ATC220906: Report of the Select Committee on Co-Operative Governance and Traditional Affairs, Water, Sanitation and Human Settlements on withdrawal of Interventions issued in terms of Section 139(1)(B) of the Constitution (1996) in Maluti-A Phofung and Mafube Local Municipalities - dated 2 August 2022
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 withdrawal of Interventions issued in terms of Section 139(1)(B) of the Constitution (1996) in Maluti-A Phofung and Mafube Local Municipalities - dated 2 August 2022
1. Background and Overview
1.1 The Select Committee on Co-operative 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 withdrawal of interventions invoked in terms of section 139(1)(b) of the Constitution in Maluti-A-Phofung and Mafube Local Municipalities, reports as follows:
1.2 In terms of NCOP Rule 101, the Office of the Chairperson of the NCOP referred the notices of withdrawal of interventions by the Free State MEC for Cooperative Governance and Traditional Affairs, to the Select Committee for consideration and reporting.
1.3 On 17 May 2022, the Select Committee had a virtual meeting with the Free State Department of Cooperative Governance and Traditional Affairs, and the internal and external stakeholders of the Municipalities.
1.4 The main objective of the virtual meeting was to interact with the Department and the stakeholders, in order to solicit their opinions on the progress made in respect of the implementation of the interventions in the respective Municipalities.
1.5 This report of the Select Committee is structured into two sections. The first section reports on the withdrawal of intervention in Maluti-A-Phofung Local Municipality (MAP) and the second section reports on Mafube Local Municipality.
2. Briefing by the Department of Cooperative Governance and Traditional Affairs on Withdrawal of Intervention in terms of Section 139 (1)(b) of the Constitution in Maluti-A-Phofung Local Municipality
2.1 The Free State MEC for Cooperative Governance and Traditional Affairs briefed the Select Committee on the withdrawal of intervention in terms of section 139(1)(b) of the Constitution in the Municipality. The presentation focused on the background, progress in respect of governance, financial management, service delivery, appointment of senior managers and status of court judgements.
3. Background
3.1 MAP was placed under administration in terms of section 139(1)(b) of the Constitution on the 10 February 2018, after a series of unrests within the MAP area, specifically in QwaQwa. There were various administrative and service delivery challenges in terms of monitoring and oversight actions performed by the Department of Cooperative Governance and Traditional Affairs, and serious financial problems as contemplated in section 138 of the Municipal Finance Management Act, 2003 (Act no. 56 of 2003). This includes the risind of Eskom debt to the tune of R2.2 billion, non-payment of third parties amounting to R206 million covering pensions, medical aid, AGSA and insurance policies.
3.2 An urgent intervention by the Provincial Executive was necessary in terms of section 139(1)(b) of the Constitution of the republic of South Africa, 1996 (Act No 108 of 1996), as amended, to assume responsibility for the relevant obligations in the Municipality to the extent necessary to maintain essential national standards, restore finances to a sound footing and meet established minimum standards for the rendering of services.
4. Implementation Progress on Governance
4.1 A Service Level Agreement (SLA) with Eskom has been concluded and Eskom will proceed to install another 86 meters of Large Power Users (LPU’s) as per the SLA. Regrettably, some of the decisions of the Joint Intervention Team have been reversed by the Municipal Manager, namely, among others: re-instatement of suspended managers/senior managers, re-instatement of the shop stewards who were suspended, and reversed the implementation of the 4-shift system which was done in terms of the Collective Agreement for the Free State Division of the SALGBC, Circular No. 1/2016, dated 1 November 2016.
4.2 These actions risk the reversal of significant progress which were made with the implementation of among others, the Recovery Action Plan and some of the recommendations contained in the concurrence of the section 139(1)(b) letter of the NCOP in 2018 on consequence management. It further undermined the efforts to restore discipline, governance systems, order, and accountability in the Municipality. The dispute around the Municipality’s bank account has been put to bed, with the withdrawal of the Administrator as co-signatory to MAP’s bank account.
5. Implementation Progress on Financial Management
5.1 As at June 2020, the Municipality has available cash, including investments amounting to R69, 881,954. There is a plan available to which it is envisaged to successfully stabilize the Municipality’s cash flow with an expected income of R128, 571, 429 by November October 2020. These projections are based on the expected revenue from installation of new electricity meters by Eskom on LPU’s from 1 June 2020. The monthly salary bill of the Municipality is R46, 942,284, without overtime.
5.2 Creditors continue to increase as the Municipality’s Eskom bill has now risen to R5.2 billion, and the Municipality is still not yet servicing its DWS account. An agreement has been reached with Eskom regarding the following: that MAP will explore all avenues available to it to pay current consumption of R55 million (excluding other charges); MAP undertook to pay R60 million of July equitable share towards the current account of the Municipality for July 2020. Eskom would continue installing outstanding 87 of the 1st 100 meters of LPU’s and should be completed by end of June 2020.
5.3 Eskom also indicated that they would avail capacity to install another 200 meters by end of August 2020, which would increase revenue for the Municipality and possibly enable it to pay the August 2020 account. Eskom declared its availability to take further instructions from MAP for more installations until the Municipality can pay its current monthly consumption. Eskom also brought to the attention of MAP that some of the LPU’s who are supposed to make direct payments to Eskom, were not complying with the court order. MAP will have to attend to these customers in line with the court order to compel them to pay. The other creditors are owed approximately R53 million.
6. Implementation Progress on Service Delivery
6.1 Service delivery is currently limited to essential services which includes, water and sanitation, electricity, waste collection, security and other services which are rendered on an ad-hoc basis, e.g. housing, planning and finance. The provision of water to communities continues to be a problem for the Municipality.
6.2 The Municipality is continuing providing water using water tankers and Jojo tanks for communities of Qwaqwa. Ageing infrastructure has not helped the situation also. Power outages are still a problem, with several experienced due to lack of load balancing. Overloading has also led to transformers being blown, resulting in power outages. An order of 60 transformers has been placed in anticipation of the demands of the winter period, and delivery is expected soon. Waste removal is hampered by the lack of sufficient trucks, but two trucks have been ordered and the Municipality is awaiting delivery.
7. Progress on Appointment of Municipal Senior Managers
7.1 The Municipality is now stable, and vacant positions of the Municipal Manager and Chief Financial Officer were filled, respectively from 01 April 2020.
8. Progress on the Status of Court Judgment
8.1 The MEC brought an application to set aside the salary levels that the Municipal Manager and Chief Financial Officer of MAP had been given when they entered into the contracts with the Municipality. The then Administrator had offered them salaries in terms of the adverts, and with the Municipality recognized as a category 6 Municipality. The matter was opposed by all parties. The court ruled that the contracts and the salary levels were illegal ab initio, that means from the beginning.
8.2 The Municipality was ordered to enter into renegotiations with the officials and the differences in the salary levels agreed on, and the ones they initially contracted on must be paid back within 90 days. The court erroneously set aside the appointment of the officials in that the appointments were never the issue of the matter. The officials have already given notice of their intention to appeal the court order.
9. Briefing by the Department of Cooperative Governance and Traditional Affairs on withdrawal of Intervention in terms of Section 139(1)(b) of the Constitution in Mafube Local Municipality
9.1 The Free State MEC for briefed the Select Committee on the withdrawal of intervention in terms of section 139(1)(b) of the Constitution in the Municipality. The presentation focused on the background, service delivery challenges, service delivery achievements and status of municipal litigations.
10. Background
10.1 On 11 December 2019, the Free State Executive Council resolved to appoint Mr Moses Moremi as the EXCO Representative/Administrator for Mafube Local Municipality to replace the erstwhile EXCO Representative/Administrator, Mr Mokete Notsi, with effect from 1 January 2020. On 11 December 2020.
10.2 The Free State Executive Council resolved to revoke section 139(1)(b) of the Constitution at Mafube Local Municipality with effect from 30 March 2021, and henceforth section 154 support in terms of the Constitution will be provided by Mr Moses Moremi from 1 April 2021 to December 2021. The support was further beefed-up by the secondment of Mr. Kadimo Masekoane, as the acting Municipal Manager from 1 April 2020 until 1 April 2021.
11. Service Delivery Challenges
11.1 The status quo analysis on service delivery done in January 2020 revealed the following:
- Insufficient water supply in high-lying sections of Mamello and Phomolong that will be alleviated by constructing Namahadi rising main, and attendant 8 km water pipeline to provide water services to these communities.
- Leveraging resources for the replacement of cement asbestos pipe that are prone to bursting and constitute a significant proportion of water network in the Municipality.
- Stalled capital projects as management encroached onto these grants and used R8 million for unintended purposes, i.e. for defraying operational costs.
11.2 The reliability of water supply at high-lying areas that should be addressed by the implementation of Water Conservation and Demand Management Programmes (water balance and water pressure management, etc.). A significant percentage (64%/8 458) of total households in the Municipality do have functioning water meters, however these meters age range between 10 to 15 years old and are prone to meter inaccuracies.
11.3 Around 573 unmetered stands, representing 4.2% of total meters were found during the meter audit and that posed a loss of revenue to the Municipality due to unmetered unbilled connections. Conducting of prompt maintenance of water and waste-water service delivery infrastructure and eradication of basic sanitation backlog was necessary.
11.4 Sourcing of resources for the refurbishment of Waste Water Treatment Works to avoid the discharging of raw sewer into the Vaal River System was critical. The Municipality have roads and storm-water backlogs that is standing at 224.54 km and will need an estimated capital outlay of R2. 475 billion.
11.5 This backlog represents 68.59% of the total road network of 327.32 km that criss-crosses the Municipal area. Inadequate municipal fleet, that encumbers the Municipality to provide prompt and reliable municipal services such as refuse removal and maintenance of the bulk water, sanitation and roads and storm-water infrastructure. Restoration of waste removal services on a weekly basis in all the towns and periodic removal of illegal dumping sites.
11.6 The average monthly collection rate from all revenue sources for the ten months period was R2.087 million, representing 20% collection rate, that is not sufficient to meet an average monthly gross salary bill of R9.1 million. Collection rate is 75% less than the set threshold of 95% set by National Treasury. Due to the low revenue collection the Municipality experienced salary deficit of R7.013 million monthly (R84, 156 million per annum). The Municipality depends mostly on equitable share (ES) for payment of compensation of employees and other operations, however the whole of ES is used for salaries and nothing is left for the operations and service delivery purposes.
12. Service Delivery Achievements
12.1 As a result of support from CoGTA the following were achieved: R8 million of capital grants encroached with March 2020 ES was paid back; 100% of capital grants for 2019/20 were spent on intended purpose and thereby extended services such as electricity connections and ensured reliable provision of water services. For example: completed and commissioned 6.5 Mega Litres (ML) reservoir at Villiers; refurbished and automated of 12 ML Frankfort Water Treatment Works.
12.2 Refurbished Ext 3 Sewer Pump Station Qalabotjha; Replaced blocked sewer lines in Ext.3 Qalabotjha; Upgraded 86-meter sewer lines at Frankfort (Klein Street); Upgraded 654m sewer main lines in Phomolong; Constructed and completed Namahadi road and storm-water; Completed the electrification of 466 households in Namahadi Ext.8; Constructed 3 km 6.6 KiloVolt (KV) Overhead Lines (OHL); Electrified 176 h/hs at Matoding Namahadi and electrified 52 h/hs at Mafahlaneng / Tweeling.
12.3 The Municipality provides an effective water and sanitation services and attendant operation and maintenance in an event of service interruption. The Municipality is providing electricity services through rural maintenance. The provision of waste removal services has been restored in all the towns, as the Municipality has purchased two compactor trucks.
12.4 Ensured that R16.9 million Covid Relief Grant was used to provide effective water and basic sanitation services. The purchase of new yellow fleet - two 18 000l water tankers, 2 compactor vehicle and 1 TLB was facilitated.
12.5 The Municipality has implemented a Water Meters Replacement Project, as part of Revenue Protection Programme. It has since replaced 708 conventional water meters with pre-paid water meters by 12 June 2021.
12.6 The outstanding two set of Annual Financial Statements for the 2018/19 and 2019/20 financial years, were submitted simultaneously to the Auditor-General on 16 February 2021 for auditing. The outcome of these audits for both financial years were qualified audit opinion. Decisions that were not in the best interest of the Municipality were reversed – opposed paying for unlawful contracts and demoted and adjusted salaries of employees done contrary to the provision of the law. The Municipal Manager was appointed and assumed duties on 4 May 2021.
12.7 Consequence management was implemented and disciplinary processes against two section 56 managers whose services were terminated by the 31st of December 2021 and the 4th of February 2022, was instituted. The Rural Maintenance contract for the provision of electricity services on behalf of the Municipality is being reviewed.
13. Status on Municipal Litigation Cases
13.1 On 4 May 2021, the Mafube Business Forum and Afri-Forum NPC lodged an application with the Free State Division of the High Court of SA against Mafube Local Municipality, the Municipal Manager, Council, EXCO Representative/Administrator, the Premier, EXCO of Free State, 3 MECs, 4 Ministers, NCOP, Fezile Dabi District, NCOP and the President seeking the following relief: Intervention in terms of section 139(7) of the Constitution to the effect that Mafube Local Municipality be dissolved and be placed under administration by National Government; A supervisory/structural interdict requiring that national respondents report back to court; Mafube Business Forum & Afri-Forum NPC be permitted to assist and oversee in the Mafube Local Municipality’s administration on a temporary basis.
13.2 The matter was heard on 27 January 2022, and judgement was delivered on 28 April 2022. The said judgement ordered as follows: A mandatory Provincial Intervention in terms of section 139(4) and (5) of the Constitution should be instituted; The Free State EXCO on 11 May 2022 resolved to invoke section 139(5)(a) and (c) at Mafube.
14. Observations of the Select Committee
14.1 The Select Committee has noted that Mafube Local Municipality is still grappling with sustainability challenges, due to the following: Financial distress – (monies owed to Eskom, SARS, pension funds, Messrs Rural Maintenance, etc,); rising services arrears debt; ageing infrastructure challenges and dependency on conditional grants and equitable share.
14.2 The Select Committee has noted with great concerns on the status of litigations in both Municipalities, including the associated litigations costs.
14.3 The Select Committee has further noted that the Free State Department of Cooperative Governance and Traditional Affairs has withdrawn the interventions in both Municipalities in terms of section 139(1)(b) of the Constitution, and invoked section 139(1)(5) to assist the Municipalities with the development and implementation of the financial recovery plans, including support in terms of section 154 of the Constitution.
15. Recommendations of the Select Committee
15.1 Having considered the notices of withdrawals of interventions in terms of section 139(1)(b) of the Constitution in Maluti-A-Phofung and Mafube Local Municipalities, the Select Committee recommends to the NCOP as follows:
15.1.1 The NCOP notes the withdrawal of the interventions in terms of section 139 (1)(b) of the Constitution in Maluti-A-Phofung and Mafube Local Municipalities.
15.1.2 The NCOP notes that the MEC of Department of Cooperative Governance and Traditional Affairs has reported to place of Maluti-A-Phufung and Mafube Local Municipalities under section 139(5) of the Constitution for the purpose of developing and implementing financial recovery plans. The select committee recommends the MEC of CoGTA to notify the NCOP and the provincial legislature so as to ensure constitutional and procedural compliance
15.1.3 The MEC for Cooperative Governance and Traditional Affairs provides the NCOP and the Free State Provincial Legislature with quarterly reports, including progress on litigation status in both the Municipalities.
15.1.4 The Select Committee on Cooperative Governance and Traditional Affairs to coordinate joint oversight visits in both Municipalities, in collaboration with the relevant Portfolio Committee in the Free State Provincial Legislature, in order to assess interventions impact.
Report to be considered.