ATC160510: Report of the Select Committee on Cooperative Governance and Traditional Affairs Inspection In Loco On notice of Intervention issued in terms of section 139(1)(B) of the Constitution (1996) in Thabazimbi Local Municipality, dated 10 May 2015

NCOP Cooperative Governance & Traditional Affairs, Water and Sanitation and Human Settlements

 

REPORT OF THE SELECT COMMITTEE ON COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS INSPECTION IN LOCO ON NOTICE OF INTERVENTION ISSUED IN TERMS OF SECTION 139(1)(b) OF THE CONSTITUTION (1996) IN THABAZIMBI LOCAL MUNICIPALITY, DATED 10 MAY 2015 

 

1.      Background

 

1. On 16 February 2016, the MEC for Limpopo Department of Cooperative Governance, Human Settlements and Traditional Affairs (COGHSTA) tabled to the Office of the Chairperson of the National Council of Provinces (NCOP), a notice of the of intervention in terms of section 139(1)(b) of the Constitution at Thabazimbi Local Municipality.

 

1. Subsequent to the tabling, the Chairperson of the NCOP referred the notice of intervention in terms of Rule 101, to the Select Committee on Cooperative Governance and Traditional Affairs for consideration and reporting. On 15 April 2016, the delegation of the Select Committee conducted loco inspection on the notice of intervention in terms of section 139(1)(b) of the Constitution, in Thabazimbi Local Municipality.   

 

1.     Composition of Delegation

 

1. The delegation of the Select Committee was composed of the following Members of Parliament and Officials: Hon N Mthwethwa, KwaZulu-Natal (ANC); Hon S Thobejane, Limpopo (ANC);  Hon D Ximbi, Western Cape (ANC); Hon R Manopole, Northern Cape (ANC); Hon T Mokwele, North West (EFF); Mr T Manele (Committee Secretary); Mr B Mahlangeni (Committee Researcher) and Mr N Mangweni (Committee Assistant).

 

 

1.       Objectives of the Loco Inspection  

 

1. The objective of the loco inspection session was to consult and interact with the Department of Cooperative Governance, Human Settlements and Traditional Affairs, the Mayor, Speaker, Administrator, representatives of the Ward Committees, South African Local Government Association (SALGA), organised labour, business forum, youth and women forums, in  order to solicit their opinions on the constitutional, procedural and substantive matters related to the of intervention in the Municipality, in terms of section 139(1)(b) of the Constitution.    

 

4.         General Overview of Loco Inspection in Thabazimbi Local Municipality

 

1. On 15 April 2016, the delegation of the Select Committee had consultative and participatory meeting with the Mayor; the Speaker; the Administrator, members of Ward Committees; representatives of the ratepayers association; youth and women forums.  

 

1. Due to the absence of the MEC for (COGHSTA); SALGA and the representative of the labour unions, the delegation of the Select Committee having considered the reasons for their absence, resolved that the MEC should be summoned to Parliament in order to present to the Select Committee the constitutional; procedural and substantive matters related to the intervention in the Municipality.

 

5.        Briefing on the Notice of Intervention in Thabazimbi Local Municipality    

 

1. On 4th May 2016, the MEC for (COGHSTA) in Limpopo appeared before the Select Committee, and briefed Members on the constitutional; procedural and substantive matters relating to the intervention in terms of section 139(1)(b) of the Constitution, in Thabazimbi Local Municipality. The departmental presentation focused on the overview of the Municipality; background to intervention; legal mandate; discussions; legislative considerations; implementation of EXCO resolutions and recommendations.  

 

 

 

6.        Background to the Intervention

 

1. Thabazimbi Local Municipality started experiencing challenges around May 2015 and a Rapid Assessment Team was established and constituted by officials from COGHSTA, Provincial Treasury and SALGA Limpopo to provide a fair objective report on the state of affairs of the Municipality. The Task Team focused on all Key Performance Areas (KPAs) with specific recommendations for remedial action or support required for the Municipality. The Task Team observed the governance in the Municipality was compromised, the financial health of the Municipality has deteriorated since 2011/12 financial year. Further, there were signs of inability by council to exercise its oversight role in the municipal affairs, non-adherence to legislations and policies, for example, supply chain management and human resources.

 

1. The Acting Municipal Manager, as the head of administration, has appointed all acting section 56 Managers (CFO and Community Services) without a Municipal Resolution and concurrence from the MEC for COGHSTA. There was lack of interest by the Municipality to reverse the illegal promotions which resulted in high salary bill. The Acting Municipal Manager failed to take reasonable steps to prevent the reoccurrence of section 32 expenditures (perennially procurement through section 32 of Supply Chain Management). Equally, management has failed to honour financial commitment which resulted in non-payment to creditors.

 

1. The Task Team further observed the high number of litigations cost as a result of not honouring financial commitments. The Municipality was technically bankrupt and could not sustain itself, and the conditional grant (MIG) was used for operational expenses. There was increased irregular expenditure from R73 million in 2011/12 to R209 million in 2012/13, due to non-compliance with procurement processes. The Municipal Public Accounts Committee (MPAC) was not functional, due to lack of support from management and the Municipality’ debts was R320 million which, exceeded its income.

 

 

 

 

1. Legal Mandate and Discussions

 

1. Based on the recommendations of the rapid assessment report, the Department seconded departmental Chief Financial Officer as a Financial Specialist to the Municipality in August 2015. The purpose was to do a detailed analysis of the municipal financial status, develop and implement a financial recovery plan for the Municipality, with a view to improve on the prevailing financial situation.

 

1. The MEC for COGHSTA seconded Mr Pat Khunou as a Financial Specialist to the Municipality on 24 August 2015 (for a 3 months period), to conduct an analysis of the municipal financial status and to develop and implement a financial recovery plan for the Municipality with a view to improve on the current financial situation that the Municipality find itself in. On 01st November 2015, the MEC seconded Mr Nyiko Mashamba, as an Acting Municipal Manager to the Municipality, for a period not exceeding 6 months, to provide strategic management leadership.

 

1. Legislative Considerations   

 

1. Having due regard to the provisions of section 139 of the Constitution, the Department considered appropriate steps to intervene in Thabazimbi Local Municipality. These steps included, the issuing of a directive to the Municipality that would describe the extent of the failure and the steps to be taken in terms of section 139(1)(a); the assumption of responsibility for the relevant obligation in terms of section 139(1)(b); and the dissolution of the municipal council in terms of sec 139(1)(c) of the Constitution.  In line with the spirit of co-operative governance, as laid out in Chapter 3 of the Constitution, and in particular section 41, the Department further took note of the requirement to afford the Municipality an opportunity to respond to the issues through issuing of a notice.

 

1. Implementation of EXCO Resolutions

 

1. The Provincial Executive Council of Limpopo has on 17 February 2016, considered the progress report on Thabazimbi as per COGHSTA intervention from August 2015 to January 2016. The Executive Council approved that the Thabazimbi Local Municipality be placed under section 139(1)(b) of the Constitution. The Executive Council approved that the Department should appoint an Administrator, who will assume the responsibilities of an Accounting Officer for the Thabazimbi Local Municipality, in in line with section 139(1)(b) of the Constitution.

 

1. After consideration, EXCO resolved as per Decision No. 90 of 2015/16 that the Executive Council approved that the Thabazimbi Local Municipality should invoke section 152(1) and section 152(2) of the Municipal Finance Management Act (No. 56 of 2003), by directing the Administrator to apply for stay of legal proceedings for a period not exceeding 90 days, while the financial situation in the Municipality was being stabilised. The Executive Council approved that the National Treasury should be requested to undertake a forensic investigation of all municipal activities, in order to unearth any further financial irregularities.

 

1. Notice of Assumption of Responsibility to Intervene in Thabazimbi 

 

1. As directed by EXCO, the MEC for COGHSTA on 17 February 2016, wrote a letter to the Mayor of Thabazimbi Local Municipality, informing the Municipality of the decision by EXCO. The letter was emailed to the Mayor on 17 February 2016. On 18 February 2016, a hard copy was hand delivered to the Municipality, in a meeting between the municipal political management team and the representatives of COGHSTA. On 19 February 2016, the Thabazimbi Local Municipality held its special council meeting and approved the EXCO Decision no.90 of 2015/16 in its entirety. The Mayor of Thabazimbi Local Municipality had, on even date, communicated such decision to the MEC for COGHSTA.

 

1. Notification of the intervention was sent to the Minister of CoGTA and SALGA on 17 February 2016, whilst notification to the NCOP and Provincial Legislature was also done during February 2016. The Minister of CoGTA sent a team of officials to COGHSTA on 29 February 2016, for a further discussion and clarification on the intervention. In terms of the Constitution, the intervention must stop if the Minister disapproves it or there is no communication from the Minister within 28 days after the intervention has begun. On 16 March 2016, COGHSTA received approval for the intervention from COGTA dated 15 March 2016.

11.       Administrator’s Report on the Implementation of Intervention        

 

1. The Administrator tabled the progress report in respect of the implementation of the intervention in the Municipality. The presentation focused on the background; good governance and participation; audit outcomes; financial status; conditional grants; revenue management; debtors age-analysis; financial restructuring; restructuring strategy; operational restructuring; process management and stakeholder management.      

 

1. The good governance and participation reported included the functionality meetings of the municipal council; executive committees; municipal public accounts committee; internal audit; risk management committee and ward committees. The major problem reported in respect of the audit outcomes related to the disclaimers audit outcomes for the past three financial years; 104 issues raised by Auditor General in the management letter and recurring issues related to property, plant and equipment; revenue and receivables

 

1. The problem reported in respect of municipal financial status and the use conditional grant funding, included the utilization since 2010 of the conditional grant for operational purposes. The main source of revenue reported in respect of revenue management included basic services; property rates; government grants and rental of facilities. Although the indigent register has been developed, the Municipality has failed to update it during the 2015/16 financial year. The main challenges reported in respect of municipal creditors included, the R3 million owned to Eskom; failure to honour arrangement made with Magalies Water Board; non-payment of creditors; garnishing of bank account and defaulting of judgment at R56 million.

 

12.      Opinion of South African Local Government Association

 

12.1      The Chairperson of the Provincial South African Local Government Association tabled the opinion of the Association. They welcomed and supported the intervention in terms of section 139(1)(b) of the Constitution. The Chairperson indicated and confirmed the consultation and notification followed by the Department of COGHSTA in issuing the notice of intervention to the Municipality.

                         

 

 

13.      Opinion of Ward Committee Members

 

1. The representatives of Ward Committee welcomed the placing of the Municipality in terms of section 139(1)(b) of the Constitution and the appointment of the Administrator. The representatives however, raised concerns with regard to the lack of service delivery, feed-back on community concerns from the Office of the Speaker and the Mayor, mushrooming of informal settlement and the culture of non-payment of basic services.  

 

14.        Opinion of Rate-Payers Association

 

14.1      The representative of the Association welcomed the intervention as issued in terms of section 139(1)(b) of the Constitution, the Association welcomed also the progress made by the Administrator, more especially with regard to stakeholder management and the commitments to engage the internal and external stakeholders of the Municipality in solving community problems. The Association raised concerns with regard to the lack of updated bylaws, normal procedure for public participation, outstanding debts, court cases and service delivery such as water and sanitation.

 

1. Opinion of  Moral Regeneration Movement

 

1. The representative of the Movement welcomed the intervention as issued in terms of section 139(1)(b) of the Constitution, and the appointment of the Administrator to deal with the problems faced by the Municipality, the representative made commitment to pray for all the councillors and the municipal officials so as to be able to deal with municipal problems and challenges.   

 

1. Opinion of  Youth Formation

 

16.1      The representative of the women formation welcomed and supported the intervention. The formation also welcomed the initiatives taken by the Mayor of the Municipality, more especially with regard to the developmental projects in some communities and the willingness of the appointed Administrator, to engage with the external stakeholders of the Municipality.   

1. Opinion of the Business Chamber        

 

1. The representative of the Chamber welcomed and supported the intervention. The Chamber however, raised concerns with regard to slow pace of local economic development in the communities, closing of local businesses, poor service delivery and the money owed to Eskom, which in their opinion, could affect the provision of electricity to the business and the community. The Chamber also welcomed the work done by the Administrator more especially with the programme of consulting and engaging the internal and external stakeholders of the Municipality.            

 

1. Opinion of Political Parties   

 

18.1      The African National Congress in the municipal council welcomed and supported the intervention as issued I terms of section 139(1)(b) of the Constitution. The members also welcomed the municipal turn- around strategy development by the Administrator more especially with regard to stakeholder management, restructuring and operational strategies.      

 

18.2      The Democratic Alliance welcomed and supported the intervention as issued in terms of section 139(1)(b) of the Constitution. Concerns were raised with regard to political appointment in the administration, absence and non-availability of senior managers, dereliction of duties by some managers and low morale among municipal employees.        

 

1. Select Committee Observations

 

19.1      The Select Committee has observed and noted that the Department of COHSTA has complied with the constitutional and procedural matters relating to the notice of intervention in terms of section 139(1)(b) of the Constitution. The constitutional and procedural compliance matters included the submission of notifications to the Minister for Cooperative Governance and Traditional Affairs, the Municipality Council and the NCOP, as required by the Constitution                                                                                                                                                                          

 

19.2      The Select Committee has also observed and noted the general support of the internal and external stakeholders in the Municipality with regard to the intervention in the Municipality. The internal and external stakeholders included the municipal council, the South African Local Government Association, Ward Committee Members, Political Parties, representatives of youth, women, rate payers association, business chamber and religious formations.   

 

19.3      The Select Committee has further observed and noted that the Provincial Executive Council has approved that National Treasury be requested by the Provincial Department of COHSTA to undertake a forensic investigation to all municipal activities, in order to unearth any financial irregularities.

 

19.4      It was noted that the Department of COHSTA has enlisted the services of the State Attorney to file papers on behalf of the Municipality, to invoke section 152(1) and section 152(2) of the Municipal Finance Management Act. The matter was heard in Polokwane High Court on 1st March 2016, and the order was granted and published in the Bushveld (Thabazimbi local newspaper) and Sowetan, as per the order.  

 

19.5      Furthermore, the Select Committee has noted that the Provincial Department of COGSTA has sent a communique to the Minister of Finance for the appointment of competent firm to do forensic investigation, as resolved by the Provincial Executive Council.   

 

19.6      Despite the constitutional and procedural compliance of the intervention in terms of section 139(1)(b) of the Constitution, the Select Committee has further observed that the appointed Administrator has not yet developed and submitted a progress report on the implementation of intervention, as aligned with the terms of reference and municipal financial recovery plan and turn-around strategy.

 

19.7      The Select Committee welcomed the commitment of the South African Local Government Association to table on 10 May 2016, a comprehensive report on the support it provided to the Municipality since 2009. The Select Committee also welcomed the commitment of the Administrator to table a progress report on the intervention to the Select Committee on 10 May 2016.

 

 

20.      Recommendations

 

20.1      Having conducted an oversight visit and interacted with the internal and external stakeholders of the Municipality, the Select Committee recommends to the NCOP as follows: 

 

            20.1.1   The NCOP approves the intervention in Thabazimbi Local Municipality in terms of section 139(1)(b) of the Constitution.

 

            20.1.2 The MEC for Cooperative Governance, Human Settlements and Traditional Affairs and SALGA in Lompopo Province, should spearhead a                          capacity building programme for councillors and officials in Thabazimbi Local Municipality, to address capacity challenges in the Municipality. This capacity building programme should be implemented within a month, after the adoption of this report.

 

            20.1.3   The MEC for Cooperative Governance, Human Settlements and Traditional Affairs, together with the Provincial Treasury in Limpopo Province, should conduct a workshop with the Thabazimbi Local Municipality’s officials, around compliance on issues of financial management. This should incorporate the compensation of employees, tariffs structures and supply chain management.

 

            20.1.4   The Department of Cooperative Governance, Human Settlements and Traditional Affairs, should table a progress report on the adjustment of salaries to be in line with National Treasury Guidelines in Thabazimbi Local Municipality. The progress report should be submitted to the NCOP, within 30 days of the adoption of this report.

 

            20.1.5   The Department of Cooperative Governance, Human Settlements and Traditional Affairs should table quarterly reports, as well as the termination of intervention report to the NCOP and the Limpopo Provincial Legislature.

 

            20.1.6 The termination of intervention report by the Department of Cooperative Governance, Human Settlements and Traditional Affairs in Limpopo should include the forensic investigation report, as approved by the Provincial Executive Council.

  

           20.1.7 The Select Committee on Cooperative Governance and Traditional Affairs

should, after the 2016 Local Government Elections, facilitate a workshop on the constitutional, procedural and substantive matters related to section 139 constitutional interventions, with all the Provincial Departments of Cooperative Governance and Traditional Affairs.

 

Report to be considered.