PRESENTATION TO THE SELECT COMMITTEE ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL

AFFAIRS ON THE INTERVENTION IN TERMS OF SECTION 139(1)(C) OF THE CONSTITUTION AT

MPOFANA MUNICIPALITY

15 SEPTEMBER 2014

The purpose of this presentation is to brief members of the Select Committee on Co-operative Governance and Traditional Affairs on the substantive, procedural and constitutionality of the resolution of the KwaZulu-Natal Provincial Executive Council, dated 01 September 2014, to intervene in terms of section 139(1)(c) of the Constitution at Mpofana municipality.

PURPOSE

• The Mpofana Municipality had been in the limelight for a number of reasons, particularly, its challenges which have created perceptions of a state of anarchy and paralysis.

• The state of the municipality has been a sore point for all of us and most importantly the communities that are served by the municipality.

INTRODUCTION

• Since 2012, the Mpofana Municipality has been plagued by a continuous series of labour unrest incidents, including unprotected strikes, community protest actions and serious financial difficulties.

• The municipality had also been mired in controversy, with allegations of bickering and infighting amongst councillors.

• A number of support interventions were tried to get things back to normal without any success.

BACKGROUND

• The Mpofana Municipality scored 47.54% for its IDP in the 2013/14 financial year, which is well below the provincial average.

• The IDP was not credible, in that it omitted critical aspects such as a workable HR strategy, workplace skills plan, integrated waste management plan, status of road networks, human settlements, associated levels of services and backlogs, consumer debt, borrowing and a spatial development framework.

• This is indicative of the lack of planning and commitment to orderly developmental local government.

• In the submission of the 2012/13 annual financial statements, the Auditor-General issued an opinion on the audit report that regressed the municipality to a qualified audit.

• The municipality did not include particulars of irregular expenditure in the notes to the financial statements as required by section 40(3)(i) or 55(2)(b)(i) of the Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003) (“the MFMA”).

• The municipality made payments in contravention of the supply chain management requirements which were not included in irregular expenditure, resulting in irregular expenditure being understated by R26.43 million.

• No disclosures were made in the financial statements regarding irregular expenditure or such expenditure that was condoned. Irregular expenditure of R26.43 million is a substantial percentage of the municipal budget which was expended in an irregular manner.

• The findings raised in the audit report of the municipality reflect that Mpofana is steeped in cash flow problems and a general mismanagement of funds.

• Money owing by the municipality was not always paid within 30 days or an agreed period, as required by section 65(2)(e) of the MFMA. Payments were made without the approval of the accounting officer or a properly authorised official, as required by section 11(1) of the MFMA.

• An effective system of expenditure control, including procedures for the approval was not in place, as required by section 65(2)(a) of MFMA.

• An adequate management, accounting and information system were not in place which recognised expenditure when it was incurred, as required by section 65(2)(b) of the MFMA. Reasonable steps were not taken to prevent unauthorised, irregular and fruitless and wasteful expenditure, as required by section 62(1)(d) of the MFMA.

• In respect of supply chain management, sufficient appropriate audit evidence could not be obtained that–

(a)goods and services with a transaction value below R200,000.00

were procured by means of obtaining the required price

quotations;

(b)goods and services with a transaction value above R500,000.00

were procured by means of inviting competitive bids;

(c)bid specifications for procurement of goods and services through

competitive bids were drafted in an unbiased manner that allowed

all potential suppliers to offer their goods and services;

(d)contracts and quotations were awarded to bidders based on

points given for criteria that were stipulated in the original

invitation for bidding and quotation;

(e) bid adjudication was always done by committees

which were composed in accordance with SCM regulation 29(2);

(f) the preference point system was applied in all

procurement of goods and services above R30,000.00 as required by

section 2(a) of the Preferential Procurement policy Framework act and

SCM regulation 28(1)(a);

(g) contracts and quotations were awarded to suppliers

based on preference points that were allocated and calculated in

accordance with the requirements of the Preferential Procurements Policy

Framework Act and its Regulations;

(h) contracts were only extended or modified after tabling

the proposed amendment in the council of the Municipality, as required by

section 116(3) of the MFMA; and

(i) construction contracts were awarded to contractors

that were not registered with the Construction Industry development

Board (CIDB) and qualified for the contract, in accordance with section

18(1) of the CIBD Act and CIDB regulations 17 and 25(7A).

It became clear that the municipality had ignored and disregarded all supply chain management regulations and the lack of financial controls in this regard has given rise to a situation where abuse of public funds is rife.

• It would appear that due to the lack of executive oversight, a culture of impunity was prevalent within the Mooi Mpofana municipality.

• The staff members of the municipality did not regard themselves as being accountable to the public whom they are supposed to serve. In a letter dated 20 September 2013, the newly appointed Municipal Manager stated that:-

Culture of Impunity

(a)He has witnessed with disbelief, high levels of indiscipline and conduct by employees who have absolutely no regard for the implications of their behavior or the purpose of their existence as employees and of the well-being of the municipality;

(b)The situation is turbulent, highly volatile and life-threatening to the extent that urgent steps to ensure the safety of councilors had to be taken;

(c) The conduct of municipal staff is totally unacceptable in that they openly make threatening remarks to councillors and managers and refer to previous incidents where they have become a law unto themselves; and

(d)The culture of non performance is prevalent and is the reason for

the municipality’s dismal performance. The municipality has become

popular for the wrong reasons to the extent that some officials

cannot draw the line between being politicians and being officials.

The behavior of staff has been described as unbecoming, unruly, rebellious and mutinous, with a blatant disregard of the laws that govern a municipality as well as its Code of Conduct. Indeed, staff members together with councilors are allegedly, in some cases, leading protest marches against service delivery that they should be providing.

• Unlawful protests also become the order of the day and this includes the throwing of rocks and blockading of the N3 highway which is the major economic artery and a life-line between Gauteng and KwaZulu-Natal.

• It had also emerged that the municipality would not be submitting their Annual Financial Statements within the statutory deadline of 31 August 2014. This was a first time in four consecutive years that KwaZulu-Natal will have their proven track record of Annual Financial Statement submission compliance in terms of the MFMA broken by this municipality.

EXECUTIVE FUNCTIONS NOT MET The council performed no effective executive oversight over its

administration, the chaos deteriorated in the presence of the council.

Councilors and Staff were part of demonstrating against their own institution

Council failed to take disciplinary actions instead allowed staff who are on strike to be paid

Committee meetings, on crucial matters emanating from the Auditor-General report, were not seating regularly, despite the concerning state of finances.

Council failed in its executive obligation to ensure an effective administration of the municipality.

Further compounding matters are relentless illegal protests and councilors embroiled in infighting. The municipality continues to experience maladministration and disarray, and there is an on-going battle between rival factions. As a result there has been a complete erosion of public confidence in the municipality.

The Municipal Council was operating in a state of chaos, and order and stability must be restored.

• Despite on-going support from Provincial government to resolve challenges and prevalent problems, the Municipality continued to deteriorate. The situation had also received extensive media coverage, which had a substantial negative impact on the credibility of local government in general. In addition the community was demanding that an appropriate intervention occurs to ensure that delivery of services is restored to normality.

It is submitted that the assumption of certain functions in accordance with section 139(1)(b) of the Constitution would have not been sufficient to address the prevailing circumstances in this Municipality and that the exceptional circumstances which prevailed, justify an intervention in terms of section 139(1)(c) of the Constitution.

PROCEDURAL ASPECT OF THE INTERVENTION

• Given the prevailing circumstances at Mpofana Municipality, on 01 September 2014, the Executive Council resolved to place Mpofana Local Municipality under intervention in terms of section 139(1)(c) of the Constitution.

• The dissolution of the municipal council would take effect 14 days after the Cabinet Minister responsible for local government and the National Council of Provinces have been informed of the resolution of the Executive Council, unless such resolution is set aside by either the said Cabinet Minister or the National Council of Provinces within a period of 14 days. The 14-day period will expire on 16 September 2014.

• As the election unfolds to re-elect the Council, it would be necessary to develop a comprehensive and integrated plan to improve the social and economic situation at the Municipality, including developing strategies for job creation, eradication of poverty, economic growth and improved access to basic services.

• The MEC was also authorised by the Executive Council to appoint an Administrator and to facilitate the election of a new Municipal Council.

• The specific terms of reference of the Administrator are as follows:-

a) Undertake all executive functions of a municipal council except the legislative functions namely, the approval of by- laws, the approval of the municipal budget and the imposition of rates, taxes, levies, duties, service fees and surcharges on fees;

b) Undertake all statutory executive functions of the Mayor;

c) Undertake the functions referred to in section 67(1)(h) and Schedule 2 of the Municipal Systems Act, read with any other relevant legislative provisions dealing with disciplinary matters, including criminal, disciplinary and civil action;

d) Ratify all decisions taken by Municipal Manager and section 57 Managers in terms of delegated or original authority;

e) Devise a turn-around strategy for the municipality;

f) Implement a system to control and approve all expenditure;

g) Ensure implementation of financial systems, policies and procedures;

h) Ensure the implementation of Municipal Property Rates Act;

i) Set out specific strategy for addressing the municipalities financial problems, including a strategy for reducing unnecessary expenditure and increasing the collection of revenue;

j) Prepare of the adjustment budget for the 2014/2015 financial year; and

k) Review the organizational structure of the municipality.

• On Tuesday, 02 September 2014, letters were drafted and dispatched to the Minister of Co-operative Governance and Traditional Affairs, Chairperson of the NCOP, Speaker of the Provincial Legislature and the Mayor and Municipal Manager of Mpofana municipality. In addition, a letter was sent to the IEC to alert the Commission of the need to conduct a full By-election for the Council Mpofana.

• On Wednesday, 03 September 2014, the MEC for Co-operative Governance and Traditional Affairs attended a meeting of the Mpofana Council and conveyed the resolution of Cabinet to the Council. Also on 03 September 2014, the MEC engaged the media on the circumstances giving rise to the intervention and expanded on the process to be followed in going forward.

• On Friday, 05 September 2014, the MEC held a meeting with the Mpofana Business Association, Rate Payers Association, Amakhosi, farmers and other stakeholders and provided the reasons for the intervention and requested their support in turning the municipality around. The Stakeholders indicated their approval of the action taken and have pledged their support to the municipality and the community. A number of suggestions and contributions were made relating to the revival programme of the municipality.

• Also on Friday, 05 September 2014, the MEC engaged with the community of Rosetta to listen to the challenges experienced by the community and to convey the resolution of Cabinet to the community. The community expressed their endorsement for the actions of Cabinet.

• Letters were also sent to all MECs requesting support for the intervention and requesting dates within the next 3 months for MECs to engage the community on specific matters, including the implementation of projects, as resolved by Cabinet on 01 September 2014.

• The Administrator has commenced with drafting a comprehensive recovery plan for the municipality, including input and projects from other sector departments.

• Upon the expiry of the 14-day period, a Notice, outlining the determined functions and powers of the Administrator, will be published on the Gazette, as required in terms of section 35(2) of the Local Government: Municipal Structures Act, 1998.

• The resolution of the Executive Council was

informed by the need to restore the confidence of

the communities.

• The challenges at the municipality were

maladministration, power games, failure to govern

and a lot of issues that have nothing to do with the

constitutional mandate of local government.

• I will be monitoring the activities of this council

closely and will also be required to report to the

Executive Council regularly.

• In light of the above-mentioned reasons, the Committee is requested to consider approving the intervention in terms of section 139(1)(c) of the Constitution at Mpofana municipality, in order for:a) the Administrator to develop and implement an

intensive intervention recovery plan to ensure that delivery of services is restored to normality; and

b) new elections to be held at the municipality

• The Committee will be briefed on progress of the intervention on a quarterly basis or as determined by the Committee.

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