ATC180529: Report of the Select Committee on Co-operative Governance and Traditional Affairs (Select Committee): In loco –Inspection in terms of section 139 (1) (b) of the Constitution in Mpofana Local Municipality, dated 29 May 2018
Report of the Select Committee on Co-operative Governance and Traditional Affairs (Select Committee): In loco –Inspection in terms of section 139 (1) (b) of the Constitution in Mpofana Local Municipality, dated 29 May 2018
1. Background and Overview
1.1 On 18 December 2017, the KwaZulu–Natal Provincial Department of Cooperative Governance and Traditional Affairs (COGTA) tabled notice of intervention in terms of section 139(1) (b) of the Constitution in Mpofana Local Municipality to the Office of the Chairperson of the National Council of Provinces.
1.2. Subsequent to the tabling, the Chairperson of the National Council of Provinces in terms of NCOP Rule 101 referred the notice of intervention to the Select Committee for consideration and reporting.
1.3 On the 15 May 2018, the Select Committee took a decision to embark on an in loco oversight visit to the above-mentioned local municipality on 24 May 2018 in order to interact with all the critical stakeholders.
1.4 Having conducted the in loco-inspection in Mpofana Local Municipality in KwaZulu- Natal and interacted with the internal and external stakeholders of the municipality, the Select Committee reports in terms of Rule 102 to the National Council of Provinces (NCOP) as follows:
2. Objectives of the In Loco –Inspection
2.1 The main objective of the in loco-inspection was to interact with the internal and external stakeholders in order to solicit and verify their views about the constitutional, procedural and substantive matters related to the invocation of section 139(1) (b) of the Constitution at Mpofana Local Municipality.
3. Composition of the Delegation
3.1 The delegation of the Select Committee constituted the following Members of Parliament and Officials: Hon T Wana (ANC), Eastern Cape. Hon JM Mthethwa (ANC), KwaZulu-Natal, Hon Mthimunye (ANC), Mpumalanga, Hon M Chetty (DA), KwaZulu-Natal, Hon R Oliphant (ANC), Northern Cape, Hon D Ximbi (ANC), Western Cape, Hon B Engelbrecht (DA), Gauteng, Mr TM Manele, Committee Secretary (Committee Section), Mrs T Mpapela, Content Adviser (Committee Section); Mr N Mangweni, Committee Assistant, (Committee Section), Mr B M Mahlangeni, Committee Researcher (Research unit).
4. General Overview of the Loco Inspection at Mpofana Local Municipality
- On 24 May 2018, the Multi-Party delegation of the Select Committee first interacted with the MEC for COGTA; Head of the Department and other senior officials of the Department about the substantive reasons for invocation of section 139(1) (b) of the Constitution at Mpofana Local Municipality.
- The MEC assured the delegation that the intervention at Mpofana Local Municipality was purely due to failure of the Council to execute its constitutional mandate and not politically motivated.
- The Select Committee later interacted with the Mayor, Deputy Mayor, Speaker, Chief Whips of Political Parties, Councillors, SALGA, youth forums and organised labour.
- The Departmental official made a presentation and provided the constitutional, procedural and substantive reasons for invoking section 139(1) (b) at Mpofana Local Municipality.
- The appointed Administrator reported on progress made since the commencement of the intervention.
- The political representatives, organised labour and other stakeholders voiced their views about their support or otherwise of the intervention.
5. Presentation by the KZN Department of Cooperative Governance and Traditional Affairs (COGTA) on Section 139 (1) (b) of the Constitution in Mpofana Local Municipality
- Constitutional and Procedural Matters Related to the Intervention
- The Departmental official gave a briefing on the status of intervention in Mpofana Local Municipality in terms of constitutional, procedural and substantive matters. The presentation also provided background information dating back from 2012, citing serious financial difficulties; continuous incidents of unrest coupled with unprotected strike action by municipal workers and service delivery related protests.
- The Departmental Official reported that the KZN Provincial Executive Council (PEC) took a resolution to intervene at Mpofana Local Municipality in terms of section 139(1) (b) of the Constitution in December 2017.
- The Minister of COGTA and the Chairperson of the NCOP were notified of the decision by the PEC on 18 December 2017 as prescribed in terms of section 139(2) of the Constitution. The Minister of COGTA approved the intervention within the prescribed constitutional time frames.
- The Speaker of Mpofana Local Municipality was notified of the intervention on 19 December 2017 after which the MEC met and further engaged with the Municipal Council on 11 January 2018, followed by more engagements between the Municipal Council and the officials of Provincial Department of Cogta.
- Substantive Matters Related to the Intervention
- The substantive matters related to the invocation of section 139(1) (b) of the Constitution at Mpofana Local Municipality were due to various challenges experienced by the municipality in the execution of its constitutional mandate.
- The municipality experienced serious challenges in executing its duties in relation to four of its critical key performance areas, which are Municipal Transformation and Institutional Development; Good Governance and Public Participation; Municipal Financial Viability and Management as well as Basic Service Delivery.
- The municipal transformation and institutional development challenges related to the appointment of critical senior managers including the Municipal Manager and the Chief Financial Officer (CFO). In relation to the issue of CFO, Mpofana Local Municipality appointed an Acting CFO who did not possess the required experience and persistently retained him despite objections by the MEC.
- In relation to issue of the Municipal Manager, the Mpofana Local Municipality had failed to appoint a Municipal Manager even after hands- on support from the Provincial Department of COGTA.
- Good governance and public participation challenges faced by Mpofana Local Municipality related to the flouting of Council Rules and Orders by the Mpofana Municipal Council itself; failure to implement the Code of Conduct for Councillors; inability to hold the management accountable for poor performance and failure to implement the Auditor- General’s findings as well as the dysfunctionality of the Municipal Public Accounts Committee (MPAC) despite training and support provided.
- Mpofana Local Municipality also experienced financial viability and management challenges. The Municipality received a disclaimer audit opinion for the financial year 2015/16 due to failure in submitting required supporting documents. The Municipality was also found to be operating at a loss of R26 267 981 in the 2015/16 financial year; not spending and cash backing on its conditional grants amounting to R16 570 878 and was unable to meet its monthly operating commitments of R8.6million.
- The Municipality had more liabilities than assets and as such was unable to pay its creditors within 30days as stipulated by the MFMA. The amount owed to creditors included R36.6million owed to Eskom; R11.5 million to other creditors including R3.6 million owed to Khuselani security.
- The inability to collect revenue coupled with weak credit control and debt collection also contributed to the financial difficulties experienced by the Municipality despite reporting R97 million in gross debtors including R26.9 million property rates debtors.
- The lack of finances at Mpofana Local Municipality had also compromised the delivery of basic services to the communities. The municipality was only able to provide limited services linked to conditional grants like MIG, Small Town Rehabilitation and housing grant. Despite being only able to provide services financed through the conditional grants, the Municipality only managed to spend less than 10% of its MIG allocation.
- The municipality was also unable to complete projects under the small town rehabilitation programme, as the funds earmarked for the projects were used for operational expenses. The municipality was also unable to complete their INEP projects, as the municipality was not able to comply with Eskom specifications.
- Support provided by Provincial Government
- The Mpofana Local Municipality received a variety of hands-on support aimed at strengthening the identified weaknesses from the Provincial Department of Cogta; Provincial Treasury and the Department of Human Settlements. The municipality received support and training related to budgeting; recruitment processes; implementation of INEP; housing projects related support; support related to salaries and compensation of councillors, as well as negotiating payment agreements with Eskom.
- Progress made since the commencement of the intervention
- On assumption of duty at the Municipality, the appointed Administrator identified additional challenges. The identified challenges included irregular extension of contracts; inability to honour third party payments; numerous litigations; Eskom debt that had ballooned to over R66 million due to non-adherence to the agreed upon payment plan; and non-approval by the Council of a credible audit action plan.
- The presence of the Administrator at Mpofana Local Municipality has yielded notable progress, as all the ward committees and five (05) Operation Sukuma Sakhe war rooms within the municipality have become functional and meeting regularly and submitting minutes. The Municipality has hosted community meetings in all wards as part of IDP/Budget engagements while community meetings at wards 3 and 5 were about to encourage community members pay for services.
- The process to establish the Project management Unit (PMU) is currently underway. Successful negotiations with contractors who had deserted projects sites due to financial challenges has yielded positive results.
- A notice of termination was served to an irregularly appointed electricity contractor and process is underway to appoint a new contractor for the new INEP allocation of R5million.
- Spending on MIG allocation has increased to 64% and will likely increase to 84% by end May 2018. The Municipality has also started the process aimed at cash backing other conditional grants. The Department of Human Settlements has also agreed to resume with housing projects as soon as the Municipality opens the Municipal Housing Operating account.
- There is noticeable progress in small town rehabilitation projects, and successful completion is expected by end financial year 2017/2018. Identified roads at Mooi River and Rosetta towns regularly maintained as per request of Rate Payers’ Association and waste collection regular at Wards 1,2,3 and 5
- Portfolio committees and MPAC have monthly meetings to process Council businesses. A new Audit Committee is to be appointed by end May 2018. The Council has reviewed and adopted the Fraud Prevention Plan, and compiled a Risk Register after conducting risk assessment. There are also investigations currently under way in terms of section 106 of the Systems Act.
- Municipal Revenue and Debt Steering Committee been established to recoup funds owed by various Government Departments. A schedule of government debt compiled and shared with Provincial Department of Cogta and Provincial Treasury for assistance and follow up. An appointed debt collector has managed to collect a total of R2 624613.24 by end March 2018. Data cleansing completed for 260 debtors and top 100 consumers been contacted about their debts. The Municipality is currently up to date with the Eskom payment plan.
- The Interim Finance Committee (IFC) is dispensing with its duties and had five (05) sittings since 28 February 2018. A number of resolutions made by the IFC have been successfully implemented. The resolutions include placing a moratorium on all non-core service delivery expenditure; reduction in hours of overtime and travel claims. Bi- monthly cash flow forecast incorporating creditors repayment plans prepared and discussed with IFC.
- Mpofana Municipal Council has approved electricity recovery strategy on 7 May 2018. The Council also approved the installation of a prepaid meter at its Town Hall. Bid Committees have been reconstituted and Supply Chain Management Registers are monthly updated. There will be investigations and consequence management in relation to identified irregular, fruitless and wasteful expenditures.
- The Budget and Steering Committee is now established. The Municipal Council adopted the draft 2018/2019 budget on 27April 2018, although with an identified R28.6 million deficit
- Process is underway to appoint the Municipal Manager, CFO and Director for Social and Economic Services. There is ongoing training and capacity building for councillors and management. The reconstruction of HR files destroyed and damaged by fire is underway.
- The Municipality is able to meet some of its obligations including third party payments, which are now honoured on time. The acknowledgement of debt and payment plans has averted a number of litigations by creditors. Some of the debtors are also coming forward to make payment arrangements with the municipality.
6. Opinions of Political Parties, Organized labour and Youth on intervention in terms of section 139 (1) (b) of the Constitution
- The member of the African National Congress (ANC) welcomed the intervention and raised concerns concerning the slow pace of housing projects.
- The member of the Democratic Alliance (DA) was of the view that section 139(1) (c) was an ideal option for this Municipality as he claimed that Council members of the ruling party do not have the best interests for the municipality and its business.
- The member welcomed the forensic investigation in terms of section 106 of Municipal System Act in the local municipality.
- The Member of the Inkatha Freedom Party (IFP) supported the intervention in terms of section 139 (1) (b) of the constitution. However, the member raised concerns with regard to Eskom debt, land grabs and municipal instruction to demolition shacks.
- The representative of South African Local Government Association supported the intervention in terms of section 139 (1) (b) of the constitution and emphasized the importance of integrated support to the municipality and collaboration with the Department of Cooperative Governance and Traditional Affairs.
- The representative of SAMWU noted the progress since the intervention especially as it pertains to third party payments, but was reluctant to indicate whether the union viewed the intervention as having brought overall positive impact as yet, especially for workers.
- The union however raised a number of issues like lack of resources, tools of trade for the workers, staff shortage and lack of office space, as negatively affecting the wellbeing of workers within Mpofana Local Municipality. The union made an undertaking to monitor the progress and impact of the intervention
- The representatives of Mpofana Youth Empowerment and Youth Forum welcomed the intervention, but raised a number of concerns. They voiced their concerns about lack of consultation and support by the local municipality on matters related to youth; lack of skills and high unemployment among youth; absence of youth related community projects and substance abuse by youth within the local community. They requested the municipality to appoint a Youth Officer who will be responsible for coordinating youth programmes within the municipality.
- Select Committee Observations
- The Select Committee delegation noted the adherence to all constitutional and procedural requirements pertaining to intervention to any municipality.
- The Select Committee observed and noted the concerns raised by the youth forum.
- The Select Committee noted and strongly condemned reported incidents of illegal invasion of land.
- The Select Committee delegation noted and observed the concerns raised by SALGA about implementation of integrated support to municipalities.
- The Select Committee observed and noted the amount of debt owed to Mpofana Local Municipality by Government Departments.
- The Select Committee noted the progress reported on, since commencement of the intervention.
- The Select Committee has also observed the poor socio- economic status of the municipality.
- The Select Committee has further noted and welcomed the commissioning of Forensic Investigation in terms of section 106 of the Local Government: Municipal System Act
8. Select Committee Recommendations
8.1. Having conducted the in loco-inspection and interacted with the internal and external stakeholders of the Mpofana Local Municipality, the Select Committee recommends to the National Council of Provinces as follows:
8.1.1. NCOP to approve the notice of intervention in terms of section 139 (1) (b) of the Constitution in Mpofana Local Municipality
- That the MEC of the Department of Cooperative Governance and Traditional Affairs should table a progress report to the National Council of Provinces regarding investigations in terms of section 106 of Municipal System Act conducted in Mpofana Local Municipality.
- That the MEC of the Department of Cooperative Governance and Traditional Affairs should provide quarterly and exit reports to the National Council of Provinces on the progress made in respect of intervention in terms of section 139 (1) (b) of the Constitution and in terms of section 106 of Municipal System Act.
- That the Select Committee on Cooperative Governance and Traditional Affairs should conduct proactive oversight in collaboration with the Portfolio Committee on Cooperative Governance and Traditional Affairs in KNZ Provincial Legislature in order to assess the progress made in respect of the intervention in terms of section 139 (1) (b) of the Constitution and section 106 of Municipal System Act.
- The Select committee on cooperative governance and traditional affairs should ensure monitoring of the terms of reference and turn-around strategy through the application of Rule 91 of the national council of provinces
- The appointed Administrator to expedite the process of filing of vacancies for senior managers in order to ensure proper exiting and handing over when the intervention is terminated.
- The municipality to exercise its facilitative role to build partnerships and facilitate engagements with various Departments and other institutions like, Department of Trade and Industry and Industrial Development Corporation (IDC) to empower and support youth economic initiatives.
- The Municipality need to ensure that youth are also involved in infrastructure projects implemented by the Municipality.
- The Administrator should adhere and implement all activities as stipulated in his Terms of Reference.
Report to be considered
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