ATC190904: Report of the Select Committee on Cooperative Governance and Traditional Affairs, Water, Sanitation and Human Settlements Inspection in Loco on Notice of Intervention issued in terms of section 139(1)(b) of the Constitution (1996), in Msundizi Local Municipality, dated 4 September 2019
Report of the Select Committee on Cooperative Governance and Traditional Affairs, Water, Sanitation and Human Settlements Inspection in Loco on Notice of Intervention, issued in terms of section 139(1)(b) of the Constitution (1996), in Msunduzi Local Municipality, dated 4 September 2019
1.Background and Overview
- The Select Committee on Cooperative Governance and Traditional Affairs, Water, Sanitation and Human Settlements, having considered the request by the National Council of Provinces (NCOP), to consider and report on the intervention notice invoked in Msunduzi Local Municipality in terms of section 139(1)(b) of the Constitution, the Select Committee reports as follows:
- On 15 April 2019, the KwaZulu-Natal MEC for Cooperative Governance and Traditional Affairs (CoGTA) tabled to the Office of the Chairperson of the NCOP the notice of intervention in terms of section 139(1)(b) of the Constitution in Msunduzi Local Municipality. Subsequent to the tabling, the NCOP, the Office of the Chairperson of the NCOP referred in terms of Rule 101 of the NCOP, the notice of intervention by the KwaZulu-Natal MEC for (CoGTA), to the Select Committee for consideration and reporting. On 3 September 2019, the Select Committee conducted an inspection in loco to Msunduzi Local Municipality.
2.Objective of the Loco Inspection in Msunduzi Local Municipality
- 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) of the Constitution.
3.Composition of the Delegation
- The Select Committee delegation was composed of the following Members of Parliament and officials: Hon IM Seleku (DA) Western Cape; Hon K Motsamai (EFF) (Gauteng); Hon TSC Dodovu (ANC) North West; Mr TM Manele (Committee Secretary: Committee Section; Mr B Mahlangeni (Researcher: Research Unit) and Mr F Bulawa (Committee Assistant: Committee Section).
4.General Overview of the Loco Inspection at Msunduzi Local Municipality
- On 3 September 2019, the multi-party delegation of the Select Committee interacted with Senior Official and Administrator of the Department of CoGTA, representatives of the African National Congress (ANC), Democratic Alliance (DA), Economic Freedom Fighters (EFF), Inkatha Freedom Party (IFP), African Independent Congress (AIC), African Christian Democratic Party (ACDP), Al-Jama, South African Local Government Association, Organised Labour (SAMWU and IMATU), Business Chamber, Department of Human Settlements, Department of Water and Sanitation and Amakhosi.
- The Senior Officials of the department of CoGTA made presentation on the procedural and substantive reasons for the intervention. The representatives of the internal and external stakeholders of the Municipality tabled their opinions on the invocation of the intervention in terms of section 139(1)(b) of the Constitution in the Municipality.
5.Presentation by the Department of Cooperative Governance and Traditional Affairs (CoGTA)
- The Department of CoGTA made presentation on the status of intervention in the Municipality. The departmental presentation focused on the background, substantive reasons prior to the invocation of section 139 of the Constitution, resolution of the PEC, including terms of reference procedural matters of the intervention.
6.Basic service delivery and motivation for intervention
- In terms of MIG, as at end of January 2019, the Municipality was below the provincial target of 40%. The Municipality is one of the municipalities that were called by National Treasury to motivate why a portion of their MIG allocation should not be stopped, because of poor performance. National Treasury eventually decided not to stop their funds but the very fact that such a high capacity Municipality was counted among poor performing municipalities was a cause for concern. The Municipality remains the third lowest performing Municipality on MIG in the Province.
- ¶This financial year (2018/19), the planning of the Municipality was very poor and resulted in the late appointment of contractors. The Municipality also reprioritized projects outside of the IDP process or MIG Framework. There was also the question of the late appointments of service providers to plan and implement MIG projects in line with DCoG Implementation Plan and Municipal Procurement Plan.
- The Department does not have a Head of the Department. The Municipality has allocated insufficient resources to its Project Management Unit which is decentralised to various Business Units. This situation persists despite the fact that there is a MIG allocation of 5% which is designed to help municipalities fund their Project Management Units. This is one of the factors contributing to poor performance by the Municipality, in relation to its built programme.
- The Municipality is a Water Services Authority (WSA) in its own right. It thus receives direct funding from the Department of Water and Sanitation (DWS) to perform various functions such as water related planning, and has for this purpose completed its Water and Sanitation Master Plans by 2016. The total costs show that R2,354 billion is required over the next 25 years to eradicate backlogs and to replace aging infrastructure. Currently, the Municipality loses over R150 million per annum in non-revenue water. This is the fourth highest loss among the 14 Water Service Authorities in the Province.
- The Municipality received a letter from the DWS notifying the Municipality of its intention to withhold a portion of Water Services Infrastructure Grant (WSIG), owing to poor performance by the Municipality. The Municipality had been allocated R40 million for the 2018/19 financial year, and the Municipality had spent only R12.8 million (32%) by the end of February 2019.
- Msunduzi Municipality has been experiencing intermittent unplanned outages over the past few years affecting its customers, including the business communities. Residents were also losing hope in the capabilities of the City to supply reliable and stable power. A study on the state of the electricity network was conducted and a Network Development Plan (NDP) was developed as a result. The NDP was eventually approved. Projects were identified for implementation and funds were made available to implement the projects as and when funds were made available.
- Over the past 12 months there have been numerous reports regarding the failure of the Waste Management Department of the Municipality. This has been characterised by labour strikes, failing waste disposal, including several environmentally damaging fires at the Waste Disposal site in Willowton. The City and peripheral nodal areas are visibly dirty and full of grime. The situation is repulsive to both visitors and potential investors.
- MISA offered support to the Municipality, particularly with reference to the Project Management Unit of the Municipality, of which support was rejected by the Municipality, which branded it as unnecessary. This was also a cause for concern. The Municipality is performing poorly on the EPWP programme and in creating job opportunities. The full time employment was sitting at 141(16%) as at the end of the third quarter (October-December 2018), against the target of 859. At the end of the second quarter (July-Sept 2018), the Municipality was at 12%. Thus the annual target was not achieved.
7.Governance and Administration and reasons for intervention
- Between June 2018 and March 2019, the Speaker convened 26 council meetings of which 5 were aborted due to the lack of quorum. It was reported that councillors deliberately abandoned attendance of these council meetings, due to controversial tender awards, Municipal Manager’s suspension, and lack of payment of creditors on time among other things.
- Several meetings of Committees of Council had to be abandoned because of lack of quorum. Each of the following committees have had to abandon one or more meetings because of the lack of quorum over the same period: Sustainable Development and City Enterprises Portfolio Committee, Financial Services Portfolio Committee, Corporate Services Portfolio Committee and the Municipal Public Accounts Committee.
- There have been wide ranging public protests by various communities around service delivery and labour related challenges. Recurrent protests were recorded in Copesville, Edendale and Snathing areas. Communities have targeted road infrastructure and schools. The protests were driven largely by alleged poor service delivery in respect to
¶water, electricity and roads which are functions for which Msunduzi Municipality is responsible.
- The following issues were raised as reasons for poor functionality of Ward Committees: Ward councillors were reportedly not attending or chairing Ward Committee meetings in some wards; Some ward councillors were not compiling reports when required to do so, Ward Assistants (employed in each ward to provide secretariat to councillors) were failing the ward councillors because they do not submit portfolio of evidence to the Municipality which ultimately render most ward committees non-functional.
- Numerous allegations of improper practices occurring at the Municipality were received over the past 24 months from at least eight (8) different sources, being the Municipal and Allied Trade Union of South Africa (MATUSA), a number of whistle- blowers who chose to remain anonymous and Senior Managers within the Municipality who made allegations against the Municipal Manager. It is also a matter of public knowledge that a councillor of the Municipality reported certain matters to the Public Protector. Information in this regard was received from the Integrity Management Unit of the Office of the Premier.
- The Municipality had unlawfully designated 8 councillors as full-time, without the necessary determination of the positions they occupy as full time. The Municipality had thus breached the requirements of section 12 and section 18 of the Municipal Structures Act. Despite numerous requests for the Municipality to remedy the situation, it was only in December 2018 that this matter was authorized. The Municipality remains exposed to a serious audit query from the Auditor General. The Municipality has not held anyone accountable for this omission.
- The Municipality suspended the Municipal Manager on 2 August 2018, on allegations of gross misconduct. In terms of regulation 6(6)(a) of the Disciplinary Regulations for Senior Managers, the disciplinary hearing must commence within 3 months of the date of the precautionary suspension, failing which it will automatically lapse. The Municipal Manager had not been charged by the Municipality at the expiry of the 3 months period. However, on 09 November 2018, a disciplinary tribunal was held. The disciplinary inquiry is still ongoing.
- The CFO acted as Municipal Manager from the commencement of the suspension of the Municipal Manager. She was later seconded by the MEC for CoGTA to continue acting, pending the finalization of the disciplinary process of the Municipal Manager. The Municipality appointed an Acting CFO, which acting appointment was not supported by the MEC owing to the designated employee not meeting the experience requirements for the post. Despite advise from the MEC, the Municipality persisted with the acting appointment. On 4 March 2019, the Municipality was supported with the submission of names of qualified persons from whom the Municipality could appoint an acting CFO. Currently, the Municipality does not have the Head of its Technical Services Department. The previous incumbent was dismissed in June 2018. The position remains unfilled, which is a cause for concern.
8.Sound Financial Management and reasons for intervention
- The Municipality obtained negative audit outcomes for two consecutive financial years (2016/17 and 2017/18). The findings reflect poor record keeping and systems challenges as well as poor management of key financial processes. Some of the key findings include: Property, plant and equipment - The municipality did not appropriately account for property, plant and equipment in accordance with SA Standard of GRAP 17, Property, Plant and Equipment.
- The Municipality did not calculate the impairments on consumer debtors in accordance with SA Standard of GRAP 104, Financial Instruments. Interest was not charged on all overdue accounts, and where interest was charged on consumer accounts it was incorrectly computed.
- The Auditor-General was unable to obtain sufficient appropriate audit evidence and confirm by alternative means the Independent Development Trust receivable. Consequently, the Auditor-General was unable to determine whether any adjustment was necessary to receivables from exchange transactions stated at R81,97 million.
- The Municipality did not prepare and disclose the cash flow statement on a cash basis as required by SA Standard of GRAP 2, Cash Flow Statements. The Auditor-General
¶was unable to obtain sufficient appropriate audit evidence as the amount disclosed for unauthorised expenditure differed from the underlying records. Consequently, the Auditor-General was unable to determine whether any further adjustment was necessary to unauthorised expenditure stated at R361,22 million (2017: R361,22 million) in the financial statements.
- The Municipality did not include irregular expenditure in the notes to the financial statements, as required by section 125(2)(d) of the MFMA. It made payments in contravention of the supply chain management (SCM) regulations, resulting in irregular expenditure of R11,68 million. Consequently, irregular expenditure disclosed in the financial statements was understated by R11,68 million.
- The Municipality did not correctly disclose pension and medical aid deductions, as required by section 125(1)(c) of the MFMA, due to the poor status of the accounting records. The amount relating to pension and medical aid deductions differed from the supporting documents by R50,12 million. Consequently, the amount relating to pension and medical aid deductions disclosed in the financial statements was understated by R50, 12 million.
- During the course of the 2017/18 audit, the Auditor-General employees were allegedly ill-treated at the Municipality, to the extent that they had to be removed from the Municipality. An amicable resolution of the problem was brokered by CoGTA and Provincial Treasury, resulting in the return of the employees to complete the audit. Nonetheless, there were undue delays and thus the audit outcome at Msunduzi Municipality was issued later than the prescribed timeframe of 30 November 2017.
- As at December 2018, the Municipality indicated cash and cash equivalents, including short-term investments of R274 337 045 and unspent grants of R251 059 335. Grants were thus cash backed, however the remaining R23 277 710.00 would not be sufficient to pay operational costs and creditors.
- As at the end of June 2018, the Municipality reflected gross consumer debtors of R3 019 534 605. Of the total debtors 78% were over 90 days, indicating the inability of the Municipality to collect on old debt. As at June 2018, household debt comprised of R2,
¶3 billion, commercial debt R472 million and Government debt of R202 million. As at December 2018, the total debt increased by R138 078 395.00, an increase of 4, 5%.
9.Support measures provided by provincial government prior the invocation of section 139
- The Provincial Department of CoGTA, Provincial and National Treasury have all interacted with the Municipality in an effort to assist it resolve its challenges. The Department of Water and Sanitation (DWS) notified the Municipality of its intention to withhold a portion of Water Services Infrastructure Grant (WSIG), owing to poor performance by the Municipality, in an effort to assist it to have appropriate interventions.
- A study on the state of the electricity network was conducted and a Network Development Plan (NDP) was developed and approved. Provincial government kick started clean-up programmes to assist the Municipality in respect of its waste management function. Further, the Municipal Infrastructure Support Agency offered support to the Municipality, particularly with reference to the Project Management Unit of the Municipality, which support was rejected by the Municipality which branded it as unnecessary.
- In July 2018, the National Treasury drafted a recovery plan to turnaround the unfavourable governance, finance and service delivery position of the Municipality. CoGTA and the Provincial Treasury provided consolidated input into the recovery plan. In February 2019, the National Treasury conducted a mid-year performance assessment.
- The Department met with the Unions, management and the council on numerous occasions in an attempt to facilitate the resolution of differences. The Department facilitated the return of the Auditor General to site following their pull out citing safety concerns. The Department, together with Provincial Treasury assisted the Municipality in respect of its financial management matters and by recommending suitable personnel when the CFO was arrested and subsequently suspended.
- ¶The MEC authorised the investigation of allegations of maladministration, fraud and corruption when such were brought to the attention of the Department. Both the Department and Provincial Treasury conducts monthly and quarterly assessments of the finances of the Municipality and feedback is provided.
10.Terms of References of the Appointed Administrator
- Establishing and acting as chairperson of the Interim Finance Committee (IFC) to monitor and manage the cash flow of the municipality, approve or dis-approve purchase requisitions and to ensure that the Municipality’s cash position is not overdrawn.
- Ensuring that the IFC meets regularly and reports fortnightly to the Executive Committee of Council on the cash flow position, payments approved and disapproved and commitments made (via approved purchase orders).
- Implementing governance systems and procedures including oversight over the administration including ratification of decisions taken by the Municipal Council, the Executive Committee, Committees, Municipal Manager and Section 56 Managers in terms of delegated or original authority.
- Ensuring implementation of remedial action plans dealing with negative findings from the Auditor-General.
- Ensuring the implementation of all projects undertaken by the Municipality, including unblocking projects that have stalled.
- Ensuring that the Municipality implements measures to urgently improve its operations and maintenance programme with particular reference to waste management, roads and electricity maintenance.
- Ensuring that the requirements of the Local Government Disciplinary Regulations for Senior Managers, 2010 are met timely by the Municipality.
- Ensuring the implementation of findings arising from any investigations into fraud or maladministration or corruption.
11.Progress Report on the implementation of the intervention in the Municipality
- The Technical Steering Committee has been formed to guide the intervention and the inception meeting received a methodological approach and timeframes for the diagnosis report and development of recovery plan. The Diagnosis Report and Recover
¶Plan was finalised in June, after consultations and engagement with internal and external stakeholders throughout the City.
- All bank requirements to make Administrator a signatory to bank account were met, but awaiting bank approvals, cashflow monitored weekly. All management and Council decisions were ratified by the Administrator.
- Approval of all payments within one month after invoice, except those awaiting further details or subject of investigations. Daily collection of waste has been prioritised, but constrained by fleet availability as 4 out 17 compactors are functional. CBD clean-up plan completed and prioritized in terms of implementation as more resources have also been approved by CoGTA.
- Law enforcement was hampered by the fact that all guns in the municipal armoury were taken for ballistic testing by the National Trask Team investigating political killings.
- Interim Finance Committee has been set up to prioritize billing, meter reading, revenue collection, implementation of General Valuation Roll, compliance with Municipal Standard Charts of Accounts (mSCOA), and the effectiveness of municipal oversight strengthened from simply noting of reports to thorough considerations and deliberations on reports.
12.Opinions of Political Parties and Stakeholders of the Municipality
- During 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 African National Congress (ANC)
- The representative of the ANC welcomed and supported the PEC’s decision to invoke section 139(1)(b) of the Constitution in the Municipality, indicating that the Municipality was placed under Section 139(1) (b) of the Constitution by the KZN Provincial Government in April 2019.
- He further indicated that the ANC welcomes and fully supports the decision by the Provincial Government, adding that the intervention is not meant to fight any individual nor any political party, but to change the material conditions in the City in favour of the entire residents, but most importantly the poorest of the poor.
14.Opinion of the Democratic Alliance (DA)
- The representative of the DA welcomed the process and the merits of the imposition of intervention in terms of section 139(1)(b) of the Constitution, however, indicate that the challenges have been ongoing since August 2016 and it was a process and not an event, starting with the secondment and the appointment of the current and suspended Municipal Manager.
15.Opinion of the African Christian Democratic Party (ACDP)
- The representative of the ACDP tabled an opinion that support the intervention. The representative made allegation that some municipal officials were assisting the car washers to steal municipal water and electricity. The representative raised concerns about the stealing of municipal resources, due to political division within the ruling party.
16.Opinion of Inkatha Freedom Party (IFP)
- The representative of the IFP tabled an opinion that supported the intervention. The representative raised concerns that the Administrator was not properly introduced to the council, acknowledging that the presence of the Administrator provides hope in the Municipality and made allegation that the former MEC for CoGTA was biased towards the Municipality.
17.¶Opinion of AL JAMA
- The representative of the Al Jama submitted opinion that supported the invocation of the intervention. The main concerns raised related to the slowdown of service delivery and roads construction.
18.Opinion of the Traditional Leaders
- The representative of the traditional leaders welcomed the intervention in terms of section 139(1)(b) of the Constitution, and the visit of the NCOP Select Committee. The representative emphasised the need to provide support to the Municipality, and hoping that the intervention will yield good results.
19.Opinion of the South African Municipal Worker Union (SAMWU)
- The representative of the Union tabled an opinion that supported the intervention. The Union representative however, raised concerns with regard to salary disparities, poor leadership and management, lack of promotion, unfair remuneration system, divisions among the municipal workers, non-functionality of the local labour forum. The Union representative then appealed to the Administrator to deal with internal problems within the Municipality without biasness, and prioritizing service delivery within the communities.
20.Opinion of the Independent Municipal Allied Trade Union (IMATU)
- The representative of the Union supported the invocation of section 139(1)(b) of the Constitution in the Municipality, and the appointment of the Administrator. The Union representative then called for the extension of the time frame or period of the Administrator within the Municipality.
21.Opinion of the Business Chamber
- The representative of the Chamber raised concerns regarding recurrence of the intervention. The main concerns raised included the non-connection of electricity, poor
¶property evaluation, loss of jobs and selling of properties, inaccurate billing system. The representative then called for the recovery of money misappropriated, and the need to work together with the Municipality.
22.Findings and Observations of the Select Committee
- The Select Committee has observed that the MEC for CoGTA has complied with the procedural requirements as stipulated in the constitution to notify within 14 days the Minister of the CoGTA of the decision of the PEC to place the Municipality under intervention in terms of section 139(1)(b) Constitution. The Minister for CoGTA was notified on 5 May 2019, and approved the intervention notice on 30 May 2019.
- The Select Committee has also observed and noted that the MEC for CoGTA has notified the Municipality on the substantive matters of intervention on 6 May 2019, and introduced the Intervention Team and terms of reference to the Municipality during a council sitting dated 16 July 2019.
- The Select Committee has further noted that the MEC for CoGTA has notified per constitutional requirements, the NCOP and the KwaZulu-Natal Provincial Legislature of the notice of intervention in theMunicipality on 5 April 2019.
- The Select Committee observed and noted that the Department has provided support to the Municipality in terms of section 154 of the Constitution, prior to the invocation of section 139(1)(b) of the Constitution.
23.Recommendations of the Select Committee
- Having conducted the oversight visit to Msunduzi Local Municipality and interacted with internal and external stakeholders, the Select Committee on Cooperative Governance and Traditional Affairs, Water, Sanitation and Human Settlements, recommends as follows:
- ¶The NCOP approves the intervention in Msunduzi Local Municipality in terms of section 139(1)(b) of the Constitution.
- The MEC for CoGTA in KwaZulu-Natal should, upon approval of this intervention, table quarterly reports on the implementation of the Financial Recovery Plan as well as section 139(1)(b) of the Constitution.
- The Administrator should focus on the approved terms of reference that are time framed, produce and table quarterly reports to the NCOP.
- The Administrator’s report should be accompanied by a monthly Internal Audit Report, reflective of the state of performance and compliance of the Municipality across all functional units.
- The Municipal Council should conduct an oversight of performance and compliance of the Municipality, including implementation of consequence management for wrong-doing and where necessary, report all elements of criminality to the SAPS.
- The Administrator should ensure the tabling of all outstanding reports, including forensic investigations, to the Municipal Council within a period of fourteen (14) days.
- The Administrator should fast-track the process of filling of all vacant senior management positions, including all those in key skill areas.
23.1.8. The Select Committee should, in collaboration with the relevant Portfolio Committee in the KwaZulu-Natal Provincial Legislature, conduct a follow-up visit within a period of sixty (60) days, on the status of implementation of the recommendations and resolutions of the NCOP.
- The MEC for CoGTA in KwaZulu-Natal should, in collaboration with the Minister for CoGTA, provide continuous support to the Municipality in terms
¶of section 154 of the Constitution, and show demonstrable portfolio of evidence of the quality support, capacity building and monitoring.
- The MEC for CoGTA in KwaZulu-Natal should fast-track the process of tabling the forensic investigation report conducted in terms of section 106 of the Municipal System Act to Msunduzi Municipal Council, and then after to the NCOP.
Report to be considered.
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