State of Kagisano-Molopo Local Municipality: stakeholder engagement; with Deputy Minister

Meeting report

State of Kagisano-Molopo Local Municipality

North West Provincial Treasury

Ms Motlalepula Ziphora Rosho, Member of the Executive Council (MEC): Finance, North West Province, said that within the first three months following the local government elections in November 2021, the Kagisano-Molopo Local Municipality experienced political and administrative instability. Political instability, alleged maladministration and service delivery were among the issues that affected the proper functioning of the municipality. These challenges seriously impacted compliance with the Municipal Finance Management Act 56 of 2003 (MFMA), which might result in financial misconduct and irregular expenditure.

Mr Ndlela Kunene, Head of the Department (HOD), NW Provincial Treasury, said that the municipality had failed to implement the necessary measures to address the challenges (governance, financial management, service delivery) despite all the support provided and efforts taken by the provincial government to resolve these challenges. This resulted in the Provincial Treasury and Department of Cooperative Governance and Traditional Affairs (COGTA) requesting National Treasury to invoke the provisions of section 5(2)(e) of the MFMA, read with Section 216(2) of the Constitution of South Africa, and withhold the equitable shares as well as other conditional grants which were due to the municipality in July 2022.

The equitable share was not released on 6 July because the municipality had not met the conditions. National Treasury sent a letter to the municipality on 23 August requesting documentation/information to be submitted to support the process taken by the municipality to adopt the 2022/23 medium term revenue and expenditure framework (MTREF) budget. The equitable share was released on 24 August, as agreed in a mediation process.

(Please see slides 7-8 of the presentation for the conditions).

Most of the required information had not been provided. No proof was received that a legally constituted council had adopted the 2022/23 MTREF budget. The expenditure that was incurred was therefore unauthorised. Support was provided on the revised 2022/23 MTREF budget, which resulted in the municipality reducing the budget deficit.

Provincial Treasury would continue to support the municipality in ensuring compliance with the prescripts of the MFMA. The establishment of the disciplinary board, in line with the municipal regulation on financial misconduct procedure and criminal proceedings, was critical to ensure implementation of consequence management relating to the losses suffered. Reporting in line with the reforms, regulations, norms and standards set out by National Treasury, was key.

Auditor-General of South Africa

Ms Lorraine van der Grijp, Deputy Business Executive, Auditor-General of South Africa (AGSA), said that the audit outcome on the financial statements remained unchanged compared to the prior year. Although the municipality had resolved some of the qualification areas from the previous year, some repeat findings were reported because the action plan to address these issues had not been effective, and implementation was not always closely monitored.

The quality of the submitted financial statements remained a concern, as material misstatements were identified during the audit. Despite using consultants, the quality of financial statements remained poor. The audit outcomes for reported performance information regressed to a disclaimer conclusion, due to a lack of understanding of performance planning and reporting and inadequate records management. The municipality had failed to submit the annual financial statements for auditing by the legislated date.

The municipality did not do an adequate risk assessment of the debtors to determine its ability to pay outstanding debt. Further, reasonable steps were not always taken by the municipality to collect outstanding money. This resulted in substantial impairments and debt write-offs at the year-end, which also significantly strained the municipality's cash flow, as creditors were not paid timeously. Lack of proper records of fair value adjustments made had probably resulted in the municipality misstating the value of its investment property. The incorrect information on the assets' value may not present a true picture of assets available for the provision of services. Management did not adequately review the asset register to ensure that all land belonging to the municipality was included in the asset register used to prepare the financial statements. The incomplete asset register may not present a full picture of the assets that were available for service delivery.

The municipality did not have adequate measures in place to prevent irregular expenditure. Not following supply chain management (SCM) processes may have resulted in the municipality not procuring services economically and causing financial loss to the state. The review processes in the municipality failed to ensure that indicators relating to basic services and infrastructure development were credible. As a result, these indicators could not be audited. Without credible performance reporting, it was difficult to assess whether the municipality was delivering adequate services to citizens in the municipal area.

In the current year, there has been a stagnation in compliance with legislation. The non-compliance identified was similar to that reported in the prior year. The municipality did not implement effective action plans to address significant internal control deficiencies relating to compliance with legislation.

(Please see the presentation for further details)

Department of Cooperative Governance and Traditional Affairs (COGTA)

Ms Elizabeth Mmutle, Acting Chief Director: Municipal Finance, COGTA, said the municipality was grant dependant, as it did not have service charges, such as electricity, water and sanitation, which resulted in a low income from own revenue-generating sources. Water shortages and sanitation within the municipality were a concern, as the municipality had been highly affected by drought. Landfill site powers and functions were still not cleared between the district and local municipality, resulting in environmental issues not being addressed.

Challenges facing the municipality were related to political instability, maladministration, and service delivery, which affected its proper functioning. This situation led to the provincial executive committee invoking section139 (1)(b) of the Constitution to enhance support to the municipality. 

The municipal employees were not reporting to work at the beginning of the intervention because they fear intimidation. The intimidation was influenced by officials who did not want to see stability within the municipality.

The municipal council cooperated for the first time since January 2022. All councillors attended the council meeting. The councillors had started an inspection in loco on all municipal projects as a united body. The councillors had requested that the administrator organise a strategic workshop for the entire municipal council.

(Please see the presentation for further details)

Department of Cooperative Governance (DCOG)

Mr Mpho Mogale, Acting Deputy Director-General (DDG): Local Government (LG) Operations and Support, DCOG, and Mr Allan Zimbwa, DDG: Technical Support Services, DCOG, took the Committee through the Department's presentation.

They said it should be noted that in September 2018, Kagisano-Molopo Local Municipality was placed under section 139(1)(b) of the Constitution. However, the municipality objected to the intervention and took the provincial government to court for the invocation of section 139. On 18 July 2019, the court ruled against the intervention and the provincial government. The judgment had indicated that the provincial executive committee did not have powers to invoke section 139 of the Constitution against the municipality due to the fact that at the time of taking that decision, the entire North West provincial government was subjected to intervention in terms of section 100 of the Constitution by the national government, including the provincial department responsible for local government. The court had declared the decision of the provincial executive committee null and void, and it was set aside. However, the provincial committee was later granted a decision by the same court to appeal the decision.

Since the inauguration of new municipal councils in the province after the November 2021 local government elections, the municipal council of Kagisano-Molopo Local Municipality has never stabilised and has not concentrated on developing plans to provide service delivery to the constituents of that municipality.

MISA support to Kagisano-Molopo Local Municipality

The Municipal Infrastructure Support Agent (MISA) was a ring-fenced government component under the COGTA portfolio with the mandate to provide technical support to municipalities towards effective and efficient delivery of infrastructure and service. Technical support was provided to municipalities mainly through technical professionals assigned to support selected municipalities and learners placed in municipalities for workplace training. A district-wide model was followed in the deployment of technical support. This model involved deploying a multi-disciplinary team in a particular district to support any municipality within the area based on identified needs. An assessment was conducted on priority districts to determine the required support for each of the municipalities. A technical support plan was signed with each municipality prior to the commencement of support.

(Please see the presentation for further details)

South African Local Government Association (SALGA)

Ms Desiree Tlhoaele, Provincial Executive Director, SALGA North West, took the Committee through its presentation.

The presentation consisted of municipal finance and governance.

(Please see the table in the presentation for further details)

Dr Ruth Segomotsi Mompati District Municipality

Mr Motseokae Maje, Executive Mayor: Dr Ruth Segomotsi Mompati District Municipality, said that since November 2021, the Kagisano-Molopo Local Municipality has been beset with political and administrative challenges. The municipal manager was central to the instability of the municipality. However, his contract had ended and the municipality was taken to court. The municipality was placed under section 139(b) of the Constitution. An administrator was appointed, together with an acting municipal manager.

Currently, since the former municipal manager had left and intervention had ensued, there has been stability in the municipality. For instance, the council had had meetings without hindrance, and the administrator and the acting municipal manager had hit the ground running, ensuring that the administration did its work and that there were no more work stoppages. There were service delivery challenges, however, such as water and sanitation.

Support had been provided to the municipality. The Dr Ruth Segomotsi Mompati District Municipality was the water service authority and was mandated to provide uninterrupted water and sanitation to the municipality as a whole. For the 2022/23 MTREF budget, the district municipality had set aside allocations through various grants. There had been delays with the implementation readiness study approvals from the Department of Water and Sanitation (DWS), but both the Dr Ruth Segomotsi Mompati District Municipality and the DWS were resolving the issues.

The Kagisano-Molopo Local Municipality sent a letter on 4 November asking to be assisted with water shortages at Bona-Bona. The Dr Ruth Segomotsi Mompati District Municipality had provided support with extinguishing the veld fires that had ravaged the area recently. The district municipality was prepared to provide administrative, financial and technical support in terms of section 88 of the Structures Act when required. There was already a request to provide information communication technology (ICT) support to the municipality, and it was being considered. There had been extensive consultations with the Kagisano-Molopo Local Municipality on the district development model to identify key catalytic projects to be implemented and supported, such as a smart village concept to alleviate water challenges, landfill site development, and job creation projects (Motlopi Coffee, Devil’s Claw).

(Please see presentation for further details)

Kagisano-Molopo Local Municipality

Ms Tshireletso Marabutse, Executive Mayor, Kagisano-Molopo Local Municipality, said that the instability in the municipality became clearer after the council meeting held on 30 March, during which a parallel council meeting passed a motion of no confidence against the Speaker and another motion of no confidence against the Mayor on 12 April. The Speaker and Mayor had approached the court and secured a rule nisi court order in their favour on 12 April. The rule nisi order was confirmed on 27 October.

The municipality had experienced community protests indicating allegations of possible corruption and maladministration. A certain group of councillors, led by the former municipal manager, had attempted to adopt a budget and a five-year integrated development plan in an unlawful meeting held on 29 June. Upon noting developments in the municipal council, National Treasury requested some information to confirm the legitimacy of this meeting. The uncertainty regarding the legitimacy of the adoption of the final budget resulted in National Treasury withholding the release of the municipal equitable share and conditional grants. The provincial executive committee had then placed the municipality under section 139(1)(b) of the Constitution. The former municipal manager’s contract was terminated. An administrator was appointed, as well as a new acting municipal manager.

The municipal council had successfully managed to have two council meetings, on 13 October and 10 November. The MTREF budget and the five-year integrated development plan were successfully adopted. The municipal staff were back at their offices, and the community protests had calmed down. There has been a positive outlook of stability since the intervention by the provincial executive committee. The Municipal Public Accounts Committee (MPAC) needed to be capacitated with resources. The municipality was undergoing a healing process.

(Please see presentation for further details)

Discussion

Ms P Xaba-Ntshaba (ANC) said that at the time of the meeting, the municipality had not submitted its report to the Committee. This made it difficult for the Committee to engage the municipality. This amounted to impeding the Committee’s oversight function. This was an offence in terms of the Powers and Privileges Act. The Committee should engage the municipality in more detail on this.

On 30 April 2019, the municipality agreed to pay IGKM Management Services the amount of R6 million over a period of one year and two months to investigate unauthorised, fruitless and wasteful expenditure. The municipality was then requested to provide the Committee with a copy of this investigative report. The municipality had not complied with this request. The Committee had previously been informed that the investigative report had findings involving the Unemployment Insurance Fund (UIF), and that the MPAC would institute recommendations and consequences. Had this been carried out?

Ms E Spies (DA) said it had been indicated that the audit report would not look any better, and was actually going to be worse. What did the AGSA recommend should be done? Had any interventions been implemented? What were the requirements that needed to be fulfilled before this intervention would end? What progress had been made? It had been said many times that a lot of progress had been made, but looking at the report contradicted what had been said.

Mr I Groenewald (FF+) said that the presentations looked a lot like window dressing. If one went to the municipality and there was no service delivery, it was a dysfunctional council. He could not see how it would get out of the mess it was currently in. It had been mentioned in the last presentation that it had adopted only an unfunded budget on 10 November. If this was the case, what had been done by the North West regarding local legislation? The first budget was not approved within the timeframes of the MFMA -- what did this spell for the future of the municipality? What support had SALGA given to the councillors?

It had been said that no one was attending council meetings, so what steps had SALGA taken to ensure that councillors received training? In terms of the code of conduct, one should be able to say that there were quarterly meetings and when councillors did not attend them, consequence management would be implemented. Why had there been no consequence management, if no meetings were held between January and October? This municipality was a clear indication of what was one of the worst municipalities in South Africa in terms of service delivery. There were four core functions -- sewage, waste, water, and electricity -- within the municipality, but it had not complied with one of them. It was mentioned that R150 million had been deposited into a bank. Had it since been recovered? If so, how much?

Mr K Ceza (EFF) said officials were fighting amongst each other and taking themselves to court. There was pandemonium like that because of personal fighting within the municipality. The AGSA had indicated that the councillors were not capacitated to deal with UIF. What remedial action would SALGA undertake to capacitate councillors in relation to the UIF? If money was taken from the public to refurbish facilities but did not do so, it would mean that it was corrupt. The section 106 investigations would give some sense of the consequences that had been made. What was the nature of the consequences for a person liable to do such things? The Committee wanted to understand what constituted the particular issues.

SALGA talked about poor ethics. How was the administration going to deal with the transformational ethics of people who were inherently corrupt in a municipality? How did section 139(1(b) of the Constitution deal with issues of internal battles? There could not be public relations issues in the Committee. How could the administration do away with political influence? These issues had been raised before, and showed the lack of skills in the municipality to control the environment.

If support was given for infrastructure development, why were there still issues with water and sanitation? What was the outcome of the infrastructure development? It was nice to say there was capacity building, but timeframes should be provided. What was the nature and analysis of the capacity building? Section 165 of the MFMA required each municipality to have an internal audit. How would this intervention capacitate the internal audit to deal independently with the requirements of section 165? He said it looked like some issues the AGSA had raised had been addressed. He asked if there were any lessons the MPAC could provide for implementing best practices regarding accountability.

Mr G Mpumza (ANC) said it was very sad and shameful that a municipality established to service people was now deeply involved in fighting both politically and administratively, leading to the fact that other spheres of government must come in through section 139. During the visit to the Northwest, the MEC had undertaken to invoke section 106 of the Systems Act and investigate the service provider appointed. What had happened so far, and what consequence had management been enforced?

The municipalities were legislated to generate section 71 reports, which should be submitted to the provincial treasury and provincial COGTA. This included an indicator of the financial standing of the municipalities. This provision served as an early warning that would assist with early intervention. There had been fighting in this municipality and finances had not been properly managed. What had the provincial treasury and COGTA been doing since receiving these reports? This would help it to intervene easily before the situation became distressful. Three months into the new council, it had collapsed into the situation it was in before the elections. The provincial COGTA had a responsibility to monitor municipalities and to support them.

It had been stated that the then municipal manager had been the instigator with immunity, and that the contract had actually come to an end. What consequence management was this council bringing to the delinquent municipal manager for squandering the municipal finances? How would that municipal manager be held liable for the losses that had been incurred?

It had been said that sanitation had not been provided to all the wards in the district. This was a human dignity and human rights matter. What timelines had been put in place to ensure access to sanitation? The provincial COGTA had referred to bore holes that were being provided. Did this cover all the municipalities that provided services to communities? The AGSA had raised the issue of stability, which was a critical factor for ensuring that municipalities functioned optimally. He was pleased that the mayor of the municipality had understood this, and the dire need to ensure stability for optimal functioning of the municipality.

COGTA responses

Mr Zimbwa agreed that the issue of timelines was indeed very important. He indicated stability was now happening in the district, local municipalities, and all national and provincial departments. This would then also be easier to support in terms of the Constitution. He said that COGTA did work with a water service authority to ensure that a water services development plan was finalised, which would provide the timelines. There was one, but it did have to be updated. COGTA had been working together with the DWS and its monitoring department to ensure it was put in place. The main point he wanted to make was that with the stability that was reported, it should be able to pay forward those instruments and continue with the timelines that people on the ground were working on.

Ms Thembi Nkadimeng, Deputy Minister of COGTA, said that it had been difficult to start providing support from both the provincial and national support teams. The mayor had described the attempts that had been made to create stability in the municipality that would enable it to bring in support. If the council itself was not stable, then bringing in support would be difficult because no measures would be put in place and there would be no proper coordination. There would also be some difficulty legally in processing the issues.

However, there had been little progress. There was indeed the issue of the budgetary process and no proper service delivery that had been provided. The timelines with regard to delivery areas could be provided to the Committee. National and provincial COGTA would ordinarily come in with a form of support, whether there was a section 139 or not. The Department was the custodian of designing its own delivery. It was not possible for the provincial COGTA to take over all the service delivery that the municipality was supposed to do. There was only a small unit at MISA, and it collaborated with the province.

The training programmes were meant to enhance the work that was there. The people were there to be able to understand and do the work themselves. This was where the focus was, but other people had also been deployed, such as special development personnel and engineers, to assist municipalities in adopting its plan. Once problem areas had been identified, there was a focus on technical support. SALGA offered minimum technical support in audit programmes, but it did deal specifically with municipalities to ensure the plans were adopted and that there was an audit plan improvement.

The issue of non-attendance fell squarely on the shoulders of the council to push its own directors and employees to stick to the schedule. It may not be possible for SALGA to issue any sanctions. The law did not allow SALGA to do so. Therefore, there was more of an acknowledgement of the challenges and that they would be reviewed. There had to be stability for plans and programmes to be implemented properly.

North West government response

MEC Rosho said that there had been several engagements with the previous council, and part of the root cause of the problems was deeply rooted in the fact that the municipality at the time had a council that was micromanaged by the municipal manager. It had deepened the divisions and eroded the moral high ground regarding compliance. There had not been an utterance in terms of the law. Instead, it was sitting with a municipal manager, as it had invoked a provincial government involved in the previous administration in 2019. There had been provincial government in both section 139s. There had been court processes. However, this new council had asserted itself in terms of oversight, and was well aware of its role in administration.

She mentioned an adopted budget that had been declared null and void by a court of law. The Speaker and the Mayor were strongly supportive of the political oversight system, and were well-prepared to ensure accountability. This was something the government and the Committee could appreciate, especially if one had to compare the new council to the previous one. Decisions had been made to ensure that the municipal manager would be held accountable.

The Finance Department had started to work together with COGTA and SALGA to provide support. There had been work done to address the issue of reviewing financial statements and to provide support with the new structure that had been approved by the Department of Public Service and Administration (DPSA). There had been a financial crisis, but it was better off compared to some other municipalities. The budget would be reworked. The Department had been assisting the municipality with a financial recovery plan. There had been a concerted effort through a multi-disciplinary team to provide support. As a result of the resistance and instability which had been caused by the municipal manager, it had no choice but to contract to jointly submit a letter to the Minister of Finance and the Minister of COGTA, that section 216 of the Constitution should be invoked. This had been withheld and did not have a desirable effect. It was going to affect service delivery, but there was now no choice because it was sitting with a municipality that could not comply with adopting its budget, and it continued to have all its instabilities. Everything that was done by this one municipality, was done through consultants.

However, this new council had been very decisive in asking difficult questions to the administrator. One should appreciate the work that has been done. Although the progress had not been great, there had been some progress. Political leadership ensured that it was moving in the right direction regarding the post-audit action plans. It ensured that the MPAC was giving support. It has now also been working with SALGA to ensure that its committees prepared their schedules for engagement as part of its oversight. This one intervention had been fully accepted by the members of the community, business, traditional authorities and councillors. There was cohesion within the institution to ensure stability in the municipality. This would allow service delivery to the communities.

Dr Ruth Segomotsi Mompati District Municipality response

Mayor Maje said that there was a serious backlog in terms of sanitation, and it was a human rights issue. It was a moving target because it continued to grow; sometimes settlements grew at a rate far exceeding the resources at its disposal. They were confident that the project would be completed by the end of January 2023. It was a project that was intended to service 950 households. The boreholes within the municipal area would be covered, and would ensure that water was provided throughout the municipality.

Kagisano-Molopo Local Municipality responseee

Mayor Marabutse said R6 million had been paid to investigate the UIF-related matter and other issues raised. Since the start of the term, there has never been stability in the municipality. For the past 12 months, there have been challenges which had affected governance and service delivery. All the committees that had the responsibility to provide oversight had been non-functional due to the negative interface between the administration and the politicians, leading to overall instability within the municipality. Things had not been normal -- it was like there was no municipality. It was like a circus being orchestrated by the former municipal manager. As a result, the provincial government had to intervene and reaffirm its commitment to ensuring that it would work together with the administrator to restore the stability required within the municipality.

It would not have been able to stabilise the municipality within the space of a month and a few weeks. The municipality had been unstable for over a year. There was a service delivery improvement plan that it was working on which would be tabled at the next council meeting. It would be forwarded to the provincial treasury and the department of COGTA. It could also be provided to this Committee.

There had been correspondence at some point from the Department on the intention to invoke section 106. It was hoping that it would be able to respond to the issues of corruption and maladministration that had been taking place within the municipality. The situation had been so dire at the point that the former municipal manager had not been submitting reports. The matter had been reported to the provincial treasury, and it had intervened by withholding the equitable share which it felt was best at the time, because the municipal coffers were being misused by the then municipal manager.

It was currently developing a consequence management plan regarding the former municipal manager. It was also developing a consequence management plan with activities and timelines which would be forwarded to the provincial and National Treasury and COGTA. This plan could also be provided to the Committee. It was believed that those who brought the municipality into a state of disarray must be brought to book and face the full might of the law.

SALGA response

Ms Tlhoaele said the issue of the attendance of members at training had been captured by the Deputy Minister fairly well. The role of SALGA was very clear. SALGA’s correspondence went to the Mayor, the Office of the Speaker and the municipal manager. As a result of the instability, there had been low attendance, but SALGA would continue to work with the provincial treasury and provincial COGTA to support and continue the capacity building as indicated.

AGSA response

Ms Van der Grijp said that without instability at the leadership level and without cooperation between the political and administrative leadership, none of the interventions would bear any fruit. There needed to be coordination, interventions and accountability to bear fruit. This was a long term solution, and changes would not happen overnight.

Closing remarks

The Chairperson said that it could be agreed that there was instability within the municipality. However, it could also be agreed that something positive was being developed. He was happy to hear that the Mayor was ready to deal with all the issues. There was a backlog in terms of responding to issues that had been raised in the form of oversight by this Committee. Everything submitted to the provincial and national level should also be submitted to this Committee. The Committee had noted that this instability was serious, and acknowledged that the municipality was starting almost from nothing. If the Committee had not forced it to come to this meeting, it might not have been able to learn as much. He thought everyone would be happy with the implementation of section 139(1)(b) of the Constitution. He could not understand why the situation had not been assessed. Support should be provided so that there would not be so many questions when there was another meeting. If someone wanted to take over the authority, there must be specific executive powers that were taken from the municipality that the province must be accountable for when it puts in an administrator. He hoped in the future, when there was another interaction with the municipality, that it would be positive.

MEC Rosho said it would continuously assess and monitor municipalities not in a good state. She appreciated this session. It was committed to continuously supporting municipalities and working together with MISA, COGTA, SALGA and National Treasury. The Provincial Treasury had already worked on a plan involving supply chain management, reporting accounting and project support. This session allowed it to review some of the things, work together with the Mayor and administrator, and discuss political oversight issues.

Mayor Maje said that from the outset, it had to appreciate the work the Committee was doing. He appreciated the report provided by the national and provincial COGTA, including the provincial treasury. It was mindful of its responsibility and the role it had to play. It had taken some lessons from this engagement. These lessons would strengthen the work it did and the support it provided to local municipalities in the district.

Mayor Marabutse said that the Kagisano-Molopo District Municipality would reaffirm its commitment to cooperating with the Committee. It appreciated the immense support it had consistently been receiving from the Department of Treasury and the Department of COGTA, including the district municipalities. It was undertaking to work together with the administrator to ensure that the municipalities were stabilised where section 139 interventions had been implemented successfully. The primary objective of the municipality was to deliver services to the people of the Kagisano-Molopo District Municipality. She appreciated the comments that had been made.

The meeting was adjourned.