ATC100312: Report on Oversight Visit to Nala Local Municipality

NCOP Economic and Business Development




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) on 11th January 2010, to consider and report on the intervention notice in terms of section 139 (1)(b) of the Constitution at Nala  Local  Municipality, reports as follows:


1.2        In terms of section 139(1)(b), when a municipality cannot or does not fulfil an executive obligation in terms of the Constitution or legislation, the relevant provincial executive may intervene by taking any appropriate steps to ensure fulfilment of that obligation, including assuming responsibility for the relevant obligation in that municipality. 


1.3        In terms of NCOP rule 101, the Office of the Chairperson of the NCOP referred the notice of intervention in the affairs of the Nala LocalMunicipality to the Select Committee on Co-operative Governance and Traditional Affairs for consideration and report. On 9th February 2010, the Select Committee took a decision during its meeting to conduct an oversight visit to the above-mentioned Municipality on the 25th February 2010.


2.         Purpose and Objectives of the Oversight Visit

2.1        The main objectives of the oversight visit was to determine whether procedural requirements have been met and to verify whether the provincial executive has used its discretion appropriately before the Committee can approve/disapprove the interventions. Through the deliberations and interaction with internal and external stakeholders, the Committee wanted to determine how the provincial executive was intending to restore the fulfilment of the relevant obligations and ensure fulfilment in the long-term. The aim being to ensure intergovernmental checks and balances aimed at guarding the integrity and efficiency of the intervention process. In terms of section 139 (2)(b)(ii) of the Constitution, the intervention must end if the NCOP does not positively approve the intervention within 180 days, in this case before the end of 09 July 2010 since the intervention began.    




3.         Composition of the Delegation

3.1        The Delegation of the Committee composed of the following members of Parliament and Officials: Hon MH Mokgobi, Limpopo (ANC); Hon AG Matila, Gauteng (ANC); Hon   DV Bloem,  Free State  (COPE); Hon A Watson, Mpumalanga (DA), Mr TM Manele, Committee Secretary (Committee Section); Mr N Mfuku, Content Adviser (Committee Section) and Mr V Mfuniselwa, Administration Assistant (Committee Section).


4.         Introduction


4.1        On the 8th December 2009 the Free State MEC for the Co-operative Governance and Traditional Affairs tabled a notice of intervention inNala Local Municipality to the Office of the Chairperson of the NCOP. Subsequent to the tabling, a notice of intervention was referred to the Select Committee on Co-operative Governance and Traditional Affairs for consideration and reporting in accordance with Rule 101. In compliance with the Council referral, the Select Committee resolved to undertake a fact-finding visit to the Municipality on 25th February 2010.


5.         Problems Identified by the PEC at the Municipality

5.1        The main thrust of issues identified by the PEC to intervene in the administrative affairs of the Nala Local Municipality related to the failure to comply with Municipal Systems Act by submitting section 46 reports for two consecutive years; failure to adopt and submit the annual performance reports for 2005/06, 2006/07 and 2007/08; failure to develop and adopt a Performance Management Framework to regulate staff performance;  absence of performance agreement between the Mayor and the Municipal Manager; failure to formally approve the performance management system, failure to co-ordinate Integrated Development Planning (IDP) processes and appoint the IDP manager and the inability to spend Municipal Infrastructure Grant (MIG) funds. The overall financial management of the Municipality is in disarray, given the inability of the Auditor-General to access documentation for audit purposes.


5.2      In terms of the notice of intervention the final decision taken by the Executive Council to intervene in the administrative affairs of the NalaLocal Municipality was conveyed not only to the National Council of Provinces but also to the Minister of Co-operative Governance and Traditional Affairs, the Provincial Legislature, Municipal Council and the Administrator.


6.         Oversight Visit to Nala Local Municipality


6.1        On the 25th February 2010 the Delegation of the Committee had interactive and robust engagements with the internal and external stakeholder of the Nala Local Municipality. The main internal stakeholders the Delegation interacted with in the municipality included the Speaker, Mayor, Chief Whip, Ward Committee Members and Councillors and the Administrator and Organized labour. The main external stakeholders the Delegation interacted with included members of the community forums and non- governmental organizations.


6.2        For the purpose of this report, the submissions made by both internal and external stakeholders are structured based on the five key performance areas of the local government which are: Municipal Transformation; Basic Service Delivery; Local Economic Development; Municipal Financial Viability and Management as well as Good Governance and Public Participation.    



(A).       Municipal Transformation and Organisational Development


6.3        Municipal Council: The submissions made by the Mayor, Speaker and Chief Whip indicated that the Municipality welcomed the intervention in terms of section 139 (1)(b) of the Constitution and the subsequent appointment of the Administrator by the MEC for Co-operative Governance Traditional Affairs.  


6.4        Administrator: The major transformation and organisational development problems reported by the administrator pertained to non-compliance with regard to submission of section 46 reports in terms of the requirement of the Municipal Systems Act, non-adoption and failure to submit the 2005/06 until 2007/08 annual performance reports by the Council.  However, the major progress reported by the Administrator in respect of municipal transformation and organisational development related to development and adoption by the Municipal Council of the implementation of a turn-around strategic action plan; a financial recovery and revenue enhancement strategy; implementation of a financial system and finalising the staff placement processes.


6.5        Organised Labour: The concerns raised by organized labour through the representatives of the Independent Municipal and Allied Trade Union (IMATU) pertained to non–implementation of municipal placement policy; misuse of municipal overtime, inconsistent application of disciplinary procedures; failure to re-instate employees who have won CCMA  arbitration awards; non-payment of 13th cheques to some of the junior employees; duplication of posts; interviews conducted without consultation and participation of the union representatives and delays with regard to the appointment of forensic investigations and appointment of security officers with criminal records.     


6.6        The South African Municipal Workers Union (SAMWU) expressed its dissatisfaction regarding the re-appointment of the former CFO Mr D Shongwe as the Municipal Manager. It is alleged that he contributed to the current crisis of the Municipality. It was brought to the attention of the Delegation that there are 40 employees who have been previously employed by the previous Municipal Council, but currently redundant. Currently those employees have no job descriptions and office space.

(B).       Basic Service Delivery


6.7               Administrator:  Key service delivery problems reported by the Administrator related to non compliance with the Municipal Systems Act and failure to adopt the annual performance reports for 2005/06, 2006/07 and 2007/08 financial years.  The administrator indicated that these reports have subsequently been processed and discussed at Council as demanded by legislation. The only challenge was that these reports did not follow the guidelines of Circular 11 on Annual Report issued by National Treasury that prescribe that the Annual Report should contain the Annual Financial Statements (AFS),  the Auditor General’s  Report on AFS, any recommendations of the Audit Committee, and a report on the performance of the municipality. The Administrator further reported that progress has been made with regard to the development and implementation of the service delivery plan for the Municipality.


6.8               It was reported that the Municipality previously was unable to spend its MIG funds, however, the matter is urgently receiving attention with the assistance of the Provincial Project Management Unit. The Provincial Department has also dispatched a senior engineer that will assist the Municipality in fast-tracking implementation of infrastructure projects, and providing technical advice on corresponding operations and maintenance.


6.9     Chamber of Commerce: The Chairperson of the Chamber reported service delivery problems which started since 2007. The Chamber wanted approval to repair the town hall, but received no co-operation from the Municipality. However, since the arrival of the Administrator, good relations have been observed. Furthermore, annual electricity tariffs were discussed with all stakeholders, and so far, four meetings were held already this year.


6.10      Business Forum: The service delivery concerns echoed by the representatives of the Maize Capital Ratepayers Association related to the collapse of city hall and dumping sites; lack of sewerage infrastructure; lack of budget on electrical and water reticulation infrastructural maintenance; unlawful implementation of electrical tariff increases; shocking state of road-works and maintenance of tarred roads; inadequate state of parks and the irregular collection of refuse and garden removals.       


(C).       Local Economic Development (LED)


6.11.     Members of Community Forums: The concerns raised by the stakeholders pertained to lack of business opportunities, lack  of job opportunities, lack of access to land, lack of equity in the awarding of municipal tenders, and lack of economic financial support to small businesses and non-functionality of Unit in the Municipality. 


6.12      Administrator: It was indicated that the LED Manager’s position was vacant and the Municipality did not have an LED strategy. Since then the matter is receiving the attention of the EXCO Representative. However, in the meantime the municipality is actively participating in the development of Lejweleputswa District Growth and Development Strategy in partnership with the Presidency. The economic development intelligence gathered will be used in the development of the LED Strategy for the Municipality.


 (D).      Municipal Financial Viability and Management


6.13      Administrator: Some of the Municipality’s financial viability and management problems reported by the Administrator pertained to the inability to provide quarterly reports in compliance with MFMA, and the inability of the Auditor-General to access documentation for audit purposes. Progress achieved to date          related to the grant funding obtained from the Development Bank of Southern Africa (DBSA) to develop appropriate systems in order to embed a revenue enhancement strategy of the Municipality. A draft Service Level Agreement (SLA) has been developed and will be concluded during the week of the 26 February 2010.

6.14      With a financial grant of R1 million, Dinatla Advisory Services has been enlisted to provide CFO support at the Nala Local Municipality for the next six months and they have developed the Mid-Year Budget and Performance Assessment Review Report; Developed Budgets Related Policies (Investment, Banking, Internal Controls, Adjustment budget, Reconciliation of Government Debts); Auditing of current files to lay a solid foundation for the upcoming Audit; developed a lay-out of asset register etc. The Municipality has specifically developed a draft adjustment budget; monthly reports (section 71, MSIG) done and informed by available information; and internal control and payment manual that is en-route to the Municipal Council for adoption has also been developed.


6.15      Organized Labour: Some of the major financial viability and management concerns raised by the representatives of SAMWU related to stealing of computers, electrical appliances, petrol cards, misuse of municipal property and cars and fraud. 


(E).       Good Governance and Public Participation     


6.16.     Administrator: Some of the major progress reported by the Administrator in respect of good governance and public participation included the recent suspension of the Municipal Manager and the appointment of a non-section 56 Manager as the Acting Municipal Manager. At an ordinary Council meeting held on 04 February 2010, the Council resolved to lift the suspension of the Municipal Manager with immediate effect. This was done because the Council contravened a number of rules on agenda of Council meetings and processes to be followed in activating a precautionary suspension.


6.17      Organized Labour: The major institutional governance concern raised by the representatives of both IMATU and SAMWU pertained to the non-functionality of labour forum, lack of skills development plans and capacity building programmes for the employees.    


7.         Committee Observations and Opinion


7.1        The Delegation of the Committee is of the opinion that the organisational capacity of the Municipality to perform its functions and fulfil its developmental role is of paramount importance for service delivery. This key performance area should focus on appointment of section 57 managers, development and implementation of performance management system and agreements, submission of municipal infrastructure grants plans with proper cashflows, and development, adoption and implementation of local economic development strategy.


8.                   Acknowledgement


8.1        The Committee Delegation acknowledged the varied contributions of the parliamentary staff who participated in the oversight visit in their various capacities.  A word of appreciation is also extended to all the internal and external stakeholders of the Municipality who interacted and had robust engagements with the Delegation of the Committee on matters related to the placement of the municipality under section 139 (1)(b) of the Constitution.     


9.         Recommendations


9.1        Having conducted the oversight visit to the Nala Local Municipality and interacted with internal and external stakeholders, the Select Committee on Co-operative Governance and Traditional Affairs recommends that:   


9.1.1     The National Council of Provinces approves the intervention as issued by the Provincial Executive Council in terms of section 139 (1)(b) of the Constitution.


9.1.2     The Administrator should fast tract the process of appointing section 57 Managers and assist the Municipality in developing a labour retention strategy so as to ensure that future service delivery projects have the support of the community and are aligned with IDP.


9.1.3    The Administrator should conduct a proper and thorough investigation and report to the Free State MEC of Co-operative Governance and Traditional Affairs and the NCOP, on all alleged cases of misappropriation of funds in the Municipality.   


9.1.4     The Free State MEC of Co-operative Governance and Traditional Affairs to immediately reconsider the current appointment of the Municipal Manager, since the appointment is surrounded by serious allegations of corruption and maladministration.


9.1.5     The Administrator should ensure that the individual reported case to South African Polices Services is changed and made a municipal case.


9.1.6     The Free State MEC for Co-operative Governance and Traditional Affairs should table quarterly progress reports to the NCOP and the Free State Provincial Legislature on the status of the intervention in the Municipality; including challenges encountered.


9.1.7     The South African Local Government Association in co-operation with Local Government Sector Education and Training Authority should facilitate training and capacity building for Municipal Councillors; to further deepen their understanding of the oversight role; legal framework and policies that govern the activities of the Municipality from the date the recommendations are adopted by the NCOP.


9.1.8      The South African Local Government Association should also facilitate Executive Training Programmes for municipal officials.


9.1.9     The Minister for Co-operative Governance and Traditional Affairs should institute an independent forensic investigation into all the financial affairs of the Nala Local Municipality, including the companies doing business with the Municipality in order to detect ghost companies.


9.1.10   The NCOP should approve the establishment of a Unit in Parliament that would track the implementation of resolutions adopted by the Select Committee on Co-operative Governance and Traditional Affairs.


9.1.11   The approved report by the NCOP should be shared with all the internal and external stakeholders of the Nala Local Municipalitywhom the Committee Delegation interacted with during the oversight visit.


9.1.12      The Select Committee on Co-operative Governance and Traditional Affairs in co-operation with the relevant Portfolio Committee in Free State Provincial Legislature should conduct a follow-up visit to the Municipality, three months after the intervention has ended in order to monitor through interaction with internal and external stakeholders progress made in respect of the intervention in the Municipality.


9.1.13      The National Department of Co-operative Governance and Traditional Affairs should introduce legislation to regulate the implementation of section 100 and 139 of the Constitution, including the processes established by these sections.



Report to be considered.


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