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[2021] ZAWCHC 208
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Executive Council of the Western Cape Province and Others v Kannaland Local Municipality and Others (229/2021) [2021] ZAWCHC 208 (7 October 2021)
“
Reportable”
In
the High Court of South Africa
(Western
Cape Division, Cape Town)
Case
No: 229/2021
In
the matter
between:
EXECUTIVE
COUNCIL OF THE
WESTERN
CAPE PROVINCE
First
applicant
WESTERN
CAPE MINISTER OF LOCAL
GOVERNMENT,
ENVIRONEMENTAL AFFAIRS
AND
DEVELOPMENT
PLANNING
Second applicant
WESTERN
CAPE MINISTER OF FINANCE AND
ECONOMIC
OPPORTUNITIES
Third applicant
ADMINISTRATOR
(FINANCIAL RECOVERY) OF
KANNALAND
LOCAL
MINICIPALITY
Fourth Applicant
AND
KANNALAND
LOCAL MUNICIPALITY + AND 20 OTHERS
Respondent(s)
JUDGMENT
– 07 OCTOBER 2021
LEKHULENI
AJ
:
INTRODUCTION
[1]
This matter comprises of two sections. Part A served before
this Court on an
urgent basis when the applicants sought an order
interdicting and restraining the first to tenth respondents
(“municipality”)
from taking any steps that would negatively impact on the achievement
of the objects and intent of the plan including the taking
or
implementing a decision to lift or terminate the first applicant’s
intervention in terms of section 139 (5) of the Constitution
of the
Republic of South Africa, Act 108 of 1996
(“the
Constitution”)
and / or taking or implementing decisions to terminate the role and
function
of
the fourth applicant as Administrator (Financial Recovery) of the
first respondent. The interim order was granted by the
urgent
Court in this regard.
[2]
Subsequent thereto, the matter came before me for the adjudication of
Part B.
In this instance, the applicants seek an order
inter
alia
, declaring that the intervention by the first applicant, in
respect of the fulfilment of the executive obligations of first
respondent,
in terms of section 139(5) of the Constitution read with
section 139(1), 141 and 142 of the Local Government Municipal Finance
Management Act 56 of 2003
(“MFMA”)
is lawful and
subsists until termination in terms of section 148(3) of the MFMA.
The applicants also seek an order reviewing and
setting aside the
resolution by the first respondent’s municipal council taken on
16 November 2020 that lifted or terminated
the applicant’s
intervention in terms of section 139(5) of the Constitution;
directing the respondents to co-operate, and
ensure that all
employees of the first respondent co-operate with the first and
fourth applicants in respect of the intervention
of the provincial
executive and the implementation of the financial recovery
plan.
THE
FACTUAL MATRIX
[3]
It is common cause that in 2016 the first respondent (“
Kannaland
municipality”
) experienced a financial crisis such that it
was unable to meet its obligations and financial commitments. In
terms of section
139(5) of the Constitution, the first applicant had
to take steps to intervene directly in the management of the
municipality.
[4]
At a meeting held on 29 November 2016 between officials from the
provincial government
and municipal officials, the Executive Mayor of
the Kannaland municipality confirmed that the municipality was
experiencing a financial
crisis and could not meet its obligations.
On 02 December 2016 the municipal council resolved to request the
provincial executive
to intervene in its affairs in terms of section
139(5) of the Constitution to provide the municipality with a
targeted support
package and to appoint one or more implementation
managers. Pursuant thereto, the provincial executive accepted the
invitation
and on 07 December 2016, the provincial executive resolved
to intervene in the municipality’s affairs in terms of section
139(5) of the Constitution. The provincial executive did not dissolve
the municipal council nor appoint an Administrator to take
over the
running of the municipality’s affairs. Instead, the provincial
executive authorised the development of a financial
recovery plan as
envisaged in section 139(5)(a) of the Constitution.
[5]
The plan was developed and on 17 March 2017, the provincial executive
imposed the
recovery plan as a framework for the rehabilitation of
the municipality. The aim of the recovery plan was to place the
municipality
on a sustainable footing so that it may function as an
effective, efficient and financially stable organisation capable of
providing
services to the community on a sustainable basis. The
municipal council was initially tasked with overseeing the
implementation
of the plan. Section 146 of the MFMA described the
manner in which a financial recovery plan had to be implemented. The
relevant
parts of this section provides as follows:
‘
(1) If the recovery plan
was prepared in a mandatory provincial intervention referred to in
section 139-
(a)
the municipality must
implement the approved recovery plan;
(b)
all revenue,
expenditure and budget decisions must be taken within the framework
of, and subject to the limitations of, the recovery
plan: and
(c) the municipality must report
monthly to the MEC for finance in the province on the implementation
of the plan in such manner
as the plan may determine.
(2) The financial recovery plan
binds the municipality in the exercise of both its legislative and
executive authority, including
the approval of a budget and
legislative measures giving effect to the budget, but only to the
extent necessary to achieve the
objectives of the recovery plan.’
[6]
The applicants aver that in the event the municipality does not take
the necessary
measures to implement the approved financial recovery
plan, section 146(3) of the MFMA provides that the provincial
executive may
either dissolve the municipal council or assume
responsibility of the implementation of the plan itself. This section
provides:
‘
(3) The provincial
executive must in terms of section 139(5)(b) of the Constitution
either—
(a) dissolve the council of the
municipality, if the municipality cannot or does not approve
legislative measures, including a budget
or any revenue-raising
measures, necessary to give effect to the recovery plan within the
time frames specified in the plan and—
(i) appoint an administrator
until a newly elected council has been declared elected; and;
(ii) approve a temporary budget
and revenue-raising measures, and other measures to give effect to
the recovery plan and to provide
for the continued functioning of the
municipality; or
(b) assume responsibility for the
implementation of the recovery plan to the extent that the
municipality cannot or does not take
executive measures to give
effect to the recovery plan.’
[7]
In December 2018, the provincial executive determined that the
municipality had not
taken the necessary measures to implement the
recovery plan. The provincial executive subsequently resolved that as
from 05 December
2018, it would implement the plan. The provincial
executive also resolved that it would appoint an Administrator to
implement the
plan on its behalf. The Administrator was vested with
all powers necessary to ensure the proper implementation of the
recovery
plan, including the municipality’s executive powers.
The Administrator was also required to ensure that the municipal
manager
and all senior managers were enabled to take all and any
decisions as may be necessary for the proper implementation of the
recovery
plan failing which, the Administrator was entitled to take
such decision himself after consultation with the municipal manager.
[8]
Notwithstanding the appointment of the Administrator, the municipal
council was not
dissolved. The municipal council retained their
legislative powers provided that they could be exercised in
congruence with the
recovery plan. The municipal counsellors retained
their membership and salaries. The Administrator was entrusted with
all the municipality’s
financial executive and administrative
powers necessary for the implementation of the recovery plan. The
municipal council on the
other hand retained residual executive’s
powers only to the extent that these did not impact on the recovery
plan and its
implementation thereof. Prior to November 2016, the
Administrator interacted with the municipal council and attended all
meetings
of the municipal council. He advised the municipal council
on how best to avoid issues that could affect the municipal finances.
Up until October 2020, his advice was invariably followed by the
councillors.
[9]
The Administrator made strides in stabilising the municipality’s
financial affairs.
Some of the significant strides made by the
Administrator was the review of the municipality’s’
organisational structure
and the development of a fit-for-purpose
organogram that meets the municipality’s operational and
financial needs. This development
was approved and adopted by the
municipal council on 31 May 2020. It was expected that once this
organogram is implemented, it
would result in a cost saving of
approximately R8, 900, 000
(
eight
million and nine hundred thousand rand
) for
the municipality.
[10]
However, despite the intervention of the Administrator the
municipality remains in dire financial
straits. On 02 August 2020 the
National Minister of Finance at the instance of the provincial
executive, approved a process to
amend the plan in terms of section
144 of the MFMA. On the said date, the National Minister of
Finance authorised the Municipal
Finance Recovery Services
(“MFRS”)
to assist with the review and amendment of the recovery plan. The
amendment was aimed at capitalising on the achievements made
and to
ensure that the recovery plan is updated so that it could meet the
municipality’s needs going forward. The term of
the
Administrator was as well extended with effect from 01 December 2020
until the first sitting of the municipal council after
the 2021 local
government elections.
[11]
It is common cause that during September 2020 the Executive Mayor of
the municipality fell ill
and became unable to exercise his functions
as an executive mayor and ultimately went on sick leave. The sixth
respondent (Councillor
Antonie) thereupon assumed the position of
executive mayor. Under his stewardship as mayor, the municipal
council took decisions
which led to the applicants launching this
application. Among others, it is alleged that the municipality have
taken steps to conclude
a multi-decade contract with a company called
I
nnovasure
for the provision of energy, water services and infrastructure to the
municipality. The applicants aver that this contract did
not meet the
regulatory requirements to be treated as an unsolicited bid in
particular
Regulation 37(2)
of the
Municipal Supply Chain Management
Regulations. Among
others, this regulation provides that an
unsolicited bid may only be considered if the person who made the bid
is the sole provider
of the product or service. Furthermore, it
was alleged that the municipal council contravened various rules
regarding municipal
procurement and has not been concluded in
compliance with a transparent process.
[12]
The applicants’ state that the respondents have resolved to
establish a new organisational
structure which consists of a bloated
contingence of political appointees and is unnecessary and
unaffordable. However, the respondents
have given an undertaking to
not enter into a binding financial commitment in respect of the
hiring of new personnel pending the
hearing of Part B of this
application. The respondents undertook to ensure that the vacant
posts in essential roles will be filled
by internal secondment which
will not attract additional costs.
[13]
On 16 November 2020 at the meeting of the municipal council,
the council passed
a council resolution which effectively terminated the Administrator
and the implementation of the recovery plan. Pursuant to that
resolution, on 17 November 2020 the Administrator informed the
municipal council that the resolution by council that was taken
on 16
November 2021 was
ultra
vires
and of no
force or effect as the council did not have the statutory authority
to resolve on matters reserved by the Constitution
for provincial
sphere of government.
[14]
The provincial minister also engaged the municipal council in
correspondences and informed them
that they regarded the resolution
of 16 November 2020 as unlawful and of no force or effect. In
addition, the provincial minister
sought some undertakings from the
municipal council that the municipality would cooperate with the
Administrator in the implementation
of the recovery plan and would
cease all efforts of terminating the provincial executive’s
intervention. Notwithstanding,
on 30 November 2020 the municipal
council subsequently passed a resolution to terminate the provincial
executive’s intervention
and also to terminate the services of
the Administrator. On 03 December 2020 the municipal manager issued
communication indicating
the expiration of the Administrator’s
term of contract, and further indicated that the Administrator was no
longer part of
the municipality and that municipal officials were no
longer to take instructions from him.
[15]
On 08 December 2020, the Administrator received written notification
of the resolution of the
30 November 2020 aimed at lifting the
provincial intervention. He was informed that the effect of the
resolution lifting the intervention
was that the Administrator’s
services at Kannaland municipality came to an end. He was requested
to vacate the offices of
the municipality by the end of that day. On
10 December 2020 the municipal council met and resolved that
councillors should refrain
from leaking information pertaining to the
affairs of the municipality and items on the agenda to the MEC and
that disciplinary
action would be instituted against any councillors
who were found to have leaked information.
[16]
The applicants averred that the respondents have taken the law into
their own hands by purporting
to terminate the mandatory intervention
and the Administrator’s role. It is also the applicant’s
case that the respondents
have undermined the implementation of the
objectives of the recovery plan, where the plan contains the objects
of reviewing and
implementing expenditure management systems to
ensure efficient and effective service delivery in line with the
municipal priorities.
The applicants contend that the council’s
conduct is adversely affecting the gains made in stabilising the
municipality.
[17]
The municipality on the other hand admits that there was a crisis in
the financial affairs of
Kannaland municipality in 2016 as reflected
in the minutes of the municipality in which a resolution was taken
requesting the provincial
government to intervene in terms of section
139(5) of the Constitution. However, it was not for the province to
make a determination
and prepare a financial recovery plan and to
recommend appropriate changes to the budget. The respondents contend
that this authority
is assigned exclusively to national government by
section 139 of the MFMA. The respondents contend that in terms of the
Constitution
in particular section 40, the model of government
consists of the three spheres: national, provincial and local.
[18]
Of importance is that each sphere must respect the institutional and
functional integrity of
the other. While national and provincial
spheres are permitted to undertake interventions, including assuming
control over affairs
of another spheres, they are not entitled to
take over the functions of the municipal sphere save in exceptional
circumstances,
and even then, only temporarily and subject to strict
limitations and protocol. The respondents contend that the applicants
intervened
in the Kannaland municipality in terms of section 139(5)
of the Constitution which is the most drastic form of intervention.
For
the sake of completeness, section 139(5) of the Constitution
provides in relevant parts as follows:
“
(5)
If a municipality, as a result of a crisis in its financial
affairs, is in serious or persistent material breach of its
obligations
to provide basic services or to meet its financial
commitments, or admits that it is unable to meet its obligations or
financial
commitments, the relevant provincial executive
must –
(a) impose a recovery plan
aimed at securing the municipality's ability to meet its obligations
to provide basic services
for its financial commitments, which-
(i)
is to be prepared in accordance with national legislation;
(ii)
...”
[19]
It is the respondents’ case that the intervention in terms of
section 139(5) is so intrusive
such that the national government must
be intimately involved from the start, to serve as a check and
balance on the potent of
the provincial power. The respondents’
state that it is not for the provincial executive to make a
determination and prepare
a financial recovery plan and to recommend
appropriate changes to the budget as this authority is assigned
exclusively to national
government by section 139 of the MFMA which
provides:
‘
(1)
If a municipality, as a result of a crisis in its financial affairs,
is in serious or persistent
material breach of its obligations to
provide basic services or to meet its financial commitments, or
admits that it is unable
to meet its obligations or financial
commitments, the provincial executive must promptly-
(
a)
request the Municipal Financial Recovery Service-
(i) to determine the reasons for
the crisis in its financial affairs;
(ii) to assess the municipality's
financial state;
(iii) to prepare an appropriate
recovery plan for the municipality:
(iv) to recommend appropriate
changes to the municipality's budget and revenue-raising measures
that will give effect to the recovery
plan: and
(v) to submit to the MEC for
finance in the province-
(aa)
the determination and
assessment referred to in subparagraphs (i)
and (ii) as a matter of urgency;
and
(bb)
the recovery plan and
recommendations referred to in subparagraphs (iii) and (iv) within a
period, not to exceed 90 days, determined
by the MEC for finance: and
(b)
consult the mayor of the municipality to obtain the
municipality's co-operation in implementing the recovery plan,
including the
approval of a budget and legislative measures giving
effect to the recovery plan.
(2)
The MEC for finance in the province must submit a copy of any request
in terms of
subsection (1)(a) and of any determination and assessment
received in terms of subsection (1)(a)(v) (aa) to-
(a) the municipality;
(b) the Cabinet member
responsible for local government: and
(c)
the Minister
[20]
The gravamen of the respondent’s case is that the intervention
by the applicants was
void ab initio
and constitute a nullity
because it was executed by the provincial executive off its own bat.
National government was effectively
excluded or side-lined when it
should have been closely involved from the word go. The respondents
relied on section 139(1) of
the MFMA cited above which enjoins the
provincial executive to request the MFRS, a unit of the national
treasury, to determine
the reasons for the crisis at the
municipality, assess the situation and to prepare a recovery plan.
According to the respondents,
none of that happened in this instance.
The respondent contends that the provincial executive acted for all
intents and practical
purposes alone in conflict with the
Constitution and the peremptory provisions of section 139(1) of the
MFMA. Notably, there is
no evidence that the intervention in
Kannaland was channelled through national treasury. Instead, the
provincial treasury was assigned
the task. The respondents relied
specifically in section 141(2) of the MFMA which provides that only
the MFRS may prepare a financial
recovery plan for a mandatory
provincial intervention referred to in section 139 which was the case
in this matter.
[21]
The respondents asserted that the provincial executive did not
respect the separation of powers
between the spheres of government
established in the constitution more in particular in that the
provincial executives’ conduct
was disproportionate to what was
necessary to address the difficulties in the financial affairs of the
municipality and failed
to respect the functional and institutional
integrity of local government.
[22]
In summary, the respondents impugned the intervention by the
applicants on two grounds. First,
the respondents relied on section
141(2) of the MFMA which expressly states that only the MFRS may
prepare a recovery plan for
the municipality. The section also lists
a number of bodies that the person compiling the recovery plan must
consult when preparing
the recovery plan. Secondly, the respondents
relied on section 139(5)(b) of the Constitution and contended that
the appointment
of an Administrator comes only after the dissolution
of council. In this case, Kannaland council was not dissolved and as
a result
an essential jurisdictional fact for the appointment of the
Administrator is absent. The respondent states that the belated
request
in August 2020 to the national minister of finance to review
and amend the plan was too little too late as the nullity of the
recovery
plan could not be cured
post facto
by an amended or
revised plan drafted by the MFRS. The respondent contended that the
intervention itself contravened section 139(5)
of the Constitution.
The plan also failed to comply with the jurisdictional facts required
by section 139 of the MFMA and thus
the intervention was unlawful and
unconstitutional. The respondent avers that because the intervention
was void
ab initio,
the applicant’s application falls to
be dismissed on that basis alone.
[23]
With regard to the appointment of the Administrator, the respondents
cited section 139(5)(b)
of the Constitution and contended that the
appointment of the Administrator is permissible as an option if the
municipal council
has been dissolved. For the sake of completeness,
section 139(5)(b) of the Constitution provides:
‘
(b)
dissolve the Municipal Council, if the municipality cannot or does
not approve legislative measures, including a budget or any
revenue-raising measures, necessary to give effect to the recovery
plan, and-
(i)
appoint an administrator until a newly elected Municipal Council has
been declared elected; and
(ii)
approve a temporary budget or revenue-raising measures or any other
measures giving effect to the recovery plan to provide
for the
continued functioning of the municipality.’
[24]
In this intervention, the respondent contends that the municipal
council was not dissolved, meaning
that an essential jurisdictional
requirement for the appointment of the Administrator has not been
satisfied. To this end, the
appointment of the Administrator was void
ab initio
.
[25]
It is also the respondent’s view that in the event that this
court finds that the intervention
stands until it is set aside, the
first respondent launched a conditional counter-application and that
same should succeed for
the same reasons advanced above. In the
conditional counter-application the respondent seeks an order
reviewing and setting aside
the decision of the executive council of
05 December 2018 that a mandatory intervention in terms of section
139(5)(c) of the Constitution
be imposed on the conditions so
imposed. The respondents also seek an order setting aside the
appointment of the Administrator
for the municipality and that the
mandatory intervention by the executive council of 05 December 2016
in terms of section 139(5)(c)
of the Constitution be declared
unlawful, unconstitutional and of no force or effect.
ISSUES
[26]
The issues that this court is called upon to determine can succinctly
be summarised as follows:
1.
Whether the intervention by the first applicant
in terms of section 139(5)(c) of the Constitution read with ss
139(1), 141, 142
of the MFMA was lawful or not, and if not, whether
it should subsist until it is lawfully terminated; if lawful, whether
the reactive
challenge raised by the respondent in the
conditional-counterclaim should succeed or not.
2.
Whether the applicants’ alleged
non-compliance with the provisions of section 139(5) of the
Constitution read with sections
139 and 157(2) of the MFMA vitiated
the legality of their intervention and the appointment of the
Administrator;
3.
Whether or not the municipality can terminate the
intervention pronounced upon by the executive as it attempted to do
so in November
2020;
4.
Whether the applicants are entitled to the
declaratory relief that their intervention was lawful on the terms
prayed for.
ANALYSIS
OF THE PARTIES SUBMISSIONS AND APPLICABLE LEGAL PRINCIPLES
[27]
For reasons of completeness, I deem it prudent to consider the issues
raised above ad seriatim.
Whether
or not the intervention by the first applicant in terms of section
139(5) of the Constitution read with ss 139(1), 141,
142 of the Local
Government Municipal Finance Act was lawful.
(a)
The imposition of the Financial Recovery Plan
[28]
The reactive challenge raised by the respondent in its counterclaim
and the determination of
the lawfulness of the intervention by the
provincial executive in the municipality are inextricably imbricated
and I will deal
with them together. It is a common cause factor that
during 2016 the Kannaland municipality experienced a material crisis
in its
financial affairs such that it was in serious breach of its
obligations to provide basic municipal services and various financial
commitments. On 02 December 2016 the municipality resolved to engage
the applicant to intervene in the municipality in terms of
section
139(5) of the Constitution for the implementation of a recovery plan.
The intervention by the provincial executive was
requested by the
municipal council of the first respondent at a council meeting. On 07
December 2016, the provincial executive
took a decision to intervene
in terms of section 139(5)(a) of the Constitution read with ss
139(1), 141 and 142 of the MFMA to
impose a financial recovery plan
on the municipality.
[29]
It is also not in dispute that in December 2018, the provincial
executive determined that Kannaland
municipality had not taken the
necessary measures to implement the recovery plan and it resolved to
implement the plan and to appoint
an Administrator to implement the
plan on behalf of the provincial executive. The applicant impugned
the two decisions made by
the provincial executive. The respondent
contends that whilst it is not in dispute that the municipality
requested the provincial
executive to intervene, however it is
disputed that the provincial executive had the power to exercise
authority without statutory
or constitutional source. The respondent
contended that what was envisioned by the decision to call for an
intervention was that
the provincial executive would prepare the
recovery plan; that the national treasury would recommend appropriate
changes to the
municipality’s budget; furnish the provincial
finance minister with a determination of the reasons for the crisis
and provide
an assessment of the financial state of the municipality.
[30]
The problem of the plan established by the respondent, so the
argument goes, excluded the national
treasury and this was a fatal
flaw of the genesis of the intervention. According to the respondent,
from the start the provincial
executive treated this as a permissive
intervention in terms of section 139(1) of the Constitution as
opposed to section 139(5)
of the Constitution.
[31]
In my view, a proper pronouncement on this critical issue lies in the
proper examination and
interpretation of section 139 of the
Constitution as well as sections 139, 141 to 143 of the MFMA. The
Constitution requires a
purposive approach to statutory
interpretation.
[1]
The starting
point should be section 39(2) of the Constitution which provides
that:
“
When interpreting any
legislation, and when developing the common law or customary law,
every court, tribunal or forum must promote
the spirit, purport and
objects of the Bill of Rights.”
[32]
In
Investigating
Directorate: Serious Economic Offences and Others v Hyundai Motor
Distributors: In Re Hyundai Motor Distributors (Pty)
Ltd and Others v
Smit NO and Others,
[2]
the Constitutional Court interpreted this provision to mean,
inter
alia
,
that the Constitution requires judicial officers to read legislation,
where possible, in ways which give effect to its fundamental
values
and in conformity with the Constitution.
[33]
Mindful of the imperative to read and interpret legislation
purposively in conformity with section
39(2) of the Constitution, I
turn to consider the question whether, the intervention by the
applicant in terms of section 139(5)
of the Constitution was lawful
or not. Section 139 of the Constitution makes provision for two types
of interventions, namely,
a permissive intervention in terms of
section 139(1) and a mandatory intervention in terms of section
139(5). A provincial executive
has a discretion in terms of section
139(1) to intervene at a local government if among others, the
municipality cannot fulfil
its executive obligations in terms of the
Constitution and / or legislation. An intervention in terms of
section 139(5) on the
other hand, is obligatory and mandates the
provincial executive to intervene where the municipality is in crisis
in its financial
obligations to provide services or to meet its
financial commitments.
[34]
A section 139(5) intervention is called for when the financial
problems have reached crisis proportions
calling for more intrusive
mandatory remedial steps, in which case the intervention may entail
both executive and legislative measures,
the latter requiring the
dissolution of the municipal council.
[3]
The
obligation in terms of section 139(5) is peremptory and there is no
discretion to be exercised by the provincial executive.
It
has been said that the intervention in terms of
section
139(5) rests on two legs.
[4]
Firstly
,
manifest jurisdictional facts has to be present, in that the
municipality has to be in serious or persistent material breach of
its obligations to provide basic services; alternatively, the
municipality has to be in serious or persistent material breach of
its financial commitments. The second jurisdictional fact requires
that either or both of these two factual situations must have
been
caused by a crisis in the municipality's financial affairs.
For
the sake of brevity, section 139(5) of the Constitution provides as
follows:
‘
If a municipality, as a
result of a crisis in its financial affairs, is in serious or
persistent material breach of its obligations
to provide basic
services or to meet its financial commitments, or admits that it is
unable
to
meet its obligations or financial commitments, the
relevant provincial executive must –
(a) impose a recovery plan
aimed at securing the municipality's ability to meet its obligations
to provide basic service or
its financial commitments, which-
(i)
is to be prepared in accordance with national legislation; and
(ii) binds
the municipality in the exercise of its legislative and executive
authority,
but only to the extent necessary to solve the crisis in
its financial affairs. and
(b)
dissolve the Municipal Council, if the municipality cannot or does
not approve legislative
measures, including a budget or any
revenue-raising measures, necessary to give effect to the recovery
plan, and-
(i) appoint
an administrator until a newly elected Municipal Council has been
declared elected; and
(ii) approve
a temporary budget or revenue-raising measures or any other measures
giving effect to the recovery plan to provide for the continued
functioning of the municipality; or
(c) if the Municipal Council is
not dissolved in terms of paragraph
(b),
assume responsibility
for the implementation of the recovery plan to the extent that the
municipality cannot or does not otherwise
implement their recovery
plan.’
[35]
As alluded to hereinabove, Kannaland was in financial crisis that
caused it to breach its constitutional
obligations of service
delivery and it admitted that it cannot meet its obligations or its
financial commitment in a material fashion.
The intervention by the
applicant in terms of section 139(5) was a sequel to this crisis. The
jurisdictional requirement set out
above existed in this matter prior
to the intervention by the applicant. In its founding affidavit the
applicant alluded to the
fact that during 2016 the municipality
experienced a crisis in its financial affairs and as a result, it was
in serious and material
breach of its basic service delivery
obligations and its financial commitments. The municipality requested
the provincial council
to intervene in terms of section 139(5).
Indeed, the provincial executive intervened. It must be stressed from
the outset that
the intervention had to comply with the
Constitutional prescripts laid down in section 139(5) of the
Constitution.
[36]
The respondent questioned the decision of the provincial executive of
07 December 2016 for not
requesting the MFRS to conduct the
determination, assessment and preparation of the financial recovery
plan. The respondent contended
that the provincial executive
instructed its provincial treasury to perform these statutory duties,
even though this was a mandatory
intervention in which sections
139(5) of the Constitution read with sections and 139(1) and 141(2)
of the MFMA applied. To this
end, the respondent argued that the
resultant plan was a nullity and substantively unlawful. It is the
respondent’s contention
that the plan was unlawful because a
plan for a mandatory intervention needs to be consulted with the
affected parties by the MFRS.
It was contended that the provincial
executive avoided the constitutional checks and balances introduced
by parliament in mandatory
intervention at its peril and that the
resultant plan and intervention on the basis of such plan is also a
nullity.
[37]
In my view, this contention is correct. Section 139(5) of the
Constitution must be read in tandem
with sections 139(1) and 141 of
the MFMA. Section 139(1) of the MFMA makes it abundantly clear that
if a municipality as a result
of a crisis in its financial affairs as
was the case in Kannaland, admits that it is unable to meet its
financial commitments,
the provincial executive must request the MFRS
to determine the causes for the financial crisis, to assess the
municipality’s
financial state; to prepare an appropriate
change to the municipality’s budget and to submit to the MEC
for finance in the
province. Section 141 enjoins the MFRA as the only
body that may prepare a financial recovery plan for a mandatory
provincial intervention
referred to in section 139.
[38]
In this case, the provincial executive requested the provincial
treasury to prepare the recovery
plan for the municipality in
accordance with the procedural and substantive requirements set out
in section 141 and 142 of the
MFMA. The provincial executive also
requested the provincial treasury to recommend appropriate changes to
the municipality’s
budget and to provide the provincial
minister with a determination and assessment. The impugned recovery
plan records that it was
prepared and finalised by the provincial
treasury pursuant to the provincial intervention undertaken by the
provincial executive
in the municipality in terms of section 139(5)
of the Constitution read with section 139(1)(a) and 141 to 143 of the
MFMA.
[39]
The applicant’s contention that it was agreed that the
provincial treasury would do the
preparatory and consultative work in
respect of the intervention which would later be vetted, to the
extent necessary, by the MFRS
is at variance with the express
provisions of the section 139(1)(a) read with section 141 of the MFMA
which clearly vests this
responsibility upon the MFRS to prepare the
recovery plan and to do the necessary consultations. It was asserted
by the applicant
that when the provincial executive adopted this
procedure of delegating the provincial treasury to prepare the plan,
it was because
the provincial treasury was closer to the relevant
municipality and better acquainted with its financial affairs.
[40]
The provincial executive also contended that the collaborative
approach allowed for the most
efficient deployment of scarce public
resources while at the same time ensuring that both national and
provincial governments fulfilled
their constitutional and statutory
functions. In my view, this argument is misplaced and misses the
point. It must be borne in
mind that when the MFMA was passed, the
legislature was aware of this fact. Notwithstanding this knowledge,
the legislature entrenched
and directed that a recovery plan must be
prepared by the MFRS in the national treasury.
[41]
Furthermore, and most importantly, the intervention of a provincial
executive over a municipality
has been circumscribed by legislation.
Section 139(1)(a) of the MFMA is giving effect to section 139(5) of
the Constitution which
enjoins a provincial executive to impose a
recovery plan aimed at securing the municipality’s ability to
meet its obligations
to provide for basic services or its financial
commitments. This section derives its
authority
from the Constitution which is the supreme law of the land in this
Country. Section 139(5)(a)(i) of t
he
Constitution also commands that the recovery plan for an intervention
in terms of section 139(5)(c) must be prepared in accordance
with
legislation. The MFMA is the legislation envisaged by section
139(5)(a)(i) of the Constitution. Once the plan is prepared,
it binds
the municipality in the exercise of its legislative and executive
authority but only to the extent necessary to solve
the crisis in its
financial affairs.
[42]
As discussed above, section 141(2) provides that
only
the MFRS may prepare a financial recovery plan for a mandatory
provincial intervention referred to in section 139. In my view,
the
legal duty imposed by section 141(2) is peremptory and commanding.
There is no implication in the relevant provision of the
MFMA that
this duty may be delegated or abdicated. As a consequence thereof,
the provincial executive could not lawfully and constitutionally
assume such duty as it purported to do.
[43]
In my judgement, the plan prepared had to comply with the provisions
of this Act. The plan had
to be prepared by the MFRS based at the
national treasury as prescribed by section 139(5) of the
Constitution. It is a constitutional
imperative that this
responsibility had to be heeded by the relevant organ of state. As I
see it, there are cogent reasons why
a recovery plan of this
magnitude should be prepared by the national treasury. The dispute
between the parties in this matter is
between two spheres of
government concerning their respective constitutional and statutory
authority. Parliament in its infinite
wisdom sought to introduce
constitutional checks and balances in the imposition of financial
recovery plans by provinces on local
governments. Thus, in the case
of mandatory provincial interventions in terms of section 139(5)(a)
of the Constitution, and
sections 139(1), 141 and 142 of the
MFMA it has imposed exceptional and exclusive duties upon the MFRS
which is a function of national
treasury and thus a part of the
national sphere of government.
[5]
[44]
Steytler and De Visser
[6]
addresses this point with admirable brevity when he states:
‘
As
soon as the provincial executive (through either the MEC for local
government or the MEC for finance) becomes aware of the seriousness
of the situation, it must promptly request the
municipal
financial recovery service
…
to prepare a financial recovery plan. Unlike the case of a
discretionary
intervention,
where any suitable person may prepare a plan, the provincial
executive’s choice is restricted to the Recovery
service.’
[7]
(the
emphasis is mine)
The
plan is submitted to the MEC for finance for approval. Unlike the
case with a recovery plan in terms of a discretionary intervention,
where the MEC may make amendments, the role of the MEC is restricted
in this case to reviewing two matters. Firstly, the MEC must
verify
that the procedural requirements for the drafting of the plan have
been complied with, namely, who should be consulted,
what factors to
take into account, and the comment procedure. Secondly, the MEC must
verify that the substantive requirements for
a financial recovery
plan have been met.’
[8]
[45]
Most importantly, the Constitution provides that the national or
provincial government may not
compromise or impede a municipality’s
ability or right to exercise its powers or perform its functions.
In
Johannesburg
Metropolitan Municipality v Gauteng Development Tribunal and Others
(“
supra”
),
the court noted that ‘
section
40 of the Constitution defines the model of government contemplated
in the Constitution.
[9]
In
terms
of this section, the government consists of three spheres: the
national, provincial and local spheres of government. These
spheres
are distinct from one another and yet interdependent and
interrelated. Each sphere is granted the autonomy to exercise
its
powers and perform its functions within the parameters of its defined
space. Furthermore, each sphere must respect the
status, powers
and functions of government in the other spheres and not assume any
power or function except those conferred
on it in terms of the
Constitution.
[10]
[46]
The strict procedures laid down in the Constitution and the MFMA had
to be complied with in order
to protect the autonomy of the three
spheres of government. The provincial executive in this matter
usurped the statutory and constitutional
responsibilities assigned to
the national sphere of government by the legislature. These duties
are set out in section 131(1)(a);
141 and 141(3) of the MFMA. The
often quoted seminal piece of Japhta J, in
City
of Johannesburg Metropolitan Municipality v Gauteng Development
Tribunal and Others,
[11]
is
apposite in this matter. The learned justice stated:
‘
The
scope of intervention by one sphere in the affairs of another is
highly circumscribed. The national and provincial spheres are
permitted by ss 100 and 139 of the Constitution to undertake
interventions to assume control over the affairs of another sphere
or
to perform the functions of another sphere under certain well-defined
circumstances, the details of which are set out below.
Suffice
to say, that the national and provincial spheres are not entitled to
usurp the functions of the municipal sphere, except
in exceptional
circumstances, but then only temporarily and in compliance with
strict procedures. This is the constitutional scheme
in the context
of which the powers conferred on each sphere must be
construed.’
[12]
[47]
In my view, the procedure that was followed by the applicant in
preparing the plan was inconsistent
with the Constitution. It was
impermissible and at best it is unconstitutional for the MFRS or the
national treasury to abdicate
its responsibilities and to delegate
its authority to a different sphere of the government. I appreciate
the fact that there were
efforts made by the provincial treasury to
comply with the peremptory provisions of the section 139(1)(a) and
141 of the MFMA however
these efforts were made inconsistent with the
Constitution. It was not competent for the provincial treasury to
prepare a plan,
a responsibility that is assigned to MFRS. In its
replying affidavit, the applicant contends that the MFRS lacked the
institutional
capacity necessary to perform from scratch and without
assistance, all of the ground work required for the tasks envisaged
by section
139(1) of the MFMA. As a result, the provincial treasury
and the provincial executive did much of the ground work for the
intervention
which was subsequently reviewed and approved by the
national treasury. It is not clear on what basis it is alleged that
the MFRS
was incapable of discharging its constitutional duties. The
sweeping statement of the provincial executive is not supported by
the averments of Ms Kavitha Ruplal the Head of the Municipal Recovery
Service. In her affidavit, she does not allude to the fact
that the
MFRS was incapable of discharging its constitutional duties. Instead,
she states that it was agreed that the provincial
treasury would do
the preparatory and consultative work in respect of its intervention
in the municipality.
[48]
It must be stressed that the averments of Ms Ruplal are contradictory
to the decision that was
taken by the Provincial Executive in
December 2016. In its recovery plan the provincial executive
stated as follows:
“
This
financial recovery plan has
therefor
been prepared and
finalised by the provincial treasury pursuant to the provincial
intervention undertaken by the provincial executive
in the municipality in terms of section 139(5) of the Constitution
read with sections 139(1)(a) and 141 to 143 of the MFMA.’
(The
emphasis is mine)
[49]
From this excerpt, it is observable that the decision was taken by
the provincial executive in
December 2016 that the provincial
treasury should prepare a plan for the municipality in accordance
with the procedural and substantive
requirements set out in section
141 and 142 of the MFMA. Put differently, it was the provincial
executive that directed the provincial
treasury to conduct the
necessary assessment and to prepare the financial recovery plan and
to make recommendations on the appropriate
changes to the municipal
budgets and revenue raising measure. This, in my judgment was a
statutory duty exclusively assigned to
the national sphere of
government in terms of section 141(2) of the MFMA. The MFRS was not
involved in the decision to appoint
the provincial treasury to
prepare the plan and to do the necessary assessment and consultation.
In my considered view, this decision
offends the principle of
legality and the rule of law. It was said this principle
was
‘implicit in the Constitution’ and reflected the notion
that ‘the exercise of public power is only legitimate
when
lawful.
[13]
[50]
Notably, the plan itself does not record any collaboration between
the provincial treasury and
the MFRS. Instead, the plan records that
it was prepared and finalised by the provincial treasury pursuant to
the provincial intervention
undertaken by the provincial executive.
Furthermore, the email exchange between Ms Cossa of the MFRS and Ms
Sigabi of the provincial
executive paints a clear picture that the
MFRS was only expected to make inputs on the plan that was prepared
by the provincial
treasurer. From the email correspondence dated 08
December 2016, the Acting Chief Director of Local Government Finance
at the provincial
treasury sent an email to Ms T Cossa of the
national MFRS in which she attached a copy of the Cabinet resolution
of section 139(5)
intervention of the Constitution
they
were instituting
at
Kannaland municipality. She indicated that the intervention revolved
around a financial recovery plan and that the province will
play a
major role as the provincial treasury with regard to this
intervention. In response, on 01 February 2017, Ms Cossa addressed
an
email to Ms Sigabi stating that:
“
I
hope your efforts at Kannaland municipality are progressing well.
Kindly share Kannaland’s draft financial recovery plan.
Upon
review we will provide you
(sic)
inputs
.
”
[51]
On 02 February 2017 Ms Sigabi
responded to
the email of Ms Cossa and
stated:
‘
Please
find the draft FRP for Kannaland as tabled to their council for
consideration and provisions of comments. As usual your comments
will
be greatly appreciated before this gets finalised.’
[52]
On 07 February 2017 Ms Cossa of the MFRS wrote to the provincial
treasury and stated:
“
Find
attached our inputs on the draft financial recovery plan for your
consideration as you finalise the plan.
[53]
From these correspondences, it is abundantly clear that this plan was
prepared by the provincial
treas
ury in
conflict with the constitutional prescripts. In my view, providing an
opinion or inputs that helps someone make a decision
is not the same
as assuming the respon
sibility
of performance of a specific duty. In the same way, providing inputs
is not the same as assuming responsibility for the
MFRS’
obligations in terms of section 139(5) of the Constitution read with
section 139(1) (a) of the MFMA. It must be stressed
that the
intervention of the provincial council was mandatory in terms of
section 139(5) of the Constitution. The intervention
of the
provincial council was not discretionary as envisaged in section 137
of the MFMA in terms of which the provincial executive
could take any
appropriate steps referred to in section 139(1) of the Constitution.
What I also find very concerning is that this
plan was drafted and
prepared by the provincial treasury and was tabled at the council
meeting for consideration before it was
even presented to the MFRS
for comments. In my view, this irregularity and the illegitimate
displacement of the MFRS’ responsibilities
was in conflict with
section 139 of the Constitution and sections 139(1)(a), 141 and 142
of the MFMA.
[54]
I am in complete agreement with the views expressed by the
respondent’s counsel that the
process envisaged in section
139(1)(a) of the MFMA was not done in line with the Act and the
Constitution. It was the MFRS and
not the provincial treasury that
should have determined the reasons for the crisis in Kannaland. This
was in conflict with the
peremptory provisions of section
139(1)(a)(i) of the MFMA. The provincial executive assigned all the
functions of the MFRS to the
provincial treasury. It was anticipated
that MFRS will assess the municipality’s finances and prepare
an appropriate plan
for the municipality. In this case, this
responsibility was done by the provincial treasury. In my view, the
provincial treasury
had no authority to prepare the plan or to
recommend the changes of the municipality’s budget.
Furthermore, there is no indication
that the final approval process
for the approval of the plan was followed as required by section 143
of the MFMA. Section 143(2)
enjoins the Provincial Minister to verify
a recovery plan prepared by the MFRS and ensure that the process in
section 141 had been
followed and that the criteria in section 142
are met. Once the plan complies with sections 141 and 142 the
Provincial Minister
had to accept the plan of the MFRS and approve
it.
[55]
In my considered view, the applicant flagrantly disregarded the
mandatory provisions of section
139(5) of the Constitution read with
section 139(1)(a) of the MFMA. The provincial executive had no
authority to impose a financial
recovery plan of its own creation. It
was a responsibility that could not be delegated to the provincial
treasury. In addition,
section 2 of the Constitution provides that
the Constitution is the supreme law of the Republic; law or conduct
inconsistent with
it is invalid and the obligations imposed by it
must be fulfilled. An administrative decision that fails to comply
with the substantive
prescripts of the Constitution or statutory
provision is invalid and of no force or effect. In
Fedsure
Life Assurance Ltd and Others v Greater Johannesburg Transitional
Metropolitan Council and Others,
[14]
the constitutional Court stated:
‘
It
seems central to the conception of our Constitutional Order that the
legislature and executive in every sphere are constrained
by the
principle that they may exercise no power and perform no function
beyond that conferred upon them by law. At least in this
sense, then,
the principle of legality is implied within the terms of the interim
Constitution.’
[15]
[56]
In essence, the provincial executive failed to comply with the
substantive and the procedural
requirements set out provided by the
Constitution and the MFMA. The provincial executive did not respect
and observe the separation
of powers between the three spheres of
government established in the Constitution. It is my considered view
that such failure was
fatal and unconstitutional. Pursuant to this
finding, I deem it unnecessary to consider the reactive challenge
raised by the respondent
as it was dependent upon the outcome of this
finding. Furthermore, notwithstanding the finding of the unlawfulness
of the intervention
I made hereinabove, I deem it proper to consider
the second ground raised by the respondent relating to the
appointment of the
Administrator.
(b)
The appointment of an Administrator
[57]
As discussed above, it is common cause that in November 2016 at a
meeting of officials from the
Provincial Government and municipal
officials, the mayor of the municipality confirmed that the
municipality was experiencing financial
crisis and could not meet its
financial obligations. Subsequent to this meeting, on 02 December
2016 the municipality resolved
to request the provincial executive to
intervene in terms of section 139(5) of the Constitution and on 07
December 2016 the provincial
executive resolved to intervene in the
Municipality’s affairs in terms of section 139(5)(c) of the
Constitution.
[58]
In
Premier,
Western Cape and Others v Overberg District Municipality and
Others
,
[16]
the
court observed that ‘broadly stated, section 139 of the
Constitution permits and requires provincial governments to supervise
the affairs of local governments and to intervene when things go
awry.’
The
difference between section 139(5)(c) and 139(5)(b) is that in respect
of the former, the provincial executive assumes responsibility
for
the implementation of the recovery plan to the extent that the
municipality cannot implement the plan. This intervention is
less
drastic in that it allows the municipal council to remain in place,
albeit with curtailed powers and responsibilities.
[59]
The purpose is a co-operative governance relationship between the
municipality and the provincial
executive to implement the plan. The
Provincial executive empowers and adds capacity in the municipality
to implement the plan.
Section 139(5)(b) on the other hand, entails a
total take over by the provincial executive. It is drastic and it
requires the dissolution
of the municipal council and for the
appointment of an administrator. It has been said a
ppointing
an administrator is a stop gap option that is meant to pave the way
for an election.
[17]
[60]
In
casu
, it is a common cause that the intervention by the
Provincial executive was in terms of section 139(5)(c) of the
Constitution as
described above. The provincial executive did not
dissolve the municipal council and it did not appoint the
Administrator as envisaged
in section 139(5)(b) of the Constitution
when the intervention was imposed in December 2016. The
proposed plan was prepared
by the provincial treasury at the
instruction of the provincial executive and was implemented on the
municipality on 17 March 2017.
On December 2018, the provincial
executive determined that the municipality had not taken the
necessary measures to implement the
plan and it resolved to implement
the plan. It also resolved to appoint an Administrator to implement
the plan on behalf of the
provincial executive. The administrator was
vested with all powers necessary to ensure the proper implementation
of the plan, including
the municipality’s executive powers.
[61]
In my view, the appointment of the Administrator in terms of section
139(5)(c) by the provincial
executive was in conflict with the MFMA.
If the provincial executive intended to appoint an Administrator as
it purported to do
in this case, it should have invoked section
139(5)(b) and dissolved the municipal council. The Constitution and
the MFMA does
not envisage a dual or a concurrent intervention and /
or administration in terms of section 139(5)(b) and 139(5)(c). If the
municipality
was not implementing the recovery plan as it is alleged
by the applicant, it was expected of the executive council to
dissolve
the municipal council and appoint an Administrator until a
newly elected municipal council was declared elected. In my view, an
intervention in terms of section 139(5)(b) cannot co-exist with an
intervention in terms of section 139(5)(c) as this will create
two
conflicting centres of power.
[62]
To this end, I agree with the views expressed in
Mere
v Tswaing Local Municipality and Another,
[18]
where the court found that
any
intervention in terms of section 139(1)(c) of the Constitution
entails an actual dissolution of the municipal council until
it can
be replaced by a newly elected council. The Administrator is
for all practical purposes an interim council, to be
replaced with a
new council once elected.
[63]
Accordingly, the argument expressed by the respondent’s legal
representative is apposite
in this regard. He contended that if an
administrator is appointed, but the council remains in place, one can
anticipate perpetual
squabbling between these competing centres of
power. The respondent’s counsel contended that this is what
happened in Kannaland.
Counsel asserted on behalf of the respondent
that there was an unhealthy situation in which the council remained
unhappy with what
it viewed as usurpation of powers by distant Cape
Town, but the Administrator continually found himself frustrated by
what, from
his point of view, is unreasonable resistance from the
very local leadership that required drastic intervention in the first
instance.
[64]
It must be stressed that the Constitution only provides for the
appointment of an Administrator
in the event of a dissolution of the
council in terms of section 139(5)(b) of the Constitution. In this
case, the municipal council
was not dissolved and section 139(5)(b)
was not engaged by the provincial executive. The use of an
Administrator to take over the
executive functions of the
municipality while the council is still in office is no remedy and
such process is not included anywhere
in section 139. Indeed, this
practice has no basis in law. The subsequent appointment of the
Administrator by the provincial
executive while it purported to act
in terms of section 139(5)(c) of the Constitution was in my
considered view unlawful and inconsistent
with the Constitution. This
leads me to the third issue for consideration.
Whether
or not the Municipality can terminate the intervention pronounced by
the executive as it attempted to do in November 2020.
[65]
It is common cause that on 16 November 2020 the municipal council
held a special council meeting
in which a resolution was passed
lifting the mandatory provincial intervention imposed by the
provincial executive. At this meeting,
the municipal council resolved
to recall its previous resolution to ask for intervention in terms of
section 139 and that the intervention
be lifted with immediate
effect. The Administrator appointed by the provincial executive
informed the council that they had no
power to terminate the
intervention. That under section 139(5) of the Constitution, an
intervention is started and brought to an
end by the relevant
provincial executive. Pursuant thereto, there were a number of
correspondences exchanged between the provincial
executive and
members of the municipal council on the legality of the termination
of the intervention. The Local Government Minister
as well addressed
a correspondence to the respondents on 20 November 2020 informing
them that the plan remains in place and that
they should cooperate
with the Administrator. Instead, on 08 December 2020 the acting
executive mayor addressed a correspondence
to the Administrator
informing him that he should vacate the municipal offices as council
resolved to uplift the intervention.
[66]
It has been argued that the municipal council had no power to bring
the mandatory intervention
to an end. The court was referred to
section 148 of the MFMA which regulates the termination of mandatory
provincial interventions.
The relevant part of that section reads as
follows:
(2)
A mandatory intervention referred to
in section 139 must end when –
(a)
the crisis in the municipality’s financial affairs has been
resolved; and
(b)
the municipality’s ability to meet its obligations to provide
basic services or its
financial commitments is secured.
(3).
When a provincial intervention ends, the MEC for local government or
the MEC for finance in the
province must notify –
(a)
the Municipality;
(b)
the Minister, in the case of a mandatory intervention;
(c)
the Cabinet member responsible for local government;
(d)
any creditors having pending
litigation against the municipality;
(e)
the provincial legislature;
(f)
organised local government in
the province.
[67]
I am in agreement with the views expressed by applicant that a
provincial intervention may only
be brought to an end by the
provincial executive, which will notify the municipality accordingly.
From the above provisions, it
is also clear that intervention only
comes to an end when the financial crisis of the municipality has
been resolved and the municipality
is able to provide basic services
and meet its financial obligations. I also share the views express by
my sister Mangcu-Lockwood
AJ (as she then was) who dealt with part A
of this matter that it is the municipality that receives notification
from the provincial
executive not the other way round.
[19]
The learned justice observed that it would not make sense, in any
event, for the termination of a mandatory intervention to be
at the
behest of a municipality, especially when it was the conduct of the
latter that led to the mandatory intervention in the
first place.
[68]
Having said that, I must emphasise the fact that the circumstances of
this case are a bit novel
and different. As discussed hereinabove,
the provincial executive appropriated authority to itself, that it
did not have. It purported
to delegate to the provincial treasury the
statutory duty to determine the reasons for the crisis in the
financial affairs of Kannaland;
to assess the financial state of the
municipality, to consult with the statutory parties, and to prepare a
financial recovery plan.
This responsibility is exclusively assigned
to the MFRS of the national treasury. As I have found earlier in this
judgment, the
mandatory intervention under section 139(5)(a) of the
Constitution inclusive of assumption of power by the provincial
executive
and the purported power to delegate the provincial treasury
to prepare the recovery plan are contrary to the peremptory
provisions
of ss 139(1), 141 and 142 of the MFMA which exclusively
assigns those statutory duties to the MFRS. In my view the plan was
in
conflict with the constitutional right from the beginning and is
unlawful.
[69]
Furthermore, the decision of the provincial executive to appoint an
Administrator, while purporting
to act in terms of section 139(5)(c)
of the Constitution was unlawful and inconsistent with section
139(5)(c) of the Constitution.
I am aware that the intervention, the
plan as well as the appointment of the Administrator have been extant
since March 2017 and
December 2018 respectively, without any
objection from the respondents, however that does not validate the
fact that the applicants
acted contrary to the provisions of the
Constitution and the MFMA.
In
Department of Transport and Others v Tasima (Pty) Ltd,
[20]
the Constitutional Court stated as follows:
‘
These
decisions make patent that any law or conduct that is inconsistent
with the Constitution is invalid to the extent of its inconsistency.
This includes the exercise of public power. Moreover, when confronted
with unconstitutionality, courts are bound by the constitution
to
make a declaration of invalidity. No constitutional principle allows
an unlawful administrative decision to “morph into
a valid
act”. However, for the reasons developed through a long string
of this court’s judgments, that declaration
must be made by a
court. It is not open to any other party, public or private, to annex
this function. Our Constitution confers
on the courts the role of
arbiter of legality.’
[21]
[70]
What I find very concerning in this intervention is the protracted
and inordinate length of the
intervention. It started in 2016 and it
is still extant to date. The court was informed that the purported
plan is proposed to
last until the local government elections in
October/November 2021. The contract of the Administrator was also
extended until the
new 2021 local government elections. In my
view, an intervention of this nature that is aimed at lasting for
five years (from
one election to the other) is not a temporary
measure that is envisioned by the Constitution. This is tantamount to
a permanent
intervention under the guise of section 139 of the
Constitution. In my view, it infringes the functional and operational
integrity
of the three arms of government.
[71]
This extended intervention coupled with the appointment of an
Administrator with the municipal’s
executive powers caused
conflict at the municipal council as it created two centres of power.
The Administrator conflicted with
the council and the municipal
manager of the municipality. This prompted the council to pass a
resolution terminating the intervention.
In my view, the prolonged
intervention infringes on the autonomy of the local government. It
was certainly not temporary or to
the extent necessary as
contemplated in the Constitution. National and provincial spheres are
not entitled to usurp the functions
of the municipal sphere except in
exceptional circumstances, but only temporarily and in compliance
with strict procedures.
[22]
[72]
As far as the allegations concerning the fact that the municipality
is at the verge of making
huge financial commitments with Innovasure
(Pty) Ltd a renewable energy company, I am of the view that there is
no agreement at
this stage between Innovasure and the Municipality.
At this stage there is currently a council approval for the
memorandum of understanding
which is not a binding agreement.
Furthermore, from the documents filed it would appear that Innovasure
would carry all the risk
and provide the funding even if a final
agreement is signed. However, if such agreement is considered it is
expected that the municipality
would follow the correct processes as
proposed by the national treasury to engage the services of
Innovasure should it become necessary.
[73]
It has also been argued that the municipality is wasting money on
redundant personnel. It is
common cause that the council voted to
amend its staff component. The municipality has indicated that
no staff will be actually
appointed pursuant to the revised staff
establishment and that the amendment does not automatically entail
that new officials will
necessarily be hired to fill the vacancies.
The municipality has also alluded to the fact that in the interim the
vacant essential
posts will be filled by internal secondments. If I
understood the municipality’ case correctly, this entails that
there will
be no additional expenditure to the municipality.
[74]
In any event, it is the municipal council that enjoys legal authority
to employ personnel that
are necessary for the effective performance
of its function. However, it is expected that in the exercise of that
right, the municipality
will act responsibly and also take into
account its budgetary constraints and ensure that it does not
prejudice its residence by
appointing redundant staff. However, I am
of the view that in this case there is no basis in law or fact why
the court should interfere
with the decision taken by the
municipality which in my view serves the best interest of the
municipality and its community.
[75]
From the aforegoing, I am of the view that the preparation and the
imposition of the implementation
plan by the applicant was unlawful
and unconstitutional. As a consequence thereof, the applicant’s
application should fail.
[76]
In the result, the following order is granted.
76.1
The applicant’s application is dismissed with costs, such costs
to include the costs of two counsels and the costs for
the hearing of
the matter in respect of Part A.
LEKHULENI
AJ
ACTING
JUDGE OF THE HIGH COURT
WESTERN
CAPE HIGH COURT
Appearances:
Counsel
for Applicant:
Adv. Johan
de Waal
Adv. Ashley Pillay
Instructed
by:
Shireen Karjiker State Attorney
Counsel
for Respondent:
Adv. Denzil Potgieter
Adv. Jean Pierre
Snijders
Instructed
by:
Steven Hill McGregor Erusmus
[1]
See
National
Coalition for Gay and Lesbian Equality and Others v Minister of Home
Affairs and Others
[1999] ZACC 17
;
2000
(1) BCLR 39
(CC) at para 24.
[2]
2000
(10) BCLR 1079
(CC) at para 22,
[3]
Steytler
& De Visser
Local
Government Law of South Africa
(Issue
11, November 2018) at 15 – 46, 47.
[4]
See
U
nemployed
People's Movement v Eastern Cape Premier and Others
2020 (3) SA 562
(ECG) at para 52.
[5]
Section
157(1) provides that a Municipal Financial Recovery Service is
hereby established as an institution within the public
service. (2)
The Municipal Financial Recovery Service from part of, and functions
within, the national treasury.
[6]
Steytler
& De Visser
Local
Government Law of South Africa
(Issue
11, November 2018) at 15 – 50(2).
[7]
[8]
Steytler
& De Visser
Local
Government Law of South Africa
(Issue
11, November 2018) at 15 – 50(3).
[9]
See
City
of Johannesburg Metropolitan Municipality v Gauteng Development
Tribunal and Others
2010 (3) SA 293
(CC) at para 43. Section 40 provides: ‘I
n
the Republic, government is constituted as national, provincial and
local spheres of government which are distinctive, interdependent
and interrelated. (2) All spheres of government must observe
and adhere to the principles in this Chapter and must conduct
their
activities within the parameters that the Chapter provides.
'
[10]
Section
41(1) provides, in relevant part: 'All spheres of government
and all organs of state within each sphere must -
(e)
respect
the constitutional status, institutions, powers and functions of
government in the other spheres;
(f)
not
assume any power or function except those conferred on them in terms
of the Constitution'
[11]
2010
(6) SA 182 (CC).
[12]
At
para 43.
[13]
Fedsure
Life Assurance Ltd and Others v Greater Johannesburg Transitional
Metropolitan Council and Others
[1998] ZACC 17
;
1999 (1) SA 374
(CC) at para 59.
[14]
1999
(1) SA 374 (CC)
[15]
At
para 58
[16]
2011
(4) SA
441
(SCA)
at para 1.
[17]
Democratic
Alliance and Others v Premier for the Province of Gauteng and Others
(18577/2020)
[2020] ZAGPPHC 119; [2020] 2 All SA 793 (GP) (29 April 2020)
at
para 89.
[18]
[2015]
10 BLLR 1035 (LC).
[19]
At
para 46.
[20]
2017
(2) SA 622 (CC)
[21]
At
para 146.
[22]
City
of Johannesburg Metropolitan v Gauteng Development Tribunal and
Others
2010
(6) SA 293
(CC) at para 44.