National Council of Provinces

REPORT OF THE SELECT COMMITTEE ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS ON THE OVERSIGHT VISIT TO THABO MOFUTSANYANE DISTRICT MUNICIPALITY – DATED 12 MARCH 2010

1. Background and Overview

1.1 The Select Committee on Co-operative Governance and Traditional Affairs, having considered the request by the National Council of Provinces (NCOP) on 9^th December 2009, to consider and report on the intervention notice invoked in terms of section 139 (1)(b) of the Constitution at Thabo Mofutsanyane District Municipality, reports as follows:

1.2 In terms of section 139(1)(b), when a municipality cannot or does not fulfil an executive obligation in terms of the Constitution or legislation, the relevant provincial executive may intervene by taking any appropriate steps to ensure fulfilment of that obligation, including assuming responsibility for the relevant obligation in that municipality.

1.3 In terms of NCOP rule 101, the Office of the Chairperson of the NCOP referred the notice of intervention in the affairs of Thabo Mofutsanyane District Municipality to the Select Committee on Co-operative Governance and Traditional Affairs for consideration and report. On 9^th February 2010, the Select Committee took a decision during its meeting to conduct an oversight visit to the above-mentioned Municipality on 24 February 2010.

2. Purpose and Objectives of the Oversight Visit

2.1 The main objectives of the oversight visit was to determine whether procedural requirements have been met and to verify whether the provincial executive has used its discretion appropriately before the Committee can approve/disapprove the interventions. Through the deliberations and interaction with internal and external stakeholders, the Committee wanted to determine how the provincial executive was intending to restore the fulfilment of the relevant obligations and ensure fulfilment in the long-term. The aim being to ensure intergovernmental checks and balances aimed at guarding the integrity and efficiency of the intervention process. In terms of section 139 (2)(b)(ii) of the Constitution, the intervention must end if the NCOP does not positively approve the intervention within 180 days, in this case before the end of 06 June 2010 since the intervention began.

3. Composition of the Delegation

3.1 The Delegation of the Committee composed of the following members of Parliament and Officials: Hon MH Mokgobi, Limpopo (ANC); Hon AG Matila, Gauteng (ANC); Hon DV Bloem, Free State (COPE); Hon A Watson, Mpumalanga (DA), Hon TMH Mofokeng, Free State, (ANC) Mr TM Manele, Committee Secretary (Committee Section); Mr N Mfuku, Content Adviser (Committee Section) and Mr V Mfuniselwa, Administration Assistant (Committee Section).

4. Introduction

4.1 On the 4^th December 2009 the Free State MEC for Co-operative Governance and Traditional Affairs tabled a notice of intervention in Thabo Mofutsanyane District Municipality to the Office of the Chairperson of the NCOP. Subsequent to the tabling, the notice of intervention was referred to the Select Committee on Co-operative Governance and Traditional Affairs for consideration and report in terms of Council Rule 101. In compliance with the Council referral, the Select Committee resolved to undertake a fact-finding visit to the Municipality on 24 February 2010.

5. Problems Identified by the PEC at the Municipality

5.1 The main issues identified by the PEC to intervene in the affairs of Thabo Mufutsanyane District Municipality related to the failure by the Municipality to service its local municipalities due to vacant Section 57 positions; failure by the Municipality to address current municipal financial and other administrative challenges confronting the Municipality and the Municipal Council’s inability to perform its executive obligation due to the failure of the Municipality to function properly. There is no compliance with current legislation; unspent 2008/09 MIG allocation (R13, 5 million); there is no dedicated Public Participation Officer and the District failed to co-operate with local municipalities and other stakeholders.

6. Oversight Visit to Thabo Mofutsanyane District Municipality

6.1 On the 24 February 2010 the Delegation of the Committee had interactive and robust engagements with the internal and external stakeholder of the Thabo Mofutsanyane District Municipality. The main internal stakeholders the Delegation interacted with in the Municipality included the Speaker, Mayor, Chief Whip, Ward Committee Members, Councillors and the Administrator. The main external stakeholders the Delegation interacted with included members of the community and business forums and non-governmental organizations.

6.2 For the purpose of this report, the submissions made by both internal and external stakeholders are structured based on the five key performance areas of the local government which are: Municipal Transformation; Basic Service Delivery; Local Economic Development; Municipal Financial Viability and Management as well as Good Governance and Public Participation.

(A). Municipal Transformation and Organisational Development

6.3 Municipal Council: The submissions made by the Speaker, Mayor and the Chief Whip indicated that the Municipality welcomed the intervention in its affairs by the PEC. Some of the major progress reported by the Municipal Council since the appointment of the Administrator by the Provincial Department of Co-operative Governance and Traditional Affairs included the development of a turn-around strategy and municipal financial recovery plan; co-ordination and scheduling of meetings are done monthly and regular executive management meetings are being held fortnightly to identify and provide solutions to organisational problems.

6.4 SALGA: The Association declared that what has happened in the past should serve as a lesson. The Municipality should devote its energy and resources towards the implementation of the turn-around strategy, in order to remedy the Municipality. SALGA registered its support to the Administrator, and appreciated the current efforts in the filling of vacant positions.

6.5 Administrator: Some of the organisational development challenges indicated in the report of the administrator pertained to poor assessment of the recoverability of Regional Service Council (RSC) debtors and the lack of management oversight to implement procedures to recover outstanding amounts – which led to the Municipality handing over the amounts due to debt collectors/attorneys. Furthermore, the staff was not performing duties in terms of formal job descriptions and standard task lists; failure to provide supporting documentation and ineffective application of HR processes; lack of performance management system, non-implementation of the organisational training plan and monitoring of training costs and lack of monthly payroll payment reconciliation and review. There were instances of maladministration, non-compliance with statutory obligations and serious malpractice. This has resulted in poor staff morale.

6.6 Some of the intervention activities reported by the Administrator in assisting the Municipality included: review and approval of job descriptions, documenting processes and policies, monitoring policy implementation, implementing performance management system, conducting skills audit for all posts and implementing a capacity-building plan and reconciliation of salary and third party payment and sub-system information. It was reported that Mr M Makhele of Setsoto Local Municipality has been seconded to the Municipality in order to provide capacity in the IDP Unit, and support the neighbouring local municipalities with alignment and development of credible IDPs. Since the Municipality failed to comply with Treasury Regulations, an amount of R5, 8 million of its equitable share was withheld. However, the amount was given back after numerous deputations to the National Treasury. The Labour Forum was inactive, however, it has since been revived and regular meetings have been conducted. It was reported that single isolated cases of disputes and grievances have been dealt with, whilst others have been referred to the CCMA.

6.7 Organised Labour: Some of the major transformation and organisational development issues raised by the Independent Municipal and Allied Trade Union (IMATU) related to lack of environmental health system and services. Since 01 July 2009 there environmental health function was not performed by the Municipality. It was reported that the allocated R10 million for environmental health by National Treasury has been used for other functions. Furthermore, there was non-implementation of Council decisions by the Municipal Manager; lack of organisational structure, lack of tools of trade and procurement of goods and lack of professional training. The salary disparity, was being done based on the old grading system. There were also serious challenges with respect to the filling of vacant positions of health professionals, lack of consultation on budget related services, lack of by-laws and legislation, non-functioning of the labour forum.

6.8 IMATU expressed appreciation about the placing of the Municipality under section 139 (1)(b) of the Constitution and the subsequent appointment of the Administrator. Some of the progress reported by the representatives of the IMATU as a result of the intervention and appointment of the Administrator related to the resuscitation of the labour forum; training on computer systems; appointment of skills development facilitator and development of skills development plans.

6.9 The South African Municipal Workers Union (SAMWU) raised major concerns related to the prevention of employees to attend skills development programmes; forceful resignation of employees; non-functionality of the labour forum; low staff morale and trust among employees, delay with regard to the appointment of section 57 managers, and non implementation of the bursary policy. SAMWU reported that most of the departmental functions previously resided in the Municipal Manager’s office, for example, Finance and Fleet Management. Despite the above concerns, SAMWU welcomed the placing of the Municipality under section 139 (1)(b) of the Constitution. Some of the progress reported in respect of the intervention and the appointment of the Administrator related to the development of the organisational structure and management’s open door policy. The representative of the union further proposed that the Administrator fast-track the appointment of Section 57 Managers.

(B). Basic Service Delivery

6.10 Administrator: Some of the basic service delivery problems highlighted by the Administrator included lack of reconciliation of Municipal Infrastructure Grant (MIG) projects expenditure for previous years, inadequate public participation and support of local municipalities by the District Municipality and provision of service delivery not in accordance with the approved IDP. It was further indicated that the MIG balance as at 22 February 2010 of R7, 2 million will be spent accordingly and the projects will be completed by March 2010. Other intervention activities reported in order to assist the Municipality to deal with service delivery problems included improvement of communication between district, local municipalities and the community and ensuring that there was a dedicated Public Participation Officer to liaise with local municipalities.

(C). Local Economic Development (LED)

6.11 Administrator: The Administrator declared that previously there was an acute shortage of personnel in the LED component, hence it was critical to get external support whilst there was a process of appointing relevant personnel in this component. Progress is anticipated with the assistance of the Independent Development Co-operation (IDC) in terms of establishing a Development Agency which is likely to be catalytic in LED projects. Furthermore, IDT and ABSA have been engaged on the alignment and the review of the District LED Strategy.

6.12 Members of Community Forums: The gist of inputs emanating from these stakeholders with respect to LED related to lack of access to land and provision of title deeds, in order to participate in LED projects.

(D). Municipal Financial Viability and Management

6.13 Administrator: It has been identified that there are weak procurement controls, non-compliance with procurement policies and legislation, lack of reporting regarding procurement and policy implementation in the Municipality. The Auditor-General has identified fruitless and wasteful expenditure for two consecutive financial years. An action plan has since been developed to address the issues raised by the Auditor-General and is being implemented. The Administrator has also updated policies and installed on-line SCM module; enforced compliance reporting and developed additional procurement reporting templates for stakeholders. In addition, the current budget has been reviewed in order to identify and realise cost saving opportunities and develop a financial recovery plan. Assistance to address the Auditor-General queries and funding to deal with poverty alleviation projects and legal creditors has been provided by the Provincial Department of Co-operative Governance and Traditional Affairs.

6.14 The Administrator reported that the Office of the Premier (State Law Advisor) has been tirelessly providing support to the Municipality regarding the outstanding litigation and legal costs with the creditors. This relates to the R50 million that was supposed to have been collected by debt collectors on behalf of the Municipality, but unceremoniously it has been discovered that the Municipality owes the debt collectors more than R9, 8 million and more than R15 million has been paid since 2007.

(E). Good Governance and Public Participation

6.15 Administrator: Governance problems reported by the Administrator related to the non-functionality of Audit Committees since 2008; lack of risk assessment; monitoring and control system; poor communication of risk management issues through municipal formal structures and a lack of fraud prevention plan. In order to improve and facilitate good governance and public participation, there is an urgent need to appoint and/or transfer a Public Participation Officer internally that will also assist the Speaker’s Officer. The Officer will be appointed as from 01 March 2010. In addition to this, the Administrator was assisting the Municipality to deal with governance challenges including the updating of internal audit and risk management policies and plans, monitoring of the implementation of policy and plans and ensuring the effective oversight function of the Audit Committee.

6.16 Ward Committees: The Ward Committees declared their dissatisfaction with regard to poor consultation and communication on the application of section 139 (1)(b) of the Constitution on the Municipality, non consultation with other municipalities on the application of the intervention in the District. They proposed that the community should be provided with regular and deliberate feedback on progress made in respect of intervention.

7. Committee Observations and Opinion

7.1 The Delegation of the Committee has observed that the Municipality has failed to ensure mid year financial review in consultation with the district and local municipality, failed to ensure the appointment of section 57 managers as indicated in the report and the Council has been unable to collect revenue owed since 2006 stoppage of levies. It was observed that the process of collecting outstanding RSC levies has been tedious. The amount that was suppose to be collected was estimated to be in the region of R50 million.

7.2 Furthermore, the changing of debt collectors with regard to the collection of outstanding RSC levies has not assisted the Municipality. The amount of R9, 8 million owed to the debt collectors was unjustified. The Municipality had failed to comply with national legislative requirements and consequently contributed to the evoking of section 139 (1)(b) of the Constitution. There was also poor communication with the community on the objectives of intervening in the Municipality.

8. Acknowledgement

8.1 The Committee Delegation acknowledged the varied contributions of the parliamentary staff who participated in the oversight visit in their various capacities. A word of appreciation is also extended to all the internal and external stakeholders of the municipality who interacted and had robust engagements with the delegation of the committee on matters related to the placement of the municipality under section 139 (1) (b) of the Constitution.

9. Recommendations

9.1 Having conducted the oversight visit to the Thabo Mufutsanyane District Municipality and interacted with internal and external stakeholders, the Select Committee on Co-operative Governance and Traditional Affairs recommends that:

9.1.1 The National Council of Provinces approves the intervention as issued by the Provincial Executive Council in terms of section 139 (1)(b) of the Constitution.

9.1.2 The Administrator should fast-tract the process of appointing Section 57 Managers and assist the Municipality in developing a labour retention strategy in order to ensure that future service delivery projects have the support of the community and are aligned with IDP.

9.1.3 The Administrator should conduct a proper and thorough investigation and report to the Free State MEC of Co-operative Governance and Traditional Affairs and the NCOP on the possible link between the resignation of the former Municipal Manager and any other form of misconduct that has since contributed to the current crisis in the Municipality.

9.1.4 The Select Committee on Co-operative Governance and Traditional Affairs would summon the former Municipal Manager of Thabo Mofutsanyane District Municipality, accompanied by the MEC, to appear before it in order to explain and give details on the allegations of maladministration and misappropriation of funds during his term as Municipal Manager of Thabo Mofutsanyane District Municipality.

9.1.5 The Minister for Co-operative Governance and Traditional Affairs should institute an independent forensic investigation into all the financial affairs of the Thabo Mofutsanyane District Municipality.

9.1.6 The Administrator should also conduct a proper and meticulous reconciliation of payments on the litigation and legal costs of its debt collectors and attorneys. This will enable the Municipality to avoid fruitless and wasteful expenditure.

9.1.7 The Free State MEC for Co-operative Governance and Traditional Affairs should table quarterly progress reports to the NCOP and the Free State Provincial Legislature on the status of the intervention in the Municipality, including challenges encountered.

9.1.8 The South African Local Government Association in co-operation with Local Government Sector Education and Training Authority should facilitate training and capacity building for Municipal Councillors; to further deepen their understanding of the oversight role; legal framework and policies that govern the activities of the Municipality from the date the recommendations are adopted by the NCOP.

9.1.9 The South African Local Government Association should also facilitate Executive Training Programmes for the municipal officials.

9.1.10 The NCOP should approve the establishment of a Unit in Parliament that would track the implementation of resolutions adopted by the Select Committee on Co-operative Governance and Traditional Affairs.

9.1.11 The approved report by the NCOP should be shared with all the internal and external stakeholders of the Thabo Mufutsanyane District Municipality whom the Committee Delegation interacted with during the oversight visit.

9.1.12 The Select Committee on Co-operative Governance and Traditional Affairs in co-operation with the relevant Portfolio Committee in the Free State Provincial Legislature should conduct a follow-up visit to the Municipality, three months after the intervention has ended in order to monitor through interaction with internal and external stakeholders progress made in respect of the intervention in the Municipality.

9.1.13 The National Department of Co-operative Governance and Traditional Affairs should introduce legislation to regulate the implementation of section 100 and 139 of the Constitution, including the processes established by these sections.

Report to be considered.