ATC130910: Report of the Select Committee on Co-Operative Governance and Traditional Affairs on the Intervention in Matlosana Local Municipalty – dated 10 September 2013
NCOP Economic and Business Development
REPORT OF THE SELECT COMMITTEE
ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS ON THE INTERVENTION IN MATLOSANA
LOCAL MUNICIPALTY DATED 10 SEPTEMBER 2013
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 in terms of
section 139(1
)(
b) of the Constitution in
Matlosana
Local Municipality, reports as follows:
1.2
In terms of
section 139(1)(b) of the Constitution, 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 the 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
Matlosana
Local Municipality by the Acting MEC for Local
Government and Traditional Affairs, to the
Committee
for
consideration and reporting. Subsequently the
Committee
took a
decision during its meeting to conduct an oversight visit to the
above-mentioned Municipality during the 21 August 2013.
2.
Purpose and Objectives of the Oversight
Visits
2.1
The main
objectives of the oversight visit were to determine whether procedural
requirements have been met,
and also to
verify whether the provincial executive has used its discretion appropriately
before
the Committee could recommend approval/disapproval of the
intervention.
Through the deliberations
and interaction with internal and external stakeholders, the Committee wanted
to determine how the PEC intends 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.
3.
Composition of the 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 LPM
Nzimande, KwaZulu-Natal (ANC); Hon B
Nesi
,
Eastern Cape (ANC); Hon TMH
Mofokeng
, Free State
(ANC); Hon MV
Manzini
, Mpumalanga (DA);
Hon J Bekker, Western Cape (DA); Hon
MW Makhubela, Limpopo (COPE); Hon JJ Gunda, Northern Cape (ID); Mr NA
Mfuku
, Content Adviser (Committee Section); Mr MT
Manele
, Committee Secretary (Committee Section); Mr BM
Mahlangeni
, Committee Researcher (Research Unit); Mr MC
Mbebe
, Procedural Officer (NCOP) and Mr N
Mangweni
, Administration Assistant (Committee
Section).
4.
Introduction
4.1
On the 19
th
March 2013 the North West Provincial
Executive Council (PEC) resolved to intervene in the affairs of
Matlosana
Local Municipality, in terms of section 139(1
)(
b) of the Constitution. This intervention was intended to
last for a minimum period of six months, with effect from the 1
st
April 2013.
4.2
The main issues that were identified by the PEC in the Municipality
were evident signs of poor administration and governance. This has affected the
financial status of the Municipality and would ultimately affect service
delivery. Equally, the current financial crisis in the Municipality has
resulted in statutory obligations not being honoured. Further, the non-payment
of the bulk electricity and bulk water accounts to ESKOM and
Midvaal
Water Board has resulted in notices of
disconnection by ESKOM.
4.3
The Department has conducted a brief analysis of the
financial status of the Municipality, and the outcome of the analysis revealed
the following:
·
the
Municipality was not collecting what is due for services
rendered to consumers, and the debtors book is standing at about R960 million.
·
there
was non-enforcement of debt collection and credit control
policies as adopted by Council.
·
the
Municipality was using the revenue from the sale of
electricity to subsidise other services that consumers are not paying.
·
the
Municipality has numerous contractual obligations with
consultants for services such as debt collection, meter reading, and other
services that could be done internally.
·
there
was a lack of management and leadership capacity in the Budget
and Treasury Office, and this result in poor financial management and
administration of the Municipalitys finances.
4.4
The PEC has then resolved on the basis of the poor financial
state of the Municipality, to take over the financial management obligation of
the Municipality. An Administrator and a team of financial management experts
will be appointed to implement the intervention on behalf of the PEC.
5.
Oversight Visit to
Matlosana
Local Municipality
5.1
On
the 21 August 2013, the delegation of the Committee had interactive and
robust engagements with all stakeholders
of the
Municipality. The main
thrust of the
discussions centred
around
procedures followed by the
intervening Province, which
is
alleged to have omitted section 139(1)(a) directive as stipulated in the
Constitution,
to the extent the
Municipality was not afforded the opportunity to converse with the
PEC
on
the matter to relay its state of affairs.
6.
Presentation by the MEC
for Local Government and
Traditional
Affairs
6.1
The MEC stated that the Municipality has been experiencing
serious financial problems for the past two years, to the extent that it failed
to honour its statutory financial obligations. Equally, it incurred a long
standing debt with ESKOM and
Midvaal
Water Board,
which resulted in the two bulk services accounts in arrears in excess of R100
million. In March 2013, the ESKOM arrears were standing at about R68 million.
6.2
The former MEC convened a meeting with the Council and
stakeholders on the 21 February 2013, to discuss the matter and seek solutions.
Subsequent to the meeting with Council and stakeholders, a report was tabled to
the PEC on the 19 March 2013, and a decision to place the Municipality under
section 139(1
)(
b) of the Constitution was taken. The
decision was to take over only the financial administration of the
Municipality, given the severity of the financial status and the impact it
would have on service delivery.
6.3
The Municipality was informed of the PEC decision on the 22
nd
March 2013, and was requested by the then Acting MEC to convene a meeting of
councillors to communicate the decision of the PEC. Subsequently a letter from
the Office of the Mayor was written to the MEC, raising objections to the
interventions. The MEC met with Troika of the Municipality, and confirmed that
the intervention would proceed. The name of the Administrator was announced.
6.4
The intervention team has never been to the Municipality and
there have been numerous letters from the Municipality objecting to the
intervention, and even threatening legal action against the Provincial Government.
Five months since the intervention began, no progress has been registered in
the Municipality.
7.
Structure
of the Report
7.1
The Committee delegation had interactive
engagements with the internal and external stakeholders of the
Matlosana
Local Municipality. The main internal
stakeholders the delegation interacted with at the Municipality included the
Speaker, Mayor, Chief-Whip, the Administrator and representatives of Organised
Labour. The main external stakeholders the Delegation interacted with included
representatives from the South African Local Government Association (SALGA),
the business and community forums and non-governmental organizations.
7.2
For the purpose of this report, the
submissions made by stakeholders are structured in terms of Governance and
Leadership; Clean Audit Plan; Financial Management and Revenue Enhancement and
Creditors Management.
(A).
Governance
and Leadership
7.3
Chief Financial Officer:
The Municipal Manager and CFO were appointed in 2012. Previously these
positions were occupied by acting officials for more than two years. Only one
Director
position
was vacant until the recent passing
away of the Director responsible for Electrical and Mechanical, however, both
positions have been advertised.
7.4
The Municipal Council was fully functional and its
committees, the Municipal Public Accounts Committee (MPAC) and both the
Performance Audit Committee (PAC) and the Audit Committee (AC).
Both the PAC and AC reports regularly to the Council.
Furthermore, t
here is a sound relationship that exists with the
Local Labour Forum.
7.5
SALGA:
The
Association remarked that the implementation and application of section 139(1
)(
b) of the Constitution in the Municipality, and how SALGA
in the Province was not consulted by the MEC. SALGA raised constitutional
compliance with the intervention in its PEC sitting. However, they were not
opposed to an intervention that will
effect
service
delivery in
Matlosana
.
7.6
SAMWU:
The South African Municipal
Workers Union submitted that workers were working abnormal working hours in the
Municipality, because of the unavailability of trucks. It was also reported
that contract workers were still unpaid.
7.7
IMATU:
The Independent Municipal and
Allied Trade Union raised concerns about the irregular appointment of people
who were not suitable qualified. Further, there was appointment of service
providers in the Municipality, without the necessary knowledge, e.g. meter
reading.
7.8
Matlosana
Business Chamber:
The Chamber stated
that there was a memorandum of understanding on local economic development with
all stakeholders. It was mainly concern about meter reading, lack of service
delivery as well as corruption in the Municipality. Despite the challenges, it
was willing to work with any delegated official from the MEC with regard to the
intervention that will bring tangible outcomes for service delivery.
7.9
West Vaal Chamber:
It was made known
that without water or electricity, no business will ever thrive in
Matlosana
. The Chamber was also concern about the potholes
around town.
(B).
Clean
Audit
7.10
Chief Financial
Officer:
It was reported that the audit
action plan was developed and approved by the Council, with inputs of the
Performance and the Audit Committee. The plan was discussed and accepted by the
Auditor-General. The 2012/13 financial statements and audit file will be
compiled in-house.
7.11
The Council approved the reinforcement of the Finance
Department, to ensure effective implementation of the audit action plan and day
to day operations. Currently, skills audit in the Finance Department were being
performed to address skills level raised by the Auditor-General. Further,
training was provided to the Finance staff on the use of the system and
accounting standards. In addition,
staff including
councillors were
attending financial and management development
programmes.
(C).
Financial
Management
7.12
Chief Financial
Officer:
It was stated that internal
controls on all financial areas were
reviewed
for weaknesses. An additional reviewers and approvers were introduced on
changes to consumer balances and details. Bank
reconciliation were brought and
done
on monthly basis, as opposed to the past. Cashiers reconciliations were done
daily. In addition, creditors bulk
accounts and major suppliers accounts were now
being reconciled monthly.
7.13
A Financial
Management Improvement Project managed by National Treasury is
currently being implemented in the
Municipality, and this project plan was adopted by
the Council. The project has a detailed project plan which was
being monitored by a
full time Advisor
from National Treasury and a steering committee made up of the
Executive Mayor, Member of the Mayoral
Committee of Finance, Municipal Manager,
CFO
and the National Treasury Advisor.
(D).
Revenue
Enhancement
7.14
Chief Financial Officer:
The
revenue collection rate of the Municipality during June
2013 stood at 90%, 93.5% in May 2013 and 88.7% in April
2013. However, there were
delays on
payments by provincial departments, and the outstanding balance was
R38.6 million as at 31 July 2013.
(E).
Revenue
Enhancement
7.15
Chief Financial Officer:
It
was reported that ESKOM bulk account was a challenge in
the past. The difference between the ESKOM
tariff
was materially high, compared to
the
tariff the Municipality was selling to its consumers. However, the tariffs
adjustments made in the 2013/14 financial
year will be able to address this to a great
extent.
7.16
The ESKOM account used to be R190 million in arrears in
November 2012, however,
arrears now
stood at zero and only the current account was being serviced. The
Midvaal
Water
Board account was up to date, in line with payment agreement made
with the Municipality. The remaining
arrear balance of R18 million will be paid by
November
2013.
8.
Committee Observations
and Opinion
8.1
The first step in terms of an intervention would be the
issuing of a directive. A
directive
must first be issued by the Provincial Executive before it can assume
responsibility in terms of the section
139(1
)(
b). This injunction can be based on the
Constitutional Courts reasoning when it
evaluated section 100 (the equivalent of
section
139 in the context of the relationship between national government and the
provinces). The Court resolved that
the assumption of responsibility is not possible
without first issuing a directive.
[1]
Consequently, after the directive has been issued, its
content and the steps identified therein continue to determine the
scope of the section
139(1
)(
b) intervention.
8.2
The principle
of respect for local governments autonomy, which is critical to the
design of a developmental local
government, instructs the Provincial Executive to
inform the Municipality of its intention to use section 139. The Municipality
must be
allowed to make
representations prior to a Provinces decision to issue a directive
[2]
or
assume a responsibility. Otherwise, the
circumstances
underlying the intervention
exposes
the Provincial Executive to a procedural attack.
8.3
The Provincial Executive decision to
invoke section 139(1
)(
b) of the Constitution rest
solely on the financial crisis in the Municipality, which was observed as a result
of the non-payment of the bulk electricity and water accounts to ESKOM and
Midvaal
Water Board. However, it should be pointed out that
since the intervention was of a financial nature, section 136(2) of the MFMA should
have been invoked which provides
for a less intrusive
measures
to be taken, and in light of the constitutional imperative that
the functional integrity of the Municipality must be respected. Such measures
should first be implemented in this case before the more drastic step of section
139(1
)(
b) of the Constitution.
8.4
There seems to be political stability in
the institution and the Local Labour Forum was functional and effectively
utilised, due to the cooperation between organised labour, councillors and senior
management.
8.5
The Committee wish to emphasize that all
the spheres of government are tasked to observe the principle of co-operative
government and must conduct their activities within the parameters of Chapter 3
of the Constitution. In the case of
Matlosana
,
section 155 (6)(b) of the Constitution places a duty on the North West Provincial
Government to support the Municipality and further to promote its developmental
capacity so as to enable it to perform its functions and duties.
9.
Recommendations
9.1
The Select Committee on Co-operative
Governance and Traditional Affairs recommends as follows
:
9.1.1
Since the intervention team has never been
to the Municipality and f
ive
months has passed since the intervention began, and no
progress has been registered in the Municipality.
The NCOP should disapprove the intervention in
Matlosana
Local Municipality as issued by the North West Provincial
Executive Council in terms of section 139(1
)(
b) of the
Constitution.
9.1.2
The National Minister for Cooperative
Governance and Traditional Affairs, together with the MEC for Local Government
and Traditional Affairs in the North West Province, should review the
intervention and taking into account the procedural requirements of section
139(1
)(
b).
Report to be considered.
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