Withdrawal of section 139 interventions: Mafube and Maluti a Phofung Local Municipalities; State of forensic investigations in municipalities

Meeting report

The Chairperson noted an apology from the Minister of Cooperative Governance and Traditional Affairs (COGTA), Dr Nkosazana Dlamini-Zuma, who was said to be attending an urgent Cabinet committee meeting. He said Ms L Kleynhans of the Free State Provincial Legislature had been invited to participate in the meeting.  

Free State: Opening Remarks
Mr Mxolisi Dukwana, MEC: Cooperative Governance and Traditional Affairs in the Free State, said the Department had not been performing well in most of its municipalities as there had been many challenges. The Department had not been able to deliver on its constitutional mandates in terms of Section 154 and had put interventions in place to deal with the challenges. Most of the municipalities thought that their responsibilities concerned only service delivery and did not view their responsibilities as catalysts for development and growth. Most municipalities were found to be not ready or resilient enough to deal with changes relating to climate change and twenty-first century developments. Those challenges had given rise to some of the interventions within the province. 

Section 106 investigations
Mr Mokete Duma, Head of Department (HOD), Free State COGTA, presented a progress report on the municipalities where section 106 of the Local Government: Municipal Systems Act had been invoked. He would inform the Committee of steps that the Department had taken to remedy the situation where the invocations had not yielded the desired results.

Municipalities where section 106 was invoked
The Committee heard that the Department had successfully invoked section 106 in the Nala, Matjhabeng, Tswelopele and Kopanong local municipalities.

In the case of the Nala and Tswelopele local municipalities, the MEC had still to set a date to present reports to the councils.

In the case of the Matjhabeng and Kopanong municipalities, the Department was awaiting reports from the councils on the implementation of the recommendations that had been made.

Invocation of section 106 had not commenced in the Mohokare Local Municipality due to instability in the municipality and the community. In the case of the Nketoana Local Municipality, a meeting had been arranged to introduce the investigative team on 28 June 2021. However the council and the management of the municipality were not present on the day, and invocation never commenced. The MEC had plans to resuscitate the investigations.

Progress Report: National Prosecuting Authority cases
Cases involving 17 municipalities had been referred to the National Prosecuting Authority (NPA). Among them were:

The Mohokare Local Municipality case was in court on 3 May 2022. The matter involved the use of fraudulent invoices for catering, procurement of properties and the payment of ghost employees. The matter had not yet been referred to the Asset Forfeiture Unit (AFU)

The Thabo Mofutsanyana Municipality case from 2019. Money was paid to the Compensation Fund in terms of the Compensation for Occupational Injuries and Diseases Act.  The bank account used was fraudulent and the money was never received by the Department of Labour. The case was still under investigation and had not yet been referred to the AFU.
 
The Ngwathe Local Municipality case from 2011 wherein the municipal manager was accused of increasing his salary and approving a once-off payment to himself. The accused failed to appear in court on 2 and 3 February 2022.
 
The Department was organising witness protection for a key witness in some of the cases, whose life it felt might be in danger due to a high number of assassinations in the area near Lesotho.

Hawks progress report 
The Committee was told that 12 municipalities were involved in investigations by the Directorate for Priority Crime Investigation (Hawks). There were 20 cases in total - five involved the Maluti a Phofung Local Municipality and three involved the Mafube Local Municipality, making them the municipalities most investigated by the Hawks in the province.

Senior managers suspended
The chief financial officer (CFO) of Maluti a Phofung and the municipal managers of Dihlabeng and Masilonyana local municipalities had been suspended, but the courts had lifted their suspension. The CFO of Kopanong and the municipal manager of Lejweleputswa were still under suspension. The CFO of Nketoana had been suspended and dismissed.   

Challenges in the invocation of section 106
The Committee heard that the MEC, because of some other challenges, could not complete section 106 investigations in the Mohokare Local Municipality. The Nketoana municipal council had impeded the investigations. However, the current MEC, as a form of remedial action, had strengthened the section 106 investigations team and they would resuscitate the investigations in the current financial year.

Discussion
Ms L Kleynhans (DA, Free State Legislature) referred to slide five, on the legislative mandate of the MEC. She said no report had been presented to the Free State Legislature or the COGTA Portfolio Committee. That was a bit disturbing, given that the Section 106 investigations had already been instituted in 2019. It was also disturbing that councils seemed to be resisting the Section 106 interventions. A lot of education needed to take place within councils. Most of the NPA cases had not been referred to the Asset Forfeiture Unit (AFU). Whose responsibility was it to refer the cases to the AFU? Did the councils or the MEC have to make an application for the cases to be referred? 

On slide 11 there was a short report on the cases being handled by the Hawks. Very little information was given on what those cases were related to. Maluti a Phofung alone had five cases being investigated by the Hawks and it would have been good to know what those matters related to.

On slide 13 there was a reference to a case in Thabo Mofutsanyana District Municipality. The preliminary report of the disciplinary board had been presented to the council and the council had referred it to the municipal public accounts committee (MPAC). The council had to be advised that the proper procedure had not been followed. The council had to proceed with the full investigation as per the directive of the disciplinary board.

Ms S Shaikh (ANC, Limpopo), said the presentation had not given a clear picture of the work that was done. In terms of Section 106, the MEC was required to provide a directive or written statement to the National Council of Provinces (NCOP) motivating the actions taken, and a report detailing the outcome of the investigations had to be sent to the NCOP.  Could the province provide the Committee with the dates on which the reports had been sent to the NCOP and also include the necessary reports so that the Committee Members could become more familiar with the content?

Mr S Zandamela (EFF, Mpumalanga), asked when the province would “zoom into” the allegations against senior managers. The HOD had indicated that some of the municipalities were not following the stipulated processes, resulting in some of the culprits escaping prison. One had got away with R90 million. The Province had to monitor and pay attention to any allegations.

Mr I Sileku (DA, Western Cape), said in order for the Committee to have a clearer picture of what was presented, all the stakeholders should have been in the meeting so that the Committee could direct questions to them. To avoid having a one-sided discussion, the Hawks, the NPA and the affected municipalities had to be present in the meeting.

Mr E Mthethwa (ANC, KZN), asked if there had been any follow up on the “gentleman who ran away” with about R90 million for the building of a stadium. Were there any other legal means of following up on the matter?

Mr G Michalakis (DA, Free State), asked whether the investigating teams that were sent by the province were properly qualified. Did those teams know what they had to be looking for? The Masilonyana Local Municipality had not been submitting its financial statements for years, while it was under administration and while it was not under administration. For 20 years, the municipality had had no rates policy in place, as required by law, because the administrator who was sent to the municipality did not know what the law required. What guarantee was there that the investigating teams from the province knew what was required of them?  

The dates on the NPA cases appeared to be ludicrous. Some cases involving the investigation of a few invoices took about 14 years. The problem could not always be with the police, but could also be that the municipalities were simply not cooperating. There was a need for the Committee to arrange a meeting with the Provincial Commissioner of Police in the coming weeks to get an update on what the hold-up was in those cases. There was a need for independent audits to be done at some of the municipalities, especially the biggest culprits so that there could be cooperation between COGTA, the police and the NPA. Confidence in these institutions was being diminished on account of a very simple matter pertaining to Zastron from the year 2 000. It was still being investigated 22 years later, while the matter only pertained to a few invoices. 

Ms N Nkosi (ANC, Mpumalanga) agreed with Mr Sileku that the stakeholders, especially from the NPA, had to be present in the meeting. It was concerning that some of the cases had not been referred to the AFU. Some cases had been taken to court but the outcome had not been sent to the Committee. On the issue of Nketoana Local Municipality, the MEC had reported that the Department was supposed to go there and introduce the investigation team, but unfortunately, the management of the council was not there. What was the reason for them not being present on the day? In the case of Ngwathe Local Municipality, it was said that the accused had to appear before the court on the second and the third of February 2022 and he did not. What reason was given for the accused not appearing? If the reason was not satisfactory, what actions were taken to make sure that the accused appeared?

Mr K Motsamai (EFF, Gauteng), said he was shocked and surprised that there were cases from 2008 -14 years ago - where the implicated persons had not yet been prosecuted. Who was responsible for following up on the cases? When were those people going to be arrested and imprisoned, for stealing the people’s money?

The Chairperson said the meeting was incomplete because there was a need for all the law enforcement agencies to be present and brief the Committee on why little action had been taken on the cases. The municipalities also needed to come in and tell the Committee why they had not assisted the law enforcement processes. The Provincial Commissioner, the Hawks, the SIU and the NPA had to appear before the Committee in two weeks’ time to brief it on those cases that had existed for a very long time. The municipalities would be invited to the very same meeting.

The picture about the state of the municipalities was very disturbing. It could not be the case that people looted in such a manner and faced no consequences. In the past, starting from 2018, the Department had been in the wrong in that when Section 106 was invoked, the NCOP had to be informed within 14 days, and that had not been the case. In future, when the Department invoked section 106, the NCOP needed to be informed within 14 days. He referred to a provision in the Municipal Systems Act that gave a province 90 days to investigate a matter referred to it by the national minister. If there had been a criminal issue, a quick investigation had to be conducted. The investigation could not take three to four years. 

Mr Mthethwa said the Chairperson had made a good proposal, but bringing in the law enforcement agencies to meet with the Committee would not help much because they tended to not divulge information on cases that were still under investigation. It would be better for the Department to consult with the law enforcement agencies and acquire the necessary details, then submit a report to the Committee on the cases.

The Chairperson agreed with Mr Mthethwa but emphasised that the Department had already rendered reports with little information to the Committee. It was thus important for the law enforcement agencies to account to the Committee for the hold-ups. Even if the agencies would not divulge the details, they had to account for the delay in finalising the cases. An explanation should be given on why some cases had been under investigation for 14 years. 

Responses
The MEC, Mr Dukwana, said some of the questions clearly outlined the challenges that the Department had to deal with. From a provincial perspective, the point of entry should not be only the criminal case investigations; some of the investigations that needed to be carried out had to be in terms of section 154, to establish what kind of support had to be given to municipalities to enable them to deliver on their mandates. Section 106 investigations related to allegations of non-performance and serious fraudulent activities.  The Department needed to know what section to invoke in each municipality and could not always resort to invoking Section 106 when planning interventions.

The Department appreciated that it had been cautioned that it had not been submitting reports to the NCOP in the stipulated timeframes and would be working to correct that.  The Department noted that it had to submit such reports to the provincial legislature as well, as indicated by Ms Kleynhans.

The Chairperson said the Committee would look into the matters that were discussed and expedite them so as to make a case for the Free State. In December 2020, the Committee visited the Maluti a Phofung Local Municipality, as part of its oversight work and also to observe the progress in terms of the invocation of section 139(b) of the Constitution. The Department had to then brief the Committee on the progress since the invocation in Maluti a Phofung and Mafube local municipalities. 

On Mafube, MEC Dukwana said the business community and AfriForum had approached a court to ask for intervention from national government. However, the resulting court order had stipulated that the provincial government had to take over the intervention in the municipality. Mr Duma would lead the presentation on both the Maluti a Phofung and Mafube Local Municipality.

Invocation of Section 139 in the Mafube Local Municipality
Mr Duma told the Committee that the Mafube Local Municipality had, for a number of years, encountered serious crises in its financial affairs and had persistently breached its obligations to provide basic services and to meet its financial obligations, including third party deductions. The situation resulted in Mafube being placed under administration in terms of Section 139(1)(b) of the Constitution by the provincial executive council during a meeting 15 March 2017.

On 11 December 2020, the Free State Executive Council resolved to revoke the implementation of section 139 and provide support to Mafube in terms of section 154.

Service delivery challenges
The Committee was told that a status quo analysis on service delivery done in January 2020 had revealed that:
-Insufficient water supply in high-lying sections of Mamello and Phomolong would be alleviated by the construction of the Namahadi rising main and an 8km water pipeline to provide water services to those communities.

-There was a need to leverage resources for the replacement of cement asbestos pipes that were prone to bursting and constituted a significant proportion of the water network in the municipality.

-There were stalled capital projects as management had encroached on those grants and used R8 million for unintended purposes such as defraying operational costs.

Sixty four percent, or 8 458 of total households, in the municipality, had functioning water meters. However, they were between 10 and 15 years old and were prone to inaccuracies.

From July 2020 to April 2021, the municipality’s revenue bill amounted to R103.99 million, but only R20.87 million, or 20 percent of the total amount, had been collected. The collection rate was 75 percent less than the threshold set by the National Treasury. Due to low revenue collection, the municipality had experienced a salary deficit of R7.01 million on a monthly basis.

Service delivery achievements
As a result of support from the COGTA department, the following were achieved:
-The Municipality paid back R8 million of capital grants that were encroached from the March 2020 Equitable Share.
-One hundred percent of capital grants for 2019/2020 were spent on their intended purposes and thereby extended services such as electricity connections and ensured the reliable provision of water services.
-The municipality completed the electrification of 466 households in Namahadi Ext.8
-The municipality implemented a water meter replacement project as part of its revenue protection programme. It had replaced 708 conventional water meters with prepaid water meters by 12 June 2021.
-The rural maintenance contract for the provision of electricity services on behalf of the municipality was being reviewed.

Litigation
The Committee was told that on 4 May 2021, the Mafube Business Forum and Afri-Forum NPC lodged an application with the Free State Division of the High Court against Mafube Local Municipality, the municipal manager, the council, the executive council representative or administrator, the premier, the Free State Executive Council, three MECs, four ministers, the NCOP, the Fezile Dabi District Municipality and the President. They sought the following relief:
1) An intervention in terms of section 139 (7) of the Constitution to the effect that the Mafube Local Municipality be dissolved and be placed under administration by the national government.
2) A supervisory/ structural interdict requiring national respondents to report back to court.
3) That the Mafube Business Forum and Afri-Forum NPC be permitted to assist and oversee the Mafube Local Municipality’s administration on a temporary basis.

The matter was heard on 27 January 2022 and the judgement was delivered on 28 April 2022. The judgement ordered that a mandatory provincial intervention in terms of Section 139 of the Constitution be instituted. The Free State Executive Council, on 11 May 2022 resolved to invoke Section 139 at Mafube.

The Chairperson said the Committee understood the gist, which was that the Department received a court order that compelled it to invoke Section 139 of the Constitution and the Executive Council had met in the past week to invoke Section 139 because the municipality was facing financial paralysis.

Going into the next presentation, the Committee knew that Maluti a Phofung Local Municipality had been placed under administration through the invocation of Section 139(b). The Committee knew of the problems that had been identified, and required the Department to present the current state of affairs and the actions the Department wanted to take in Maluti a Phofung. The Committee was aware of a new council that had been appointed in November 2021 and that there was a new coalition government in that municipality.   

Maluti a Phofung Local Municipality
Mr Duma told the Committee that the Maluti a Phofung Local Municipality would conclude an agreement with Eskom to provide electricity and ultimately raise revenue for the municipality. Once Eskom deducted its fees, the remaining amount would be paid to the municipality’s account, in terms of Section 8 of the Municipal Finance Management Act. The municipality had had a meeting with Eskom the previous day in order to receive the details of the active partnering model. In terms of the model, Eskom would suppress the interest, ensure that it improved the network and mitigate the notified maximum demand which had caused the municipality to suffer. The agreement with Eskom on the notified maximum demand for the municipality had been 110 MVA, while the municipality had actually been using 170 MVA. 

The municipality’s Eskom bill had stood at R2.2 billion at the start of the intervention, but it now stood at R6 billion because of all the penalties levied, including interest due on accounts. The municipality’s active partnering model with Eskom had its advantages and disadvantages. However, the advantages far outweighed the disadvantages as there would be consistent electricity supply. The Committee would recall that two of the biggest factories in the municipality wanted to relocate because of problems with water and electricity supply. With the advent of the municipality’s partnering with Eskom, the Department could guarantee that the two factories would not be relocating.

The Minister had assigned Bloem Water, working together with the Department of Water and Sanitation, to ensure that all the water supply problems that were identified in the municipality were dealt with.

The Free State COGTA department had reported to the Portfolio Committee and the Select Committee that it had concerns about the salaries of the municipal manager and CFO which were not consistent with the regulations. The matter was taken to the High Court for a declaratory order which nullified the salaries. The court had also nullified the appointment of the two candidates, but the candidates had appealed against the ruling. This meant that the status quo would remain until their contracts automatically expired. 

Discussion
The Chairperson asked if the Maluti a Phofung Local Municipality was still under administration in terms of Section 139(b).

Mr Duma answered that the municipality was no longer under administration.
 
The Chairperson asked for confirmation that the purpose of the presentation was to inform the Committee about new measures in relation to the payment for services, the issues around the municipal manager’s appointment and the issues around non-payment to third parties.

Mr Duma agreed that indeed that had been the purpose of the presentation. 

Ms Kleynhans referred to a review of the rural maintenance contract for the provision of electricity services on behalf of the Mafube municipality. She said it was clear that the municipality was in a dysfunctional state. The only functional aspect of Mafube was the constant supply of electricity. Rural maintenance was paying the current Eskom account. There was an outstanding historical Eskom debt in Mafube. Putting Mafube in charge of the electricity was going to make things worse since the municipality had clearly not been collecting revenue. Mafube had to sort out its billing system and collection rate so that it could have money to do other things. Mafube taking over the entire supply of electricity would be a big mistake.

On the Maluti a Phofung Local Municipality, she said 35 factories in QwaQwa had already closed as a result of challenges with water and electricity supply. The active partnering model with Eskom was a very positive development, although the model had not yet been deliberated on and adopted by council, meaning it was not yet final.

The intervention by the Minister into the issue of water and sanitation in Maluti a Phofung was also welcome, but it was unclear how that was going to work and how the reporting was going to be done. The issues of both electricity and water supply were going to have an impact on the budget, which had already been tabled. Would the tabled budget have to be withdrawn and re-worked to include the Eskom and water and sanitation implications?

On the court order on the municipal manager and CFO, the first contracts which were entered into were now declared illegal by the court and those individuals had to pay back their excessive salaries. However, it was said that the correct contracts that were entered into by the administrator would remain in place until they legally expired. Could the Department provide clarity on that?

Mr Motsamai suggested that the Committee should hold a physical meeting with the law enforcement agencies as opposed to a virtual one. The issue of the Free State was very serious. It seemed as if everyone did whatever they pleased with no regard for the law.

Mr Sileku asked if the HOD would say there was political stability in Maluti a Phofung, and provide reasons for his answer. The municipal manager and CFO were to be paid until their contracts expired or until a review from the court was received. In terms of which contracts were they currently being paid? The contracts that were found to be illegal and providing for excessive salaries or the correct contract that was later entered into by the administrator?

Would the HOD say that there was political stability in the Mafube Local Municipality?  The provinces had the power to intervene in struggling municipalities but seemed to not intervene in time, leading to external parties going to court to force the provincial departments to intervene. Why was there such a need for external parties to go to court to force the provincial departments to intervene? It was known that when the external parties went to court they advocated for section 139(7) instead of section 139 (1)(a) or (b). When the executive council met, it opted for section 139(5) (a) and (c) for the intervention in Maluti a Phofung. Could the Department motivate why that option was chosen instead of the other options in Section 139.

Mr Tumelo Thulo (ACM), Councillor in Maluti a Phofung, said the active partnering model between Maluti a Phofung and Eskom was not yet finalised. The partnership seemed to disadvantage the current municipal workers who were dealing with the issues of electricity. As Eskom was to bring in its own workforce, there was still a need for discussions on what would happen to the municipality’s current workforce. There was a need for discussions on the appointment of Bloem Water as well. There was no political stability in the municipality, but the HOD of the Department would respond further on that.

Mr Moeketsi Lebesa (DPSA), Council Whip in Maluti a Phofung, said the negotiations with Eskom had started during the term of the previous Council and the current council had only resuscitated those negotiations the previous day. There would be a special council meeting the following week to deliberate on the active partnering model. There was political stability in the municipality as councillors were able to meet regularly and discuss matters. Two council meetings had already been held, with the only problem being that some of the councillors were sponsoring motions of no confidence which always failed.

The Chairperson summarised that the Executive Council of the Free State Provincial Government had intervened in Mafube Local Municipality under Section 139(5) (a) and (c) of the Constitution. Once a municipality was placed under Section 139(5), the Department had to inform the NCOP of the matter within seven working days. Missing any procedural aspects of the intervention would create problems for everyone. The Department would be aware that a lot of people had criticised the provincial government for the invocation of Section 139, saying that it had not yielded positive results. The Department needed to provide a road map indicating what actions were to be taken in the intervention. 

Regarding Maluti a Phofung, the main emphasis was that whatever agreement the municipality reached with Eskom had to be all inclusive. Engagements and consultations with all the necessary stakeholders were a must. It was confusing that the whip had reported to the Committee that there was political stability in the municipality while the councillor had said there was none. The municipality was under a coalition government due to a motion of no confidence. Political parties had to work together to ensure that there was stability in the municipality and to forge ahead in terms of service delivery. “When elephants are fighting, the grass must not suffer.”  The area of Maluti a Phofung had been through tremendous suffering and there had been violent service delivery protests relating to water and electricity supply that had been covered extensively in the media. Reports had indicated that 70 percent of the nationwide debt owed to Eskom was from the Free State.

Responses
On Mafube, MEC Dukwana said there were some lessons to be learned. There was an intervention in the municipality, and then there was a forced intervention. There was a need to assess the ability of the municipality to exist in the state that it was in at the moment and whether it would be able to service the people going forward. The capacity of the administration was also an issue that needed to be dealt with.  When interventions were to be put in place, the intention had to be to ensure the betterment of the municipality at the end of the intervention; interventions could not be put in place just because the law dictated so. Those were some of the items that had to be considered going into the future.

Mr Tseko Mokoena, SA Municipal Workers Union, said the Committee should expect a written submission from the “side of labour”. In the case of Mafube, the municipality was run by external parties and hence the intervention was appreciated for the sake of stability and improving service delivery in the area.

On Maluti a Phofung, as much as the active partnering model was welcome and as much as the intervention was aimed to improve service delivery, there were due procedures that had to be embarked on to enable other interested stakeholders to participate. “Nothing about us without us.” The intervention posed a threat to the jobs of the community members and it would be proper to avoid concluding service level agreements with Eskom without exhausting the internal mechanisms. 

The Chairperson interjected, asking Mr Mokoena to summarise as most of the issues that he was speaking on, had already been dealt with.  The Committee had said that, as a matter of principle, the agreements that were to be concluded were not to be concluded in the absence of any of the stakeholders. All the stakeholders had to be taken on board.

Mr Mokoena said he was representing a constituency and had been invited into the meeting to participate.

The Chairperson asked Mr Mokoena to stop interrupting. He said Mr Mokoena had been given a chance to speak and had almost entirely repeated what had already been said.

Mr Mokoena interrupted the Chairperson and the Chairperson requested that Mr Mokoena be removed from the meeting platform.

The Chairperson said that the matter had been closed on the note that there was a need for active participation of all the stakeholders when agreements were concluded.

Committee Reports

The Committee considered its Budget Vote reports on the 2022/23 annual performance plans (APP) and budget allocations of the Department of Water and Sanitation, Department of Human Settlements and the Department of Cooperative Governance and Traditional Affairs. They were adopted with abstention of the DA.

The meeting was adjourned.