Section 139 Interventions in KZN Municipalities

Meeting report

The Chairperson said the Committee was meeting because of the need to consider the state of municipalities in KwaZulu-Natal (KZN), especially in ensuring that the Section 139 interventions implemented by the KZN provincial government were effective.

MEC's overview

Ms Bongi Moloi, Member of the Executive Council (MEC): Cooperative Governance and Traditional Affairs (Cogta), KZN, introduced her delegation. In her opening remarks, she indicated that it was an honour to update the Committee on the progress of the municipalities placed under Section 139 of the Constitution. It was essential to remember that the primary objective for evoking Section 139 was to make informed decisions and extend the necessary support to stabilise the municipalities failing to fulfil their executive functions. The Cogta in KZN had therefore appointed administrators who were playing a critical role in ensuring that municipalities adopted approved budgets, revenue-raising measures and recovery plans to meet their obligations. In KZN, the Department has intervened in 12 municipalities under Section 139 since 2016.

Except for the Nquthu Local Municipality and the Emadlangeni Local Municipality, all interventions had been approved by the Minister and the National Council of Provinces (NCOP). The Provincial Executive Council (PEC) terminated interventions at Endumeni (in November 2019) and Richmond (in March 2021), as these municipalities had stabilised and were being supported by the provincial government in terms of Section 154 of the Constitution.

The PEC had had to intervene in terms of Section 139(4) in July 2021 at uMkhanyakude Municipality, when it had failed to approve its 2021/22 budget and related revenue-raising. The Executive Council intervened yet again in uMkhanyakude Municipality in July 2022, when the Municipal Council failed to approve its 2022/23 budget and associated revenue-raising measures. The requirements of the intervention had since been met -- the municipality had approved the budget and the Integrated Development Plan (IDP).

On 25 April 2023, the PEC resolved to extend eight interventions in terms of Section 139(1) (b) of the Constitution at the Mpofana, Msunduzi, Inkosi Langalibalele, Abaqulusi and Mtubatuba Local Municipalities, and at the uMzinyathi, uThukela and uMkhanyakude District Municipalities, until 31 October. However, the Abaqulusi intervention had been invalidated on 8 April 2022.

Although some municipalities had been under intervention for longer than desired, several municipalities had demonstrated substantial improvement due to the support that had been provided. Common challenges identified in these municipalities included the failure to implement infrastructure projects, inadequate oversight, neglecting investigations of fraud and corruption, cashflow problems, negative audit outcomes, failure to submit annual financial statements, and prolonged vacancies in senior managerial positions. The PEC continued to monitor the progress of the municipalities and assess their financial health.

The Department was grappling with a range of challenges in addressing Section 139 constitutional interventions in municipalities. These challenges included the absence of a legal framework, political instability, and infighting, especially in hung councils, along with the lack of enforcement measures for Section 106 investigation reports. Furthermore, there was a need for a clear framework to regulate the appointment of ministerial representatives/administrators. Poor oversight by councils and relevant committees and legal challenges further complicated the process, often resulting in delays and increased costs. Overcoming these challenges was vital to improving the efficacy of municipal interventions and ensuring the stability and functionality of municipalities in KwaZulu-Natal. To address some of these challenges, the PEC had enhanced early warning systems in municipalities to provide support before early interventions became necessary.

Status of Section 139 interventions in municipalities

Dr Joey Krishnan, Chief Director: Municipal Finance, Cogta, KZN, took the Committee through the presentation.

Umzinyathi District

She said the intervention in the Umzinyathi District was initiated in 2017, when there was a failure to implement Regional Bulk Infrastructure Grant (RBIG) projects. Regarding good governance, there had been poor oversight and a failure to conduct investigations into fraud and corrupt activities in the district. Furthermore, there were cash flow challenges, as unauthorised, irregular, fruitless and wasteful expenditure (UIFW) had increased from R42 million to R244 million, with a negative audit outcome. There had also been a failure to build institutional capacity, as there were vacant managerial positions.

In 2023, although there had been expenditure on the grants, water and sanitation backlogs were not yet resolved, and this spoke to elements of planning for infrastructure, including its operation and maintenance. Governance in Umzinyathi had been stable as of 30 January 2019, when a section 106 report was tabled in Council with 23 recommendations, 16 of which had been implemented. Seven recommendations were still outstanding, but were in progress. Cost containment measures had also been implemented, and UIFW had decreased from R2.3 billion to R2.0 billion. All senior management posts had been filled, except for the position of Chief Financial Officer (CFO).

uThukela District

Concerning uThukela District, the intervention in 2018 was because of community protests over the lack of service delivery, including the poor state of infrastructure. There were also shortages in the delivery of basic services, as there was a lack of capacity to undertake water and sanitation functions, with extensive water losses. Good governance was jeopardised by the weak oversight by the Council, EXCO, and portfolio committees, resulting in weakened financial management.

In 2023, public protests remained persistent, as there was a lack of capacity to undertake water and sanitation functions. However, grants were now ring-fenced and represented by identifiable investment accounts. Although all Section 106 recommendations had been implemented, there was still weak oversight by the Council, EXCO, and the portfolio committees. uThukela had maintained a qualified audit opinion, but there was persistent instability, with claims of staff purging, nepotism and favouritism.

Inkosi Langalibalele

The intervention in 2017 at Inkosi Langalibalele was triggered by the mismanagement of conditional grants and the failure to spend infrastructure grants. There were also poor oversight measures in place, with various warrants of execution against the municipality. In 2015/16, the municipality received a disclaimer audit opinion, and there had been a failure to submit the 2016/17 annual financial statements (AFS).

In 2023, conditional grants had been ring-fenced and cash-backed. The municipality had openly objected to the Ministerial representative, despite a court order preventing the municipal manager and other parties from preventing the Ministerial representative from implementing the intervention. The department intended to approach the court for the contempt of court order issued on 13 September.

Contract management had improved, and creditor reconciliations were complete. Cash flow had improved, based on specific triggers with a surplus reported (unaudited), and creditors generally paid within 30 days. The AFS had been submitted by the compliance date of 31 August,  and all posts had been filled. However, the job evaluation process has not been resolved yet.

Mpofuna

In Mpofona, the intervention in 2017 was because of housing projects, and the Cogta's small-town rehabilitation projects had been stalled due to the mismanagement of conditional grants. Repairs and maintenance were below the 8% norm, as they were at 0.82%. There were also allegations of fraud and corruption, with political interference in administration on the rise. Mpofana also had a ballooning Eskom dept, was in a dire financial crisis, and had failed to appoint senior managers, such as a CFO and the municipal manager.

Following the intervention, a payment agreement was put in place with the provincial Department of Human Settlements (DHS) to reimburse mismanaged housing grant funds. To ensure good governance, functional Council structures had been established. The municipality had maintained a qualified audit opinion, but the Eskom debt had increased to R414 million. The municipality had also failed to implement cost-cutting measures. Noteworthy, filling the Corporate and Community Services post was in progress.

Mtubatuba

In Mtubatuba, the intervention took place in 2019 because of dysfunctional ward committees, coupled with service delivery protests and a failure by the municipal Council to respond to the raised issues. There had also been dysfunctional oversight mechanisms, including a failure to deal with waste management services. Institutional capacity was poor, as senior management vacancies had not been filled.

In 2023, the ward committees were functional, with the municipal rapid response unit able to respond to public protests. There was still persistent failure to deliver basic services, such as dealing with waste management issues and securing a landfill licence. UIFW had decreased from R307.3 million to R26.5 million, and all senior management posts had been filled. Council and oversight structures were fairly stable, though it had been noted that the municipality had made various litigation attempts to frustrate the constitutional intervention.

Msunduzi

In Msunduzi, the interventions in 2019 were triggered by the dysfunctional ward committees, coupled with public protests, failure to resolve service delivery challenges, frequent electrical outages, failure to hold councillors accountable for absenteeism, poor financial management, and the failure to institute consequence management measures.

In 2023, Msunduzi had 98% functional wards, and Council had fairly resolved service delivery challenges in the municipality. A Section 106 report had been tabled in 2020, with 17 recommendations, 15 of which had been implemented, and two were in progress. The Section 106 report tabled in 2021 contained 27 recommendations, four of which had been implemented, and 16 were in progress. The municipality still had poor financial management, although the overdraft had been paid off and cash coverage had improved slightly in July and August. There were still unfilled vacancies.

Umkhanyakude

In Umkhanyakude District Municipality, the 2021 intervention was because of community protests, poor project management and supervision, political instability, failure to prevent and investigate UIFW of R2.7 billion in 2018/19, and unfilled vacancies.

The current trend showed that the municipal rapid response was effective. The investigation in terms of Section 106(1)(b) of the Systems Act commenced on 4 August 2020, and was finalised in December 2021. The report was tabled on 24 March 2022, with 29 recommendations, ten of which have been implemented to date. Umkhanyakude’s cash flow position had improved, and an acting CFO had been appointed and a Municipal Manager and Director of Community Services. The positions of CFO, Director of Corporate Services and Director of Planning Services, were still vacant.

COGTA intervention strategy

Dr Krishnan said the Cogta MEC had introduced a robust intervention strategy aimed at enhancing support for municipalities facing challenges. The Department had been mandated to implement two critical measures to address these issues.

Firstly, monthly intervention meetings, led by the Deputy Director-General for Local Government, had been established. These meetings served as a platform for coordinating representatives from provincial, national, and state-owned enterprises. Their primary objective was to provide progress reports on functional areas within municipalities undergoing intervention, with a focus on unblocking challenges encountered by Ministerial representatives.

Secondly, political intervention steering committee meetings were convened and chaired by the MEC for Cogta, and involved affected Mayors, Speakers, and EXCOs. This committee oversees the provincial support provided to municipalities under Section 139(1) interventions, with a specific focus on resolving political challenges.

In addition to these intervention mechanisms, the Department reinforced the implementation of recovery plans through various measures. These included reviewing the agreements of Ministerial representatives to include a clause stipulating the completion of outstanding recruitment processes within 90 days, the submission of weekly activity plans, and a requirement to execute consequence management stemming from Section 106 investigations within three months. The MEC assesses the performance of Ministerial representatives every three months, with the possibility of termination in cases of underperformance.

She repeated the MEC's concerns over the range of challenges in addressing Section 139 constitutional interventions in municipalities, such as the absence of a legal framework, political instability, and infighting, especially in hung councils, along with the lack of enforcement measures for Section 106 investigation reports. Poor oversight by councils and relevant committees and legal challenges further complicated the process, often resulting in delays and increased costs. Overcoming these challenges was vital to improving the efficacy of municipal interventions and ensuring the stability and functionality of municipalities in KwaZulu-Natal.

To enhance the effectiveness of municipal interventions, several key recommendations were proposed. These included:

• strengthening the early warning system to provide support before formal interventions;
• establishing a standardised legal framework for Section 139 interventions;
• continuing intensive support for municipalities under intervention;
• addressing concerns highlighted by the Auditor-General (AG), and
• taking action on municipalities operating with unfunded budgets, such as Mpofana, uThukela, and uMzinyathi, to ensure their financial sustainability.

Implementing these measures would be vital in improving governance, financial stability, and service delivery in these municipalities.

See attached for full presentation

Discussion

The Chairperson thanked the Department for the presentation, and allowed the Members of the Committee to engage with the presentation.

Ms S Shaikh (ANC, Limpopo) asked the Department when the forensic investigation reports would be tabled, and for it to provide an indication of the status of the criminal cases or prosecutions in the municipalities.

The presentation indicated that interventions had been in progress for a long time. When was the Department planning to terminate the interventions in municipalities where they had been long-standing, and when would the termination reports be tabled?

What was the audit status of uThukela District? The presentation had indicated that in uThukela, there had been renewal of the intervention -- what had been the procedure for that?  

It was understandable that the UIFW issues in the municipalities varied. However, it would be appreciated if the Department would inform the Committee about what was happening in these municipalities regarding consequence management.

Mr Thando Tubane, Head of Department: Cogta, KZN, said that the process that was normally followed when tabling Section 106 reports was that after the conclusion of the investigation, there would be a Council meeting at which the report was tabled, with recommendations. Thereafter, the municipality would be given 21 days to provide a plan in response to the tabled recommendations. This plan was thus used to keep track of the progress in the municipalities. However, there was often resistance to implementing the recommendations of the forensic investigation report(s), with municipalities wanting to find reasons for not implementing them.

However, where there was resistance, the Department would put measures in place, including opening criminal cases and working with the Special Investigating Unit (SIU) and other law enforcement agencies. Such actions aimed at instigating movement in these municipalities to implement the recommendations.

Regarding the termination of interventions, Mr Tubane said the approach that the Department had adopted was that after the expiry of a intervention, it would request an additional six months for a review process. This was mainly because, despite the triggers that would have called for the intervention, other issues would emerge once the intervention was undertaken, resulting in longer interventions.

uThukela had a qualified audit opinion.

There was progress on the issue of consequence management, although this varied across the municipalities. For example, in Msunduzi and uMkhanyakude there was a consequence management framework in place. However, there were municipalities where the Department ended up having to invoke disciplinary measures.

Ms M Dlamini (EFF, Mpumalanga) said it was mentioned that Councils were compliant in some municipalities -- for example, it was mentioned that in uThukela, there was compliance when it came to Council meetings. However, the problem was that there was not much of an impact from those kinds of meetings, as they were more for compliance than for providing an oversight role, to ensure that the different departments were effective. Therefore, were there any other stakeholders that the Department worked with to enhance the skills of councillors? What programmes had been put in place to make councillors understand their roles?

After the protest actions, what had been the engagement with the community to create community stability? What public participation enhancement strategies had been put in place to respond to the concerns of the communities?

What was the morale of staff members in all these municipalities? She was asking because the Department could have all legislative frameworks for what needed to happen, but if those who were supposed to implement them were not brought on board, they were not likely to be successful. Therefore, had there been any assessment of the staff morale, including their willingness to turn the municipalities around?

Had there been a skills audit in the municipalities that had an over-bloated staff complement? What was the Department doing to eliminate the unnecessary staff overloading the system?

Concerning the resistance to the interventions, have any of this involved violence towards the Department? What was the status of the staff's safety?

Mr Tubane said the point that the Department was making was that without proper Council oversight, the municipalities would not be at their current status. This was because one of the indicators of a weak Council structure was when municipalities failed to execute their executive function, and had to be placed under intervention. Therefore, the effectiveness of the Council was not determined by the number of meetings held, but the Department looked at other key factors such as governance, finances, and service delivery.

The Department was working with the National School of Government and the South African Local Government Association (SALGA) to have training programmes to better understand the roles of municipalities and councillors. There were also training programmes that were specifically for municipalities under intervention.

To engage communities during protests, the Department had established a unit called "Public Participation," which had a chief director responsible for engaging protesters. The municipalities also had municipal response teams who worked to engage with protesters, including working with various stakeholders to resolve pressing issues. This collaborative effort included the Department, municipalities, the community and other stakeholders.

The morale of the staff members of the municipalities was something that the Department had not looked at closely. However, Ms Dlamini's recommendation was noted, and the Department would look into this.

In 2022, the provincial department conducted an overall skills audit in all 54 municipalities in KZN. Once the skills audit for both councillors and the municipalities had been concluded, the Department then sent a team to all the municipalities to table the results. This was to ensure that the workplace skills plan integrated the recommendations that came out of the skills audit reports.

The issue of violence was a serious challenge in KZN municipalities. Recently there had been a special meeting of the Executive Council to deliberate on security for everyone in the municipal environment, including providing security for the Ministerial representatives.

Mr C Smit (DA, Limpopo) said that with all these interventions in KZN, the Department should indicate to the Committee if any criminal cases or disciplinary actions were implemented for misconduct.

What was the cost of appointing the administrators for each intervention? Furthermore, what measures were used to determine whether an intervention succeeded? How many of the interventions were successful? This was because the Auditor-General had indicated to the Committee earlier in the year that most interventions were a little too late -- where the situation had got to such a bad point that an intervention would be expensive. Did the Department think that the interventions in KZN had been in time to ensure that they were effective, and were they in line with the current framework of the law?

Responding on the cost of the interventions, Mr Tubane said that the Department remunerated the Ministerial representatives between the band level of director and chief directors. In some instances, the Department provides board staff, such as governance and technical experts, to support the municipalities, including the security costs for the ministerial representatives. These were some of the associated costs of interventions.

Unfortunately, the presentation did not include the number of cases. However, criminal cases had been opened in uThukela, uMzinyathi, uMkhanyakude, uMsunduzi, and uMtubatuba. Law enforcement was following these cases, including cases of misconduct in some of the municipalities.

Regarding when the Department knew when it was time to exit an intervention, as outlined in the presentation, the interventions were benchmarked against various pillars ,and if the triggers that had brought the municipality under Section 139 had been addressed, then the provincial department would make a swift exit. However, one of the challenges was that as much as there was progress with the interventions, there were often unforeseen emerging issues which ended up having to extend the length of the intervention.

The timing of the intervention was always an issue, but this differed from one case to the other. This was because there were triggers even when there was Section 154. However, the Section 154 support was often ignored, as this worked based on consensus and mutual agreement by the Department and the municipality, unlike a Section 139 intervention.

In a follow-up question, Mr Smit requested quantifying the cost associated with each intervention.

He also indicated some municipalities could not sustain the interventions after the Department had exited. This was because, during the interventions, the situation seemed to stabilise, but after the end of the intervention, things fell back to the way they were before the intervention. Therefore, he asked if capacity support was provided to local municipalities in the province.

Could legislation guide interventions so municipalities did not get to the level where they were destroyed and could not be fixed?

Mr Tubane responded that the intervention space had not been canvassed in terms of legislation. There was currently a Bill being looked at that would consider the intervention framework. What had been happening was that each province applied its approach and methodology to Section 139 interventions. It was thus hoped that once the Bill became law, there would be an element of certainty and uniformity in interventions.

Districts were not effective in supporting municipalities, because they were so absorbed in their own challenges that they were unable to effectively support the municipalities in their areas of jurisdiction. Although the Department provided support in the interventions, there was always the intention to fast-track the appointment and filling of key positions in the municipalities.    

Mr N Hadebe (IFP, KZN) said it had been mentioned that the provincial government, in terms of Section 139, was empowered to intervene when a municipality could not or did not fulfil its executive obligations in terms of the Constitution. However, what had been seen was that, more often than not, Cogta had given the responsibility to former municipal employees to act as ministerial representatives. However, what were the outcomes of having people who had either been expelled or suspended, perhaps for failing to perform their functions, being given the task of turning things around in municipalities?

Were the municipal ministerial representatives subject to performance monitoring and evaluation of their tasks, to see if they could assist municipalities with turnaround strategies?

Mr Tubane said it was true that the Department did draw from the ranks of accounting officers in municipalities, such as municipal managers. This was because they knew the space and there was no need for more time to integrate or help them understand the complex systems of government. Systems were in place to ensure they were supported in their role. Further, every appointed Ministerial representative had to sign a performance contract, and the Department monitors the terms of those contracts.

Mr K Motsamai (EFF, Gauteng) referred to the municipalities facing serious corruption cases, and asked what the consequences were for officials who were involved in these cases? This was because some of the officials seemed not to be facing justice. Was it because they were feared by those who were supposed to hold them to account?

Mr Tubane said that the frustration of Mr Motsamai cut across the board. This was because no provision in the Section 106 instrument could compel the MEC or anyone in the Department to enforce the implementation of the recommendations. Therefore, it remained a consideration that Section 106 should be given teeth to enforce the recommendations. What was currently being done was that when there were cases of a criminal nature, they were referred to law enforcement.

Mr R Badenhorst (DA, Western Cape) asked what the next step was if the appointed administrators were unable to fulfil their obligations.

Mr Tubane said that in an instance where a municipality was dissolved, the next step would be to reconstitute after 90 days with a new Council. The Department would support the new Council, but if the reconstituted Council followed the same route as the previous one, the support would intensify.

The employment of municipal and senior managers was regulated. Once the Municipal Council confirmed the appointment, it was sent to the MEC for her concurrence, who would then advise the Minister. Therefore, appointments outside the regulations were closely monitored, and municipalities were informed to restart the process to the satisfaction of the regulations.

The Chairperson stressed that it was unacceptable for a municipality to be placed under administration for seven years. These interventions were invoked because a municipality was unable to fulfil its executive obligations. However, when the interventions lasted up to seven years, it should be realised that the interventions had perhaps been ineffective. Did this not trump the democratically elected Council? Was the problem with the municipality or the Department?

The Department must submit a report to the Committee on the cost of each of the interventions in the municipalities.

What had been the impact of political contestations on stabilising municipalities in KZN?

Mr Tubane responded that the length of the intervention period was a legitimate issue. Although, at times, exiting seemed to be viable, councillors sometimes requested the Department not to exit as things would completely collapse. This was not the councillors giving the Department permission to continue with the intervention, but it was a matter of courtesy, as the MEC had continuous interaction with the municipalities. He admitted that an extensive intervention was not ideal, but sometimes, the conditions were complex and needed more time.

Closing remarks

In his closing remarks, the Chairperson took the Committee through a summary of the meeting and said that the meeting had clarified the issues at the municipalities in KZN. There was a lot that the Department was doing in the affected municipalities, but the recommendations had to be followed up as the interventions should have a clear period, and should not be extensive.

The meeting was adjourned.