Application of Section 139 of the Constitution Cooperative Governance and Traditional Affairs Portfolio Committee 4 June 2013 1

Overview of Presentation (1) Background: the Constitutional context; (2) Breakdown of interventions and categories of challenges; (3) Summary of Intervention Triggers; (4) Current interventions; (5) Key findings from past experience; (6) Rationale for section 139(8) legislation and structure of the Bill; (7) Processes and status quo; and (8) Recommendations.

Background:- Constitution Three types of interventions Section 139(1) of the Constitution provides that when a municipality cannot or does not fulfil an executive obligation in terms of the Constitution or legislation, the provincial executive may intervene by taking any appropriate steps to ensure fulfilment of that obligation. Since the advent of the Constitution, this section was invoked by the provinces starting from Northern Cape in 1998 and to date, there has been 62 invocation of this section at an average of 4 invocations per annum. Section 139(8) provides that national legislation may be enacted to regulate the processes established by these sections; Three types of interventions Section 139 (1) provides for general intervention in instances where a municipality fails to fulfil an executive obligation (this is a provincial discretionary intervention); Section 139(4) provides for instances where a municipality fails to approve a budget or any revenue raising mechanism as required by legislation (a mandatory obligation); and Section 139(5) provides for intervention in instances where a municipality due to its financial affairs is unable to deliver services or meet its obligation (a mandatory obligation.

Constitution: Legislative Framework for Monitoring and Support Section 154(1) of the Constitution provides that national government and provincial governments, by legislative and other measures, must support and strengthen the capacity of municipalities to manage their own affairs, to exercise their own powers and perform their functions; Section 155(6) of the Constitution provides that each provincial government must, amongst others, provide for the monitoring and support of local government in the province; and promote the development of local government capacity to enable the municipalities to perform their functions and manage their own affairs. Within this context, the new Bill deals with these aspects in the form of establishing indicators for performance, establishing early warning systems and provincial monitoring mechanisms, types of support to municipalities and how provincial and national government processes can assist in providing targeted support.

Interventions undertaken in Municipalities: Breakdown (Annexure B): Total municipalities that were subjected to section 139 since the advent of this section. 62 Municipalities under section 139 as at 18 May 2011 Local Government Elections. 21 Municipalities that challenged the interventions in court and won. 3 Municipalities under section 139 post 18 May 2011 Local Government Elections (of which this presentation is focusing on) 9 5 5

Interventions: Provincial Breakdown (1998 - 2013) Province No. of Interventions North West 14 (3 currently) Free State 10 Gauteng 1 Northern Cape 2 Eastern Cape 9 Mpumalanga 11 (2 currently) Kwazulu-Natal 12 (4 currently) Western Cape 3 Limpopo 6 6

Summary intervention triggers Governance They range from political in-fighting to political mismanagement and include Council’s inability to perform as required by legislation; non-performance of top management; conflicts between top management and councillors; lack of proper organisational structure and vacant post in management positions. Financial The most glaring is financial non-viability. These also include the lack of adequate systems and capacity to effectively manage the financial situation; the municipality not raising sufficient revenue due to poor budgeting, poor tariff policies, weak billing systems, poor infrastructure management (e.g. water losses); lack of internal control (e.g. related to revenue management); fraud and misuse of municipal funds due to lack of risk management and lack of credit control; and debt collection policies. Service Delivery Sections 152 and 153 of the Constitution clearly set out the service delivery obligations of municipalities. In certain instances services are not provided in a sustainable manner. Tariff are not cost reflective. There is little or no spending on repairs and maintenance resulting in distribution losses or services not rendered.

Current section 139 interventions Mpumalanga: Emalahleni Local Municipality; and Bushbugridge Local Municipalities; North West: Matlosana Local Municipality; Maquassi Hills Local Municipality; and Ditsobotla Local Municipality. Kwazulu-Natal: Indaka Local Municipality; Mtubatuba Local Municipality; Abaqulusi Local Municipality Imbabazane Local Municipality

Current Section 139 Interventions PROVINCE: KZN DATE OF INVOCATION DATE OF TERMINATION REASONS Indaka Local Municipality March 2010 (Extended after 18 May 2011 Local Government elections on the province’s request due to the depth of the challenges still faced by the municipality ) Still in progress Governance: Lack of institutional leadership amounting to poor performance; Weaknesses in performance reporting directly affecting the oversight role of council over the executive and management. Financial: Continuous financial irregularities resulting in the municipality receiving a disclaimer; Continuous failure to respond to audit findings and implement audit recommendations.

Current Section 139 Interventions PROVINCE: KZN DATE OF INVOCATION DATE OF TERMINATION REASONS Mtubatuba Local Municipality November 2012 Still in progress Financial: Continued instability in financial management; Failing to exercise supervisory authority in the implementation and enforcement of municipality’s credit record, debt collection and by-laws; Failing to take reasonable steps to ensure that the municipality performs its constitutional and statutory functions within budget limits; Failing to recover unauthorized, irregular, fruitless and wasteful expenditure; Failing to conduct mid-year budget and performance assessment; Failing to address issues raised in the Auditor-General’s report.

Current Section 139 Interventions PROVINCE: KZN DATE OF INVOCATION DATE OF TERMINATION REASONS Imbabazane Local Municipality January 2013 Still in progress Governance: Political instability impacting on various aspects of administration and resulting in unstable governance; Tensions and disagreements in council resulting in various walkouts by political parties; Irregular decisions by council, such as continuing employing the Municipal Manager although his contract had terminated by operation of law ; Non adherence to policy, principles and frameworks applicable to council and the administration, such as instances where not all councillors were notified of meetings.

Current Section 139 Interventions PROVINCE: KZN DATE OF INVOCATION DATE OF TERMINATION REASONS Abaqulusi Local Municipality March 2013 Still in progress Governance: Municipality was without a municipal manager from 31 January to 05 March 2013 and other senior positions remained vacant; Council was failing to fulfil its executive obligations; Council failed to accept an offer of support from the provincial government. Financial: Municipality received a disclaimer audit opinion for the 2011/12 financial year for various reasons, such as unauthorised expenditure; Municipality’s annual report not compliant with section 121 of the MFMA.

Current Section 139 Interventions PROVINCE: MPUMALA-NGA DATE OF INVOCATION DATE OF TERMINATION REASONS Emalahleni Local Municipality April 2013 Still in progress Governance: Relationship between the Mayor and Municipal Manager had deteriorated to such an extent that it had paralysed the functioning of the municipality; Municipality was unable to discharge its responsibility of providing its communities with constant water, refuse removal and electricity . Financial: Municipality was struggling to honour its debts, with the total outstanding debt it owed its creditors amounting to R263 million. Municipality was operating with a negative balance of R93 million.

Current Section 139 Interventions PROVINCE: MPUMALA-NGA DATE OF INVOCATION DATE OF TERMINATION REASONS Bushbuck-ridge Local Municipality April 2013 Still in progress Governance: Failure by the Municipal Council to implement the recommendations of the provincial support team regarding its financial problems; Municipality was unable to discharge its responsibility of providing its communities with constant water, refuse removal and electricity . Financial: Inability of the municipality to honour its financial commitments to the Bushbuckridge Water Board, resulting in the latter cutting off its water supply . Municipal finances had deteriorated to a point where the municipality was only dependent on its Equitable Share and the Municipal Infrastructure Grant.

Key Observations from past interventions Since the advent of the Constitution, it has been shown that there has been 62 interventions in the municipalities by the provincial government; Out of these empirical evidence, a “Discussion Document: Towards the Development of Section 100 and 139 Legislation” was developed; The Discussion Document outlined all the key obseravations as to how the interventions were undertaken; The Intergovernmental Monitoring, Support and Intervention Bill now provides regulatory framework to overcome some of the challenges encountered and the following slides picks up on some of those.

Key observations vs IMSI Bill (a) The vast majority of interventions were conducted in terms of section 139(1)(b). However, the provincial executive have tended to usually appoint an administrator to assume the authority over the entire municipal administration even though an administrator is only mentioned in subsection (1)(c)); The Intergovernmental Monitoring, Support and Intervention Bill specifically provides for the appointment of an “Administrator” in all interventions in terms of section 139 of the Constitution once the province takes over the administration of a municipality. (b) The intervention mechanism can also be used outside the scenario of total collapse: more targeted interventions are possible (NewCastle LM on water provision function only); The Bill provides for a full resumption of taking over of the whole of the administration of a municipality. At the same time, the Bill also provides for a targeted intervention for the taking over of a specific function of a municipality without taking everything over. 16 16

Key observations vs IMSI Bill (c) The limitation of section 139(1) regarding ‘failure to fulfil an executive obligation’ led to difficulties in interpreting (a) what constitute this, and (b) when intervention is permitted; The Bill provides for a clear definition of what constitutes an “executive obligation” in a municipality or province for the purpose of bringing clarity to the phrasing. It should be noted that by implicit, legislative obligations are also defined. (d) There was little indication that the provincial legislatures exercised oversight over the Provincial Executives’ actions in regard to section 139 interventions; Before the 2003 amendments to section 139 of the Constitution, provincial legislatures were given a role to play in intervention. The Bill has now provided a role for provincial legislatures providing for an oversight role on interventions. 17 17

Key observations vs IMSI Bill (e) The district municipalities in interventions (into local municipalities) have never been allocated any role-playing in interventions; The Bill provides for a consultative processes with the resident District Municipality when its local municipality is placed under administration. (f) There has been a lack of targeted monitoring, oversight and support mechanisms before the invocation of an intervention (e.g. ‘early-warning’ for performance failures to avert the need for an intervention); The Bill extends the scope of oversight and intervention; it provides for early-warning monitoring and reporting systems for the provision of support to provinces and municipalities in terms of sections 125(3) and 154(1) of the Constitution, respectively; this means that effective implementation of the Bill will require extensive facilities for data collection, analysis and assessment processes. 18 18

Key observations vs IMSI Bill (g) The Provinces are virtually totally reliant on the National CoGTA funds for their support programs and as such, the provincial duty to monitor and support local government is viewed as an unfunded mandate; The Bill provides for targeted supports that may be given to a municipality and the processes thereof. Also to note is that the Bill provides for sector departments to provide support provides for a consultative processes with the resident District Municipality when its local municipality is placed under administration. (h) The effectiveness of the interventions can be questioned in terms of the intended outcomes. Are the interventions curative or were they simply temporary take-overs without, for instance, the necessary skills transfers and meeting the objectives set for the interventions? Provides that there must be capacity building and transfer of skills before there can be any consideration of termination of an intervention; 19 19

Key observations vs IMSI Bill (i) More often than not, the provinces do not issue the “directives” in terms of section 139(1)(a) or were at least not part of the documentation for review by the Minister and/or the NCOP. Provides for different kinds of intervention ‘options’ as deemed most appropriate. In terms of the provisions of the Bill, there are six options to choose from, including issuing of a directive. (j) Provinces have since not been able to submit regular report and the final close-up reports once the interventions have been revoked for the purposes of monitoring the effectiveness of the interventions Provides that regular or minimum 3 months assessment reviews of the intervention must be undertaken and reported to the Minister as such. 20 20

Development of Legislation and Rationale The legislation, particularly pertaining to section 139 interventions, seeks to ensure a consistent and uniform approach to the application of an intervention; Section 139(8) legislation would complement the provisions of the Municipal Finance Management Act, which provides a detailed framework for (section 139(4)&(5)) ‘financial’ interventions; A section 139(8) legislation would support sector legislation; sector legislation increasingly refers to interventions in terms of section 139; MECs are sometimes obligated to exercise this supervisory power (South African Police Services Act, 1995; and Housing Act, 1997); a uniform intervention regime would provide certainty for municipalities and all the stakeholders as to the legal framework governing an intervention.

Intergovernmental Monitoring, Support and Intervention Bill Regulate processes established in terms of Section 100 of the Constitution; Regulate processes established in terms of section 139 of the Constitution; and Provides for Monitoring and support in terms of section 154 and 155(6) of the Constitution. Chapter 1: Interpretation and application of Act; Chapter 2: National interventions in provinces; Chapter 3: Monitoring and support of municipalities (early warning system and targeted national and provincial support matters in complementing section 154 and 155(6) of the Constitution); Chapter 4: Provincial interventions in municipalities; Chapter 5: Administrators in provincial and municipal interventions; and Chapter 6: Miscellaneous (inter alia costs of interventions & Minister’s issuing of regulations assisting in the application of the Act).

Processes and status quo In February 2011, the Bill was presented before the Select Committee on CoGTA ; On 1 September 2011 the Bill was approved by the Technical G&A Cluster for submission to Cabinet; The Bill was submitted to the State Law Advisor (SLA) to test its constitutionality and subsequently have incorporated the G&A Cluster comments. SLA did not raise unconstitutionality; The Bill draws largely from the experiences of the invocation of section 139 of the Constitution. However, currently section 100 has been invoked in 8 provincial departments in Limpopo, Eastern Cape and Free State. The Department has now largely drawn on the experiences on these interventions.

Processes and status quo The Bill will be submitted to Cabinet for consideration and approval; Once Cabinet approves the Bill, it will be published for public comments; Consideration and consolidation of comments will be undertaken; and The Bill will then be submitted for parliamentary processes within 2013/2014 financial year.

Recommendations It is recommended that the Portfolio Committee: Notes the application of section 139 of the Constitution; and (ii) Notes the salient features of the Intergovernmental Monitoring, Support and Interventions the Bill.

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