ATC190820: Report of the Select Committee on Cooperative Governance and Traditional Affairs, Water and Sanitation and Human Settlements Inspection in Loco on Notice of Intervention issued in terms of section 139(1)(b) of the Constitution (1996), in Richmond Local Municipality, dated 20 August 2019

NCOP Cooperative Governance & Traditional Affairs, Water and Sanitation and Human Settlements

Report of the Select Committee on Cooperative Governance and Traditional Affairs, Water and Sanitation and Human Settlements Inspection in Loco on Notice of Intervention issued in terms of section 139(1)(b) of the Constitution (1996), in Richmond Local Municipality, dated 20 August 2019

1. Background and Overview

1.1 The Select Committee on Cooperative Governance and Traditional Affairs, Water and Sanitation and Human Settlements, having considered the request by the National Council of Provinces (NCOP), to consider and report on the intervention notice invoked in Richmond Local Municipality in terms of section 139(1)(b) of the Constitution, the Select Committee reports as follows:

1.2 In terms of NCOP Rule 101, the Office of the Chairperson of the NCOP referred the notice of intervention by the KwaZulu-Natal MEC for Cooperative Governance and Traditional Affairs (CoGTA), to the Select Committee for consideration and reporting. On 14 August 2019, the Select Committee conducted a loco inspection in Richmond Local Municipality.

2. Objective of the Loco Inspection in Richmond Local Municipality

2.1 The main objective was to interact with the internal and external stakeholders of the Municipality in order to solicit their opinions on the constitutional, procedural and substantive matters related to the invocation of section 139(1)(b) of the Constitution. [

3. Composition of the Delegation

3.1 The Select Committee’s delegation was composed of the following Members of Parliament and officials: Hon K Motsamai (EFF) Gauteng; Hon SE Mfayela (IFP) KwaZulu-Natal; Hon S Shaikh (ANC) Limpopo; Hon M P Mmola (ANC) Mpumalanga; Hon S Zandamela (EFF) Mpumalanga; Hon AB Gxoyiya (ANC) Northern Cape; Hon TSC Dodovu (ANC) North West; Hon C Visser (DA) North West; Hon IM Sileku (DA) Western Cape; Mr TM Manele (Committee Secretary: Committee Section); Mr N Mfuku (Content Adviser: Committee Section); Mr B Mahlangeni (Researcher: Research Unit); Mr M Mbebe (Procedural Officer: NCOP) and Mr F Bulawa (Committee Assistant: Committee Section).
 

 4. General Overview of the Loco Inspection at Richmond Local Municipality

4.1 On 14 August 2019, the multi-party delegation of the Select Committee interacted with the MEC and senior officials of the Department of CoGTA in KwaZulu-Natal, representatives of the African National Congress (ANC), Democratic Alliance (DA), Economic Freedom Fighters (EFF); and the representative of the South African Local Government Association (SALGA), South African Municipal Workers Union (SAMWU), the Department of Human Settlements, the Department of Water and Sanitation, uMgungundlovu District Municipality, Amakhosi, Farmers Association, and the Business Chamber.
 

4.2 The departmental official made a presentation on the constitutional, procedural and substantive reasons for the intervention. The representatives of the internal and external stakeholder of the Municipality tabled their opinions on the invocation of section 139(1)(b) of the Constitution in the Municipality, as tabled by the MEC for CoGTA. 5. Presentation by Department of CoGTA 5.1 The Department of CoGTA made presentation on the status of intervention in the local Municipality. The presentation focused on the background, substantive reasons for the intervention, support measures prior to the invocation of section 139, resolution of the Provincial Executive Council (PEC) including the terms of reference, procedural matters and key factors impacting on the intervention.

 6. Background

6.1 As far back as December 2017, allegations of maladministration, fraud and corruption surfaced against the Director Technical Services, while criminal charges were brought against the Chief Financial Officer (CFO) who were suspended by the Municipality in February and May 2018 respectively. In July 2018 the Municipal Council sought to suspend the Municipal Manager (the MM) who turned to the courts.

6.2 Labour protests and work stoppages, primarily against the MM, took place during August 2018 lasting until January 2019. The Auditor-General (the AG) was unable to complete the 2017/18 financial year audit, citing safety concerns arising from the instability at the Municipality and protracted legal disputes between the MM and the Council. The Council and the MM were communicating conflicting messages to the AG. Furthermore, allegations of maladministration, fraud and corruption were brought to the attention of the Department, and an investigation in terms of section 106 of the Local Government: Municipal Systems Act (Act 32 of 2000) was instituted by the MEC.

6.3 The Municipality’s financial management deteriorated as a result of poor leadership and governance, with the Municipality regressing to an adverse audit opinion in the 2017/18 financial year. The Department supported and facilitated various mediation meetings with numerous stakeholders over a period of one year including, meetings with officials, councillors/council itself, the AG, whistle-blowers and law enforcement agencies, amongst others. Despite guidance, advice and support in terms of section 154 of the Constitution by the Department, the Municipality remained dysfunctional and regressed in financial management, oversight and governance.

6.4 There were failures at the Municipality which warranted drastic steps because they remained uncorrected by the Municipality, which was resorting to legal battles to deal with personal and political differences within the Municipality. As the result, the PEC took the view that it was necessary to invoke the provisions of section 139(1)(b) of the Constitution, in order to stabilize the Municipality.

7. Substantive Reasons for Intervention in terms of section 139(1)(b) of the Constitution
 

 7.1 The Department of CoGTA presented the substantive reasons for intervention in the Municipality. The reasons for the intervention focused on service delivery, good governance, institutional matters and sound financial management

8. Service Delivery and Reasons for the Intervention

 8.1 The Municipality was identified as a candidate for stopping of the Municipal Infrastructure Grant (MIG) in December 2018, having failed to expend 40% of their 2018/19 MIG allocation by 31 December 2018. It was required to submit representations to the National Treasury in January 2019, and the Municipality’s remedial action plan was accepted and the MIG funds were not stopped.

8.2 The submission of claims and commitments for 2019/20 in January 2019, alleviated concerns over Richmond’s MIG implementation. However, the Municipality still experienced delays in grant related payments to service provides (< 60 days) and submission of “Proof of Payment” to the Provincial MIG office. Despite support, the municipality still struggled due (in the main) to internal political and administrative squabbles.

8.3 The municipality’s INEP programme was littered with allegations and counter allegations of maladministration fraud and corruption which negatively impacted the ability of the municipality to spend its allocated funding. The machinery and plant that the municipality had been using to maintain streets in the town of Richmond and access roads in rural areas ground to a halt due to lack of maintenance.
 

9. Good Governance and Institutional Matters

9.1 The Mayor suffered a major illness in January 2018 and the Municipal Council resolved in March 2018, to grant the Mayor sick-leave until he had fully recovered to return to his duties. The Municipal Council also resolved at that same meeting that the Deputy Mayor would fulfil the duties of the Mayor while he was on sick-leave. It was established that even though the Mayor had not recovered satisfactorily, he would come to the office on an ad hoc basis.

9.2 The Mayor presented himself at one of the meetings convened by CoGTA to attempt to resolve disputes, and disputed the fact that there was an Acting Mayor and contradicted the decisions of Council on the suspension of the MM. He also indicated in writing that he was still the Mayor and was never consulted about the decisions of Council in respect of the purported suspension of the MM. This precipitated a crisis where the Deputy Mayor was unsure whether she was empowered to perform Mayoral duties while the Mayor was unavailable.

9.3 The MM lodged court papers in July 2018 disputing her suspension as well as the fact that the Mayor was not in a position to fulfil his Mayoral duties. The court heard the matter in July, as well as in August and October 2018 where the court issued an interim court order barring the suspension of the MM as well as the alleged “side lining” of the Mayor. In October 2018, the MEC sought to intervene in the court matter and the court gave the MEC the opportunity until the 30th of November 2018 to mediate the disputes in Richmond, failing which the parties would return to court for the matter to be ventilated. The mediation failed and the MEC filed an affidavit to that effect.

9.4 By December 2018, the Municipal Council took a decision to remove the Mayor citing the fact that he was unavailable to perform his duties. The decision was subsequently reversed and to date the Deputy Mayor is performing the functions of the Mayor whilst the Mayor is recuperating. The Council sought to suspend the MM in July 2018. However, CoGTA intervened in the matter, because the process that was followed by the Municipal Council was flawed. The flaw was that the Speaker, instead of the Mayor, tabled the allegations against the MM in Council.

9.5 Another meeting was held where the Municipal Council rescinded its earlier decision and resolved to again put the MM on notice of intention to suspend, with the Deputy Mayor presenting the allegations against the MM in line with the requirements of section 49(2) of the Municipal Structures Act, due to the absence of the Mayor. The allegations against the MM ranged from intimidation of staff, to failure to perform her duties as Accounting Officer, as well as alleged acts of maladministration, fraud and corruption.

10. Sound Financial Management

10.1 The AG issued an adverse opinion on the 2017/18 Annual Financial Statements (AFS), which was indicative of a regression when compared to the previous financial years. The regression of the audit opinion was due to the key positions being challenged, particularly that of Municipal Manager. The 2017/18 financial statements indicates that the unauthorised, irregular and fruitless and wasteful expenditure increased by 501%, when compared with the previous financial year. Irregular expenditure increased from R286,334 to R80 million. Unauthorised expenditure increased from R27 million to R67 million, and there was no fruitless and wasteful expenditure reported. The contracted services as a percentage of operating expenditure was calculated at 24%, which is above the National Treasury norm of 2% - 5%.
 

10.2 The consumer debtors increased by 42% when compared with the previous financial year. Debtors outstanding for more than 90 days’ amounts to 92% of the total debt, which was an indication that the Municipality failed to collect its outstanding debt. The Municipality’s operating performance had regressed significantly, evidenced by a reduction in cash and reserves by a total of R50 million, with the Municipality closing on a deficit as reported in the audited annual financial statements for 2017/18. This was determined when comparing financial performance for 2016/17 and 2017/18 financial years, reflecting that the Municipality regressed from a surplus of R22 million to a deficit of R28 million.

11. Support Measures by Department of CoGTA Before the Intervention

11.1 The Department mediated labour strikes with the support of SALGA (the strikes commenced as far back as December 2017). The Department met with the unions, management and the council on numerous occasions, in an attempt to facilitate the resolution of the differences.

11.2 The Department mediated the dispute between the MM and Council even before it landed in court. When the dispute between the MM and the Council landed in court, the Department sought court permission to intervene in the court matter and held numerous meetings with the parties.

11.3 The Department facilitated the return of the AG to site, following their pull-out citing safety concerns. The Department was on-site on several occasions to assist the Municipality when it was facing several public protests on service delivery and in respect of the MM matter.

11.4 The Department, together with the Provincial Treasury, assisted the Municipality in respect of its financial management matters and by recommending suitable personnel when the CFO was arrested and subsequently suspended
 

11.5 The Department facilitated the secondment of the current Acting-Municipal Manager, who is an employee of uMgungundlovu District Municipality. The MEC authorised the investigation of allegations of maladministration, fraud and corruption when such were brought to the attention of the Department. 11.6 Both the Department and the Provincial Treasury conducts monthly and quarterly assessments of the finances of the Municipality, and feedback is provided. The Department supported the Municipality in turning around its MIG expenditure, thus averting the stoppage by the National Treasury.

12. Resolutions of the PEC and Terms of Reference of the Administrator

12.1 On the basis of the serious challenges prevailing at the Municipality at the time, the PEC resolved to intervene in terms of section 139(1)(b) of the Constitution, at Richmond Municipality on 13 March 2019, by assuming the functions specified in terms of sections 51, 54A and 56 of the Municipal Systems Act. The PEC also authorized the MEC for CoGTA to appoint a suitably qualified person to implement the following terms of reference:
· Ensuring the implementation of financial systems, policies and procedures including preparation and implementation of cost-cutting measures.
· Implement governance systems and procedures, including oversight over the administration, ratification of decisions taken by the Municipal Council, the Executive Committee, Committees, MM and section 56 Managers in terms of delegated or original authority.
· Ensuring the implementation of findings arising from any investigations into fraud, maladministration or corruption.
· Ensuring implementation of remedial action plans dealing with negative findings from the AG, including consequence management against managers and officials found to have caused unauthorized, irregular, fruitless and wasteful expenditure.
· Being a compulsory signatory on the Municipality’s primary bank account and any other bank accounts that the Municipality may hold.
· Establishing, and serving as chairperson of an Interim Finance Committee (IFC) to monitor and manage the cash flow of the Municipality, approve or disapprove purchase requisitions and to ensure that the Municipality’s cash position is not overdrawn and ensure that the IFC meets regularly and reports fortnightly to the Executive Committee of Council.
 

13. Presentation on the Financial Recovery Plan by the Administrator

13.1 The Administrator presented the financial recovery plan to the delegation of the Select Committee and the stakeholders of the Municipality. The presentation focused on the progress made in respect of the invocation of section 139(1)(b) of the Constitution in the Municipality.
 

14. Opinions of Political Parties and Stakeholders of the Municipality

14.1 During the loco-inspection, the Select Committee interacted and solicited opinions of the political parties, internal and external stakeholders of the Municipality. Their opinions are tabled below:

15. Opinion of the African National Congress (ANC)

15.1 The representative of the ANC welcomed and supported the PEC’s decision to invoke section 139(1)(b) of the Constitution in the Municipality, and the progress made by the Administrator. The representative however, raised concerns with regard to municipal financial crisis, allegations of fraud by the CFO, intimidation of junior officials by the MM, protests actions within the municipality, using of consultants to over-charge the municipality and Municipal Manager misleading the Council.

16. Opinion of the Democratic Alliance (DA)
 

16.1 The representative of the DA tabled an opinion that supported the intervention. However, concerns were raised with regard to non-implementation of projects, recurrence of vandalism, non-implementation of council decisions, appointments of officials without qualifications. The representative then stressed the need to conclude allegations of corruption cases within the municipality.
 

17. Opinion of the Economic Freedom Fighters (EFF)

17.1 The representative of the EFF tabled an opinion that supported the intervention, and further raised concerns about unemployment with the local municipality, noncompletion of projects at ward levels, misuse of municipal vehicle by the children of the Mayor who is on sick leave. The representative further emphasized to importance of fast-tracking the process of the disciplinary hearing of the suspended MM.

18. Opinion of the South African Local Government Association (SALGA)

18.1 The representative of SALGA tabled an opinion that supported the intervention in the Municipality, and welcomed the financial recovery plan developed by the Administrator. The representative however, stressed the importance of ensuring that the financial recovery plan addresses the findings of the AG on the performance audit of the municipality and the oversight role of the Municipal Council. An observation was made on the Municipality’s tolerance towards wrong doing and inadequate control systems in place.

19. Opinion of Traditional Leaders

19.1 The representative of the traditional leaders tabled an opinion that supported the intervention, and welcomed the progress made by the Municipality more especially with regard to the participation of the traditional leaders in the municipal programmes and the Council. Emphasis were made on cooperation and working together, in order for the Municipality to move forward.

20. Opinion of South African Municipal Worker Union (SAMWU)

20.1 The representative of the Union tabled an opinion the supported the invocation of section 139 (1) (b) of the constitution. The representative further raised concerns with regard to the intimidation of junior officials due to the presence of the body guards of the municipal manager, lack of salary parity, nepotism, and unequal treatment of the employees within the administration. The representative then emphasised the importance of fast-tracking the process of job evaluation and engagement with the senior management of the municipality.

21. Opinion of Farmers Association and Agricultural Society (FAAS)

21.1 The representative of the Farmers’ Association and Agricultural Association supported the intervention. However, concerns were raised with regard to poor service delivery, safety and security, dysfunctionality of the robots, non–implementation of waste management programmes and lack of traffic officials.

22. Select Committee Observations and Opinion

22.1 The Select Committee has noted on procedural and constitutional matters that the Minister for CoGTA was notified within 14 days of the invocation of intervention in terms of section 139(1)(b) Constitution in Richmond Local Municipality. The Minister approved the intervention within 28 days as prescribed by the Constitution. The Chairperson of the NCOP was notified of the intervention on 29 March 2018.

22.2 In terms of the Back to Basics Programme, the Municipality is categorised as financially dysfunctional. These are municipalities that are struggling to deliver on a number of their mandates and which are financially distressed. The CoGTA MINMEC resolved to prioritise the Financially Distressed and Dysfunctional municipalities and to identify practical and sustainable support and intervention measures.

22.3 The Select Committee has further noted that the MEC for CoGTA in KwaZulu-Natal met with the Municipal Council on 20 March 2019, to advise the Municipal Council of the decision of the PEC to intervene at the Municipality.

22.4 Furthermore, the Select Committee has observed that the MEC for CoGTA has appointed a Ministerial Representative who has prepared a Recovery Plan, which was approved by the Municipal Council. The Recovery Plan focuses on the three critical areas namely: Governance including Institutional Matters, Financial Recovery & Service Delivery Matters.

22.5 On implementation matters, the Select Committee has noted that the Department of CoGTA coordinates monthly Steering Committee meetings to monitor the implementation of the resolution of the PEC and to coordinate support to the Municipality. Members of the Steering Committee includes representatives from National Department of Cooperative Governance, Provincial Treasury, SALGA amongst other representatives.

22.6 Despite the progress made in respect of the implementation of the intervention, the Select Committee has noted with concerns the allegations of corruption, fraud, misuse of municipal vehicle, slow pace with the process of disciplinary cases, misleading of Council by the senior officials, non-completion of projects as well as nonimplementation of Council decisions.

23. Recommendations

23.1 Having conducted the oversight visit to Richmond Local Municipality and interacted with internal and external stakeholders, the Select Committee on Cooperative Governance and Traditional Affairs recommends as follows:

23.1.1 The NCOP approves the intervention in Richmond Local Municipality in terms of section 139(1)(b) of the Constitution.

23.1.2 The KwaZulu-Natal MEC for CoGTA should table the forensic investigation report in terms of section 106 of the Local Government: Municipal System Act (Act 32 of 2000) to the NCOP, after tabling it to the Municipal Council of the the Municipality.

23.1.3 In respect to consequence management, all cases of unauthorised expenditure incurred by the Municipality should be investigated to determine if any person is liable for the expenditure, as required by section 32(2)(a) of the MFMA. Equally, all cases of irregular expenditure incurred by the Municipality, should be investigated to determine if any person is liable for the expenditure, as required by section 32(2)(b) of the MFMA.

23.1.4 The KwaZulu-Natal MEC for CoGTA should conduct an investigation on the allegation of the misuse of the municipal mayoral vehicle, and ensure disciplinary measures are taken to whoever is responsible.

23.1.5. The KwaZulu-Natal MEC for CoGTA in collaboration with the national MEC for CoGTA should provide continuous support in terms of section 154 of constitution and other relevant prescript to the local municipality

23.1.6 The Administrator should review the municipal financial recovery plan and ensure that there is alignment of the finding and concerns raised by the AuditorGeneral with the municipal audit findings.

23.1.7 The Administrator should ensure the fast-tracking of the process of the disciplinary hearing of the suspended Municipal Manager on allegations of fraud and corruption.

23.1.8. The Administrator should focus on the implementation of terms of reference and facilitate visits to performing municipalities in order to learn best practices and sharing of knowledge.

23.1.9 The administrator should provide quarterly reports to the select committee on progress made in respect of the implementation of the intervention in the municipality.

23.1.10. The Richmond Station Commander should provide a list to the NCOP, of all the cases that are opened by the Municipality, as well as their status.

23.1.11. The Select Committee on Cooperative Governance and Traditional Affairs, in co-operation with the relevant Portfolio Committee in KwaZulu-Natal Provincial Legislature, should in future conduct a follow-up oversight visit to the Municipality in order to evaluate the progress made in respect of the intervention in the Municipality.


Report to be considered