State of Kannaland Local Municipality: Stakeholder Engagement

Meeting report

The Chairperson officially opened the meeting and welcomed all. Apologies were acknowledged. After brief opening remarks, he handed over to the Western Cape government.

Western Cape Provincial Department of Local Government and Provincial Treasury

Western Cape Minister of Finance and Economic Opportunities, Ms Mireille Wenger, first introduced her delegation.

Mr Steven Kenyon, Chief Director: Local Government Public Finance, Western Cape Provincial Treasury, pointed out that after the 2016 Local Government Elections, Kannaland Municipality saw a change in leadership. The new Council requested the Department of Local Government and Provincial Treasury to conduct a Diagnostic Assessment, which revealed several critical financial, service delivery and governance failures. Therefore, a Financial Recovery Plan (FRP) and targeted support plan were developed to strengthen the implementation of the financial recovery plan and to address governance and service delivery failures.

Some of the progress that has been made is in governance, administration, financial management, public participation, and service delivery. Mr Kenyon pointed out that the local government also aided with financial and logistical support to purchase ten vehicles and one fire truck to the value of R494 000 and R730 000, respectively. The Municipality has also been supported through financial resources and human resources.

The Municipality still faces significant financial challenges, including the adoption of an unfunded budget for 2022/2023. The Municipality has adopted a Budget Funding Plan. However, its implementation has been too slow, and targets have been missed. There is also a small revenue base, weak collections and high staff costs, severe capacity constraints, and losses on services – which means that the Municipality struggles to build cash reserves, hence the liquidity challenges. Current approaches to support the Municipality include engaging new management in establishing a formal “cashflow committee” to prioritise revenue and spending decision, including overseeing implementation. There has also been continued advice and close monitoring of the Budget Funding Plan.

Adv Gary Birch, Director: Specialised Support, Western Cape Department of Local Government, said that on governance, administration and service delivery, coalition arrangements in the Municipality are unstable, and coalition partnerships are constantly changing. This has led to Council being unstable and dysfunctional for intermittent periods. Further, there has been a pattern of poor governance within the Municipality over a long period including the prolonged vacancies of critical positions. Procurement remains a stumbling block concerning service delivery due to delayed processes and lack of communication.

Dr S Greyling, Director: Municipal Support and Capacity Building, Western Cape Department of Local Government, said that, given the status of the Municipality, a support package had been drafted for Kannaland Municipality. The Support Plan has been developed to address the Diagnostic Assessment’s key findings, including developing several by-laws, councillor training, reducing high water losses, and replacing water and electricity meters in Ladismith.

See attached for further details

Briefing by the Auditor-General of South Africa (AGSA)

Mr Ashley Olkers, Deputy Business Executive, AGSA Western Cape, said that the Kannaland Municipality was placed under mandatory provincial intervention in terms of section 139(5) of the Constitution read with section 139(1) of the Municipality Financial Management Act (MFMA), from December 2016. However, on 07 October 2021, the Western Cape High Court ruled that the administration be declared unlawful and was ended as a result. The financial statement outcome of being qualified with findings has stagnated since the previous year. This outcome resulted from material limitations and disagreement misstatements for assets, liabilities, expenditures, and disclosures.

Mr Olkers said there was non-compliance in procurement and contract management in Kannaland, as some of the good services with a transaction value of below R200 000 were procured without obtaining the required price quotations. Some contracts were awarded to providers whose tax matters had not been declared by the South African Revenue Service to be in order. There was also irregular expenditure incurred, non-compliance with laws and regulations of annual financial statements and strategic planning, expenditure management, and consequence management.

The root causes of the findings were that the leadership did not exercise adequate oversight regarding implementing action plans to address prior year audit findings and internal control deficiencies. Also, the management did not implement prompt record-keeping to ensure that complete, relevant, and accurate information is available and accessible to support financial reporting. Mr Olkers added that the continuing instability and capacity challenges in key positions have resulted in a lack of effective monitoring and oversight over internal controls.

It was recommended that the management intensify their review processes before submitting the financial statements to detect misstatements. Basic controls need to be implemented, adhered to, and monitored and the Municipality should strive to attract and retain skilled personnel. Thus, the instability experienced in key leadership positions must be addressed as a matter of urgency.

See attached for further details

Briefing by the South African Local Government Association (SALGA)

Mr Anthony Moses, SALGA, said that support was provided to the Municipality in an institutional capacity, and it included representation in the collective bargaining in the South African Local Bargaining Council (SALGBC) – including negotiating the Collective Agreements. There was also support for the implementation of collective agreements in municipalities.

Support was also provided in labour relations, which included representing municipalities in SALGBC disputed arbitrations, disciplinary hearings, and having written and telephonic advice daily. There were also capacity-building opportunities across all units, with various annual seminars on labour relations and performance management.

Support in human resources included sharing best practices with municipalities, peer learning between municipalities, and support with implementing the Municipal Staff Regulations. There has also been support for performance management, including signing the Performance Management Support Plan and implementing performance management training for officials, management, and councillors.

See attached for further details

Briefing by the Department of Cooperative Governance and Traditional Affairs / MISA

COGTA Director-General, Ms Avril Williamson, introduced the delegation from the Department, and then requested that they present to the Committee.

Mr Allan Zimbwa, Deputy Director General: Technical Support Services, Municipal Infrastructure Support Agent (MISA), said that the State of Local Government Report presented by the Minister to Cabinet on 30 June 2021 categorised the Kannaland Local Municipality as a dysfunctional municipality experiencing political, institutional, financial, and service delivery challenges. The Municipality has faced numerous challenges in terms of governance, administration, and financial management.

MISA provides technical support under the District Development Model, wherein MISA's professional registered engineers, town planners and other professionals support the Municipality within the areas where a need has been identified. An assessment is conducted on infrastructure to determine the support required by each Municipality within the district. MISA Western Cape Technical support is comprehensive and includes a provincial manager, chief engineer, professional civil engineer, and professional electrical engineer.

MISA's capacity-building programmes include the Apprenticeship Programme, Experiential Learnership Programme, Technical Training Courses for Municipal Officials, and Recognition of Prior Learning Programme. Furthermore, support in infrastructure grant implementation is focused on improving infrastructure asset management practices and assisting with implementing operations and maintenance-related activities.

MISA has supported the Municipality by providing technical support, water conservation, improvement of infrastructure asset management practices, support with the implementation of integrated infrastructure plans, integrated waste management services, and implementation of performance monitoring strategy and electricity supply management strategies.

See attached for further details

Briefing by the Garden Route District

The Mayor of Garden Route District Municipality, Mr Memory Booysen, said that Kannaland is the smallest Municipality out of the seven in the district in terms of population. It is also the poorest, with the district's lowest rates and tax base. He added that Kannaland is also a politically volatile municipality due to various issues such as litigations and motions of no confidence. Kannaland is also prone to disasters, especially drought and animal diseases. Several interventions have been fairly successful, especially in issues where political and administrative will were needed. However, there were struggles in terms of the law and legal requirements.

Strategic Manager of Garden Route District Municipality, Mr Thembani Loliwe, said that the support provided to Kannaland Municipality’s service delivery challenges has focused on various areas, including: Rural Roads Assessment Management, Integrated Transport Plan, Disaster Risk and Vulnerability Assessment, the Kannaland Disaster Management Plan, Water Security, Dam Safety Plan, Fire Services, Third-Generation Integrated Waste Management Plan, Waster Minimisation Plans, organic waste diversion, Waster Characterisation, Covid-19 Coordination, housing projects, Air Quality Management Plan, and others areas of intervention.

See attached for further details

Kannaland Local Municipality

Acting Municipal Manager of Kannaland Municipality, Mr Keith Jordan, said that the biggest institutional challenges include the current cash position, the vacant post of the Chief Financial Officer, the fact that the Auditor-General is still finalising the 2021/2022 audit, and councillor litigation costs that are still are unknown. He added that there is a need to improve the effectiveness of debt collection, improve consequence management, review policies and procedures, cost containment measures, and review current service delivery mechanisms.

See attached for further details

Discussion

Ms E Spies (DA) said she is optimistic about the situation in Kannaland. She said the stakeholders need to decide if the support packages, diagnostic reports, investigations, and interventions are effective. This is because, for the longest time, Kannaland has received all the support, but things have not improved. The core issue is that there is political instability in the Municipality.

Ms Spies said it is unfounded that the Municipality is poor and has a small economic base. The Municipality has all the resources that it needs in terms of agriculture. However, the Municipality has not been able to meet the needs of the community. She asked what the percentage of the current wage bill in terms of the operational expenditure is, and what revenue enhancement strategy to respond to these high bills is in place.

Since it is a small municipality, what is the staff complement that has given rise to the high wage bill? How many new staff is appointed in the offices of political office bearers, including people who have been appointed in the impact offices?

How many officials are on suspension due to irregular expenditure and poor management? On the allegations of unlawful appointments made in the Kannaland Municipality, is the Mayor aware of the appointments?

The Municipality has not implemented the Provincial Financial Recovery Plan as they have committed. Therefore, does the Provincial Government have the impression that there would be any change in the Municipality?

Ms Spies commented that the infrastructure challenges at Kannaland Municipality are not because of the lack of capacity but because of poor planning and mismanagement. That is the primary reason for the water rations on top of load-shedding. Therefore, what is the Mayor’s plan to address the challenges of poor planning and mismanagement? 

Mr G Mpumza (ANC) said that the presentation about Kannaland Municipality was disheartening. The presentation indicated that the Municipality has repeatedly adopted unfunded budgets over several financial years, including the current year. He highlighted that when the Municipality develops the draft budget, it is submitted to COGTA in the province and Provincial Treasury for scrutiny. Therefore, how is it possible that support from the Provincial Treasury and COGTA has been absent over the years?

What prevents the Municipality from prioritising critical positions to ensure a stable administration? What role are the Provincial Treasury and COGTA in ensuring that the administration of the Municipality is stable so that it runs with its legal and constitutional mandate of providing services?

Mr Mpumza asked what consequence management is in place to ensure the timeous submission of annual financial statements.

On 21 October 2022, the Kannaland Municipality appointed an acting Municipal Manager who was previously dismissed from the George Municipality for financial misconduct. This appointment contradicted Regulation 18 of the Appointment Regulations and the Municipal Systems Act. What remedial action is the Municipality and COGTA taking to address the deliberate contradiction of regulations and law? What remedial action is the Municipality taking on the appointment of the Executive Manager of Infrastructure and Community Services who does not have the required qualifications for the position?  

Mr X Msimango (ANC) expressed his concern about the situation at Kannaland Municipality, as there seems to be no plan to improve the situation to ensure the efficient delivery of services. How is the Municipality planning to build internal audit skills capacity to avoid using outsourced capacity? Further, what is the Municipality doing to correct the irregular and unlawful appointments?

Mr B Hadebe (ANC) asked if the leadership of the Municipality deliberately disregarded the legislation prohibiting the reappointment of dismissed officials. What is the remedial action to ensure the appointment is aligned with the law? At the time of the Council's decision to appoint the acting Municipal Manager, was Council aware of the three findings that had led to the dismissal of the acting Municipal Manager?

Responses

Kannaland Mayor, Mr Jeffrey Donson, said that Council decided to get a legal opinion about the appointment of the Municipal Manager. When the decision was taken for the Municipal Manager to be in the acting capacity, no irregularities were known until a letter from the Minister was received hence a legal opinion was sought. The Municipality awaits the outcome of the legal opinion.

The Municipality has been working to restructure Kannaland, including putting systems to better the situation in the Municipality. He said that there is a commitment to service delivery to the communities. He is still new in the position, and the Portfolio Committee should at least give the Municipality some time to address the issues.

Mayor Donson added that the Municipality wrote to National Treasury and the Auditor-General about the unfunded budget, but there was no response.

Cape Agulhas Executive Mayor, Mr Paul Swart, said that he concurs with the points that the Portfolio Committee has raised. He said that the situation in Kannaland is disheartening, as there have been many interventions provided to the Municipality with little progress. If things are allowed to continue the way they are, then the Committee and those responsible for ensuring that the municipality accounts would have been complicit. He said it would be important to meet the political head of Kannaland, and work with them to ensure that the Municipality improves.

Mr Graham Paulse, Head of Department, Western Cape Department of Local Government, said that the Committee is correct, as the MEC in the province responsible for local government has written to the Mayor of Kannaland about certain irregular appointments in the Municipality, specifically the Director of Infrastructure and Community Service. The MEC has requested that the Mayor responds within seven days.

Mr Paulse said that the Department of Local Government had requested senior counsel’s opinion on whether the appointment of the Municipal Manager was irregular or not in terms of meeting the basic qualification requirements. Once the legal opinion has been received, the MEC will write to the Municipality.

Speaker of Kannaland Municipality, Mr Peter-George Rooi, informed the Portfolio Committee that the Mayor of Kannaland, Mr Donson, had left the meeting. He confirmed that a letter was received from the MEC and was taken to Council. A resolution was made to await the MEC’s legal opinion on the appointment of the Municipal Manager. He said that the Municipality did not know that the appointment of the Acting Municipal Manager was in contradiction with legislation.  

Mr Kenyon said that, from the province’s perspective, Kannaland Municipality has the potential to be financially sustainable because it has the revenue base and support. However, this requires the adoption and implementation of plans by management.

He said that issues and recommendations had been raised about the draft budgets of Kannaland Municipality. However, the recommendations were not implemented. The Municipality has also been assisted in drawing a budget funding plan. The plan sets out measures that, if implemented, would reduce expenditure and raise additional revenue to close the funding gap.

Mr Hadebe said that the Mayor of Kannaland has not sufficiently responded to the questions that the Committee has raised. He said that there seems to be ignorance of the law and regulations. He asked that the Municipality should also provide the Committee with the costing of the senior legal opinion that will investigate the appointment of the Municipal Manager.

Ms Spies added that it was concerning that questions were not being answered. She added that it was inappropriate that the Mayor of Kannaland abruptly left the meeting without cause.

Mr Mpumza proposed that the Municipality fully responds to the Portfolio Committee in writing within seven days.

This was seconded by other Members of the Committee.

It was recommended that the Municipality should be visited to get a comprehensive understanding of the situation in Kannaland.

The Chairperson supported the proposals and thanked everyone for attending and participating in the meeting.

The meeting was adjourned.