Walter Sisulu; Inkosi Langalibalele Dube; Mpofana; Maluti-Phofung Local Municipalities interventions

Meeting report

Opening Remarks

The Acting Chairperson advised that as the Chairperson of the Committee was unavailable until the end of May, he would be standing in during that period. He noted the apology received from the MEC of COGTA for KZN. He asked the EC to commence with their briefing to the Committee.

Ms T Mokwele (EFF, North West) said she had two concerns that needed to be addressed before the meeting could commence.

She was not happy with the apology from the KZN COGTA MEC and said that the Committee had to “caution” the apology.  She also wanted to know the rationale of the process that elected Mr Mthimunye as interim Chairperson of the Committee. She was not satisfied that the process was correct in terms of parliamentary rules.

Mr D Ximbi (ANC, Eastern Cape) said Ms Mokwele was absent from the Committee meetings where Mr Mthimunye was elected as interim Chair.

Ms Mokwele responded that she was not invited to that meeting.

Ms B Engelbrecht (DA, Gauteng) agreed with the concern raised by Ms Mokwele regarding the election of the interim Chairperson and emphasised that she was not happy with the process.

A heated exchange followed between the Acting Chairperson and Ms Engelbrecht on the issue.

The Committee Secretary commented that an invitation (for the meeting) was sent to all Members for the special meeting to elect an interim Chair - and that perhaps some did not receive this (he would have to check and verify members details again to ensure that this did not happen again).

The matter was closed although Ms Mokwele and Ms Engelbrecht were not satisfied.

All three provinces were represented at the briefings, the MEC’s of Free State and Eastern Cape and the DG (Director General) of COGTA in KZN (Kwazulu-Natal), as well as other provincial officials from all three provinces, were present.

KZN COGTA on the intervention in Inkosi Langalibalele Dube and Mpofana Local Municipality.

Ms Mokwele said according to the Constitution, the Committee required that an Executive member of the province, brief the Committee and not officials. The MEC was accountable to the Committee, hence she had to brief the Committee and not officials. 
Ms Engelbrecht was in agreement with Ms Mokwele on the issue.

Mr M Chetty (DA, KZN) said, based on previous experience, the MEC had a tendency not to respect Committee proceedings and that he supported the concern raised by Ms Mokwele.

Ms G Oliphant (ANC, Northern Cape) supported the above speakers on the issue.

The Acting Chairperson commented that Committee Members accepted the apology from the MEC at the start of the meeting and therefore should allow the KZN delegation to brief the Committee.

Ms Mokwele responded that the Committee did not accept the apology and that she raised a concern on the apology and asked that it be cautioned.

Mr Ximbi said he felt that the Committee did accept the apology.

The Acting Chairperson asked all non-committee members attending the meeting to briefly leave the meeting while the Committee attempted to get consensus on the matter.

All non-Committee members, including the provincial COGTA delegation, left the meeting.

The meeting was reconvened (after about 5-10 minutes) when the Committee discussion on the matter was concluded.

The Acting Chairperson advised the Committee had reached a decision on the issue - that the Committee was concerned about the absence of the MEC and would not engage with the other KZN officials on the matter. He advised that the KZN delegation could leave the meeting and that they had to tell the MEC for COGTA that the Committee would conduct an oversight visit to KZN during the next week, where they would engage her on the matter.

The KZN COGTA delegation left the meeting.

Eastern Cape COGTA on intervention in Walter Sisulu Local Municipality (WSM).

The MEC for COGTA in the Eastern Cape, Mr F. Xasa led the briefing, supported by the Administrator for WSM, Mr K. Mpungose.

No briefing documents were made available to the public; however, the Committee did have some documentation on the issue.

Mr Xasa said he had been involved in the matter from the start and gave the Committee an overview of the matter and the progress thus far.

WSM was formed during the amalgamation with other municipalities like Gariep and Malatsai after the 2016 election. The new entity received provincial and national government support to ensure that the municipality could function effectively. However, despite the support, the municipality did not function properly and numerous problems arose - e.g., it owed the Eskom around R141m, monies were collected from clients but not paid over to Eskom.

Subsequently the Province had written to the WSM and indicated that it was going to intervene in terms of government rules. An Administrator, Mr S. Mpungose, was appointed by the EC government to stabilise the municipality. Mr Mpungose assumed all control to effectively run the municipality with the support from the provincial government.

The EC government was working on a turnaround strategy for the municipality including an agreement with Eskom to settle the outstanding debt.

Ms Mokwele asked if the Administrator could brief Members on the current status of events at WSM.

Mr. Mpungose responded that situation had stabilised. A major concern was the lack of service delivery within the municipality. As an example, he referred to Aliwal North, a major town in the municipality, as the “capital of potholes”. Another major issue was the debt owed by the WSM. There was some financial support from EC COGTA (R30m) but a fundamental issue was that it did not have resources to pay its debt.

He asked the Committee to support WSM so that it could attract more funds from government in terms of the “rural” bias” policy whereby rural areas received additional funds to support the service delivery programmes for rural indigent households. He felt that WSM qualified given its current situation.

He cited other challenges that constrained the municipality’s ability to run its business effectively, i.e. 

• large debt base of around R200m
• financial problems - e.g. some employees unable to retire as the municipality had defaulted on paying over member contributions to pension funds!  (R23m shortfall)
• There was no Audit Committee within WSM (issue has since been addressed)
• lack of understanding of governance within the municipality
• political instability
• other issues like industrial action (labour strikes since August 2016) that exacerbated the situation.
• lack of records so it was difficult to ascertain the full liability (of outstanding debts) to WSM

He advised that the three key positions of Municipal Manager, Chief Financial Officer, and Director of Corporate Services would be filled in early July 2018

Discussion on Walter Sisulu Municipality (WSM)

The Acting Chairperson said that Members of the portfolio committee were not convinced that the amalgamation of the municipalities would result in better service delivery in the region - the poorly managed municipality problems had remained even within the new entity.

Mr Chetty asked what the provincial support was for WSM, prior to the interventions. He wanted to know what the composition of the council was. He agreed that amalgamating municipalities with problems with others did not lead to the improvement envisaged.  He felt that the pain suffered by people on the ground due to the lack of service delivery was worse that the pain suffered by WSM due to the lack of financial resources. Mr Chetty wanted to know why the provincial intervention was not at level 139 (1)(c) of the Constitution (i.e. the provincial intervention could dissolve the municipal structures in place and take absolute control).

Ms Mokwele commented that WSM had an administrative and a political problem. She was concerned that there was not a structured plan in place to deal with problems at the municipality. Intervention in terms section 139 (1)(c) of the Constitution was more appropriate than the chosen route of 139(1)(b).

Ms Engelbrecht wanted confirmation if the contract of the Municipal Manager was illegal and when the contract was terminated. She was concerned about the length of time it took for the province to act on the problems at WSM. She felt that the Municipal Council was obstructive and that this further constrained the operations of the municipality. She asked the Administrator how he would reduce expenditure at the municipality.

Mr Ximbi supported the work of the EC intervention process, in WSM. However, he wanted to know where the plans were that informed the Administrator in his actions regarding the intervention process.

The Acting Chairperson was very concerned about the R200m debt as it meant that the municipality was technically insolvent. He asked for the turnaround plans for WSM. He was also concerned about appointing new senior municipal staff (e.g. Municipal Manager whilst there may still be litigation by the former Municipal Manager). He felt that the problem that arose because of non-payment of pension fund monies was a criminal matter and that had to be dealt with as such.

Response by the EC COGTA MEC and the WSM Administrator

Mr Mpungose said there was an Acting Director for Corporate Services in place, (support from another municipality) and that more support was need to enable WSM to provide adequate water and sanitation services. The 22-member Municipal Council consisted of 16 ANC members, 4 DA members and 1 each for the EFF and an independent.

Mr Mpungose felt that in his view the municipality was not at a stage where it warranted a section 139 (1)(c) intervention, as there was still good political and other support from the municipal leadership. There was no CFO in place and support for this was provided by the EC Provincial Treasury. He said there was a financial recovery plan in place and that savings were already being reaped by a centralised supply chain management system.

The Acting Chairperson commented that despite all the good work being presented by the EC and the Administrator, the Committee had to see the actual Turnaround Plan to address the problems identified and a Progress Report on the intervention status. He asked for input from Members on this issue.

Ms Oliphant said she was confused and the lack of the Plan and the Report contributed to this as the Committee could not see how the progress was being achieved. She asked for a weekly rather than a monthly plan.

Mr Chetty felt that the EC briefing lacked substance. It was difficult to judge and comment on the progress without the plan. He asked if the Committee could get the turnaround plan and progress report in due course.

Ms Mokwele was unhappy about the manner in which the EC intervention into WSM was communicated to the Committee (without and plan or terms of reference). She asked that the MEC for COGTA in the EC submit a detailed plan to the Committee on the issue.

The Acting Chairperson said the Committee needed to hear and access all information on the issue to enable it to do its work on this issue, therefore it needed the turnaround plan, the terms of reference that guided the Administrator and a progress report of developments.

Mr Ximbi agreed with the Acting Chairperson

Ms Engelbrecht was still concerned why section 139(1)(c) was not invoked.

The MEC for COGTA in the EC, Mr Xasa, responded that the reports as requested would be sent to the Committee within 21 days.

This concluded the discussion on the intervention in the WSM Local Municipality.

Briefing by the Free State on the intervention in Maluti-Phofung Local Municipality

Mr O Khoabane, new MEC for COGTA in the FS, provided the background for the briefing in terms of a letter sent to the Municipality informing it of the intervention in terms of section 139(1)(b) of the Constitution. The province had informed the NCOP and provided the Administrator Mr M Moremi (seconded from the FS Treasury) with terms of reference to conduct the intervention.

He asked Mr Moremi to provide more detail of the intervention and to brief the Committee on progress thus far.

Mr Moremi provided a well-structured and systematic report to the Committee on the intervention into the Maluti-Phofung Local Municipality (Maluti). His report was based on the terms of reference issued by the FS provincial government and some of the important aspects it contains were as follows:

• implementing a system for the control of expenditure - Administrator has secured control of municipal bank account
• a strategy to address municipal problems - enlist help of National Treasury, Provincial COGTA to assist with financial recovery plan, implement cost cutting measures
• the review of the organisational structure - e.g. reduced the bloated organogram for directorates (reduce from 9 to 5)
• to review and or implement municipal council resolutions - rescind municipal council decision to write off R508m of debt to all - a new decision was taken to only write debt off to indigent people, those who could afford had to pay bills
• fill important vacant positions - ensure that all senior vacant position filled by July 2018.
• assess contractual obligations - review all outstanding contracts, enlist help of COGTA and State Law Advisor
• implement consequence management - matters related to financial, supply chain management, human resource irregularities would result in criminal charges being pursued if justified.
• disruption of water supply in some areas e.g. Kestell (shortfall in financial resources for infrastructure)
• the withholding of bond and medical aid payment to service providers despite it being deducted from employee salaries - this has since been addressed.

He gave some examples of actions taken to address the problems in the municipality:

• utilising unused MIG funding for service delivery (road upgrades, water and sanitation services)
• Mr K Masekoane of COGTA had been appointed as Acting Municipal Manager
• the contracts of 300 people employed illegally had been terminated (saving if R2.5m pm)
• no electricity accounts had been issued since July 2017 resulting in a huge debt to Eskom of R2.7bn. Some businesses are now paying Eskom directly to avoid supply disruptions. This would result in a loss of revenue to the municipality. A plan was now in place to recoup outstanding monies.
• due to its constrained financial position, the municipality faces a big challenge to pay salaries for May and June (income of around R40m and expenditure of around R45m) - all avenues were being pursued to address this problem.

Municipal council meetings had been dysfunctional with meetings either being postponed, disrupted or aborted. A motion of no confidence had been passed in the Executive mayor, who has since tendered his resignation with effect 1 July 2018.

He hoped that the Committee and the NCOP would support the process embarked upon in the FS to address the problems in Maluti.

Discussion on Maluti-Phofung Local Municipality

 All Committee Members were satisfied with the feedback from FS on the measures being taken to address the problems in Maluti.

The Acting Chairperson commended the province and the Administrator on the actions taken to bring things on an even keel. He however had a concern about the disruption of water supply (a basic human right) to some areas. He suggested that the province approach Eskom to refund electricity income due to the municipality, from customers who paid Eskom directly (he proposed a service level agreement between Eskom and the Municipality). He also asked that the province and the Administrator had to ensure that the systems and legacy it left behind after the intervention, would ensure that the municipality could function effectively afterwards.

Ms Engelbrecht congratulated the province on the good feedback to the Committee. She wanted to know if residents would be “warned’ or informed that their bills were still outstanding (since July 2017)

Ms Mokwele said this was a good report and had to be copied to other provinces to ensure the Committee gets quality input such as this. She had two further queries - she wanted to know if the Mayor would face criminal charges if proven (now that he had resigned). The other issue she was concerned about was -  if it was necessary to have two admin assistants for HR and Governance (could these be combined in the interest of cost savings). She was concerned about the problem the municipality had regarding the payments of salaries for May and June. She wanted to know if the municipality would remain as a municipality after this process.

Mr Chetty said this was a good report and wanted this best practice example to be circulated to other provinces. He said he was glad that the mayor had resigned. He wanted more detail on the issue of one of the service providers who had advanced some money to the municipality to enable it to pay worker salaries? - was this true? He wanted consequence management for those that committed fraud or other irregularities. He asked that the municipality use water tankers to deliver water to communities where pipeline infrastructure was problematic. He queried whether the help of National treasury should be sought to assist the province in its dealings with Eskom.

Mr Moremi responded as follows.

The municipality was using water tankers to deliver water to Kestell. He further advised that the province had met with Eskom to agree a plan to pay back the debt. Part of the intervention process was to ensure that adequate skills transfers were in place to ensure that incumbents were trained and ready to assume the new responsibilities. He said that the municipality was engaging with communities via the media (radio and local newspapers) to encourage them to continue paying their outstanding bills and to make them aware of what the municipality was doing on the issue.  The issue on salary payments was a crisis that was being attended to urgently, to address the problem. He was aware of the issue of money being loaned to the municipality to pay salaries - the issue was being investigated.

Mr Chetty wanted to know what the total debt of Maluti was.

Ms Mokwele wanted to know if Maluti was one of the 112 dysfunctional municipalities mentioned by the Minister in a speech during the previous week.

The FS MEC for COGTA said that if investigations indicated that some people were guilty of transgressions, these would be dealt with decisively via the law enforcement agencies.

The Acting Chairperson thanked the provinces for the presentation. The Committee Secretary advised that other agenda items would be discussed at the next Committee meeting.

The Acting Chairperson adjourned the meeting at 13h10.