ATC181115: Report of the Select Committee on Co-Operative Governance and Traditional Affairs Inspection In Loco on notice of Intervention Issued in terms of Section 139(1)(B) and (5) of the Constitution (1996), In Enoch Mgijima Local Municipality, dated 15 November 2018

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

REPORT OF THE SELECT COMMITTEE ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS INSPECTION IN LOCO ON NOTICE OF INTERVENTION ISSUED IN TERMS OF SECTION 139(1)(b) AND (5) OF THE CONSTITUTION (1996), IN ENOCH MGIJIMA LOCAL MUNICIPALITY, DATED 15 NOVEMEBR 2018
 

1.         Background and Overview

 

1. The Select Committee on Co-operative Governance and Traditional Affairs, having considered the request by the National Council of Provinces (NCOP), to consider and report on the intervention notice invoked in Enoch Mgijima Local Municipality in terms of section 139(1)(b) and (5) of the Constitution, the Select Committee reports as follows:

 

1.2        In terms of NCOP Rule 101, the Office of the Chairperson of the NCOP referred the notice of intervention by the Eastern Cape MEC for Co-operative Governance and Traditional Affairs (CoGTA), to the Select Committee for consideration and reporting. On 14 November 2018, the Multi-Party Delegation of the Select Committee conducted an inspection in loco at Enoch Mgijima Local Municipality.

           

2.         Objective of the Loco Inspection in Enoch Mgijima Local Municipality

 

2.1        The main objective was to interact with the internal and external stakeholders of the Municipality in order to solicit their opinions on the constitutional, procedural and substantive matters related to the invocation of section 139(1)(b) and (5) of the Constitution.

 

3.         Composition of the Delegation

 

3.1        The Select Committee delegation was composed of the following Members of Parliament and officials: Hon J Mthethwa (ANC) KwaZulu-Natal; Hon G Oliphant (ANC) Northern Cape; Hon D Ximbi (ANC) Western Cape; Hon E Mateme (ANC) Limpopo; Hon T Wana (ANC) Eastern Cape; Hon M Chetty (DA) KwaZulu-Natal; Mr TM Manele (Committee Secretary: Committee Section); Mr N Mfuku (Content Adviser: Committee Section); Mr B Mahlangeni (Researcher: Research Unit); Ms T Matthews (Researcher: Research Unit); Mr M Mbebe (Procedural Officer: NCOP) and Mr TM Maunye (Intern: Committee Section). 

 

4.         General Overview of the Loco Inspection at Enoch Mgijima Local Municipality

 

4.1        On 14 November 2018, the delegation of the Select Committee interacted with senior officials of the Department of CoGTA, representatives of the African National Congress (ANC); Democratic Alliance (DA); Economic Freedom Fighters (EFF); Freedom Front Plus (FF+), United Democratic Movement (UDM) and the South African Municipal Workers Union (SAMWU). The departmental official made a presentation on the constitutional, procedural and substantive reasons for the intervention. The representatives of the political parties and Organised Labour, shared their opinions with regard to the intervention as tabled by the MEC for CoGTA.

 

5.         Presentation by Department of CoGTA

 

5.1        On the 14 November 2018, the Department of CoGTA briefed the delegation of the Select Committee on the constitutional, procedural and substantive matters related to the intervention. The presentation focused generally on the background; first notice of intervention to invoke section 139(1)(a) of the Constitution; response of the Municipality on the notice; developments and negligence by the Municipality; legal provision on the roles responsibility of a Municipality; provincial support and advice to the Municipality; financial assessment conducted by the Department; departmental conclusions on the financial assessment; executive failures and legislative recourse and terms of reference of the Administrator.       

 

6.         Background on the Local Municipality

 

6.1        Enoch Mgijima Local Municipality is a newly established Municipality after the amalgamation of the erstwhile Lukhanji, Tsolwana and Inkwanca Municipalities. The Municipality, immediately after its establishment, was confronted with various challenges in terms of service delivery, administration and financial management which have nearly led to a total collapse of the Municipality. In line with Chapter 7, section 154 of the Constitution, the Department has on a number of instances held series of engagements with the Municipality, aimed at addressing challenges that were confronting it. The reports that emanated from these interactions, made a reflection wherein the Municipality failed to execute fully its executive obligations. Service delivery challenges began to take the center stage at the Municipality, and community members towards the end of 2017, blockaded all the entrances to Komani town and people were finding it difficult to enter, leave or to pass through.

 

7.         First Notice of Intervention to invoke Section 139(1)(a) of the Constitution 

 

7.1        On 10 November 2017, the Department served the Municipality with a Notice of Intention to invoke section 139(1)(a) of the Constitution. This was after the engagements referred to above had taken place with the Municipality on matters that the Council was failing to implement. Outlined below, are the areas that were brought to the attention of the Municipal Council as areas where they have failed to fulfill their executive obligations:

 

• Failure to adhere to the provisions of section 54 and 56 of the Local Government: Municipal Systems Act (Act 32 of 2000). In terms of section 54A(1), the municipal council must appoint the Municipal Manager as the head of  administration.
• Non-compliance with section 80(2)(a) of the Municipal Finance Management Act, (MFMA), Act 56 2003, in relation to the availability of the CFO in the Municipality.
• Irregular expenditure caused by not complying with the provision of the Gazette on Implementation of Upper Limits.
• Allowances and benefits of members of Municipal Councils and breach of the Code of Conduct, wherein councilors vote in favour of or agree to a resolution which was before the Council or committee of the Council, which conflicts with any legislation applicable to local government.

 

 

 

 

8.         Local Municipality Responses to the Notice of Intervention

 

8.1        The Executive Mayor appealed to the MEC for other measures to be agreed upon between CoGTA and the Municipal Council, as a way of seeking necessary support to the Municipality. To date, the Municipality has fulfilled some of the obligations cited above. The Municipality resolved to reject the intention to invoke section 139(1)(a) of the Constitution, and instead requested support from the Department in areas that the Municipality was challenged.

 

9.         Constitutional and Procedural Matters Related to the Intervention

 

9.1        The Department recommended to the Provincial Executive Committee (PEC) the invocation of section 139(1)(b) and (5) of the Constitution. In its sitting of 1st August 2018, the PEC approved the intervention and delegated its authority to the MEC responsible for CoGTA.      The Department seconded its senior official (DDG) to be an Administrator for a period of six (6) months, subject to review with clear terms of reference and assumed duties on 14 September 2018. All statutory bodies (Minister, NCOP, Legislature, SALGA and Executive Mayor of Joe Gqabi District Municipality) were notified about the intervention at the Municipality, within the legislated time frame.  The Minister approved the intervention in a letter to the MEC dated 29 August 2018.

 

10.        Terms of Reference of the Administrator 

 

10.1      An Administrator has been appointed, to assume the following responsibilities, amongst others: 

• Representing the MEC and take over the functions of the Council in respect of financial management and administration, in particularly credit control and debt collection, supply chain management and development of financial recovery plan.
• To be the custodian of the financial management authority and must, after assessment of the financial environment, develop financial sub-delegations.
• The Municipal Manager will continue to perform his other powers that are not related to financial management, but everything that has financial implication must first be ratified by the Administrator.
• To ensure the preparation and implementation of a Financial Recovery Plan, working closely with the Municipal Financial Recovery Service of National Treasury.
• To ensure the implementation of financial systems, policies and procedures including preparation and implementation of cost-cutting measures, in order to reduce and ultimately complete the process of paying prior year creditors, increase revenue collection and related measures.
• To be a compulsory signatory on the Municipality’s primary bank account, and other bank accounts that the Municipality may operate.
• To establish and act as Chairperson of the Interim Finance Committee (IFC), to monitor and manage the cash flow of the Municipality, approve or disapprove purchase requisitions and to ensure that the Municipality’s cash position is not overdrawn.
• To ensure that the IFC meets regularly to monitor the cash flow position, payments approved and disapproved, and commitments made via the approved purchase orders.
• To implement governance systems and procedures, including the oversight over the administration, and ratifying of decisions taken by the Municipal Council, the Executive Committee, Committees, Municipal Manager and section 56 Managers in terms of delegated or original authority.
• To ensure the implementation of remedial action plans dealing with negative findings from the Auditor General of South Africa.
• Implementation of all projects undertaken by the Municipality, including unblocking projects that have stalled.
• To open and conclude negotiations with creditors of the Municipality, including the application of processes envisaged in sections 152 and 153 of the MFMA.

 

11.        Progress Made Since the Commencement of the Intervention by the Administrator

 

• Concluded negotiations with municipal creditors and implemented all projects, including unblocking of other projects.
•   Developed municipal financial delegation and presented to the Mayoral Committee.
• Developed cost containment measures and established Interim Finance Committee to monitor municipal cash flow.
• Implemented remedial action plans to deal with negative findings from the Auditor-General.
• Solicited support from the National Treasury for a forensic investigation in terms of section 106 of the Municipal System Act. 
• Convened and held meeting with Eskom to discuss repayment of the municipal debts.

 

12.       Opinions of Political Parties and Stakeholders of the Municipality  

 

12.1      During the loco-inspection, the Select Committee interacted and solicited opinions of the political parties, internal and external stakeholders of the Municipality. Their opinions are tabled below:   

 

13.        Opinion of the Democratic Alliance (DA)

 

13.1      The party contended that the Municipal Demarcation Board set the Municipality for failure, as a result the local government equitable share allocation has reduced. Although the intervention was supported, the Department failed to provide adequate support to the Municipality.

 

14.        Opinion of the African National Congress (ANC)

 

14.1      The intervention was supported, although challenges on the amalgamation committees were raised. The party argued against the withholding of grants, which had a negative impact on service delivery in the Municipality.

 

15.        Opinion of the Economic Freedom Fighters (EFF)

 

15.1      The party recommended that the Municipality to be dissolved, in terms of section 139(1)(c) of the Constitution. It alleged that the MEC was responsible for the collapse of the Municipality, since there was no monitoring and support provided.

 

 

 

 

16.        Observations of the Select Committee

 

16.1      In terms of the constitutional and procedural matters, the Select Committee has observed that the National Minister for CoGTA, the NCOP, the Eastern Cape Provincial Legislature and the Municipality were notified of the intervention. The Minister for CoGTA approved the intervention on 29 August 2018.

 

16.2      The Municipality has exceeded the upper limits of the National Treasury Guidelines, as a result, the Municipality’s salary budget as a percentage to its operating budget was 36%. Treasury guideline is that salary budget should not exceed 35%.

 

16.3      For the 2017/18 financial year, the Municipality received a disclaimer audit opinion. Meaning the Municipality provided insufficient evidence in the form of documentation on which to base an audit opinion. The lack of sufficient evidence is not confined to specific amounts, or represents a substantial portion of the information contained in the financial statements.

 

16.4      In the face of massive challenges confronting the Municipality, the Select Committee has observed the absence of the MEC for CoGTA, without a formal apology, during the loco inspection at the Municipality.

 

17.        Recommendations of the Select Committee

           

17.1      Having conducted the oversight visit to Enoch Mgijima Local Municipality and interacted with internal and external stakeholders, the Select Committee on Co-operative Governance and Traditional Affairs recommends as follows:   

 

17.1.1   The NCOP approves the intervention in Enoch Mgijima Local Municipality in terms of section 139(1)(b) and (5) of the Constitution.

 

17.1.2   The Administrator should fast-tract the process of implementing forensic investigation, in order to enable the MEC for Co-operative Governance and Traditional Affairs to table the report to the NCOP.

 

17.1.3   The Eastern Cape MEC for Co-operative Governance and Traditional Affairs should table quarterly progress report to the NCOP on the status of the intervention in the Municipality; including challenges encountered.

 

17.1.4   The Select Committee on Co-operative Governance and Traditional Affairs, in co-operation with the relevant Portfolio Committee in Eastern Cape Provincial Legislature, should in future, conduct a follow-up oversight visit to the Municipality in order to evaluate the progress made in respect of the intervention in the Municipality.

 

Report to be considered.