ATC101123: Report on Intervention In Msunduzi 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 made by the National Council of Provinces (NCOP) on 03 November 2010 to consider and report on the intervention notice invoked in terms of section 139 (1)(b) of the Constitution at Msunduzi Local Municipality by the KwaZulu-Natal Provincial Executive Council (PEC), reports as follows:


1.2        The Office of the Chairperson of the NCOP referred the notice of intervention in the affairs of Msunduzi Local Municipality to the Select Committee of Co-operative Governance and Traditional Affairs, in terms of NCOP Rule 101 for consideration and reporting. TheCommittee took a decision during its meeting to conduct an oversight visit to the above-mentioned Municipality on the 26 October 2010.


2.         Purpose and Objectives

2.1        The main objectives of the oversight visit was to determine whether procedural requirements had been met and to verify whether the PEC had used its discretion appropriately, before the Committee could recommend approval/disapproval of the intervention to the NCOP.Through the deliberations and interaction with internal and external stakeholders, the Committee wanted to determine how the PEC was intending to restore the fulfilment of the relevant obligations and ensure fulfilment in the long term. The aim was to ensure intergovernmental checks and balances aimed at guarding the integrity and efficiency of the intervention process.


3.         Delegation

3.1        The delegation of the Committee was composed of the following Members of Parliament and Officials: Hon MH Mokgobi, Limpopo (ANC); Hon AG Matila, Gauteng (ANC); Hon TMH Mofokeng, Free State (ANC); Hon A Watson, Mpumalanga (DA); Mr NA Mfuku, Content Adviser (Committee Section); Mr MC Mbebe, Procedural Officer (NCOP); Ms V Makubalo, Stand-in Committee Secretary (Committee Section) and Ms A Nkwandla, Administration Assistant (Committee Section).  

4.         Introduction

4.1               On 22 October 2010, the KwaZulu-Natal MEC for Co-operative Governance and Traditional Affairs tabled a notice of intervention inMsunduzi Local Municipality to the Office of the Chairperson of the NCOP. 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 since the intervention began, in this case before the end of 19 April 2011.    


5.         Problems Identified by the Provincial Executive Council (PEC)

5.1        On 06 October 2010, the Executive Council of the KwaZulu-Natal Province resolved to intervene in the Municipality as contemplated in terms of section 139(1)(b) of the Constitution. The background to the intervention by the Provincial Executive is a result of serious financial problems and the fact that the municipal executive committee and the municipal officials had failed to exercise oversight and fulfil specific legislative obligations, and services could no longer be rendered effectively.


5.2               The PEC has authorised the MEC for Co-operative Governance and Traditional Affairs to approach the Chairperson of South African Local Government Association (SALGA) to release Mr Johann Mettler, a local government expert employed by SALGA, for appointment as the Administrator of the Msunduzi Local Municipality.


6.         Appointment and Functions of the Administrator

6.1        The Administrator, amongst other functional responsibilities, was appointed to undertake the following functions:

·         devise a turn-around strategy for the Msunduzi Local Municipality;

·         ratify all decisions taken by Municipal Manager and Managers reporting to the Municipal Manager in terms of delegated or original authority;

·         ensure implementation of Council resolutions and the administration;

·         implement a system to control and approve all expenditure recommended by the intervention support team;

·         implement all governance systems and procedures including appropriate councillor-oversight mechanisms;

·         ensure implementation of financial systems, policies and procedures; and

·         approve a strategy for addressing the municipality’s financial problems, including a strategy for reducing unnecessary expenditure and increasing the collection revenue.


7.         Oversight Visit to Msunduzi Local Municipality

7.1               On 09 November 2010 the delegation of the Committee had interactive and robust engagements with the internal and external stakeholders of the Municipality. The main internal stakeholders the delegation interacted with in the Municipality included the Speaker, Executive Mayor, Chief Whip, Councillors, Ward Committee Members, Administrator and the representatives of the South African Local Government Association (SALGA). The main external stakeholders the delegation interacted with included members of the community, the business forum and non-governmental organizations.


8.         Presentation by the MEC for Co-operative Governance and Traditional Affairs

8.1        The MEC indicated that the report of the Auditor-General reflected major problems in finances of the Municipality, in which the Municipal Council has condoned irregular, fruitless and wasteful expenditure. This was evident from the Auditor-General's report on the 2008/09 financial year. The Municipal Council has dismally failed to exercise an oversight role over the municipality's administration. Despite several interventions by the Provincial Department, it has gone from one disaster to another.


8.2        In providing support, the MEC has sent three experts, two accountants and an auditor to look at the expenditure and supply chain management of the Municipality. The deployed financial experts have reported that there was a lack of co-operation from certain Senior Managers of the Municipality who have issued instructions to staff not to provide urgently required information, on the basis of which a comprehensive financial recovery plan would be developed. Following this lack of co-operation, the provincial government was forced to introduce tougher measures. However, significant progress has been recorded and all the allegations of corruption are being pursued.


8.3        For the purpose of this report, the submissions made by both internal and external stakeholders are structured on the basis of the key strategic performance areas of the Local Government Strategic Agenda which are: Municipal Transformation; Basic Service Delivery; Municipal Financial Viability and Management, as well as Good Governance and Public Participation.  


(A).       Municipal Transformation and Organisational Development

8.4        Municipal Council:  It was appealed that the Provincial Intervention Team (PIT), which was appointed to assist in turning around the financial crisis of the Municipality and to develop an overall business plan, should not be removed, as there are still huge challenges ahead. There has been a lot of infighting amongst politicians. The municipal workers were not discharging their work appropriately, as people who were not qualified were appointed. Furthermore, the Municipal Management has misled the Council in terms of their reports.


8.5        The Office of the Premier has set a new unit to expedite cases of investigations in the Province’s municipalities. The Municipality will engage with the Office of the Premier to take advantage of this new unit. Mr Mike Tarr, the current City Mayor, has since resigned from the Legislature to serve as the Mayor.


8.6        Administrator: The Administrator reported that the current political structure of Msunduzi was not supportive of overall corporate governance. As a result, a structure that will be embrace performance-based outcomes of all strategies has been implemented. The senior staff members that were alleged to be involved in fraud and corruption have been suspended, with civil and criminal charges pursued against them. However, certain current positions cannot be filled as a result of outstanding prosecutions.


8.7        Organised Labour: Both the South African Municipal Workers Union (SAMWU) and the Independent Municipal and Allied Trade Union (IMATU) supported the placement of the Municipality under administration. They further acknowledge the progress made thus far by the Administrator. Hence, they recommended the intervention to continue until the Local Government Elections in 2011.


(B).       Basic Service Delivery

8.8        Municipal Council:  Basic service delivery had deteriorated to a state of almost non-existence. However, this has been re-established to a semblance close to normality. It must be noted, however, that there is still some way to go before service delivery is fully functional and operational on an ongoing basis. It was reported that the sudden termination of the service delivery systems and processes would result in a disintegration of the efforts of the PIT, as the hand-over process to the relevant municipal officials was far from complete.


8.9        Administrator: In terms of infrastructure development and strategy, there were challenges on the poor running of fleet management. In rectifying this challenge, maintenance plans and tracking systems have been introduced to ensure vehicle availability. In terms of commercial and industrial waste collection, a new waste collection process was introduced in order to enhance waste collection. A process has been implemented that addresses water distribution and sanitation management, which was previously inadequate.Although 30 000 units for housing have been delivered since 1994,  there are still challenges of a high demand for housing, shortage of skilled staff, missing beneficiaries and illegal occupation of units.


8.10      Ward Committees: There are high levels of unaccounted water losses in Msunduzi. The consumers, especially the poor, were paying for the loss of water at the reservoir. It was reported that water and electricity readers were not monitored, with rates being estimated.


8.11      Pietermaritzburg Chamber of Business: Waste management was an unmitigated disaster in the Municipality, as management has yielded its authority to the workers. The airport almost lost its licence, because the Council had prevaricated over the question of who should manage the facility. The Chamber was in support of the intervention continuing, because, if the process was ended prematurely, serious flaws would remain, and it would only be a matter of time before the Municipality found itself in deep distress again.


8.12      Built Environment Support Group: The Municipality is faced with a chronic backlog in housing delivery and access to basic services. The Support Group has provided support to communities, who were evicted 14 years ago, to go to a transit area that is still awaiting development. Another 1 200 households had to share two standpipes while their eviction was on hold, because no land could be found for them. The Support Group acknowledged the progress made by the Administrator and PIT in the short term in saving the City from bankruptcy.


(C).       Municipal Financial Viability and Management

8.13      Municipal Council: The finances of the Municipality reflected a net surplus of R58 million for the first quarter of the 2010/11 financial year, taking into consideration a deficit of R522 million in the 2009/10 financial year. However, the turnaround must be maintained and well managed by ongoing adoption of stringent financial controls, until the end of the current financial year. The control measures introduced by the Administrator have to be maintained to ensure continuity of the positive trend. In cases where capacity reflects a challenge, local FET colleges should be engaged in this regard to provide training.


8.14      Administrator: It was reported that apart from redesigning processes and implementing certain policies and procedures by the PIT, the following ongoing issues were still a major challenge confronting the Municipality:

·         cost containment across the board;

·         revenue enhancement processes;

·         management accounting;

·         performance management processes; and

·         risk analysis.


8.15      On cash flow, projections were showing signs of recovery, as is reflected by a positive cash flow position of R18, 4 million by the end of October 2010, and an expected upward movement of R3 million at the end of November 2010. However, this requires diligent monitoring to keep the cash flow status in the positive. Furthermore, there is a need for staff training in management accounting, since this is a specialised section where all transactions and operating performance are tracked, traced and analysed. It stands to reason that if this function is aborted and/or does not get the attention it desperately needs, it will come to a standstill.


(D).       Good Governance and Public Participation     

8.16   Built Environment Support Group: The Support Group reported that the largest single problem in keeping the ratepayers and the public on board with the turnaround measures, has been the lack of communication and public participation. Public engagement has been non-existent, and the IDP/Budget process held on 27 June 2010 was reduced to a single, poorly publicised meeting.


8.17      Ward Committees: The Ward Committees reported their dissatisfaction with resource allocation for their activities, since there was no budget for ward committees.


9.         Committee Observations and Opinion

9.1               Where Municipal staff members have been implicated in cases of fraud and corruption, the Hawks should be brought in for the successful prosecution of those cases. This matter should be speeded up.


9.2               The approach on forensic investigation should be suspended as, in most cases, it does not lead to immediate arrests. The Hawks should be approached instead, since there was no time for complacency in the fight against crime, and the Hawks would leave "no stone unturned" in fighting organised crime.

9.3               It was observed that some Councillors were irresponsible and not disciplined, since 70 Councillors should have been present during the meeting, but less than 50% were present. This raised questions of the seriousness in their commitment in providing leadership to the Municipality. The Mayor and Chief Whip should summon those absent Councillors, in order to understand the reasons for their absence.


9.4               The Committee is of the opinion that the lack of support and oversight by the Msunduzi Council points to the failure to provide an enabling framework to build the institutional strength and functionality of municipalities.


9.5               There are capacity constraints in the Municipality, especially with regards to financial accounting and management. This matter needs urgent address, otherwise all efforts to stabilise the Municipality will fail, with the real possibility of reverting to a worse situation than the Municipality was in at the commencement of the intervention.


10.        Recommendations

10.1      Having conducted the oversight visit to Msunduzi Local Municipality and interacted with all relevant stakeholders, the Select Committee on Co-operative Governance and Traditional Affairs recommends as follows:   


10.1.1      The NCOP approves the intervention in terms of section 139 (1)(b) of the Constitution in Msunduzi Local Municipality for a period of six months.


10.1.2      The Minister for Co-operative Governance and Traditional Affairs should approach the Hawks to pursue criminal investigation in all cases of financial irregularities and fraud in Msunduzi Local Municipality, as a matter of urgency.  A progress report in this regard should be forwarded to the NCOP within one month.


10.1.3      The Administrator should fast-track the process of appointing skilled personnel, in order to facilitate the transfer of skills and to ensure continuity and stability.


10.1.4      The KwaZulu-Natal MEC for Co-operative Governance and Traditional Affairs should table quarterly progress reports to the NCOP and the Provincial Legislature on the status of the intervention in the Municipality, including the challenges encountered.  

Report to be considered.


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