Beaufort West sec139 intervention & Financial Recovery Plan; Kannaland and Lainsburg sec154 Support Plan

Meeting report

Beaufort West Section 139 Intervention and financial recovery plan

Legislative mandate and Departmental strategy

Adv Gary Birch, Chief Director: Specialised Support, Western Cape Department of Local Government, briefly took the Committee through the legislative mandate and Departmental strategy. The Member of the Executive Council (MEC) for Local Government had several obligations sourced in the Constitution and the broader local government legal framework. Limitations in the legislative framework hampered the ability of the Minister ability to be responsive to act quickly and be innovative. Despite the limitations, however, the Minister overcomes these limitations through zero tolerance for unlawful actions by instituting numerous court actions and developing enabling provincial legislation. According to Section 139, provincial interventions had to be initiated by the provincial executive. The Constitution required the provincial governments to monitor the performance of municipalities and promote the development of municipal capacity to perform their duties.

The Western Cape strategy on monitoring and support to local government was reviewed consistently to adapt to the lessons learnt, and was aimed at supporting and strengthening the capacity of municipalities to enable them to function independently and ultimately to reduce the need for provincial interventions. Section 154 of the Constitution enabled the national government and provincial governments, through legislative and other measures, to provide support and strengthen the capacity of municipalities to manage their own affairs.

Financial recovery plans

On the financial recovery plans and current status of implementation in the Beaufort West Municipality, the Department reported the Municipality was still in the first phase of implementing the financial recovery plan. The provincial government would continue to provide support to assist the Municipality
with implementing the plan. Regular cash flow committee, technical committee and oversight committee meetings were being held with the National Treasury, the Provincial Treasury, the South African Local Government Association (SALGA), the Department of Local Government and the Municipality.

The Section 154 support plan for Beaufort West was meant to support the financial recovery plan, and was based on the findings contained in a diagnostic assessment report (11 to 12 May 2022). There had been consultation with the municipal manager and senior management, and the Council adopted the plan on 13 February 2023. The Department had set up a steering committee which had decided that all S154 steering committee meetings would take place on site in Beaufort West to give sector departments an opportunity to gain traction with the implementation of identified support projects. These priority projects included a review of the organisational structure, filling critical vacancies, disciplinary matters, support provided by the Municipal Infrastructure Support Agent (MISA), fleet management and waste management.

The Department of Environmental Affairs and Development Planning, together with the Beaufort West municipality, would establish a waste management committee to develop an action plan that would address all waste management issues identified by the Municipality. The Provincial Treasury would provide guidance on a transversal contract in terms of fleet and equipment.

Looking at the general progress in Beaufort West, Adv Birch reported the Municipality was slowly gaining traction with implementing the S154 support plan. The Western Cape government, in collaboration with stakeholders such as MISA, SALGA and Statistics South Africa (Stats SA), was working together to provide a comprehensive support package to Beaufort West. A number of support projects have progressed, such as the filling of critical vacancies, instituting disciplinary procedures, the development of standard operating procedures, and monitoring implementation of municipal infrastructure grant (MIG) expenditure.

Kannaland Section 154 support plan

Concerning the current status of implementation of Section 154 support plan in Kannaland Local Municipality (KLM), the Municipality approached the Department to conduct a diagnostic assessment, which it had done on 16 and 17 August 2022. Two feedback sessions were held with the then KLM leadership team regarding the report and plan. On 2 November 2022, discussions were held on each chapter of the diagnostic report. On 13 December 2022, the support plan was reworked into a template that the then acting-municipal manager aimed to use to link each activity contained in the plan to the performance agreement of a relevant municipal official. This was to keep them accountable to reach agreed targets, to identify the costing associated with each activity, and to determine what the Municipality should budget for in the short to long term, and what it needed to request additional support on.

The Department had written a letter to the executive mayor enquiring about the adoption of the diagnostic assessment report and the Section 154 support plan by Kannaland Municipal Council in February 2022. It followed up on a response on 8 March 2023. The mayor responded on 27 March requesting additional time to manage the internal affairs of the Municipality. The current municipal manager (MM) requested a further feedback session for an extended KLM leadership team concerning the report and the plan. Subsequent to the engagement held, the MM had responded requesting changes to the support plan, before being tabled at Council, despite the resolution taken at the meeting earlier that day. The municipal manager was reminded of the resolution taken and the priorities identified, and it was pointed out there were no fundamental changes required to the support plan.

Section 154 support plans in Laingsburg

On the current status of implementation of Section 154 support plans in Laingsburg, the diagnostic assessment was conducted in 2019, and the support package was duly adopted by the Municipal Council.

Its implementation had commenced and had been underway. The municipal manager had expressed satisfaction with the support methodology adopted and the manner in which it had aided the Municipality in making progress with long outstanding matters.

Some of the projects that had been completed included the transfer of houses in Matjiesfontein from the Municipality to registered beneficiaries, the installation of pre-paid water meters, a water master plan, a review of the organisational structure, development of a communications strategy, review of the local economic development (LED) strategy, and installation of bulk meters. Other ongoing projects involved the application for new houses to substitute the mud houses in Matjiesfontein, the building of a clinic in Matjiesfontein, implementation of an electricity infrastructure audit and electricity master plan, implementation of the Land Use Planning Act (LUPA) and Spatial Planning and Land Use Management Act (SPLUMA), and support of the implementation of the municipal staff regulations.

In his conclusion, Adv Birch said the Department would continue to offer its support to all municipalities, and would support those municipalities which requested such assistance, and those that were willing to accept the support in line with the mandate of the Department.

(Tables and graphs were shown to illustrate obligations of the MEC for local government; obligations of the MEC for finance: support, monitoring & investigations; the Western Cape strategy on monitoring and support; monitoring of oversight and support; and the DLG approach on knowledge management and support strategies)

Discussion

Deliberations with the Department

Ms M Maseko (DA) remarked there had been no improvement in the Kannaland municipality, but there were improvements in the Beaufort West municipality. She acknowledged that the interventions in the form of Sections 139 and 154 sometimes limited the involvement of the Minister. Shortcomings had been identified in Kannaland. For the year 2020/21, there had been no transfers for governance and citizen-centric grants. This grant was meant for qualifying municipalities. However, for 2021/22, governance had been allocated R1.6m and citizen-centric R5.6m, so she wanted to know more about the portion allocated to Kannaland and what the rationale was for the grant allocation to this Municipality, seeing that there had been no grant allocation during 2020/21. She asked how that was going to be monitored if the Council was going to take a year to approve the support plans, and the Department had been waiting. If there had been an allocation, that meant there had been progress in that Municipality. She wanted to understand the rationale behind some of the decisions taken about Kannaland. When there was no stability to ensure the Municipality could be entrusted with service delivery, one did not see the responsibility that the end user got joy from the money allocated to the Municipality. The allocation was an enabler for things to happen within the municipalities. She also wanted to know why the monitoring of the Department had waited a year for a response to the support plans it had provided to Kannaland in March 2022, because the mayor had asked for additional time.

Adv Birch replied that the allocations mentioned in the presentation were for all the municipalities, and not limited to the three municipalities in question. The amount of money available for 2020/21 was significantly less than the other years, while there was no grant for governance and citizen centric. That grant funding was used for the priority projects. The ratio that went to Kannaland would be responded to in writing, because the information was not in the presentation.

The Section 154 support being provided was an offer that needed to be accepted. The challenge was that one could go only to a certain point with the offer. It was up to the municipal leadership and Council to request this offer and accept what was being offered. The Department continued to monitor and evaluate the municipalities and assess the services provided, as well as the national and provincial indicators to determine what was required. What was looked at carefully was the monitoring of the triggers under Section 139 of the Constitution, to see whether or not a provincial intervention was required, or if an option was for the provincial government itself to see if further steps needed to take place.

He said there were certain types of intervention options and interventions under Section 139 of the Constitution. For example, Section 139 (1) allowed for the provincial government to intervene when executive obligations were not occurring, and it allowed some discretion on the provincial government's approach to determine if the intervention was required. Other types of intervention were triggered automatically -- for example, Section 139 (4) of the Constitution. If the Council did not adopt the budget within a particular timeframe, then the provincial government must intervene.

Section 139 had two types of financial recovery. The relevant threshold was set out in the Municipal Finance Management Act (MFMA), and the criteria for determining if it was a "must" or a "may." A discretionary financial recovery plan could be adopted by the provincial government, as against one that National Treasury developed, if the thresholds were meant for a mandatory financial recovery plan. The Department monitored to determine if the mandatory thresholds were triggered by the actions of the municipalities, and to see if it had the power to go in. The courts had been critical of provincial governments. In circumstances where they had intervened, they had determined the relevant thresholds were not met sufficiently and, even if they were met, the type of intervention had been seen by courts as too stringent. The courts wanted the Department to intervene in the least amount possible to achieve what was needed to turn around the Municipality.

Adv Birch said the Department had recently engaged with the Kannaland municipality. The request from the Municipality had come through in August 2022, and in November 2022, each chapter of the diagnostic report was discussed with it. In December 2022, the report was reworked at the request of the acting municipal manager. A follow-up took place during February 2023 by the Department. He noted that the Department had to be aware of the timeframes for the Council meeting. It had been waiting for a response from the Municipality to see if it had tabled the support documents before the Council, and if the Council had decided to take up the support.

The Chairperson remarked that the Department had supported the Municipality, which could be accepted or rejected by the Council. He therefore wanted to know if the Department had a remedy in place for when the Municipality did not want the interventions, because when the Department had done its own processes, it had to implement them.

Adv Birch said the support was under Section 154 of the Constitution. There was further support that the Department ultimately provided to the Municipality, be it from an infrastructure side or through public participation. The different units within the Department provided other assistance in relation to Section 154 support. If the Municipality declined the support, nothing under Section 154 could be done. The only thing the Department could do was monitor the various triggers in the Systems Act, the Structures Act, the MFMA and the Constitution to determine whether or not the requirements under those acts were available, as well as whether Section 139 was permissible. That was the only legal mechanism available to the provincial government.

Ms Maseko commented that the Department was supposed to communicate its support to officials such as the chief financial officer (CFO) and the municipal manager, but not with the politicians on the Council. On the support strategies, the presentation talked about the linkages of the activities. She wanted to know if the Department had the power to ensure the CFO and municipal manager used the legislation to implement the support being provided without relying on the Council and politicians, so that the allocated budget could be used for service delivery. She asked what happened when the Department identified that a municipality like Kannaland budgeted for R250m, for example. Its revenue collection was R158m, because Section 139 had options the Department could use -- or any other section in the Constitution or legislation -- and she wanted to understand if there was something that empowered the Department to intervene and tell the Municipality it could budget only with what it had got.

Mr D America (DA) said it was good to see that the stakeholders supported projects because the diagnostic report had identified these matters. Something fundamental about these municipalities had given rise to the status quo. When looking at the audit reports of these municipalities over the past years, there had been disclaimers and adverse findings. The AG had identified, amongst other things, the lack of internal controls, the lack of financial management, the lack of ethical leadership, etc. These matters had given rise to the disintegration of service delivery, so these support plans had been provided. If these matters were not addressed, they would be discussed again in a few years' time. He wanted to know the extent to which these matters were taken seriously, because the financial recovery plans might not resolve these matters, even though support needed to be given to the municipalities to address them.

He wanted to know the kind of disciplinary issues that had been referred to in the presentation -- who the people were that these disciplinary procedures had been instituted against, and what the role of the district municipality was in implementing these disciplinary matters. He added that the financial recovery plans had been fairly successful in Laingsburg, because many of the matters raised in the diagnostic report and its implementation had received buy-in from the Council and the leadership of the Municipality. If there was no political will within a particular municipality, like in Kannaland, whatever support was provided would not be successful.

Adv Birch said a lot of the concerns in the projects were contained in the financial recovery plan (FRP) itself. There were three phases in the FRP -- rescue phase, stabilisation phase, and sustainability phase. Currently, they are in the rescue phase, which focuses on the restoration of the cash flow of the Municipality. Indicators included a funded budget that demonstrated the Municipality was on a credible path, monitoring the daily cash and cash balances, cost containment measures, ring-fencing of conditional grants, ensuring creditors were paid timeously, and that negotiations were entered into to settle outstanding debts, etc. It had been taking longer to get out of the rescue phase than they would have liked. The type of intervention in this case was financially related. The Department assisted with governance and service delivery-related issues. The additional support provided was to further the activities and projects of the FRP. The Department also tried to improve processes and systems.

Regarding disciplinary matters, there was support and guidance from the district municipality. What was being assessed at the moment was whether to enter into a shared service with the disciplinary board, and that process was underway.

The Chairperson wanted to understand what the consequences were for the Department when the political leadership in the Municipality kept on changing, and if that was a challenge, how the Department was planning to address it to ensure the Municipality met its legal obligations. He indicated the Department took two days to make the diagnostic assessment, but the Council took seven months to adopt the plans. He then wanted to know if the Department did work with the Council when drafting the interventions so that it did not take time for the Council to approve them. What was acceptable for the Department in terms of the timeframe for the report to be adopted by the Council?

He said Kannaland had been under Section 139 of the Constitution, which had different interpretations, because he believed that an administrator should be appointed when a council had been dissolved. He wanted to know if that intervention had ceased to exist before going to the local government elections, or it had ceased to exist because there had been successes.

Adv Birch said the diagnostic assessment was done over two days and a report was developed, depending on what had been discovered during the diagnosis and visit, and the report could take more time to prepare. A lot of behind-the-scenes work was done, and the provincial treasury analysed the finances. All that got pulled into the report.

Ms Merle Green, Acting Director: Municipal Support and Capacity Duilding, Department of Local Government, explained that the diagnostic process starts with a presentation to both the Council and administrative leadership. The leader of the diagnostic team got into a separate engagement with the Speaker and mayor so that the Council was on board every step of the way. When the process was finalised, the findings were presented to both the Council and administrative leadership. The document was left to the Council and administrative leadership to digest the support package and return to the diagnostic team to state they were ready for implementation.

Adv Birch said the intervention in Kannaland had ceased to exist because of the court process. The court had stated that due process was not followed when the FRP was initially developed. The issue there was the degree of involvement from the national and provincial treasuries. Due processes were not followed when the plan was developed. The court had set aside that intervention and the FRP as well.

Ms Maseko asked if the Department would agree with her that Kannaland Municipality needed to be put under administration, and, considering the diagnostic tools the Department had, whether there was hope that things would change. The Committee could not continue to get used to understanding the Municipality was difficult to deal with, so there must be a system in place for what needed to be done because, in some previous meetings, the Kannaland municipality had refused to cooperate with the Committee. The Committee was the voice of the communities that the Municipality served.

She suggested the Committee should call the Auditor-General (AG), the national Department of Cooperative Governance and Traditional Affairs (COGTA), Minister Bredell, SALGA, and leadership of the MPAC to engage with the Committee, because it had been about ten years that the Committee talked about Kannaland and Beaufort West while the outcome was still the same -- yet money was being pumped into these municipalities every year. The Department had been doing its best to provide interventions, but if the municipalities were not using these tools they were receiving from the Department, the Committee would keep on engaging in the same conversation. If the Committee could have a chance to engage with the national Minister, maybe it would get a better understanding of the challenges facing other municipalities like Kannaland in the country.

Mr America asked at what stage the municipalities would be ready to implement the second phase of the financial recovery plans seeing that they had now been busy with the first phase, and asked if the implementation of the first phase would be completed within this year or next year. He further asked what the extent of the political leadership was to ensure the FRP was fully implemented, because it needed a full collaboration between the administrative leadership, the Council and the political leadership.

Adv Birch said the Provincial Treasury was best suited to provide answers on the movement to the second phase of the FRP, given its financial nature, but ultimately the activities in that phase needed to be achieved before one progressed to the next phase. A lot of these activities required the first phase of the activities to be completed before one moved to the next phases, especially in stabilising the Municipality's finances. If the Municipality did not progress with that intervention, then the provincial government would have to be responsible for implementing that recovery plan. At this stage, the municipalities had been implementing the intervention, but if they failed to implement it, the Department would make a recommendation to the provincial executive to take responsibility for that plan.

The Chairperson asked the Department to explain the limitations in the legislative framework that inhibited the Minister from doing his job, and whether there were opportunities for the provincial parliament to amend those pieces of legislation.

He also asked if the Department was afraid to fulfil its mandate of ensuring the province used Section 139, because history had proved that the first case of implementing Section 139 in the country was in Overberg, where the Department had lost the case. It had also lost another case. It appeared the Department was afraid to implement Section 139 when the signs were there for all to see, because it could not be normal for a municipality to have the same problems over the last ten years. There had been no success in Section 139 (5) intervention in Kannaland. The Department had then opted for Section 154, and asked if it was a better intervention than Section 139 (5) that was lost in court because no due processes had been followed.

He asked the Department to identify the positions where disciplinary matters were being resolved, and said he was happy with the progress in Laingsburg. He did not understand why Kannaland municipality had been given ample time to engage in a process, and when time came for approving what it had been engaged in, it asked for extra time and someone wanted to amend it. He wanted to know if the Committee was missing something between Kannaland and the Department, because the Municipality had asked for support and the Department had provided it.

Adv Birch stated the reason involved the municipal leadership that kept on changing, including the Council. Only the provincial executive could intervene -- the Department could only make recommendations. The provincial Minister could also recommend that the provincial executive intervene under Section 139 of the Constitution. The recommendations put forward were vetted by the state law advisors to ensure the necessary thresholds had been met for the interventions. There had been a relook at Section 139 of the Constitution and the way it was worded, as there were various thresholds that were required to be met in order for the province to take steps.

There were mechanisms to get information from the municipalities, and they were willing to give information to the Department, but there were many behind-the-scenes things the Department was not privy to, and those were not within its mandate. The Department did not want to regulate municipalities, especially those that were running well. From the side of the provincial government and mechanisms they had tried to implement, there were some changes to the system. Currently, the Western Cape Monitoring & Support of Municipalities Act has been out for public comment. The Department had proposed amendments to the Act which could assist with providing support and monitoring to municipalities and to take action which was not at the level of a Section 139 intervention, but which would support other mechanisms provided for in the national legislation.

He stated that the Department was not afraid to litigate. The provincial Minister litigated when unauthorised actions had been noted. There had been no unwillingness to make recommendations and to intervene when the necessary requirements had been met. The problem was that the requirements were stringent for the provincial government to intervene in another sphere of government. Regarding the Section 139 intervention in Kannaland, the Department was not the lead in that intervention, so he would not comment on behalf of another department and the standing committee overseeing that particular department.

SALGA's comments

Mr Carl Pophaim, Member of the Provincial Executive Committee (PEC), SALGA, said it was important for SALGA to be included in engagements with the Standing Committee on a regular basis.

It was important to distinguish between Section 139 and 154 interventions. In terms of Section 154, the Department had done what was required of it. Regarding Kannaland, they had long passed the space of Section 154. SALGA had tried to support its member municipalities. Due to the financial situation in Kannaland, its membership has been brought into question. SALGA would continue to support Kannaland, to represent the communities in the area.

He noted that Beaufort West and Laingsburg had made progress in the last two years. Over the last two years, SALGA has focused on municipal audit support. It was important to involve the AG, but SALGA had taken the view that if the internal and external auditing process was done right from the beginning, the work of the AG would become easier. In Kannaland, there was no internal auditing mechanism, and SALGA had facilitated with the district municipality to share that service so that it could take place. However, there was nothing one could do when the Municipality did not want one's intervention. SALGA had developed terms of reference for MPAC committees, and drafted oversight plans and capacitation workshops. SALGA could invest in all these facilitatory mechanisms, but if the work of MPAC was hindered internally, the outcome would be negative.

In terms of drafting and reviewing the by-laws and policies around public participation in ward committees, SALGA had done all of this for the three municipalities. Because of their audit outcomes, it conducted ethics and integrity workshops to ensure senior management and the political leadership understood the implications of their actions because of the power delegated to them by the Council. All the LED strategies of these municipalities have been reviewed. At the heart of this was the economic stability of the municipalities. Economic development needed to happen and could not be developed through grants.

SALGA had assisted in developing strategies, using the catalyst already existing in the municipalities. Portfolio inductions had been done with mayoral Committees. Interventions had also been done on job/task evaluations because it had been found that the expenditure in the municipalities on staffing did not equate with what was expected of them on paper. This broad package of support had been given to all three municipalities. In many cases, these packages were adopted in Laingsburg, accepted in Beaufort West, but with no implementation in Kannaland.

He said SALGA had faced obstacles in Kannaland. It had represented the Municipality in disciplinary arbitration areas, and there were occasions when it had been asked to excuse itself from the engagements. A settlement had been reached with a senior official -- something that had not needed to be done -- because this had cost the municipality money close to R500 000. Those were the kinds of situations that SALGA faced.

It was important to look at the broader spectrum of local government. He advised caution regarding the idea of reviewing and making amendments to some pieces of legislation. The drafters of the Constitution had drafted Section 139 and put together Section 154 in such a way one did not forget
Section 151, which protects the economy of the local government as a sphere. The oversight role of the Standing Committee was important to ensure the necessary constitutional steps were taken before making an intervention one could not turn away from, like dissolving a municipality and appointing an administrator, which was the most severe step.

SALGA had been seriously concerned about Kannaland, and had agreed to have a broad conversation with the district municipality, neighbouring municipalities, and Department of Local Government. The situation in Kannaland was so severe that the idea of reconfiguring the municipal boundaries had been considered. This was a problem of two decades that needed the intervention of the Department, SALGA, the district municipality and neighbouring municipalities. SALGA could not accept that interventions were not working in Kannaland while working in Beaufort West and Laingsburg.

Alderman Paul Swart, SALGA PEC Member, said they would become weak like these three municipalities because, as individuals, SALGA, the Standing Committee and Department knew what the real causes of the problem were in Kannaland, Beaufort West and Laingsburg. Most of the time, they turned a blind eye. The time had arrived for radical intervention in Kannaland to benefit the end users. The time was gone for interventions. He said this was a political issue caused by people who kept those municipalities hostage. Interventions were needed from the national COGTA and national SALGA. They were failing the people of those municipalities.

Mr Gert Combrink, SALGA PEC Member, commented that there must be political will and stability because everything fell apart if there was no political stability. The top structure of the administration changed when a new political leadership came in, because there was no follow-through on executive directors. The Department sat with the changing goal posts, because there was no stability in the Municipality. That was the biggest problem.

He wondered why the Beaufort West municipality was not using SALGA instead of the district municipality when it came to arbitration matters, because it was paying SALGA a huge levy. That service was available and did not come from any political party. SALGA had an independent fraud and risk committee, and the chairman of the risk committee sat on this committee as well. Councillors were not allowed in the fraud and risk committee, but only got feedback from the audit committee that went to the Council. This was a nice oversight tool and structure for councillors.

Closing comments

Mr Colin Deiner, Acting Head of Department, said in his closing remarks that it was important to recommend political intervention, and that it was at the level where it could engage with those municipalities. From the side of the Department, it was about looking at all the options that could be recommended to reach the objectives it wanted to achieve.

The Chairperson said the role of the Committee was to ensure what was supposed to be done by another sphere of government was done. The Committee had to play its oversight role over the Department of Local Government and make sure the municipalities were supported. It was frustrating to see help being rejected by the municipalities, and such a situation was unacceptable. He suggested the Department should look at the legislation to see what could be done when help had been requested and provided, but the Municipality refused to use it. Section 139 should be the last resort, because it has been used as a political tool in some instances. The Committee was here to strengthen the hand of a municipality that wanted to be strengthened. A remedy must be found to force municipalities to accept the support they provided, because it was good for resolving their problems.

Resolutions

The Committee resolved that it would organise a meeting and invite the national and provincial ministers of local government, the SALGA executive, the AG, and the accounting officers of the Kannaland municipality to the same meeting. It requested that the Committee be furnished with all the court cases on the interventions, so that the Committee could have background information when it was engaging with the national Department and other stakeholders to understand the loopholes in the legislation. It further resolved to be forwarded the FRPs of the Kannaland Municipality and Beaufort West; and to find out from a legislative point of view if there were ways of forcing the municipalities to use the support given to them, because it cost money to develop the interventions.

The meeting was adjourned.