PRESENTATION TO THE SELECT COMMITTEE ON FINANCE

1. PRESENTATION TO THE SELECT COMMITTEE ON FINANCE SUPPORT PROVIDED BY THE DCoG TO MUNICIPALITIES PLACED UNDER ADMINISTRATION UNDER SECTION 139 OF THE CONSTITUTION, 1996 11 September 2013 Parliament, RSA, Cape Town

2. PURPOSE: To brief the Select Committee on Finance on support provided by the Department of Cooperative Governance to municipalities that are presently placed under administration in terms of section 139 of the Constitution of the Republic of South Africa, 1996 (“the Constitution”).

3. CONTENTS • Types of Section 139 Interventions • Current S139 Interventions • Nature of the Challenges • Observations from Interventions • Additional Support Measures for 139 Municipalities • Status of the Intergovernmental Support and Monitoring Bill (IMSI).

4. TYPES OF SECTION 139 INTERVENTIONS • In terms of section 139 (1) of the Constitution the provincial executive has the power to intervene into the local government affairs when a municipality cannot or does not fulfil an executive obligation in terms of the Constitution or legislation. The provincial executive may intervene by taking appropriate steps to ensure fulfilment of the obligation by doing the following: • Section 139(1) provides for general intervention in instances where a municipality fails to fulfil an executive obligation (this is a provincial discretionary intervention); • Section 139(4) provides for instances where a municipality fails to approve a budget or any revenue raising mechanism as required by legislation (a mandatory obligation); and • Section 139(5) provides for intervention in instances where a municipality, due to its financial affairs, is unable to deliver services or meet its obligation (a mandatory obligation).

5. 2. CURRENT SECTION 139 INTERVENTIONS

6. OVERVIEW OF GENERIC CHALLENGES IN S139 MUNICIPALITIES

7. CURRENT INTERVENTIONS Currently there are 13 municipalities in 4 provinces under administration in terms of S139 (10) and of S136 (3) (MFMA).

8. 3. CURRENT S139 AND S136 (PFMA) INTERVENTIONS: NATURE OF THE CHALLENGES

9. KwaZulu-Natal

16. KZN SPECIFIC CHALLENGES The following specific challenges were identified for the local government in KwaZulu Natal Province which affects S139 Municipalities • Coalition government at municipal level within the Province creates political instability. • Strained relations between politicians and officials, as well as interference in administration in some municipalities, resulting in the tensions between the Council and the Municipal administration. • High vacancy rates in most municipalities. • Ineffective public participation, which was demonstrated through community protests in some parts of the Province. • Councillors failing to perform continuous oversight responsibilities over service delivery • Poor spending on MIG, exacerbated by poor planning and slow procurement processes, result in the late implementation of infrastructure projects. • Most rural municipalities are solely dependent on MIG for capital projects. • Incomplete infrastructure projects, in the areas of housing, roads, electricity, water and public facilities. • Maladministration with regard to employment of local communities in the municipalities and on infrastructure development projects (e.g. nepotism and favouritism).

17. Current Section 139 Interventions: North West

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20. NORTH WEST SPECIFIC CHALLENGES The following specific challenges were identified for the local government in North West Province which affects S139 Municipalities: • Political differences and disagreements in the implementation of section 139 interventions (i.e. Political structures not supportive of EXCO decisions to invoke section 139 interventions, which resulted in delays in the implementation of interventions). • High level of resistance from affected municipalities, resulting in threats to take legal action against Provincial government • Poor understanding of section 139 interventions by some councils and administration (e.g. The MM in Maquassi Hills does not recognise the authority of the Administrator, resulting in duplication of processes such as recruitment of section 56 posts). • The municipalities claim that the Provincial government has no basis for invoking the interventions and that proper procedures were not followed before the interventions were invoked (in all instances, the MEC for Local government has engaged with the councils, highlighting the problems in the municipalities and the need for councils to take action, but this was not done by councils, hence the decision to invoke section 139 interventions).

21. NORTH WEST: STATUS of INTERVENTIONS • The current status of the implementation of the interventions is as follows: • Maquassi Hills Local Municipality • The Administrator and a team of experts started in April 2013 but has been met with high resistance from the Municipal Manager • There is some progress registered however, due to the resistance, some of the gains may be reversed once the intervention is lifted • The NCOP select committee supports the intervention • Ditsobotla Local Municipality • The Administrator and team of experts was appointed but has not started with the actual intervention (due to political disagreements about the process) • The team has conducted an assessment and the report is due for tabling before council prior to the actual implementation of the intervention • The time remaining before the intervention lapses is too minimal to make any meaningful impact in the municipality. • The NCOP select committee supports the intervention.

22. NORTH WEST: STATUS of INTERVENTIONS 3. Matlosana Local Municipality: The municipality objected to the intervention and council took a resolution to that effect (not to accept the intervention). The Administrator (financial team) has never been introduced to the municipality since the EXCO decision in March 2013 as a result. Nothing has been done in the municipality with respect to the intervention. The municipality has issued summons to the Provincial government in objection to the intervention (same day as the NCOP SC visit) The NCOP select committee indicated a need for the decision by the Provincial EXCO and the Minister of COGTA to be revisited (the municipality indicated to the NCOP that the reasons for the decision to intervene are no longer applicable as the financial situation of the municipality has improved) However, the debt owed to the municipality continues to escalate and is estimated at R980 million.

23. MPUMALANGA

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30. EASTERN CAPE

31. 4. ADDITIONAL SUPPORT MEASURES

32. Broad strategies to address challenges Available through the department: • Deploy critical technical skills through MISA • Monitor rigorously the implementation of the amended Municipal Systems Act. • Strengthen oversight structures like s79 Committees, Audit Committees and Ethics Committees. Not within the control of the department: • The political environment in municipal spaces: e.g. coalitions, which can lead to continuous chopping and changing of Mayors and speakers; plus overall problem of political in-fighting and tensions and interference in the political/administrative interface. • Rectifying financial mismanagement, holding to account, ‘consequences’ and technical support for financial turnaround.

33. ADDITIONAL SUPPORT MEASURES • The proposed support measures will vary in application from one municipality to another, but categories of support will be ‘clustered’. • DCOG will liaise closely with Provinces, who are the guardians of municipal support measures. • Certain measures will require leadership from intergovernmental partners (e.g. Office of the Auditor-General; National Treasury, Provincial Treasuries). • Other selected stakeholders may also be approached for support.

34. APPROACH FOR PROJECT COLLABORATION

35. ADDITIONAL SUPPORT INITIATIVES BY THE DEPARTMENT

36. ADDITIONAL SUPPORT INITIATIVES BY THE DEPARTMENT

37. ADDITIONAL SUPPORT INITIATIVES BY THE DEPARTMENT

38. ADDITIONAL SUPPORT INITIATIVES BY THE DEPARTMENT

39. ADDITIONAL SUPPORT INITIATIVES BY THE DEPARTMENT

40. 5. OBSERVATIONS FROM PAST INTERVENTIONS

41. a) The limitation of section 139(1) regarding ‘failure to fulfil an executive obligation’ has led to difficulties in interpreting (a) what constitutes this, and (b) when intervention is permitted. b) Most interventions are conducted in terms of section 139(1)(b). However, some Provincial Executives will appoint an administrator to assume the authority over the entire municipal administration under this clause - which is Constitutionally only really allowed only in (1)(c)); however it allows for S56 managers to report to an objective third party. c) Improved information flow between provinces and DCOG on progress and recovery status is needed.

42. Pre – intervention Directives in terms of section 139(1)(a) may not always have been issued prior to the intervention. • Procedures for intergovernmental monitoring as prescribed in S139 may not be pursued by a province e.g. the required review by Councils and recommendations that should be made to PEC. • Unknown degree to which Provincial Legislatures exercise oversight over the Provincial Executives’ actions in regard to section 139 interventions; • District municipalities have not determined their support role: e.g. request progress reports on S139 municipalities at their IGR Forums, determine areas of support; escalate matters to LG MinMec.

43. An intervention should be used as a ‘last resort’; ‘early-warning’ and improved monitoring and provincial ‘up-scaling’ of the problem might assist. • i) Provinces may lack the capacity to deal with their mandate of monitoring and supporting local government in terms of personnel, funds, institutional knowledge, and expertise; • j) The provincial duty to monitor and support local government is largely viewed as an unfunded mandate, due to no fiscal allowance for this. • k) The sustainability of an intervention is questionable, often due to the complexities of the causes, and the need for a review of viability i.r.o some municipalities.

44. 6. THE IMSI BILL

45. Longer-term Recommendations to Strengthen the Application of S139 Development of the Intergovernmental Monitoring, Support and Interventions Bill (IMSI): Objectives of the Bill: To provide for support and intervention measures to strengthen the capacity of each sphere to fulfil its executive obligations in respect to oversight and support of municipalities.

46. The IMSI Bill Objectives: Stabilise the interventions environment through: a) Clearer procedures and processes for undertaking both S100 and S139 interventions; b) To establish, together with DPME, a range of sector norms and standards for service delivery to better define executive obligations; c) To ensure that interventions are used as a ‘last resort’ and prevent ‘conflictual interventions’ through providing pre-intervention measures for provision of support.

47. The IMSI Bill • Objectives: • Stabilise the interventions environment through: • d) Providing for a consistent and uniform approach to the application of an intervention at both provincial and local level (and rationalising procedurally, re both S139 and S100); • Section 139(8) legislation would complement the provisions of the Municipal Finance Management Act, which provides a detailed framework for (section 139(4)&(5)) ‘financial’ interventions.

48. Status of IMSI Bill • The IMSI Bill was presented before the African National Congress NEC Subcommittee on Governance on 5 February 2011. Approval was granted to continue with the technical work subject to any political deliberation and decisions to be taken on the Bill. • The IMSI Bill was presented to the Technical G&A Cluster on 01 September 2011: approval was granted to present it before a Cabinet Committee meeting, subject to any inputs from members being considered.

49. Status of IMSI Bill • Delays in processing of the Bill: • The Bill was submitted to Ministry for further submission to Cabinet twice in 2012 (August, September), and withdrawn from the Cabinet agendas: also withdrawn from the MinMec agenda of 12 November 2012. • The Bill was due to presented to the Portfolio Committee on Public Service and Administration in March 2013; meeting was cancelled. • The Bill was presented to the CoGTA Parliamentary Select Committee on 18 June 2013, who requested ‘speedy’ finalisation. • The Bill was submitted to Ministry three times during 2013 in preparation for submission to Cabinet. • The Bill has been submitted to the State Law Advisor (SLA), for its constitutionality, on two occasions; most recent certification: 15th March 2013. • Insert when work began on the Bill – and should we mention the new emphasis that arose re S100, as a result of the findings of the Limpopo TT?

50. Status of IMSI Bill • Re: S100 and S139: • In November 2012, the Minister, CoGTA, received notification that the DPSA recommended that S100 legislation be separated from the current IMSI Bill, and further developed and promulgated by the DPSA. • Bi-laterals were to be held between the Ministers of CoGTA and DPSA to discuss these matters. • Upon receiving a draft S100 Bill, the Chief SLA advised that there was no apparent need to separate the Bills. • The DPSA S100 draft Bill was submitted to FOSAD Technical Cluster ; it was agreed that resolution be found between the two ministries.