ATC191029: 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 Naledi Local Municipality, dated 29 October 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 Naledi Local Municipality, dated 29 October 2019
1. Background and Overview
1.1 The Select Committee on Cooperative Governance and Traditional Affairs, Water, Sanitation and Human Settlements, having received the referral from the National Council of Provinces (NCOP), to consider and report on the notice of intervention invoked in Naledi Local Municipality in terms of section 139(1)(b) of the Constitution, 1996 the Select Committee reports as follows:
1.2 On 10 April 2019, the North West MEC for Local Government and Human Settlements 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 Naledi Local Municipality.
1.3 Subsequent to the tabling and in accordance to NCOP Rule 101, the Office of the Chairperson of the NCOP referred the notice of intervention by the North West MEC for Local Government and Human Settlements, to the Select Committee for consideration and report. On 28 August 2019, the Select Committee conducted a loco inspection in Naledi Local Municipality.
2. Objective of the Loco Inspection in Naledi 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) of the Constitution.
3. Composition of the Delegation
3.1 The Select Committee was composed of the following Members of Parliament and officials: Hon SE Mfayela (IFP) KwaZulu-Natal; Hon EM Mthethwa (ANC) KwaZulu-Natal; Hon MP Mmola (ANC) Mpumalanga; Hon S Zandamela (EFF) Mpumalanga; Hon TSC Dodovu (ANC) North West; Mr TM Manele (Committee Secretary: Committee Section); Mr N Mfuku (Content Adviser: Committee Section); Mr B Mahlangeni (Researcher: Research Unit); Ms J le Roux (Researcher: Research Unit); Mr M Mbebe (Procedural Officer: NCOP) and Mr G Mankay (Committee Assistant: Committee Section).
4. General Overview of the Loco Inspection at Naledi Local Municipality
4.1 On 28 August 2019, the Select Committee interacted with the MEC for Local Government and Human Settlements, Administrator, representatives of the African National Congress (ANC), Democratic Alliance (DA), Economic Freedom Fighters (EFF), Organised labour, Agri-Forum, Youth Forum, Business Forum and Women in Construction Forum.
4.2 The MEC made a presentation on the procedural and substantive reasons for the intervention. The Administrator presented a progress report and 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.
5. Presentation by the MEC for Local Government and Human Settlements
5.1 The MEC made a presentation on the status of the intervention in the Municipality. The departmental presentation focused on the background, procedural and substantive matters related to the intervention, status on the appointment of Administrator and recommendations.
6. Substantive Matter 1: Collapse of service delivery and rationale for intervention in terms of section 139(1)(b) of the Constitution
- Old and inadequate sanitation infrastructure in the main town played a major role in causing blockages leading to spillages of sewerage.
- There is generally poor maintenance and operations of infrastructure.
- Poor expenditure of MIG, which affected infrastructure development.
7. Substantive Matter 2: Instability of good governance and rationale for intervention in terms section 139(1)(b) of the Constitution
- Failure by council to fill senior management positions, within the prescribed period. Currently the vacancy rate is at 67%.
- Labour unrest (due to the failure to pay pension funds of employees and to provide protective clothing), which affected the day-to-day administration of the Municipality.
- Poor audit outcomes with recurrent audit findings pertaining to irregular expenditure and unauthorized expenditure, and the Municipality has not addressed them in accordance with section 32 of the MFMA.
8. Substantive Matter 3: Financial distress and rational for intervention in terms of section 139(1)(b) of the Constitution
- Serious cash flow crisis, hence the Municipality’s inability to meet its financial obligations. Most of its creditors are not paid within 30 days as per MFMA, non-payment of third party transactions.
- The inability to implement credit control measures to recover outstanding debts from customers due to amongst others, inaccurate billing, unbilled households, water and electricity losses.
- The total outstanding debtors is standing at R308,493 million as at January 2019. The total outstanding creditors as at end of January 2019 is at R386, 996,263 of which R225, 900,702 is owed to Eskom. The Municipality currently is only able to service Eskom account and salaries as their main priority.
- Costly EPWP programme which the year to date expenditure is at R2,5 million, against the grant allocation that is at R1,6 million.
- The Municipality implemented unfunded budgets for the past three years, which was as a results of over commitments on the operations.
9. Progress Report on the implementation of the intervention in the Municipality
9.1 In order to improve sound financial management, the Administrator has developed a financial plan to be endorsed by the council. The process of paying creditors (Eskom, SARS and other third parties) has started and the Municipality has begun the process of entering into repayment agreements with creditors, so as to prevent costs associated with litigations.
9.2 The Municipality has opened the process of consumer accounts for extension 25 and 28. A financial plan which entail cost containment measures has been developed and approved by the council.
9.3 A revenue committee has been resuscitated, and overtime payments have been reduced by implementing a shift system.
9.4 The non–paying consumers have been disconnected to enforce payment. The Municipality has taken numerous strategies and projects to address the challenges faced by the Municipality in respect of capacity in Debt Collection Department, non-billing of consumers, delays on printing and posting of consumer accounts, and maintenance of indigent register.
9.5 The process of developing and updating UIF, expenditure registers and investigation is ongoing. Some expenditure was irregular as a result of incorrect composition of the Bid Adjudication Committee.
9.6 The Municipality is currently putting in place systems to deal with the culture of non-compliance with MFMA and Circular 68, as a result of shortage of personnel in the Supply Chain Management Section.
9.7 The Administrator is in the process of ensuring the functionality of the Municipal Public Accounts Committee to perform oversight on the Unemployment Insurance Funds, municipal expenditure and implementation of projects.
10. Opinions of Political Parties and Stakeholders of the Municipality
10.1 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:
11. Opinion of the African National Congress (ANC)
11.1 The representative of the ANC welcomed and supported the PEC’s decision to invoke section 139(1)(b) of the Constitution in the Municipality, and the progress made by the Administrator. The representative raised concerns with regard to the non-sitting of council meetings, official failure to support the councillors with documents for effective functional of Municipal Public Accounts Committee. The representative emphasised the need to fast-track the appointment of section 56 managers.
12. Opinion of the Democratic Alliance (DA)
12.1 The DA tabled an opinion that supported the intervention. The representative indicated that the problems faced by the Municipality started in 2016. Some of the concerns raised by the representative included political interference in the administration, misappropriation of funds, inability to pay third parties, non-payment of creditors, overstaffing and appointment of unqualified and incompetent municipal manager and low morale of municipal employees.
13. Opinion of the Economic Freedom Fighters (EFF)
13.1 The EFF tabled an opinion that supported the invocation of section 139(1)(c) of the Constitution, rather than section 139(1)(b). The representative raised concerns with regard to the lack of consequence management, non–submission of report on local economic development, poor service delivery, lack of oversight on the implementation of projects by the MPAC, spillage of sewage within the communities. The representative then emphasised the need to prioritize the appointment of the chief financial officer in the Municipality.
14. Opinion of the South African Municipal Worker Union (SAMWU)
14.1 The representative of the Union tabled an opinion that supported the intervention. The Union representative indicated that they have played a key role in mobilizing and calling for the intervention in the Municipality. Some of the main concerns raised by the Union’s representative included, political interference in administration, former senior officials and the Speaker testifying against the Municipality, tendencies of municipal politicians acting like managers, maladministration and poor management.
15. Opinion of the Independent Municipal Allied Trade Union (IMATU)
15.1 The Union tabled an opinion that supported the invocation of section 139(1)(b) of the Constitution. The Union raised concerns on behalf of its constituency on matters related to municipal instability, incidences of violence, non-payment of third parties, unfair treatment of employees, municipal failure to address community concerns.
15.2 The representative called for support and financial assistance from the Department of Local Government and Human Settlements, and assistance from the District Municipality to enable the Fire Department of the Municipality to perform its operational duties.
16. Opinion of the Business Forum
16.1 The representative of the Business Forum welcomed the intervention and the visit of the NCOP Select Committee. However, concerns were raised about local businesses not benefiting in community projects, fighting within the community members to access Extended Public Works Programmes, lack of partnership between the Municipality, local emerging businesses and farmers owing the Municipality.
17. Opinion of the Women in Construction Forum
17.1 The representative of the Women in Construction Forum tabled an opinion that supported the intervention. The representative of the Forum raised concerns with regard to the political interference of councillors, and the municipal failure to pay contractors within the stipulated 30 days’ period, big companies owing the Municipality and the lack of opportunities for women to access and own farms.
18. Opinion of AfriForum
18.1 The representative of the AfriForum supported the decision to invoke section 139(1)(b) of the Constitution in the Municipality. The main concerns raised by AfriForum’s representative included sewage problems, high salary bill but low performance, lack of proper management of municipal equipment, intimidation of municipal employees, lack of ethical behaviour and discipline.
18.2 The representative stressed the importance of appointing skilled supervisors, skilling of employees, rewarding good performers, financial assistance to the Municipality and holding employees accountable.
19. Opinion of the Youth Forum
19.1 The representative of the Forum supported the intervention in the Municipality. The main concerns raised by the Forum related to the lack of youth developmental projects within the community, high rate of unemployment and drugs, political interference in the administration, and municipal procurement process advantaging 70% of contractors outside the local community.
20. Findings and Observations of the Select Committee
20.1 The Select Committee has observed that the MEC for Local Government and Human Settlements has complied with the procedural requirements as stipulated in the Constitution to notify within 14 days, the Minister of CoGTA of the decision of the PEC to place the Municipality under intervention. The Select Committee has noted that the Minister for CoGTA approved the intervention notice on 30 May 2019.
20.2 The Select Committee has also observed and noted that the MEC for Local Government and Human Settlements, notified the Municipality of the procedural and substantive matters of intervention on 6 July 2019, and introduced the Intervention Team and the terms of reference to the Municipality during a council sitting dated 8 July 2019.
20.3 The Select Committee has further noted that the MEC for Local Government and Human Settlements has notified, per constitutional requirements, the NCOP and the North West Provincial Legislature of the notice of intervention in the Municipality on 10 April 2019.
20.4 On substantive matters, the Select Committee has found and noted that the collapse of service delivery, instability on good governance in the administration as well as distress on financial viability and management, have all contributed to the executive decision to invoke section 139(1)(b) of the Constitution in the Municipality.
20.5 On the implementation of section 139(1)(b) of the Constitution, the Select Committee has noted the appointed Administrators (Intervention Team), and progress made in respect of revenue enhancement project implemented by the Department, council agreement to resuscitate revenue enhancement committee, reduction of overtime payments by implementing shift system, development of financial plan containing cost containment measures, disconnection of non-paying consumers to enforce payment.
20.6 The Select Committee has noted with concern the existence of violence, intimidation of officials and councillors by community members, and the behaviour of the municipal stakeholder such as the AfriForum, who dumped uncollected rubbish to the municipal premises.
20.7 The Select Committee has noted that the majority of internal and external stakeholders engaged during the oversight period in the Municipality, supported the invocation of section 139(1)(b) of the Constitution, while the representative of the Economic Freedom Fighters argued for the invocation of section 139(1)(c) of the Constitution.
21. Opinion of the Select Committee
21.1 Section 152 (1)(b) of the Constitution provides that a Municipality must ensure the provision of services to communities in a sustainable manner, and section 152 (1)(d) of the Constitution provides that a municipality must promote a safe and healthy environment. The Select Committee is of the opinion that the service delivery failures of the Municipality have triggered the invocation of section 139(1)(b) of the Constitution.
21.2 Section 153(a) of the Constitution provides that a municipality must structure and manage its administration, and budgeting and planning processes to give priority to the basic needs of the community, and to promote the social and economic development of the community. In terms of section 129 of the MFMA, is should consider the annual reports and adopt oversight reports.
21.3 The Select Committee is of the opinion that the instability related to good governance as captured in the notices tabled to the NCOP, the Minister for CoGTA and the presentation made by the MEC on 27 August 2019, has provided justifiable substantive reasons for putting the Municipality under section 139(1)(b) of the Constitution.
21.4 The Select Committee is of the opinion that the financial distress of the Municipality, inability to submit annual financial statements and ensuring alignment of the budget with the Integrated Development Plan (IDP), has to a large extent, triggered the rationale and motivation for invocation of the section 139 in the Municipality.
21.5 The Select Committee has noted during its deliberations on the matter, the majority of political parties in this house such as the African National Congress (ANC), Economic Freedom Fighters (EFF), Inkatha Freedom Party (IFP) and the Freedom Front Plus (FF+), supports the intervention on the basis of the substantive, procedural and constitutional matters in the Municipality. It is only the Democratic Alliance (DA) which has requested that its rejection of the intervention be recorded.
22. Recommendations of the Select Committee
22.1.1 Having conducted the oversight visit to Naledi Local Municipality and interacted with
internal and external stakeholders, the Select Committee on Cooperative Governance
and Traditional Affairs, Water, Sanitation and Human Settlements, recommends to the
House as follows:
22.1.2 The Select Committee notes the intervention in terms of section 139 (1)(b) of the
Constitution in Naledi Local Municipality expired on 30 September 2019.
22.1.3 Further notes that in terms of section 139 (2) (b) (ii) of the Constitution, the intervention must end if the Council disapproves of it within a period of 180 days after the intervention began or by the end of that period, if the intervention has not been approved.
22.1.4 As the intervention has expired by operation of the law, if the PEC of North West sees the need to intervene it should re-table the notice of intervention to the NCOP.
Report to be considered.
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