ATC180626: 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 Maluti-A Phofung Local Municipality, dated 26 June 2018

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

REPORT OF THE SECLECT COMMITTEE ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS ON LOCO-INSPECTION IN TERMS OF SECTION 139 (1) (b) OF THE CONSTITUTION IN MALUTI-A PHOFUNG LOCAL MUNICIPALITY, DATED 26 JUNE 2018
 

1.         Background and Overview

 

1.1        The Free State Provincial Department of Cooperative Governance and Traditional Affairs (COGTA) tabled notice of intervention in terms of section 139(1) (b) of the Constitution in Maluti- A Phofung 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 May2018, the FS COGTA made a presentation before the Select Committee and provided rationale for the intervention. The Select Committee then decided to visit the MAP on 25 the June 2018, the Select Committee conducted loco inspection to the above-mentioned local municipality in order to interact with all the critical stakeholders.

 

1.4      Having conducted the loco-inspection in Maluti- A- Phofung Local Municipality in Free State 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 the 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 J Mohapi(ANC),Free State;  Hon T Wana (ANC), Eastern Cape; Hon M Chetty (DA), KwaZulu-Natal; Mr TM Manele, Committee Secretary (Committee Section); Mrs T Mpapela, Content Adviser (Committee Section).

 

4.          General Overview of the Loco Inspection at Maluti- A-Phofung Local Municipality

 

1. On the 25 June 2018, the Multi-Party delegation of the Select Committee interacted with stakeholders at MAP about the section 139(1) (b) intervention. The Chairperson of the Select Committee in outlining the purpose of the session alluded to the Constitutional provisions as they relate to invocation of section 139 interventions.

 

1. He further advised, that the Select Committee will not rubber stamp the decision of the FS COGTA but will ensure adherence to substantive, procedural and Constitutional aspects of the intervention. He also assured the stakeholders that the Select Committee has a responsibility and duty to ensure that any intervention is not used to settle political scores.
2. Various stakeholders were afforded an opportunity to voice their opinions about the section 139(1) (b) at MAP and they included, Chief Whips of Political Parties, ward committees, traditional leaders, SALGA, youth forums and organised labour.

 

1. The MEC of COGTA (FS) led the delegation, which included the acting Head of Department and other senior officials.

 

1. The Provincial Treasury delegation led by Acting Head of Department made inputs in relation to support intervention initiatives in the municipality

 

1. The newly appointed Mayor and the Speaker of the Council led the MAP delegation, which also included the appointed administrator who reported on progress up to date.

 

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

 

5.1.       The MEC of COGTA recognising that an extensive presentation was already done to the Select Committee on 15 May 2018 provided a summary of key issues. The MEC assured the stakeholders about adherence to substantive, procedural and constitutional requirements including the notices issued to Minister of COGTA and NCOP.

 

5.2.       The MEC also briefly spoke about some of the challenges that led to the invocation of section139 (1) (b) at MAP. The stated challenges reported included political tensions within the MAP Council; service delivery challenges; protest actions and conflict between the administration and elected officials.

 

5.3.       The Acting HOD also reported about non-functionality of certain ward committees, non-compliance by MAP in respect to B2B reporting and vacancy rate as also among issues that led to the Provincial COGTA to invoke section 139(1) (b) at MAP.

 

6.         Presentation by Provincial Treasury

 

6.1.       The Provincial Treasury reported on challenges they noted as a going concern that were facing the MAP which included the inability to meet its financial obligations; liabilities far exceeding the assets including a huge debt owed to Eskom; poor revenue collection, non-submission of section 47 reports and vacant position of the CFO.

 

6.2.       The Provincial Treasury reported that despite offering their support to MAP in form of advice and inputs in relation to budget and financial aspects, their inputs were disregarded and were not implemented by the MAP. The Provincial Treasury reported that the disregard for their offered support and input led to 290% increase in irregular expenditure.

 

1. Presentation by administrator on progress made since the commencement of the intervention

 

1. The Administrator reported that on his assumption of duty at the MAP, there was no billing in     system in place leading to non-collection of revenue by at least 10 the months. The administrator reported about an adopted new billing system in place, and about statements of accounts issued to customers
2. The administrator reported that MAP is prioritising and trying to service the Eskom debt. He indicated that t there is a draft budget in place, which will be adopted on next Council sitting.
3.  The presence of the administrator has also led to adoption of a viable financial recovery plan with the assistance of the Provincial Treasury and FS COGTA.
4. The MAP has also developed a draft organisational structure and the process is in place to consult with labour unions. Administrator also reported about the resuscitation of local labour forum.
5. The payment on time of salaries and third party commitments including settlement of outstanding arrears on third party payments. The administrator reported that the MAP has entered into payment agreements with third party companies currently owned by the local municipality and agreement has been entered with the organised labour about settling the outstanding contributions over a period of 4 months ending in July 2018.
6. The process of filling in of critical vacancies has been initiated with an advertisement with closing date of 22June 2018 for CFO and other senior managers.
7. The presence of the administrator at MAP local municipality has led to reviewing of all contract with various service providers and this exercise has led to a termination of contract with cash collecting Services Company. The administrator assisted on this task by the State Law advisors.
8. The Administrator has reversed a number of illegal appointments leading to reduction of the salary wage bill.
9. The MIG spending has increased and a number of key projects are progressing very well with most nearing completion. The MAP has also received deployment of three engineers through MISA.
10. The administrator has also initiated the process to develop a revenue enhancement strategy.
11. The Administrator also spoke about the establishment of a B2B task team, which is a condition, attached to the Minister’s concurrence with the section 139(1) (b).

 

1. Presentation by South African Local Government Association (SALGA)

 

1. SALGA reported being on board about the intervention at MAP and, voiced support for the section 139(1) (b) invocation. SALGA also voiced a need to be involved in the monitoring of the progress at MAP in order to ensure that the financial recovery plan is clear with short and medium term goals. SALGA also advised and advocated for proper and adequate support if the intervention is to be successful.
2. The SALGA also spoke about the capacity building initiatives offered to municipalities, and an establishment of an academy. The established SALGA academy is aimed at formalising capacity-building support to municipalities. SALGA also reported that the current capacity building initiatives include induction to all newly appointed councillors and officials; portfolio based induction and leadership development programme done in partnership with tertiary institutions.

 

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

 

9.1.       The African National Congress (ANC) welcomed and voiced support for the section 139(1) (b) intervention. The ANC also noted the progress since the arrival of the administrator at MAP.

9.2.       The EFF voiced support for the section 139(1) (b) intervention and reported that as the organisations they had sponsored votes of no confidence against the former Mayor. The EFF reported that when the organisation observed that the Mayor was failing in her fiduciary responsibilities they had instituted votes of no confidence against the Mayor. The EFF also blamed the FS COGTA for not addressing challenges earlier. The EFF also raised the issue related to the CFO who has been seconded to another entity, but the MAP has advertised the position as a vacancy even although the CFO has not resigned as an employee at MAP.

 

1. The Dikwakwetla supported the intervention in terms of section 139 (1) (b), and further claimed that it was long overdue due to challenges experienced by the MAP. The Dikwakwetla also referred to the matter raised by the DA about the CFO. The Dikwakwetla recommended for recovery of funds misappropriated by officials both elected and non- elected.
2. The APC voiced support for the section 139(1) (b) intervention at MAP.
3. The representative of IMMATU welcomed the intervention but raised concerns with regard to the situation of the workers.
4. The representative of SAMWU noted the progress since the intervention especially concerning to third party and salary payments. However, SAMWU blamed the FS COGTA for failing to address challenges that led to workers going on strike for three months. The Union outlined how the non-payment of third parties had negatively affected workers seeking medical attention. The union also raised a number of issues negatively affecting workers including lack of resources, tools of trade and low staff morale.  The union also reported about outsourcing of some services when there are employees with capacity inside the MAP Council.
5. The Ward Committees representative supported the intervention but also reported about non- functionality of certain ward committees which are receiving their stipends despite their non- functionality.
6. The representatives of youth formation welcomed the intervention, but raised a number of concerns regarding the presence of the administrator. The Youth formation reported that the students who had been awarded bursaries by the MAP have been expelled due to non- payment by the MAP. The youth formation also voiced concern about termination of EPWP and other CWP contracts since the arrival of the administrator at MAP. The youth formation requested for a skills audit at MAP.
7. The Traditional leaders voiced their support for the intervention.

 

1.     Select Committee Observations

10.1.     The Select Committee delegation noted the adherence to all constitutional and procedural requirements pertaining to invocation of section 139(1) (b) intervention at the Municipality.

10.2.     The Select Committee observed, noted and voiced concerns about the huge debt owed by the Municipality leading to financial challenges that are compromising the provision of basic services. The Members were concerned about the fruitless and wasteful expenditure, which will come because of interests incurred on the huge debt owed by the MAP.

10.3. The Members voiced concern about the R2, 9 billion owed by the MAP to Eskom, making the MAP as number one in the top ten identified municipalities owing Eskom.

1. The Members noted a court action by Harrismith Business Chamber requesting to pay     Eskom directly and its potential impact on revenue collection efforts by the MAP.
2. The Members voiced concern about using the MIG funding for municipal operations.
3. The Members noted the adoption of the new billing system, however wanted assurance that it is yielding positive results in terms of increasing the percentage of recovery.
4. The Members noted and appreciated the on time payment of salaries and third party commitments since the intervention, but also Members were concerned about the MAP current salary wage bill whether it is still within the requisite norm and the administrator’s inability to confirm.
5.  Members were concerned about the lack of political will as evidenced by the inter party political conflict and how it undermines delivery of basic services to the communities.
6. The Members noted the progress that is evident within the MAP ever since the invocation of section 139(1) (b) including the advertisement for appointment of critical personnel within the MAP.
7. The Members were concerned about the reported vulnerability of the ICT system of the MAP and its potential impact on bank accounts hacking.
8. The Members noted and strongly advised the MAP to tackle the issue of illegal electricity connections.
9. The Members noted the process underway to adopt a budget and advised against adoption of a budget in deficit.
10. Members voiced concern about public participation platforms aimed at engaging residents and how the MAP is failing to communicate its challenges with communities, which then led to wide spread protest actions.
11. The Members noted the lack of leadership shown by former Mayor in exercising her fiduciary duties including political interference on administration issues.
12. The Members noted the delay by the FS COGTA in tackling and addressing challenges before they escalated. The Members agreed that the FS COGTA should have intervened and supported the MAP when it failed to submit required reports.
13. The Members, although acknowledging the support by SALGA but voiced concern about SALGA’s inability to detect and diagnose challenges early enough to divert invocation of interventions.
14. Members also noted and appreciated efforts by the Provincial Treasury to engage various departments to donate fleet of vehicles to MAP instead of renting them.
15. Members noted the poor socio- economic status of the MAP as contributing to poor revenue collection but also noted the inability to utilise resources effectively as another contributing factor.
16. Members noted and appreciated the ongoing forensic investigations on financial mismanagement.

 

1.          Select Committee Recommendations

11.1.           Having conducted the loco-inspection and interacted with the internal and external stakeholders of the Maluti- A- Phofung Local Municipality, the Select Committee recommends to the National Council of Provinces as follows:

11.1.1.        That the NCOP to approve the notice of intervention in terms of section 139 (1) (b) of the Constitution in Maluti- A- Phofung Local Municipality.

11.1.2.       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 Maluti- A- Phofung Local Municipality.

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

11.1.4.        That 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 FS 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.

11.1.5.        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 expires or terminated.

11.1.6.        Forensic investigations to be conducted and affected officials to be subjected to consequence management

11.1.7.   The MEC to ensure that the performance contract of CFO has a built in consequence management if the MAP receives a disclaimer audit opinion.

11.1.7.        The Municipal council to implement wellness programmes for employees to boast staff morale.

11.1.8.    The Provincial Treasury to conduct constant monitoring of the budget processes at MAP.

11.1.9.    The South African Local Government Association (SALGA) in co-operation with Local Government Sector Education and Training Authority should facilitate training and capacity building for Municipal Councillors at Maluti-A-Phofung; to further deepen their understanding of their oversight role; legal framework and policies that govern the activities of the Municipality.

11.1.10.   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.

 

 

Report to be considered