ATC180529: Report of the Select Committee on Co-operative Governance and Traditional Affairs on loco –Inspection in terms of section 139 (1) (b) of the Constitution in Inkosi Langalibalele Local Municipality, dated 29 May 2018

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

Report of the Select Committee on Co-operative Governance and Traditional Affairs on loco –Inspection in terms of section 139 (1) (b) of the Constitution in Inkosi Langalibalele 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 a notice of intervention in terms of section 139(1) (b) of the Constitution in Inkosi Langalibalele 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 conduct loco inspection to the above-mentioned local municipality on 25 May 2018 in order to interact with all the critical stakeholders.

 

1.4    Having conducted the loco-inspection in Inkosi Langalibalele 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 Province (NCOP) as follows:

 

2.         Objectives of the Loco –Inspection

 

2.1        The main objective of the loco-inspection was to interact with the internal and external stakeholders in order to solicit their views about the constitutional, procedural and substantive matters related to the invocation of section 139(1) (b) of the Constitution at Inkosi Langalibalele local municipality.

 

3.         Composition of the Delegation

 

3.1        The delegation of the Select Committee composed of the following Members of Parliament and Officials:  Hon T Wana (ANC), Eastern Cape; Hon JM Mthethwa (ANC), KwaZulu-Natal; Hon G.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 Mahlangeni, Committee Researcher( Research unit).

 

4.        General Overview of the Loco Inspection at Inkosi Langalibalele Local Municipality

 

1.  On the 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 Inkosi Langalibalele Local Municipality.

 

1. The MEC assured the delegation that the intervention at Inkosi Langalibalele local municipality was purely due to failure of the Council to execute its constitutional mandate and not politically motivated.

 

1. On the 25 May 2018, the Select Committee interacted with Mayor, Deputy Mayor, Speaker, Chief Whips of Political Parties, Councillors, SALGA, youth forums and organised labour at Inkosi Langalibalele local municipality.

 

1. The Departmental official made a presentation and provided the constitutional, procedural and substantive reasons for invoking section 139(1) (b) at Inkosi Langalibalele local municipality.

 

1. The appointed administrator reported on progress made since the commencement of the intervention.

 

 

 

 

 

5.         Presentation by the Department of Cooperative Governance and Traditional Affairs (COGTA) on Section 139 (1) (b) of the Constitution in Inkosi Langalibalele Local Municipality

 

1. Constitutional and Procedural Matters Related to the Intervention

 

1. The Department of Cogta made presentation on the notice of intervention in terms of section139 (1) (b) of the Constitution in Inkosi Langalibalele Local Municipality. The presentation focused on the constitutional, procedural and substantive matters related to the intervention as well as the support provided and the progress made in the local municipality. The departmental official also gave a brief background on issues related to merger of two municipalities leading to establishment of Inkosi Langalibalele as well as the governing coalition status of the municipality.

 

1. The Departmental Official reported that the KZN Provincial Executive Council (PEC) took a resolution to intervene at Inkosi Langalibalele Local Municipality in terms of section 139(1) (b) of the Constitution in December 2017.

 

 

1. The Minister of COGTA and the Chairperson of the NCOP were notified of the decision by 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.

 

1. The Speaker of Inkosi Langalibalele local Municipality was notified of the intervention on 19 December 2017 after which the MEC met and further engaged with the Municipal Council in January 2018, followed by more engagements between the Municipal Council and the officials of Provincial Department of Cogta.

 

 

 

1. Substantive Matters Related to the Intervention and Terms of reference of the Administrator
2.  
   1. The substantive matters related to the notice of intervention at Inkosi Langalibalele local municipality related to challenges that compromised the municipality’s ability to execute its constitutional mandate. The challenges identified were within the municipality’s key performance areas (KPAs) which are municipal transformation and institutional development; good governance and public participation; municipal financial viability and management and basic service delivery.

 

1. In relation to municipal transformation and institutional development, the municipality faced numerous difficulties related to dissatisfaction about remuneration matters related to job evaluation; unequal pay and staff establishment. The municipality had no capacity to resolve these matters and they threatened the stability of the municipality.

 

1. These issues put an enormous pressure on the municipality and led to the Municipal Council adopting illegal and irregular huge salary bill way above the required threshold. This matter increased the salary threshold to 54%, which is above the prescribed norm of 25-40%. The increased salary threshold was also due to absorption of 200 casual workers and appointment of 41 bodyguards. In addition, the municipality failed to adopt a new staff establishment developed by the Change Management Committee to cater for the newly established Inkosi Langalibalele local municipality.

 

 

1. The challenges related to good governance and public participation related to failure to submit 2016/17 Annual Financial Statements by 31 August 2017, and rejecting assistance by threatening the financial experts provided by Provincial Department of Cogta and Provincial Treasury. The municipality was served with a warrant of execution by the Sheriff to attach the primary bank account and faced 41 litigation suits to the approximate value of R 38 million.  The threat of disconnection by Eskom; six councillors owing the municipality a total amount of R26, 722.00 and failure by the Municipal Council institute disciplinary action against these councillors also contributed to the financial challenges experienced by the municipality. The municipality also failed to report unauthorized, irregular or fruitless and wasteful (UIFW) expenditure in terms of section 32 of the MFMA to the MEC for Local Government, while the Municipal Public Accounts Committee (MPAC) failed to investigate the matter.
2.  In relation to municipal financial viability and management the municipality had insufficient funds to pay for fixed monthly operations as its expenditure of R531million exceeded the total revenue amounting to R436 million. In order to continue paying for monthly operations the municipality used the funds allocated for conditional grants for operational expenses, while also not cash backing about R12.5 million on conditional grants. The financial difficulties faced by the municipality also led to non-payment of creditors within 30 days as stipulated in MFMA and the total amount owed to creditors was over R38.4 million in September 2017.  The municipality also failed to manage its financial affairs as during 2016/17 financial year it had incurred R42.1 million in unauthorised expenditure; R31.6 million in fruitless and wasteful expenditure and R260.4 million in irregular expenditure. The municipality also received a disclaimer audit opinion for financial year 2016/17.
3. The service delivery challenges faced by the Inkosi Langalibalele were related to, inability to spend the MIG allocation and other conditional grants; inability to complete projects related to electrification of households; irregular and illegal appointment of contractors; inadequate budget provisions for replacement and maintenance of infrastructure, and inability to provide sufficient tools and equipment for service delivery especially waste collection and management.

 

1. Support provided by Provincial Government
   1. The Provincial Department of Cogta provided a variety of hands on support to the municipality, and it included assistance with development of financial recovery plan; establishment of critical committees; budget related assistance; HR related matters; contract management and negotiating on behalf of the municipalities with government Departments owing the municipality.

 

1.  Progress made since commencement of intervention

 

1. The administrator identified additional challenges when he resumed his duties at the municipality and his intervention led to development of standard operating procedures; asset management controls, records management and review of the functioning of the audit committee, internal audit and MPAC. The administrator also identified a need for capacity building of ward committee on LGSETA training in order to maximise their performance.
2. The administrator reported that processes are under way to fill all vacancies across all wards. He also reported that all 23-war rooms are fully functional, with ward 09 war room nominated for Premier’s Excellence Award. He also reported that community meeting have been held in all wards. He reported that the municipality is in the process of developing a public participation charter.
3.  The MIG spending has increased to 86.94% as at April 2018 and MISA has deployed engineering experts to support the PMU, a data capturer and senior technician also appointed to assist with MIG requirements. The Municipality has received R15 million INEP for 2017/2018 and has already spent 12.7% and the spending is envisaged to increase to 70% by June 2018. The municipality has also submitted a rollover application to National Treasury on 01 March 2018.
4. The Municipality is in the process of reviewing its standing rules and orders and adoption is expected by end June 2018. The Council, EXCO and Portfolio Committees are sitting to conclude their business. Relations have also improved between the Council, management and organised labour.
5. An audit committee has been established and an audit action plan developed to address the disclaimer audit opinion.
6. There are noticeable improvement in revenue collection and the collection trend is expected to increase to be around 81% by June 2018 although the National Treasury norm is 95%. A number of litigations have been settled.

 

6.    Opinions of Political Parties, Organized labour, Business Forum and Youth on intervention in terms of section 139 (1) (b) of the Constitution    

1. The member of the Democratic Alliance (DA) supported the intervention in terms of section 139 (1) (b) of the Constitution and the adopted turnaround strategy.
2. The Member of the Inkatha Freedom Party (IFP) supported the intervention in terms of section 139 (1) (b) of the Constitution and proposed that the intervention should be prolonged until the end of term of office of the current municipal council.
3. The member of the Economic Freedom Front (EFF) supported the intervention and supported the IFP proposal that the intervention should remain until the end of the term of office of the current municipal council.
4. The member of the African National Congress (ANC) supported the intervention for as long as is possible but not until the end of the term of the current Council.  

 

1. The representatives of IMATU and SAMWU welcomed the intervention, leadership of the appointed administrator and the progress made since the invocation of section 139 (1) (b) of the Constitution in the local municipality.  

 

1. The representative of AL-Jamaah welcomed and supported the intervention as well as the assistance provided by the administrator. The representative raised concern with regard to the dependency of the municipality on grant allocation.

 

1. Business Forum reported that they support any positive initiatives by the Municipality aimed at improving the status of the local municipality. The business forum further offered free technical assistance to the municipality, but would like further engagements with the administrator about debt owed to and by the municipality.

 

1. Youth Forum also voiced their support for the intervention but also raised concerns about lack of opportunities for the youth within the municipality including library and sporting activities.

 

7.         Select Committee Observations

 

7.1.       The Select Committee delegation noted the adherence to all constitutional and procedural requirements pertaining to intervention to Inkosi Langalibalele municipality

7.2.       The Select Committee noted and observed the R69 million debt owed to the municipality by Government Departments; R104 million owed by businesses and R47 million household debt.

7.3.       The Select committee also noted and observed the overcharging and inflating of prices by certain service providers when conducting business with the municipality.

7.4.       The Select Committee observed and noted the issue related to contracting of 41 bodyguards and the complex nature of safety and security of councillors within the area.

7.5.       The Select Committee noted and appreciated the offer for free technical assistance to the municipality by the local business forum.

 

 

8.          Select Committee Recommendations

 

8.1.       Having conducted the loco-inspection and interacted with the internal and external stakeholders of the Inkosi Langalibalele Local Municipality, the select committee recommends to the National Council of Provinces as follows:

 

8.1.1     The NCOP to approve the notice of intervention in terms of section 139 (1) (b) of the Constitution in Inkosi Langalibalele Local Municipality.

 

1. 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 report of intervention in terms of section 139 (1) (b) of the Constitution and forensic investigation in terms of section 106 of Municipal System Act. 

 

 

1. The Select Committee on Cooperative Governance and Traditional Affairs to 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 on intervention in terms of section 139 (1) (b) of the Constitution and section 106 of Municipal System Act.

 

1. The Select Committee on Cooperative Governance and Traditional Affairs should ensure monitoring of the terms of reference of the Administrator and the implementation of the turn- around strategy through the application the application of Rule 91 of the National Council of Provinces

 

1. In order to assist the municipality to build institutional capabilities, the Administrator should fast track the process of resolving pay parity, filling of vacancies of section 56 managers, appointment of senior manager for development planning, completion of job evaluation and presentation of the organogram to the local labour forum (LLF).

 

1. That the MEC of the Department of Cooperative Governance and Traditional Affairs in collaboration with the Provincial Treasury should conduct investigation in the local municipality on recovery of money owed to the Municipality.

 

1. The Municipality Council to implement consequence management against officials found guilty of financial misconduct and other performance related misconducts.

 

1. Administrator to assist the municipality to exercise its facilitative role by building partnerships with various Government Departments like Trade and Industry; Small Business and IDC. This will assist with empowering and supporting youth economic initiatives.

 

Report to be considered