ATC210819: Report of the Select Committee on Co-Operative Governance and Traditional Affairs, Water, Sanitation And Human Settlements On Notice of Dissolution issued in terms of Section 139(1)(C) of the Constitution (1996), in O.R Tambo District Municipality, Dated 19 August 2021

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

REPORT OF THE SELECT COMMITTEE ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS, WATER, SANITATION AND HUMAN SETTLEMENTS ON NOTICE OF DISSOLUTION ISSUED IN TERMS OF SECTION 139(1)(C) OF THE CONSTITUTION (1996), IN O.R TAMBO DISTRICT MUNICIPALITY, DATED 19 AUGUST 2021

 

1.         Background and Overview

 

1.1        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 O.R Tambo District Municipality in terms of section 139(1)(c) 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 dissolution by the Eastern Cape Provincial Executive Council (PEC) to the Select Committee for consideration and reporting.

 

1.3        On 18 August 2021, the Select Committee held a virtual interactive and consultative meeting with the Eastern Cape Department of Cooperative Governance and Traditional Affairs (CoGTA), internal and external stakeholders of the District Municipality on the notice of intervention invoked in terms of section 139(1)(c) of the Constitution in the District Municipality.

 

1.4        The main objective of the consultative virtual meeting was to solicit the opinions of all the stakeholders on the constitutional, procedural and substantive matters related to the invocation of the section 139(1)(c) in the District Municipality.

 

2.         General Overview of the Consultative Virtual Meeting

 

2.1        The Eastern Cape Department of CoGTAbriefed the meeting on the constitutional, procedural and substantive matters. The Mayor and the Speaker of the District Municipality, representatives of the political parties, Organised Labour, Traditional Leaders, Local Municipalities, Business Forums and Youth Structures, tabled their opinions on the invocation of section 139(1)(c) of the Constitution in the District Municipality.  

 

3.         Presentation by the Eastern Cape Department of CoGTA

 

3.1        The Department of CoGTA briefed the Select Committee and the stakeholders on the invocation of the section 139(1)(c) of the Constitution. The presentation focused on the background; substantive matters related to financial management; service delivery; good governance; institutional development; factors taken by the Executive Council as basis for dissolution and the state of affairs in the District Municipality.

 

4.         Background

 

4.1        The Department reported that the decision to invoke provisions of section 139(1)(c) of the Constitution was done after the District Municipality was given support on several areas, by both National & Provincial Treasuries and the Department of CoGTA and all these efforts couldn’t yield the expected results.The District Municipality has been facing serious governance and administrative crisis.In June 2020, the Municipal Manager was placed on a precautionary suspension following a media expose of the alleged payments to various companies, without having done any work. Consequently, various investigative agencies came on board to establish the veracity of the allegations and who could be held accountable for such deeds.

 

4.2        The President of South Africa issued Proclamation no. R23 of 2020 in terms of Gazette No. 43546, dated the 23 July 2020 for the Special Investigative Unit (SIU), after the request by the Premier, to investigate on the procurement of personal protective equipment (PPEs) in the District Municipality.An in-depth assessment was done by the Department on the institution with a view to assess the political environment under which the District Municipality operates in, how this impacted on the social responsibility of the District Municipality as outlined in section 152 of the Constitution, and finally the economic impact as it relates to the expenditure of the municipal grants and use of the public purse in general reflected a bad state of affairs in the District Municipality.

 

 

            The report revealed major factual arguments that were advanced for a request for intervention.

The facts were presented along four (4) pillars, i.e. Financial Management; Service DeliveryGood Governance & Institutional Capability.

 

5.         Financial Management

 

5.1        The financial position of the District Municipality was at the state of brink to collapse, with most of the indicators showing signs of distress. The municipality’s 2021/22 draft MTREF budget revealed an operating deficit budget of R14 million in the 2021/22 financial year and insignificant surpluses of an average of R38 million in the MTREF. The current ratio was reported as 1.1 per cent in the 2021/22. The District is close to technical insolvency because the available assets are very low compared to the current liabilities. The 2021/22 financial year irregularly adopted budget was assessed to be un-funded with a shortfall of R15 million, however the magnitude of the shortfall might be higher than National Treasury’s calculation if the credible information can be disclosed.

 

5.2.       The Municipality budgeted for a zero increase tariffs on business and domestic in the 2021/22 MTREF period, and the low collection rate of 67 per cent estimated in the MTREF remains a challenge. The Municipality deliver the water service to the peri-urban area without recovering any costs of providing the service. Further, there is no appetite to implement the strategy that was approved by council to bill the peri-urban areas and the progress report was not presented during the engagement.

 

5.3        While the Municipality has a low revenue base, there are no efforts to curb an operating expenditure. The Municipality spend far above the corresponding revenue. In addition, theMunicipality made a payment of danger allowance to the employees who were at the front line during national lockdown level 1 to 3 of COVID 19 pandemic in the 2020/21 financial year.

 

5.4        The South African Local Government Bargaining Council (SALGBC) Circular no. 5 of 2020 provides advice to municipalities about the employees working at the frontline to fight the COVID 19 disease. The circular provides that the council of the Municipality must have an approved policy which should guide how the danger allowance should be paid.

 

5.5        O.R Tambo District struggled to respond to how the allowances were determined, however the Municipality reported to have such policy at the time of the payment. The Municipality owes National Treasury an amount of R234 million, which was accounted as pre-payments in the 2019/20 financial statements.

 

5.6       The municipality budgeted for employee related costs of 43 per cent of the total operating budget due to the financial decisions that are taken without due diligence. The employee related costs remained higher than the National Treasury norm of 40 per cent.

 

5.7       The council adopted the implementation of the vehicle allowances at an amount of R12000 andcellphone allowances based on the draft policy that was developed a day before the council meeting. These allowances are also being offered to the employees who do not use cars to perform the duties of the Municipality.

 

5.8        The Municipality incurred wasteful expenditure which included the hiring of VIP security for the CFO costing more than R100 000 a month (almost a year now), the costs are incurred on councillors sleeping in hotels for their personal and political activities not related to municipal affairs.

 

6.      Service Delivery

 

6.1     Backlog eradication was not the only substantial challenge facing the District Municipality, much of the existing water and sanitation infrastructure was not adequately maintained and, in many cases, is not functioning. Ongoing refurbishment and maintenance are therefore a priority for sustainable water services delivery, but this has not attended to by the Municipality regardless of numerous advises by the Department.

 

6.2     The Municipality received R979,793 million which was adjusted to R943,093 million during 2019/20 financial year, for Municipal Infrastructure Grant (MIG), Water Service Infrastructure Grant (WSIG) and Regional Bulk Infrastructure Grant (RBIG).At the end of the financial year, Municipality had spent R625,625 million or 66% with an unspent of R317,468 million. An amount of R223,407 million was approved and R94,061 million was rejected during rollover process in 2019/20 financial year.

 

6.3     The Municipality has allocated a portion of funds to an organ of state (Amatola Water Board) for the MIG & RBIG schedule 5 conditional grants, without following the due process. Section 17 of 2020 DoRA state that, any expenditure incurred by the organ of state without consulting Transferring Officer and Provincial Treasury and approval by National Treasury, such expenditure will not be recognised and will be unauthorised expenditure.

6.4     A balance of R410,910 million remained as at the end of May 2021, which will be impractical to be fully spent before the end of June 2021. Any unspent amount as at end June 2021 will be at risk, due to the acting capacity of Municipal Manager as per MFMA circular 108 (acting for more than 12 months rollover will be rejected). Total amount lost is R379,798 million in the past three years.

 

7.      Good Governance

 

7.1     The council meetings of OR Tambo are sitting, though the composition is questionable because the recalled Councillors from local municipalities are always invited by the Speaker to be part of council meetings.

 

7.2     The presence of the recalled representative from locals has a huge risk of making all those resolutions that were taken in those council meetings to be unlawful or invalid, due to the composition. The council has since adopted the Budget/IDP 2021-2022 in a council meeting held on 30 June 2021, with councillors that are again no longer in the District list at the IEC.

 

7.3     The Budget/IDP was adopted in the absence of the Executive Mayor as she is challenging the presence of the recalled councillors in council meetings, and the report was tabled by the Deputy Executive Mayor. It must be noted that the budget was never tabled by the Executive Mayor to the Mayoral Committee and this in terms of the law is a procedural imperative.

 

7.4     The MPAC is not functional in the sense that there is continued wasteful expenditure incurred by the institution which include hiring of VIP security for the CFO costing more than R100 000 per month for almost a year, now and there is no action taken in respect of this. Further, there are costs that are incurred on councillors sleeping in hotels for their personal and political activities not related to municipal affairs. This is gross violation of all regulations on financial management thus display a clear reflection on the non-functionality of the MPAC.

 

7.5     The Audit Committee and the municipal Internal Audit are functional, however, the recommendations by these committees are not being executed or implemented by both management and council. This therefore means that their existence and operations do not add any value, the Audit Committee members are paid and their work is basically ignored by the institution. The relations between the two have broken down to the extent that the Executive Mayor is no longer attending council meetings convened by the Speaker, questioning the composition of the council. The Speaker continues to convene council meetings, inviting the recalled representatives (Councillors) from locals and these meetings are regarded as unlawful together with their resolutions.

 

7.6     In council meetings convened by the Speaker, the reports that are supposed to be tabled by the Executive Mayor are presented by the Deputy Executive Mayor and this is an anomaly as it is not provided in law. On 26 May 2021, two council meetings were convened, the one of the 39 Councillors who petitioned the Speaker to call a meeting, and another called by the Speaker with his group of councillors including the recalled representatives from locals.

 

7.7     The council meeting that was called by 39 Councillors removed the Speaker and the Deputy Executive Mayor and that has since been nullified by the judgement dated 18 June 2021. The Municipality as at the end of May, had two Acting Municipal Managers, the one appointed by the Executive Mayor and another one appointed through the illegal council meetings convened by the Speaker with Councillors that are no longer in the district list, and this has since been nullified by the judgement dated 18 June 2021.

 

7.8        The non-cooperation between the Executive Mayor and the Speaker has since spilled over to the administration wherein the senior management is divided with another group working with the Executive Mayor and the CFO together with another group are reporting or accounting to the Speaker. The Municipality is currently faced with numerous litigations that are unnecessary and the Speaker’s office had illegally taken over Legal Services work from a responsible Director.

 

 

 

 

 

8.         State of Affairs in the District Municipality

 

8.1        The representations by the Executive Mayor and the Speaker demonstrate extreme divisions amongst the office bearers in the Municipality. The Executive Mayor’s response was accompanied by 27 Councillors signatures of council. The Speaker stated that he was mandated by council to make the representation.

 

8.2        The MEC has received a request from the Speaker of Nyandeni Local Municipality. The request is for the removal of 5 Councillors as Councillors of Nyandeni Local Municipality. These Councillors are alleged to have breached the Code of Conduct applicable to Councillors and one of the alleged breaches is that these Councillors have been impersonating representatives of the Nyandeni Local Municipal Council within the O.R Tambo District. They have acted fraudulently and continued to extract financial benefit in the form of salaries from O.R Tambo District Municipal Council with their actions.

 

8.3        The inability to fulfil executive obligations is mainly the result of the conduct of the municipal officer bearers. It includes taking resolutions in council meetings that are not properly constituted and non-observation of the roles and responsibilities. It cannot be appropriate for the Speaker to assume executive functions, including administrative functions like taking over Legal Services and dealing with staff matters like conditions of employment and disciplinary matters. The Executive Mayor herself had to be corrected by Court that she cannot appoint an acting Municipal Manager. The dissolution of council is the appropriate step in the circumstances.

 

8.4        Non councillors have never been permitted to participate in the decision making of council. It is rare for the Speaker to take over an Executive function like Legal Services.  The Provincial Executive has never received conflicting responses on the proposed or intended invocation of section 139(1) before.The Municipality cannot fulfil its executive obligations exclusively because of council. The appropriate form of intervention in the circumstances is invocation of section 139(1)(c) of the Constitution.

 

8.5        On the basis of the above exposition and consideration of all other implications in respect of the status qou, the Executive Council resolved to invoke the provisions of section 139(1)(c) in the affairs of O.R. Tambo District Municipality and appoint an Administrator until a newly elected municipal council has been declared elected. Further, the Executive Council resolved to mandate the MEC responsible for Local Government in the Province to facilitate the implementation of procedural processes of section 139(3) of the Constitution to effect the dissolution, such processes have since been done.

 

9.         Opinions of the Internal and External Stakeholders on the Invocation of Section 139(1)(c) of the Constitution in the District Municipality

 

10.        Opinion of the Mayor of the District Municipality

 

10.1      The Mayor tabled an opinion that supported the invocation of section 139(1)(c) of the Constitution in the District Municipality. The Mayor raised concerns that on the 15th April 2021, the Independent Electoral Commission (“IEC”), published in the Government Gazette, replacement of 18 councillors of O.R Tambo District Municipality (“the municipality”). The Speaker continue to invite the replaced Councillors and allow them to participate in council meetings as if they are still councillors. The purported “council” meetings take resolution even though they are constituted by non-councillors.

 

10.2      The municipal office bearers are so in disagreement, so much that it must take court to decide who is the legitimate head of administration. It must be said that this is a manifest failure by the Municipality to establish and maintain its administration. The crisis in the governance of the Municipality has led to a situation where the Municipality spend more than R100 000 on VIP security for the CFO.

 

10.3      The Mayor further raised concerns about the appointment of independent investigator and lawyer by the Speaker, without following due procurement processes; failure by the CFO to provide report on Covid- 19 expenditure report; attempts by some Councillors, including the Speaker, to disrupt the strategic planning workshop. 

 

11.        Opinion of the Speaker of District Municipality

 

11.1      The Speaker tabled an opinion that rejected the invocation of section 139(1)(c) of the Constitution in the District Municipality. The Speaker raised concerns about R3 billion incurred fruitless and wasteful expenditures,failure by the Department of CoGTAto table a report on forensic investigation conducted in terms of section 106 of the Municipal Systems Act, failure by the MEC of CoGTA to root out corruption within the Municipality, lack of progress on opening of criminal cases of fraud and maladministration. The Speaker indicated that he does not support the substantive matters related to the invocation of section 139(1)(c) of the Constitution and he is prepared to challenge the invocation at another level.

 

12.        Opinion of the South African Municipal WorkersUnion (SAMWU)

 

12.1      The representative of the Union tabled an opinion that supported the invocation of section 139 (1)(c) of the Constitution in the District Municipality. The representative raised concerns on the failure of the District Municipality to fight corruption, municipal council failure to serve the interest of the community, non-payment of salaries, personal battles among Councillors, lack of service delivery and political instability.    

 

13.        Opinion of the Independent Municipal and Allied Trade Union (IMATU)

 

13.1      The representative of the Union tabled an opinion that rejected the invocation of section 139(1)(c) of the Constitution in the District Municipality. The representative raised concerns about the lack of substantive matters justifying the dissolution, failure by the Department of CoGTA to table report on forensic investigation conducted in terms of section 106 of the Municipal Systems Act, deployment of officials in terms of section 154 of the Constitution who have been accused of corruption, failure by the Department to issue directive in terms of section 139(1)(a) or section 139(1)(b) of the Constitution.

 

14.        Opinion of the Democratic Alliance (DA)

 

14.1      The representative of the Democratic Alliance tabled an opinion that rejected the invocation of section 139(1)(c) of the Constitution in the District Municipality. The representative raised concerns about the lack of consequence management against the late Municipal Accounting Officer, corruption within the Municipality, factional battles within the ANC, billions incurred due to irregular expenditure and failure by the Department of CoGTAto request application of section 139(5) from Treasury to provide assistance for the development of the municipal financial recovery plan, non-completion of projects initiated since 2011.

 

15.        Opinion of United Democratic Movement (UDM)

 

15.1      The representative of the United Democratic Movement tabled an opinion that rejected the intervention to dissolve the District Municipality. The representative raised concerns about allegations of corruption, factional battles within the ANC, failure by the Department of CoGTA to table report on forensic investigation conducted in terms of section 106 of the Municipal Systems Act, non-setting of council meetings and the absence of the Executive Mayor for seven times in council meetings and non-implementation of council decisions.   

 

16.        Opinion the Economic Freedom Fighters (EFF)

 

16.1      The representative of the Economic Freedom Fighters tabled an opinion that rejected the dissolution of the District Municipality. The representative raised concerns about factional politics within the ANC, lack of service delivery, non-tabling of reports to the council, R3 billion of irregular expenditure incurred by the District Municipality.   

 

17.        Opinion of the Independent Candidate

 

17.1      The Independent Candidate tabled an opinion that rejected the invocation of section 139(1)(c) of the Constitution in the District Municipality. The representative raised concerns with regard to the lack of consultation, change of council decisions by the Mayor, payment of contractors without delivering services, high level of corruption and service delivery problems related to non-provision of water and proper sanitation.

 

18.        Opinion of the Traditional Leaders

 

18.1      The representative of the traditional leaders tabled an opinion that rejected the dissolution of the District Municipality. The representative of the traditional leaders emphasised the importance allowing the District Municipality to continue with its executive responsibilities.

 

19.        Opinion of the O.R Tambo Business Forum

 

19.1      The representative of the O.R Tambo Business Forum tabled an opinion that rejected the invocation of section 139(1)(c) of the Constitution in the District Municipality. The representative raised concerns about corruption, maladministration, non-implementation of council resolutions and private investigation findings and non-tabling of section 106 forensic investigation report by the Department of CoGTA.

           

20.        Opinion of the OR Tambo Business Formation

 

20.1      The representative of the O.R Tambo Business Formation tabled an opinion that supported thedissolution of the District Municipality. The representative raised concerns about the failure of the District Municipality to pay service providers on time, delays in the implementation of SMEs programmes and lack of business services.

 

21.        Opinion of the OR Tambo Business Chamber

 

21.1      The representative of the O.R Tambo Business Chamber tabled an opinion that supported the invocation of section 139(1)(c) of the Constitution in the District Municipality. The representative raised concerns about non-payment of service providers for period of eight months, divisions among the Councillors and instability. 

 

22.        Opinion of the O.R Tambo Women in Business

 

22.1      The representative of the O.R Tambo Women in Business tabled an opinion that rejected the dissolution of the District Municipality. The representative raised concerns about the failure of the Department of CoGTA to table business plans and the invocation of section 139(1)(c) of the Constitution to serve personal interests. 

           

23.        Opinion of the South African Youth Council

 

 

23.1      The representative of the South African Youth Council tabled an opinion that rejected the invocation of section 139(1)(c) of the Constitution in the District Municipality. The representative raised concerns about youth unemployment, corruption, lack of consultation on support provided in terms of section 154 and its benefits to the youth, political infightings, non–compliance with law and non–tabling of forensic investigation report conducted in terms of section 106 of the Municipal System Act by the Department.

24.        Opinion of the South African Young Communist Party

 

24.1      The representative of the South African Young Communist Party tabled an opinion that supported thedissolution ofthe District Municipality. The representative emphasised the importance of fighting corruption, linking the IDP and budget, equitable share and provision of services to the rural communities.  

 

25.        Opinion of the Ingquza Hill Local Municipality

25.1      The Mayor of the Local Municipality tabled an opinion that supported the invocation of section 139(1)(c) of the Constitution in the District Municipality. The Mayor raised concerns about the lack of water and sanitation services, Councillors serving in the District not taking mandates from the Local Municipality.

26.        Opinion of the King SabataDalindyebo Local Municipality

26.1      The Mayor of the Local Municipality tabled an opinion that supported the invocation of section 139(1)(c) of the Constitution in the District Municipality. The Mayor raised concerns about service delivery, community frustrations and emphasised a need of service level agreement with the District for provision of water to the communities.

27.        Opinion of the Mhlontlo Local Municipality

27.1      The Mayor of the Local Municipality tabled an opinion that rejected the dissolution of the District Municipality. The Mayor raised concerns about the invocation of the dissolution against the council but not against the administration, corruption, payment of contractors without completion of water projects.

28.        Opinion of the Nyandeni Local Municipality

28.1      The Mayor of the Local Municipality tabled an opinion that supported the invocation of section 139(1)(c) of the Constitution in the District Municipality.TheMayor raised concerns about the failure of the District Municipality to perform its executive duties of providing service delivery and, lack of access to clean water. 

 

29.        Opinion of the Port St Johns Local Municipality

29.1      The Speaker of the Local Municipality tabled an opinion that rejected the invocation of section 139(1)(c) of the Constitution in the District Municipality. The Speaker emphasised the need to provide support to the District Municipality in terms of section 154 of the Constitution. The Speaker further raised concerns about the application of section 139(1)(c) against the council, excluding the officials serving in the administration.    

 

30.        Observations of the Select Committee

 

30.1      The Select Committee has noted that on 08th July 2021, the Special Meeting of the Executive Council after the tabling of the detailed report by the Department (CoGTA),resolved that it is considering invoking the provisions of section 139(1)(c) in the affairs of O.R Tambo District Municipality and directed that the MEC responsible for CoGTAto write to the Speaker and the Executive Mayor of the O.R Tambo District Municipality, and request reasons why the provisions of section 139(1)(c) may not be invoked in the Municipality; and request that a response be given within seven (7) business days.

 

30.2      The Select Committee has also noted that on 09th July 2021, the notices of intention to invoke the provisions of section 139(1)(c) in the affairs of the O.R Tambo District Municipality were issued by the MEC, and delivered to both the Speaker and the Executive Mayor as directed by Executive Council.

 

30.3      The Select Committee has further noted that according to the Notice, the Provincial Executive of the Eastern Cape resolved on 4 August 2021, to intervene in the Municipality in terms of section 139(1)(c) of the Constitution. The Notice from the MEC for CoGTA, dated 6 August 2021, submitted in terms of section 139(3)(a)(ii), was received by the NCOP on the same day.

 

30.4      The Select Committee has observed and noted that the substantive matters related to the invocation of section 139(1)(c) of the Constitution in the District Municipality revolve around local government pillars of financial management, service delivery, good governance and institutional capability.   

 

30.5      The Select Committee has noted with concern, through the inputs made by some stakeholders and the analysis of the report presented, that the relations between the Speaker and the Executive Mayor have broken down to the extent that the Executive Mayor is no longer attending council meetings convened by the Speaker, questioning the composition of the council. Furthermore, recalled Councillors from local municipalities are always invited to be part of the council meetings by the Speaker, resulting in the composition of the meetings to be questioned. 

 

30.6      The Select Committee noted that most of the internal and external stakeholders who opposed the invocation of section 139(1)(c) of the Constitution in the District Municipality, raised concerns with regard to the failure of the MEC for CoGTA to table report to the council on forensic investigation conducted in terms of section 106 of the Municipal Systems Act.

 

30.7      The Select Committee has taken cognisant of the constitutional provision that the dissolution takes effect fourteen days from the date of receipt by the NCOP, that is 20 August 2021. According to the Notice, if the dissolution takes effect, Mr Basil Mase will be appointed as an Administrator to act until a newly elected Municipal Council has been declared elected.

 

31.        Recommendations of the Select Committee

 

31.1      Having virtual consulted and engaged with the Department of Cooperative Governance and Traditional Affairs as well as the internal and external stakeholders of the District Municipality, the Select Committee recommends to the NCOP in terms of Rule 101 as follows: 

 

31.1.1   The NCOP approvesthe invocation of section 139(1)(c) of the Constitution in O.R Tambo District Municipality.

 

31.1.2   The Eastern Cape MEC for Cooperative Governance and Traditional Affairs should table the report on the forensic investigation conducted in terms of section 106 of the Municipal System Act to the NCOP.

 

            31.1.3   The Eastern Cape MEC for Cooperative Governance and Traditional Affairs should provide quarterly progress reports on forensic investigation reports conducted by the Special Investigation Unit in terms of Presidential Proclamations.

 

            31.1.4   The Select Committee on Cooperative Governance and Traditional Affairs should align its quarterly programmes to ensure continuous monitoring of the implementations of the findings and recommendations of investigations reports conducted in terms of section 106 of the Municipal System Act and Special Investigation Unit in terms of the Presidential Proclamations in Local and District Municipalities.

 

Report to be considered.