Municipal Mayor
7.1 For the past three to four years, the Municipality has repeatedly been getting disclaimers, and there were serious financial cash flows challenges, especially in instances where it was difficult to pay staff. Further, due to the state of bad infrastructure the Municipality experienced water outages, electricity, bad roads network and water leakages. On realizing these challenges, the Municipality approached the Department of Sanitation and Water Affairs for assistance. All government institutions came to the rescue in respect of funding, and most of the support was mainly to address water challenges.
8. Terms of Reference of the Ministerial Representative at Makana Local Municipality
8.1 An Administrator has since been appointed for a period of six months, subject to review, with effect from 06 October 2014 to perform the disregarded obligations, which included financial challenges at the Municipality which had seen the “collapse of basic services” where residents had gone weeks without water.
Based on the terms of reference, the Administrator was charged with the responsibility of implementing the following terms of reference:
- Facilitate the appointment of the Municipal Manager as an Accounting Officer of the
- Facilitate the appointments of the Chief Financial Officer and other section 56
managers.
- Assist in addressing the challenges confronting the Municipality such as management, financial management and service delivery.
- Ensure that the oversight structures of the Municipality are strengthen in order to be able to perform their functions effectively and efficiently.
- Ensure that the supply chain management systems are in place for the smooth running of the procurement management processes.
- Develop, facilitate and monitor the financial recovery plan in consultation with National and Provincial Treasury.
- Facilitate the review of all financial related policies, especially the credit control and revenue collection policies.
- Attend to all legal matters that are confronting the Municipality including litigations that seek to rip off the Municipality’s finances.
- Ensure that there is effective general administration with the Municipality.
9. Presentation on the Municipal Recovery Plan and Turn-Around Strategy
9.1 For the purpose of this report, the recovery plan and turn-around strategy is structured based on the key focus areas related to the Background to the Application of the Intervention and the Intervention Approach; Key Challenges Identified; Areas of Priority and Associated Challenges; Key Achievements and Outstanding Challenges.
10. Background to the Application of the Intervention
10.1 A council resolution was passed, requesting the Provincial Government to intervene in terms of section 139(1)(b) of the Constitution in Makana Local Council. Subsequently a high level report was prepared by the Province on the status of the Municipality, and what the main challenges were. An Administrator was then appointed, who was tasked to do a further assessment to confirm the status quo; stabilize the Municipality; prepare a financial recovery plan and assume executive obligation in areas. The areas include Corporate Services, Financial Management and Administration, and lastly on infrastructure development and provision of basic services.
11. Intervention Approach
11.1 The intervention approach was premised on the challenges encountered by the Municipality, based on the status quo report that was prepared. An intervention plan was then prepared to stabilize the Municipality, especially with regard to compliance issues. Various meetings and workshops were then held, including members of troika, senior management, SAMWU and IMATU, local business community, Rhodes University, as well as ESKOM.
12. Key Challenges Identified
12.1 In the Municipality there was finance and cash flow challenges, and infrastructure and water challenges. Meetings were held with the Department of Water Affairs and Sanitation, Amatola Water Board and MISA to address these challenges. Another crucial problem was the non-implementation of audit findings. There have been allegations of corruption against councilors and officials and these impacts negatively on the image of the Council. At the center of such allegations is the need to complete the work done on the Internal Audit investigation.
12.2 On challenges with regard to institutional capacity and non-compliance, the Municipality had not finalized the SDBIP and the IDP review process was not on track. There was also no fully functional local labour forum. In terms of governance issues some council committee meetings were not meeting as scheduled, and sometimes presenting a challenge with compliance. Some municipal workers were without uniforms and protective clothing, and there was general financial crisis in the Municipality.
13. Key Achievements
13.1 The intervention plan was consulted with stakeholders, and presented to council on the 04th December 2014. Equally a Service Delivery Summit held on 5th December 2014. A firm of auditors called Kabuso which conducted an investigation and compiled a report, including a draft financial recovery plan will be presented to the full council on the 26 February 2015. Lastly, interviews were conducted for the vacant position of the Municipal Manager and the Chief Financial Officer.
14. Critical Challenges that Still Remain
14.1 For the past four years, the Municipality has annually received disclaimer audit opinions. With the last 2012/13 audit report, drawing attention to a wide range of failures in the legal and regulatory requirements. Out of the five senior management positions that are vacant, only one was filled. There were irregularities in staff recruitment and appointments, and there are capacity constraints in the Municipality. There is also a need to strengthen and improve procurement systems and processes in the Municipality.
14.2 On infrastructure planning, the crucial challenge was the absence of a master plan, which should seamless link the IDP and community expenditure. Further, there is a financial challenges, especially with regard to under expenditure on capex.
15. South African Local Government Association (SALGA)
15.1 On institutional arrangements, there were serious capacity challenges and to some extent there was laxity in terms of the commitment to work by some within the staff establishment. The Municipality also experienced challenges to attract scarce skills in the Technical Department. The Association supported the intervention.
16. Opinion of the Representative of Organised Labour
16.1 The organized labour was against corruption prevalent in the Municipality, hence it supported the implementation of the Kabuso investigation report findings. In terms of the position of the Human Resource Manager, it was requested that an appointment to be made urgently on a person who qualifies. The organized labour was in support of the section 139 intervention in Makana Local Municipality.
17. Opinion of the Representative from Makana United Business Chamber
17.1 The Business Chamber strongly believe that, unless the Administrator deal with the root causes of the collapse of the municipality, the intervention will yield little progress. Just in 2012/13, the Municipality spent over R100 Million which benefitted outside companies. Only R700 000.00 benefitted local SMME’s on tenders. The Chamber believe that the Administrator was doing a very good job, and they supported her recovery plan. Hence a call was made for contract to be extended.
18. Opinion of the Representative from NAFCOC
18.1 Black businesses were not given work in the Municipality. Currently there are no investments in area, and this has serious implication on the gross domestic product of Makana. These concerns has been raised for years, but without any intervention from the Municipality.
19. Rhodes University
19.1 Grahamstown was a microcosm of the sharp and stark realities of apartheid legacy, where grinding and debilitating poverty and deprivation exist alongside relative affluence. The University relied on the Municipality for the provision of basic services such as water, electricity and sanitation. Failure by the Municipality to provide these essential services has serious and far-reaching ramifications for the University and its intellectual project.
19.2 The Municipality placed on record its deep and sincere appreciation to the Presidency, the Presidential Infrastructure Coordinating Commission (PICC) and the Provincial Government for their interventions on water challenges.
20. Opinion of the Representative of Makana Civil Society Coalition (MCSC)
20.1 The MCSC welcomed the placement of the Municipality under section 139 of the Constitution, as well as supported the work of the Administrator. Although the MCSC welcomed the intervention, it was not convinced that the Administrator alone can rescue the distressed Municipality in six months. Equally, the Administrator’s terms of reference should be urgently reconsidered and broaden to achieve the desired turn-around outcomes. Lastly, the local community has lost confidence in the Municipality, due to institutional failures and the collapse of service delivery mechanisms. Hence the Coalition proposed the Municipality to be dissolved in terms of section 139(1)(c) of the Constitution, in order to address and resolve the deeply rooted political and administrative problems in the Municipality.
21. Select Committee General Observations and Opinion
21.1 The Select Committee observed that all stakeholders in Makana supported the placement of the Municipality under administration.
21.2 The Select Committee noted that prior to the intervention, the Municipality faced challenges related to management, service delivery, executive leadership and was ultimately unable to sustainably provide basic services, and was faced with many challenges including inability to meet financial obligations and pay creditors in the short term and long term financial sustainability.
21.3 The Select Committee has further noted that the leadership challenges faced by the Municipality included failure to fullfil oversight responsibilities with regard to the implementation and monitoring of internal control in respect of financial management, compliance with law, regulations and performance reporting requirements.
21.4 Furthermore, the Select Committee has observed that the presentation of the Administrator, the Department of Local Government and Traditional Affairs, as well as the South African Local Government Association, lacked synergy in respect of progress made with regard to intervention in the Municipality. For example, the functionality of audit committee, lack of detailed figures and no specifics in respect to debtors.
21.5 The Committee had also observed that the Administrator upon appointment was assigned with ten terms of reference but her progress report was not contextually specific in addressing all the terms of reference. The report was silent on the Municipal Infrastructure Grant (MIG) expenditure patterns, yet part of the MIG funds has been irregularly used to fund salaries and wages.
21.6 On governance related matters, the report was silent on the relationship between the council and the troika, as well as the community. It appears that there is lack of clarity on the service delivery agreement between the council and the Rhodes University.
21.7 The supply chain management component is a key risk area in the Municipality, yet the turnaround plan was silent on governance intervention regarding this important function.
21.8 The Select Committee observed that the placement of the Municipality under section 139(1)(b) and (5) of the Constitution, and the appointment of the Ministerial Representative has been a good corrective measure in assisting with the service delivery and administrative challenges facing the Makana Local Municipality.
21.9 The role of the Sarah Baartman District Municipality in the intervention was an issue that is worth considering. In general, it appears as if there was no visible role played by the District. A more intergovernmental approach to an intervention may be appropriate.
21.10 The Select Committee is of the opinion that the successful implementation of the turnaround plan will depend on the cooperation, political will and active involvement of both the internal and external stakeholders of the Municipality.
22. Committee Recommendations to the NCOP
22.1 Having interacted with Makana Local Municipality, the Select Committee recommends to the Council as follows:
22.1.1 Since procedural requirements of section 139(2)(a)(ii) and 139(6)(b) of the Constitution were not met, the intervention has been rendered null and void. Thus the Select Committee is unable to come to a determination based on the procedures followed to inform the NCOP in terms of section 139 of the Constitution.
22.1.2 The Select Committee has observed with grave concern the dysfunctional state of the Municipality. The Select Committee therefore recommends that the MEC for Local Government and Traditional Affairs, should urgently regularize the appropriate intervention in accordance with all the legislative prescripts.
22.1.3 The Select Committee on Cooperative Governance and Traditional Affairs should conduct a follow-up visit to the Makana Local Municipality, to verify and observe the extent of progress achieved in the Municipality.
22.1.4 The Administrator should fast-track the process of tabling the Kabuso Forensic Investigation report to the municipal council, the Provincial Legislature and the NCOP as a matter of urgency.
22.1.5 The Eastern Cape Provincial Department of Local Government and Traditional Affairs should table an exit-report on the intervention in Makana Local Municipality to the NCOP, immediately after the intervention has ended.
Report to be considered.
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