KwaZulu-Natal municipalities in dire straits

Most KwaZulu-Natal municipalities that have undergone provincial intervention — some for as long as seven years — because of their poor financial state stemming from mismanagement, corruption, and unauthorised, irregular, fruitless and wasteful (UIFW) expenditure have not cleaned up house, while some collectively owe Eskom more than R1 billion.

This was the bleak picture the provincial department of cooperative governance and traditional affairs (Cogta) painted during MEC Bongi Sithole-Moloi and her team’s briefing to the National Council of Provinces’ (NCOP) select committee on cooperative governance and traditional affairs, water and sanitation and human settlements on Tuesday. 

Sithole-Moloi’s department provided the committee with an update on the status of section 139 interventions which have been invoked at KwaZulu-Natal municipalities in terms of the Constitution and the Municipal Finance Management Act.  

The Constitution provides five methods of intervening in a municipality, using section 139 of the Constitution, ranging from 139(1a), which requires the provincial executive council to issue a directive to the municipality and 139 (1)(b), which requires the PEC to assume executive responsibility because the municipality could not fulfil an obligation. 

The harshest intervention of 139(5) requires the PEC to impose a recovery plan to secure the municipality’s ability to meet its obligation, which may also lead to its dissolution.

The cooperative governance department’s chief director of municipal finance, Joey Krishnan, highlighted the progress the seven municipalities have made since the dates the province intervened, including uMzinyathi district municipality (October 2016); Mpofana local municipality (February 2017); Inkosi Langalibalele local municipality (December 2017); uThukela district municipality (August 2018); Mtubatuba local municipality (March 2019); Msunduzi local municipality (9 April) and uMkhanyakude district municipality (January 2017). 

Abaqulusi local municipality went under a section 139 intervention in February 2019 but later won its case in the Pietermaritzburg high court, which declared the intervention “unconstitutional and invalid” and set it aside.

Msunduzi

Krishnan said in her presentation that Msunduzi had been found to be in a poor state with “dysfunctional” ward committees, public protests, a bank overdraft and the treasury having taken the decision to stop payments to the municipality when the provincial government intervened.

“There was a failure by the council to resolve service delivery challenges [waste management, roads management and electricity] and there was underspending and under budgeting,” Krishnan said.

As a result of the lack of maintenance of infrastructure, the municipality had faced frequent electricity outages. It had failed to hold councillors accountable for absenteeism, to exercise oversight on management and on conditional grants and to investigate allegations of malfeasance and maladministration against senior managers and leaders of the municipality.

The municipality received an adverse audit opinion from the auditor general for the 2017-18 financial year, which it had improved to a qualified audit opinion in 2018-19. But it still had poor financial management and failed to prevent and investigate unauthorised, irregular, fruitless and wasteful expenditure of more than R361.22 million.

It had also failed to institute consequence management measures for managers and other officials responsible for the failure to obtain authority to designate eight office bearers as full-time councillors.

Krishnan said the cooperative governance department had filed a section 106 forensic investigation report with 17 recommendations that the municipality had tabled in 2020. Fifteen of these recommendations had been implemented and two were in progress. A further section 106 report with 27 recommendations was tabled in 2021, but only four of these had been implemented.

“The municipality regressed to a qualified audit opinion. Poor financial management

persisted although the overdraft was paid off and cash coverage improved slightly,” Krishnan said.

She said the municipality still owed its creditors R126.5 million excluding arrears

of R395.6 million and R515.9 million it owes Eskom and Umgeni Water respectively. Its current Eskom debt is R199.9 million.

After the intervention, 98% of the municipality’s wards are, in 2023, now functional and the council has “fairly resolved” service delivery related issues, while spending 7% of its budget on operations and maintenance.

“We are seeing an improvement and in the next six to eight months Msunduzi will be able to exit the intervention,” Krishnan said.

Mtubatuba

Mtubatuba municipality had also been marked by dysfunctional ward committees and service delivery protests; failure to deal with waste management services while operating an unlicensed landfill site; a dysfunctional council; the falsification of council services; failure to consider statutory reports such as annual reports; as well as failure to submit reports and to investigate unauthorised, irregular, fruitless and wasteful. It also had not appointed a chief financial officer and a director of technical services.

“Various litigation attempts have been made by the municipality to frustrate the constitutional intervention, which included preventing members of the public,

officials of Cogta and the ministerial representative access to municipal offices,” she said.

However, she said in recent matters before the court the MEC has succeeded, and the ministerial representative now has access to the municipality.

“The council and oversight structures are fairly stable … UIFW was investigated and decreased from R307.3 million to R26.5 million. All senior management posts have been filled,” Krishnan said.

Mpofana municipality has experienced one of the longest interventions and is still facing a “financial crisis”. Its Eskom debt increased from R36.6 million in 2017 to R414 million (the highest in the province) in 2023, and it is now facing a crisis based on its unaudited financial statements.  

Krishan said the cooperative governance department was in discussions with Eskom, which is in the process of revoking the municipality’s electricity licence and taking over. But the power utility first requires the infrastructure to be of a certain standard before it takes over, something the municipality is too broke to fund.

uMzinyathi 

uMzinyathi district municipality failed to implement infrastructure projects and to investigate fraud and corrupt activities, recording unauthorised, irregular, fruitless and wasteful of R244 million in 2017. This figure ballooned to R2.3 billion over the next few years before deflating to R2 billion in 2023. It has now implemented “some cost containment measures” and an external audit by the auditor general is underway.

uThukela 

Similarly, uThukela district municipality had faced protests over a lack of service delivery and the poor state of infrastructure because of its failure to spend grants, which was followed by the treasury stopping the payment of funds and a negative audit opinion.

The municipality was experiencing “extensive” water losses and did not have the capacity to undertake its water and sanitation services. Weak oversight by the council had led to a negative audit opinion and the municipality was beset  by labour disputes and vandalisation of infrastructure.

In 2023 the municipality was still plagued by protests and labour issues and although it had spent 96% of its municipal infrastructure grant and 100% of its water and sanitation infrastructure grant it still faced a lack of capacity to undertake its water and sanitation function and was experiencing persistent water losses.

The municipality maintained a qualified audit opinion with persistent financial problems including an unfunded budget, 87% of debtors are above 90 days payment, employee related costs exceed the norm at 42% of budget, and creditors are not paid within 30 days. 

Cost containment measures have not been implemented. The unauthorised, irregular, fruitless and wasteful expenditure opening balance is R541.4 million, while that of the current period is R287.7 million, and the balance to date is R517.032 million.

NCOP member Thamsanqa Dodovu said it was “unacceptable” for municipalities to be under a section 139 intervention for seven years, during which time new councils had been elected, without any major improvements.

“It means for seven years when you have taken powers from a municipality [it] still can’t solve the problem and the question is how can you stay seven years in a municipality and you can’t resolve a problem? It is not acceptable to me …  a section 139 is a drastic intervention against a municipality which has been democratically elected,” he said.

“Maybe the problem is with you … and you are still with the municipality under the new council. When you assumed powers under section 139 what was your intention, was it to stay for a year, six months or two years? I don’t remember at any given point the NCOP approving an intervention which would last more than two years,” Dodovu said.

Cooperative governance department head Thando Tubane said that in most cases a review of interventions was undertaken every six months but the results were not always as anticipated.

‘Frivolous litigation’ 

“In most cases, besides a trigger which would cause the intervention there are emerging issues which would keep on coming. We did not anticipate municipalities engaging in frivolous litigation. We have spent a lot of time in court dealing with litigation which in our view was unnecessary. The issue of consequence management varies from time to time. There is progress in some of these municipalities, especially Msunduzi.”

Tubane said criminal cases had been opened across several municipalities including uMzinyathi, Msunduzi and Mthubathuba.  He said the department would prepare a report on the cost of the interventions as required by the NCOP committee.

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