About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Eastern Cape High Court, Gqeberha
SAFLII
>>
Databases
>>
South Africa: Eastern Cape High Court, Gqeberha
>>
2024
>>
[2024] ZAECQBHC 27
|
|
Nelson Mandela Bay Municipality v Qaba and Others (3042/2023) [2024] ZAECQBHC 27 (9 April 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE DIVISION, GQEBERHA
NOT
REPORTABLE
Case
No.: 3042/2023
In
the matter between:
NELSON
MANDELA BAY
MUNICIPALITY
Applicant
And
ANELE
QABA
First
Respondent
MANDELA
BAY DEVELOPMENT AGENCY
Second
Respondent
GLENDA
ANNE PERUMAL
Third
Respondent
MXOLISIS
MOOLMAN
Fourth
Respondent
VUYANI
GALEN DYANTYI
Fifth
Respondent
NOMNIKELO
PINKY KONDLO
Sixth
Respondent
KHWEZI
GIDEON NTSHANYANA
Seventh
Respondent
THE
MINISTER OF FINANCE
Eighth
Respondent
JUDGMENT
EKSTEEN
J:
[1]
This
is a review brought in terms of s 6 of the Promotion of
Administrative Justice Act (PAJA)
[1]
in which the applicant, the Nelson Mandela Bay Municipality (the
municipality) sought an order that the decision taken by the third
to
seventh respondents, in their capacities as directors and members of
the board of the second respondent, the Mandela Bay Development
Agency (the MBDA), on 15 June 2023, to appoint the first respondent,
Mr Qaba, in the position of chief executive officer (CEO)
of the
MBDA, be reviewed and set aside. The eighth respondent, the
Minister of Finance (the Minister), was joined in the
application by
virtue of the interest which he has in the outcome of the application
as a result of his promulgation of the Municipal
Regulations on
Minimum Competency Levels
[2]
(the minimum competency regulations). Mr Qaba and the directors
of the MBDA opposed the application, but the Minister did
not enter
an appearance to defend.
Background
[2]
The
MBDA was established as a municipal entity in terms of s 86C of the
Local Government: Municipal Systems Act
[3]
(the Systems Act), which is wholly owned and controlled by the
municipality, but has an independent legal status as defined in
s 86D
of the Systems Act. The municipality is entitled to appoint and
remove the directors of the board
[4]
,
but the board is empowered to appoint the CEO of the entity.
[5]
I shall revert to the relationship between the municipality and the
MBDA.
[3]
The
municipality entered into a service delivery agreement (SDA) with the
MBDA and the services that the MBDA was required to deliver
included
the rejuvenation of economic activity within the central business
districts, harbours, nature conservation areas, and
beach areas
within the Nelson Mandela Metropolitan Municipality. It is also
required to develop a five year strategic development
plan in line
with the municipality’s development plan or plans and
strategies, and to ensure optimum use of land and infrastructure
within the area or areas designated for development.
[6]
Hence, pursuant to its mandate, the board of the MBDA advertised, on
17 November 2022, inviting applications for the
vacant post of CEO.
The ‘essential requirements’ for the position, as
advertised, were that the applicant should
be in possession of a
post-graduate qualification in the built environment/urban planning
sector; a consideration of a recognised
three year bachelor’s
degree in public administration/political science/social sciences/law
or equivalent; and eight years
relevant experience at a management
level, of which at least five years had to be at senior management
level. The advertisement
further stipulated that if an
applicant had received no reply in response to their application
within sixty days from the closing
date for applications, being 21
November 2022, they should consider their application to have been
unsuccessful.
[4]
Mr
Qaba applied for the position, but he had none of the essential
academic qualifications. He said that he had a B-Tech degree
in
Tourism Management; a national diploma in Travel and Tourism;
and a Master of Business Leadership. He did
not receive any
response to his application within the sixty day period to which I
have alluded.
[5]
However,
in January 2023, the MBDA again placed an advertisement (the second
advertisement) inviting applications for the position
of CEO.
The second advertisement made no reference to the earlier one and the
essential requirements for the position were
significantly reduced.
The second advertisement stipulated, as ‘essential requirements
(updated)’, at least a
bachelor’s degree or a relevant
qualification registered on the national qualification’s
framework at NQF level 7 with
a minimum of 360 credits. The
particular areas of study that had been essential for purposes of the
first advertisement were
no longer required. It now recorded that a
postgraduate qualification would be advantageous, and it required
merely five years’
experience at the senior management level.
The board provided no explanation for its decision to reduce the
level of academic
qualifications required for its CEO. The
second advertisement concluded that the successful candidate would be
expected to
sign an employment contract for five years and a
performance agreement. The closing date for applications in
terms of the
second agreement was set for 23 January 2023.
[6]
Mr
Qaba did not submit a new application in response to the second
advertisement, but his original application was considered effective,
notwithstanding the lapse of sixty days without response. A
selection process followed and a number of candidates, including
Mr
Qaba, were shortlisted for the position. The shortlisted candidates
were required to deliver a presentation to assess their
competency.
The shortlist was thereafter reduced, and those who had been
considered sufficiently competent were subjected
to psychometric
assessments. Thereafter, the list was reduced to two
candidates, and Mr Qaba was eventually appointed in
June 2023 as the
CEO of the MBDA. He was appointed on the maximum salary and
benefit scale permissible for a CEO in a municipal
entity under
the control of the municipality. I revert to this issue.
[7]
Prior
to these events, Mr Qaba had been employed as the Executive Director:
Economic Development, Tourism and Agriculture in the
municipality and
had been suspended, during June 2022, due to allegations of gross
misconduct relating to supply chain management
processes. The
municipality had resolved, on 21 June 2022, that he be suspended
pending the finalisation of an investigation
into allegations of
financial misconduct. It was during his period of suspension
that he first submitted his application
to the MBDA. However, a
disciplinary process was never instituted. On 28 February 2023,
the municipality and Mr Qaba signed
a settlement agreement, in terms
of which Mr Qaba vacated his office in exchange for a monetary
remuneration equivalent to the
remaining sixteen months of his
contract of employment. Mr Qaba was paid R3 million.
[8]
Against
this background the appointment of Mr Qaba as the CEO of the MBDA
raised the ire of National Treasury and of the municipality.
Treasury questioned the lawfulness of Mr Qaba’s appointment and
demanded further information relating to the process that
was
followed. They advised the municipality to suspend Mr Qaba’s
appointment as CEO of the MBDA, and cautioned them
to consider their
advice so as ‘to avoid any form of penalty as it relates to
withholding of conditional grants allocated
in terms of the
Division
of Revenue Act&rsquo
;.
[9]
On
9 August 2023, the Minister addressed the executive mayor in respect
of a number of matters of alleged maladministration in the
municipality, including the appointment of Mr Qaba. He
expressed great concern about the integrity of ‘the city’s
decision’ to appoint Mr Qaba as the CEO of the MBDA. He said
that he was concerned about the governance of the board of directors
of the MBDA, who had implemented irregular decisions that contravened
statutory prescripts and had failed to obtain approval from
the
municipal council when they were required to do so. The
Minister appeared to perceive the appointment of Mr Qaba, without
the
consent of the municipal council, to be in breach of their statutory
duties. Thus, the Minister put the municipality
to terms to
review and set aside the appointment of Mr Qaba. Hence, the
present application.
The
review
[10]
As
adumbrated, earlier, the review was launched in terms of
s 6(2)
of
PAJA and rule 53 of the Uniform Rules of Court. The material grounds
of review, for purposes of this judgment, relied upon by
the
municipality were that:
10.1
A
mandatory and material procedural condition prescribed by the
empowering provision was not complied with (s 6(2)(b) of PAJA);
10.2
the
action taken was procedurally unfair (s 6(2)(c) of PAJA);
10.3
the
administrator’s actions were materially influenced by an error
of law (s 6(2)(d) of PAJA);
10.4
the
administrator took into account irrelevant considerations or failed
to take relevant considerations into account (s 6(2)(e)(iii);
10.5
the
administrator acted arbitrarily or capriciously (s 6(2)(e)(vi));
10.6
the
action in itself is not rationally connected to the information
before the administrator (s 6(2)(f)(cc));
10.7
the
action offends the principle of legality and the rule of law.
[11]
The
notice of motion called upon the board
[7]
to provide:
‘
All
records, correspondence, including internal memoranda, reports,
documents, directives, policy documents, agenda and agenda items,
audio recordings, transcripts of audio recordings, records of
deliberations, minutes of meeting and any other documents relating
to
the decision(s) or processes, which resulted in the appointment of
the first respondent as chief executive officer of the second
respondent.’
[12]
The
board duly provided a substantial record
[8]
,
but they failed to disclose Mr Qaba’s application for
appointment, which included his curriculum vitae (CV), a performance
agreement as envisaged in the second advertisement, to which I have
referred earlier, or his contract of employment. Upon
demand
made thereafter, the MBDA produced Mr Qaba’s application
(including his CV) and his contract of employment. In addition,
they
produced an unsigned draft performance agreement. I shall
revert to these.
[13]
As
I have said, the Minister perceived that the board’s conduct in
appointing Mr Qaba without the prior approval of the municipality
was
unlawful and in breach of their fiduciary duty to the municipality.
In the review, the municipality supported this perception,
which
depends largely on the interpretation of legislation and regulations
made by the relevant ministers in terms of such legislation.
I
shall revert to these issues.
Intergovernmental
relations
[14]
In
limine, the MBDA and Ms Perumal, the chairperson of the board, urged
that the review application should not be entertained at
this stage
as the municipality had failed, before the institution of these
proceedings, to comply with the provisions of the Intergovernmental
Relations Framework Act
[9]
(the
Framework Act).
[15]
The
Framework Act was promulgated pursuant to s 41(2) of the
Constitution. Section 41 of the Constitution sets out the
principle
of cooperative governance and intergovernmental relations.
Section 41(3) of the Constitution enjoins an organ of state involved
in an intergovernmental dispute to make every reasonable effort to
settle the dispute by means of mechanisms and procedures provided
for
that purpose, and requires them to exhaust all other remedies before
they approach a court to resolve their dispute.
These
principles are reflected in s 45 of the Framework Act.
[10]
Mr Ronaasen, on behalf of the municipality, contended that the
definitions of ‘government’ and ‘intergovernmental
dispute’ are dispositive of the argument. The Framework
Act defines ‘government’ as meaning:
‘
(a)
The
national government;
(b) a
provincial government; or
(c) a
local government.’
[16]
It
proceeds to define an ‘intergovernmental dispute’ as a
dispute between different governments or between organs of
state from
different governments. Accordingly, what the Framework Act
envisages, is that any dispute which arises between
different spheres
of government or between different governments within the same sphere
of government should be subjected to the
dispute resolution
mechanisms provided for in the Framework Act. The present
dispute relates to organs of state within the
same government, being
the Nelson Mandela Bay Municipality.
[11]
I consider that Mr Ronaasen is correct that the Framework Act does
not apply to this dispute.
[17]
The
Systems Act, too, requires of the municipality to establish and
maintain clear channels of communication between itself and
the
MBDA,
[12]
but it contains no
moratorium on litigation and the failure of the municipality to have
engaged as envisaged in the Systems Act
is not a bar to the review.
[18]
There
is a further and more fundamental reason why neither the Framework
Act nor the Systems Act can bar the litigation.
Central
to the current dispute is Mr Qaba. In the event that the review
is upheld, Mr Qaba’s appointment as CEO will
be set aside.
Such relief could never be implemented without having a material
impact on his rights. Accordingly, he
would be an essential
party to any dispute resolution mechanism. Mr Qaba, in his
personal capacity, is not an organ of state
as defined in s 239 of
the Constitution, and neither party has advanced any argument in
support of such a conclusion. For
these reasons I conclude that
the Framework Act did not find application to the dispute under
consideration, and the point in limine
cannot succeed.
The
Systems Act and the appointment regulations
[19]
Much
of the dispute between the parties turns on the interpretation of
legislation and regulations made pursuant thereto.
Central to
the dispute is the application of the ‘Local Government:
Regulations on Appointment and Conditions of Employment
of Senior
Managers’ (the appointment regulations)
[13]
.
The municipality, in its papers and in the presentation of the
review, has relied heavily on the provisions of the appointment
regulations.
[20]
Mr
Buchanan, on behalf of the MBDA and the board, contended that the
appointment regulations find no application to the appointment
of the
CEO of the MBDA. They were made by the Minister for Cooperative
Governance and Traditional Affairs (the Minister of
Cooperative
Governance), pursuant to the powers vested in him in terms of s 120
of the Systems Act
[14]
.
As I have said, the MBDA was established as a separate legal entity
in terms of s 86C of the Systems Act. Although
it is wholly
owned and controlled by the municipality, and they have the
power to appoint and remove directors, the appointment
of the CEO is
the prerogative of the board.
[15]
Once appointed, the CEO is accountable to the board for the
management of the MBDA.
[16]
The municipality is enjoined by s 93A of the Systems Act to refrain
from interfering in the functions of the board.
[17]
[21]
Against
this statutory background the Minister for Cooperative Governance
made the appointment regulations. The material portion
of s 120
of the Systems Act provides:
‘
(1)
The
Minister may, by notice in the
Gazette
…, make regulations or issue guidelines not inconsistent with
this Act concerning-
(a)
the
matters listed in sections 22, 37, 49, 54A, 56, … 72, …’
[22]
The
Minister of Cooperative Governance made the regulations under s 120,
read with s 72, of the Systems Act. Section 120 of
the Systems
Act empowers him to make regulations on a wide variety of other
issues, too, arising from the act. However, it
is an
established principle of law that when a person exercising a public
power has committed themselves unequivocally to an empowering
provision to justify the authority to exercise that power, they stand
or fall by that choice. They are, generally speaking,
not free
to rely on some other sources of authority that may allow them to do
what they had purported to do.
[18]
In this matter, it has not been suggested that he enjoyed the power
under any other provision listed in s 120 and it is not
necessary to
consider this issue any further.
[23]
Section
72 of the Systems Act, that the Minister of Cooperative Governance
relied upon, empowers him to make regulations or issue
guidelines, in
accordance with s 120, in respect of various matters relating to
public administration and human resources in local
government.
He is specifically entitled to make regulations relating to duties,
remuneration, benefits and other terms and
conditions of employment
of municipal managers and managers directly accountable to municipal
managers,
[19]
but the power is
confined to matters arising from Chapter 7 of the Systems Act.
[20]
Chapter 7 relates only to municipal staff and contains no reference
to municipal entities or staff employed by such entities.
[24]
Regulation
2 is central to the municipality’s argument in respect of the
application of the appointment regulations to the
appointment of Mr
Qaba. Regulation 2 purports to circumscribe the scope of the
appointment regulations, and it stipulates
that they also apply to
municipal entities. As I have said, the matter listed in s 72
of the Systems Act has no bearing at
all on municipal entities.
Accordingly, prima facie, I consider that regulation 2, to the extent
that it purports to include
municipal entities in the appointment
regulations, is ultra vires the Systems Act. It seems to me
that the Minister of Cooperative
Governance was simply not empowered
to make regulations relating to the appointment of staff of the MBDA
under section 120, read
with s 72, of the Systems Act. However,
the Minister of Cooperative Governance is not a party to the
litigation, is not before
me, and has not had an opportunity to
address this issue. In the circumstances I shall refrain from
making a definitive finding
in this regard. I shall assume, for
purposes of this judgment, that he did have that power.
[25]
Mr
Buchanan presented his argument on the applicability of the
appointment regulations on a slightly different basis. He
contended, even assuming the power of the Minister of Cooperative
Governance to make regulations in respect of the appointment of
staff
in the MBDA, they could not apply to the appointment of the CEO,
because it would be incompatible with the provisions of
s 93J of the
Systems Act, which grants the power to the board to make the
appointment. As I shall demonstrate, the application
of the
appointment regulations would fundamentally undermine, and are
incompatible with, the original powers granted to the board
by the
Systems Act.
[26]
Chapter
3 of the appointment regulations regulates the appointment of ‘senior
managers’. ‘Senior managers’
are defined in
the appointment regulations to include a municipal manager or acting
municipal manager, appointed in terms of s
54A
[21]
of the Systems Act, and managers directly accountable to the
municipal manager, appointed in terms of s 56
[22]
of the Systems Act. There is no reference in the appointment
regulations to a municipal entity or its CEO. Regulation
12
provides for a municipal council to appoint a selection panel to make
recommendations in respect of the appointment of candidates
to vacant
senior manager posts.
[23]
In terms of regulation 16, candidates recommended for appointments to
the post of a senior manager, including a municipal
manager, must
undergo a competency assessment as circumscribed in regulation 16.
The selection panel must then submit a report
in respect of their
selection process to the municipal counsel and make a recommendation
on the suitability of candidates who comply
with the relevant
competency requirements for the post. The municipal council must
then, in terms of regulation 17, make a decision
on the appointment
of the appropriate candidate
[24]
and inform all interviewed candidates, including applicants who were
unsuccessful, of the outcome of the interview.
[27]
Self-evidently,
in respect of the appointment of the CEO of the MBDA, the provisions
of the appointment regulations are irreconcilable
with the Systems
Act to the extent that it seeks to usurp the function of the board
arising from the legislation.
[25]
Accordingly, on a proper interpretation of the appointment
regulations, read in the context of the empowering legislation,
they
do not apply to the appointment of the CEO of a municipal entity
established in terms of s 86C of the Systems Act. I
am not
required, for purposes of this judgment, to consider whether the
appointment regulations may be applied in respect of other
officials
in a municipal entity and I express no view in that regard.
[28]
Recognising
this difficulty, the municipality sought to invoke the provisions of
s 93L of the Systems Act to bring the appointment
process prescribed
in the appointment regulations within the ambit of the act.
Section 93L provides for a code of conduct
for directors and members
of staff of municipal entities. It stipulates that the code for
municipal staff members, contained
in Schedule 2 to the Systems Act,
applies, with necessary changes, to members of staff of a municipal
entity. Section 93L(3)
proceeds to provide that:
“
For
purposes of this section
, any reference
in Schedule 1 or 2 to a ‘counsellor’, or ‘MEC for
local government in the province’, ‘municipal
council’,
‘municipality’, and ‘rules and orders’ must,
unless inconsistent with the context or otherwise
clearly
inappropriate, be construed as a reference to a director of a
municipal entity, parent municipality, board of directors,
municipal
entity and procedural rules, respectively.” (My underlining)
These
provisions apply, expressly, only to the code of conduct and
accordingly cannot come to the assistance of the municipality.
[29]
Mr
Ronaasen further laid emphasis on the provisions of regulation 2(b)
of the appointment regulations, which provides for the regulations
to
be read in conjunction with the Local Government: Municipal
Regulations on Minimum Competency Levels, 2007 (the competency
regulations), issued in terms of the Municipal Finance Management Act
(the MFMA).
[26]
Both
sets of regulations apply, of course, to the appointment of municipal
officials. However, Mr Ronaasen, contended
that the competency
regulations, legitimately published by the Minister, have the effect
of incorporating the appointment regulations,
by reference, also in
respect of the CEO of a municipality. That brings me to the
MFMA and the competency regulations.
The interpretation and
application of the competency regulations were equally contentious.
[30]
Chapter
10 of the MFMA deals with municipal entities. It provides for
the CEO of the MBDA, appointed in terms of s 93J of
the Systems Act,
to be the accounting officer of the entity.
[27]
The accounting officer is responsible for the financial
administration of the entity and he must ensure that the resources
of
the entity are effectively, efficiently, economically and
transparently used. He is obliged to ensure that a full and
proper record of the financial affairs of the entity are kept and
that the entity has and maintains effective, efficient and
transparent
systems of financial and risk management, and of internal
audit, complying with, and operating in accordance with, any
prescribed
norms and standards.
[28]
He is responsible for the asset and liability management and the
revenue management of the entity.
[29]
Thus, he bears the overall responsibility for the management of the
revenue, expenditure, assets and liabilities and financial
dealings
of the entity. This may, as is the case with the MBDA, involve
the management of large amounts of money, all of
which are public
funds. Accordingly, the MFMA provides that the accounting officer
must meet the prescribed financial management
competency levels.
[30]
The competency regulations prescribe the minimum competencies
required to fulfill the functions of a CEO
[31]
in a municipal entity.
[31]
The
minimum competency levels prescribed for an accounting officer in a
municipal entity are set out in chapter 2 of the competency
regulations and are equivalent to those prescribed for municipal
managers under the appointment regulations. They also prescribe
minimum competency levels for various other financial and supply
chain officials. Regulation 13
[32]
of the competency regulations, upon which Mr Ronaasen relied,
requires the CEO of a municipal entity to ensure that competency
assessments of all financial officials and supply chain management
officials are undertaken in terms of Regulation 16 of the appointment
regulations, in order to identify gaps in competency levels of those
officials, as part of the recruitment process. Thus,
as I have
said, Mr Ronaasen argued that irrespective of the authority of the
Minister of Cooperative Governance to make regulations
in respect of
the appointment of employees of a municipal entity, the
Minister has incorporated the provisions of the appointment
regulations in the competency regulations, which he was entitled to
issue. Accordingly, so the argument went, the provisions
of
Regulation 12–17, to which I referred to earlier, must be
complied with in respect of the appointment of the CEO of the
MBDA.
[33]
[32]
The
authority of the Minister to make competency regulations is not in
issue, but the argument requires an interpretation of Regulation
13
in its proper context. The approach to interpretation of
documents, including statutes, has been authoritatively stated
in
Endumeni
Municipality
[34]
.
It is the process of attributing meaning to words in the light of the
ordinary rules of grammar and syntax; the context
in which the
provision appears; the apparent purposes to which it is directed and
the material known to those responsible for its
production.
[35]
Regulation 13 is itself not a model of clarity. As adumbrated
earlier, it requires the CEO to ensure that competency
assessments,
in the form prescribed in the appointment regulations, are done in
respect of all financial officials during the recruitment
process.
However, a ‘financial official’ is defined in the
regulation to include an accounting officer.
For the reasons
set out earlier the appointment regulations cannot find application
in respect of the appointment of the CEO by
the municipal entity by
virtue of the provisions of s 93J and 93A(c) of the Systems Act.
Nor could it be required of a CEO
to ensure his own assessment, or to
identify gaps in his own competency levels, before his appointment to
the vacant position.
I consider that, on a proper construction
of competency regulation 13, it requires the CEO of the municipal
entity, in the discharge
of his obligations under the MFMA, to which
I have referred to earlier, to ensure that all subordinate officials
undergo competency
assessments in accordance with the provisions of
regulation 16. Such a construction would accord with the
provisions of the
MFMA and of the Systems Act in respect of the
appointment of all financial officials in the municipal entity, save
for the CEO,
whose appointment is the prerogative of the board. It
leads, ineluctably, to the conclusion that neither the appointment
regulations
nor the competency regulations prescribe a particular
process for the assessment of the suitability of the CEO. That
does
not mean that he should not be properly assessed to ensure that
he has in fact achieved the minimum competency, but the method of
assessment is not prescribed. It is the responsibility of the
board, who is required in law to act in the best interests
of the
MBDA, and is accountable to the municipality as envisaged in s 93B of
the Systems Act, to ensure that the candidate meets
the minimum
competency as envisaged in s 107 of the MFMA. As I shall show,
it was common cause that Mr Qaba had not achieved
the minimum
competency level in unit standards prescribed for financial and
supply chain management.
[33]
However,
both Mr Qaba and the municipality rely on regulations 15 and 16 of
the competency regulations. In regulation 15(2)
of the
competency regulations, the Minister has provided for an indulgence
in respect of the appointment of certain officials.
The
regulation provides:
‘
A
person appointed as a financial … official on or after the
date of the commencement of this regulation who does not meet
the
minimum competency level in the unit standards for a competency area,
required for the position in terms of these Regulations,
must attain
that minimum competency level within 18 months of the date of
appointment.’
[34]
Regulation
16 stipulates that, when a financial official is required to conclude
a performance agreement, as stipulated in the second
advertisement,
and is appointed on the basis set out in regulation 15, the
performance agreement must include, as a performance
target, the
attainment of the minimum competency level within the prescribed
period
[36]
and his contract of
employment must stipulate that if he does not attain the minimum
competency levels within the stipulated period
his employment
contract would terminate automatically within one month after the
lapse of the applicable period.
[37]
The effect of these regulations is that an unqualified candidate may
be appointed, subject to an express term in his contract
of
employment incorporating the resolutive condition that the contract
will come to an end if the candidate does not acquire the
necessary
competency levels in unit standards within eighteen months of the
conclusion of the contract.
[35]
The
CEO, as I have said, must meet the prescribed financial management
competency levels.
[38]
I
have explained earlier the extent of the financial responsibility
placed on the shoulders of the CEO in terms of the MFMA
which require
of him to meet the minimum competency levels prescribed. If
regulations 15 and 16 are held to be valid and
enforceable it would
permit a series of short-term appointments of successive unqualified
CEO’s placing the finances of the
MBDA at risk for years.
Section 107 of the MFMA provides no latitude for condonation of
insufficient competency in financial
management and an interpretation
that permits such a concession would, prima facie, be contrary to the
object of the MFMA.
[39]
However, although the Minister is a party to the review, he has not
entered an appearance to defend. Accordingly, because
the
municipality has not contended that regulations 15 and 16 are ultra
vires the MFMA, he has not had an opportunity to address
the issue.
In my view it would be inappropriate, in these circumstances, to make
such a finding in the review. I proceed,
accordingly, as the
parties did, on an assumption of the legitimacy of these provisions.
Prescribed
competency levels
[36]
The
Minister has prescribed that an accounting officer of a municipal
entity must generally have the skills, experience and capacity
to
assume and fulfil the responsibilities and exercise the functions and
powers assigned, in terms of the MFMA, to them.
[40]
He has further prescribed that an accounting officer of a municipal
entity must, at the very least be competent in the unit
standards
prescribed for the financial and supply chain management competency
areas identified in the competency regulations.
[41]
These are the financial management competency levels contemplated in
the MFMA.
[37]
Mr
Buchanan argued that the minimum prescribed competency levels are not
prescriptive and should be interpreted as being no more
than
guidelines, because regulation 2(2) requires of a CEO, ‘generally’,
to have the skills experience and capacity
for the position.
The interpretation contended for is untenable. I have set out
earlier the responsibilities that the
MFMA imposes upon the CEO and
the extent of his financial functions. Interpreting the
provisions of regulation 2 of the competency
regulations, in the
context of the general scheme of legislation, which I have discussed
earlier, it is imperative for a CEO to
have achieved at least the
minimum competency requirements for the financial management
entrusted to him. It may be that
the functions and
responsibilities of a particular municipal entity may, having regard
to the nature of the entity and the extent
of its mandate, require of
the CEO to have greater qualifications than the minimum prescribed.
The MBDA is required to manage
substantial amounts of money and I
have described the nature of its mandate, as set out in the SDA,
earlier. Hence, the first
advertisement required a
post-graduate qualification specifically directed at the built
environment or urban planning sector.
This is a greater and
more focused qualification than that prescribed as the minimum in the
competency regulations but, no doubt,
was perceived to be necessary
for a CEO in the MBDA to fulfil the responsibilities and exercise the
functions of powers assigned
to him in terms of the MFMA and the
SDA. It is not apparent from the papers of the board, or of Mr
Qaba, why Mr Qaba thought
that he might qualify for an appointment in
response to the first advertisement, nor is the reason for the second
advertisement
explained. However, the second advertisement was
published, with the concurrence of the municipality, and the
application
for appointment was measured against the second
advertisement.
[38]
In
his application for the position of CEO Mr Qaba had annexed a CV in
which he represented that he had obtained a National Treasury
Minimum
Competency Requirements certificate. However, the municipality
contended that Mr Qaba had been in their employ from
2014 until
February 2023 as an Executive Director: Economic Tourism and
Agriculture and that he had not attained the minimum
competencies
required by the regulations. In the review, both the board and
Mr Qaba acknowledged that he had not obtained
the necessary minimum
competencies for the position. Both the board and Mr Qaba were
somewhat coy of the actual competencies
which Mr Qaba had attained.
Neither took this court into their confidence by disclosing the
extent of his shortcoming.
[39]
As
adumbrated earlier, both Mr Qaba and the board sought refuge in the
provisions of Regulation 15(2) of the competency regulations.
The board contended that Mr Qaba was entitled to eighteen months in
order to achieve the minimum competencies and that the period
had not
yet lapsed when the review was launched. Mr Qaba, likewise,
relied on the provisions of the regulation and said that
he was in
the process of now obtaining these competencies.
[42]
[40]
As
I have said, I assume, for purposes of this judgment, the validity of
regulation 15(2), but it is subject to regulation 16.
Notwithstanding the provisions of the second advertisement, that
required the successful candidate to conclude a performance
agreement,
neither the board nor Mr Qaba have been forthcoming with a
signed performance agreement. Rather, two, unsigned, draft
performance
agreements were discovered. Mr Qaba’s
contract of employment was signed on 20 June 2023. It is an
unconditional
fixed term contract of employment that records that it,
together with the annexures to it, the agency’s policies, codes
and
procedures as adopted from time to time, constitutes the entire
and only agreement between them in respect of his employment.
It does not contain the resolutive condition that it will
automatically terminate in the event of his failure to achieve the
necessary
competencies within the prescribed period.
[41]
I
am driven, ineluctably, to the conclusion that he was not appointed
in terms of regulations 15 and 16. He represented to
the board
that he was in possession of a certificate verifying that he met the
minimum competencies required, and he was appointed
unconditionally.
He did not sign a performance agreement.
[42]
The
conclusion to which I have come finds support in the salary package
awarded to Mr Qaba. Section 89 of the MFMA provides
for the
parent municipality to determine the upper limits of salary,
allowances, and other benefits of a CEO and senior management
in the
municipal entity. The municipality had adopted the upper limits
of total remuneration packages payable to municipal
managers and
managers directly accountable to municipal managers, proclaimed by
the Minister for Cooperative Governance and published
in the
Government Gazette on 18 November 2022. It was common ground
that the CEO of a municipal entity is entitled to the
annual total
remuneration package equivalent to that for managers directly
accountable to a municipal manager in terms of the said
upper
limits. These upper limits provide guidelines and stipulate a
minimum, midpoint and maximum remuneration package, dependent
on the
competencies of the individual appointed. The municipality is a
category 8 municipality as defined in these provisions.
Mr Qaba
was appointed on the maximum salary permissible under these upper
limits. His salary package does not reflect any allowance
for the
fact that he had not met the competency levels prescribed for the
post.
[43]
To
summarise, Mr Qaba represented to the board, by the submission of his
CV that he did possess the minimum competencies required
for the
position. He was appointed, unconditionally, for a period of
five years. The fact that he was perceived to
be fully
competent is borne out by his remuneration package at the highest
permissible level for the CEO of a municipal entity.
Thus, the
decision to appoint him was materially influenced by an error of law
and was unlawful.
[44]
If
it is accepted that the board were aware of the shortcomings in his
competency levels, his appointment was still not subject
to the
attainment of further qualifications. In these circumstances
the decision to appoint Mr Qaba, unconditionally, was
materially
influenced by an error of law, was not rationally connected to the
information before the board and was unlawful.
In fixing his
remuneration, the board failed to give consideration to relevant
considerations, being his insufficient competency
levels, and their
decision in this regard was not rationally connected to the
information before them.
[45]
In
conclusion, Mr Buchanan emphasised that the municipality had, at all
material times, a representative present at meetings of
the selection
committee and during the process of selection. Thus, he
submitted, that it was not open to the municipality,
who raised no
objections during the process of selection, to seek now to set aside
the appointment of Mr Qaba. He submitted
that it has only
occurred as a consequence of the demands of the Minister to which I
have referred earlier. I think that
there is merit in the
submission relating to the Minister and, for the reasons set out
earlier, the Minister’s perception
of the legal position was
incorrect. But that cannot redound to Mr Qaba’s credit
where the appointment in dispute was
made irregularly and unlawfully
to a position in a public entity, managing public funds.
The
relief
[46]
Section
8 of PAJA empowers a court in proceedings for judicial review to
grant ‘any order that is just and equitable’.
Its
remedial power is bounded only by considerations of justice and
equity.
[43]
Mr Ngqakayi,
on behalf of Mr Qaba, submitted that it would not be just and
equitable to set aside the decision to appoint
him, as it would be
unduly prejudicial to him. He argued that Mr Qaba had taken
life changing decisions on account of his
appointment and had
rejected other employment opportunities elsewhere. These are,
of course, matters that are material to
the exercise of my
discretion.
[47]
However,
as I have said, Mr Qaba responded only to the first advertisement.
It is difficult to comprehend on what basis it
was conceived that he
qualified for the appointment. He submitted his CV which
purported to confirm that he had a certificate
from National Treasury
verifying that he had met all the competency levels required.
This was not true, he was subsequently
appointed, unconditionally,
contrary to the provisions of s 107 of the MFMA and the competency
regulations and awarded a salary
package, which he continues to
receive, at the upper limit permissible for the post, for which he
was not qualified. On consideration
of all the factors, I
consider that the only appropriate relief is to review and set aside
the decision to appoint Mr Qaba.
[48]
In
the result, it is ordered that:
1.
The
decision taken by the third to seventh respondents, in their
capacities as directors and members of the board of the second
respondent, on 15 June 2023, to appoint the first respondent to the
position of chief executive officer of the second respondent,
is
hereby reviewed and set aside.
2.
The
first to seventh respondents are to pay the costs of the application,
jointly and severally, the one paying the other to be
absolved.
J
W EKSTEEN
JUDGE
OF THE HIGH COURT
Appearances:
For
Applicant:
Adv O Ronaasen SC
Instructed
by:
Kuban Chetty Inc, Gqeberha
For
1
st
Respondent:
Mr Ngqakayi
Instructed
by:
Ntlabezo
Attorneys, Gqeberha
For
2
nd
– 7
th
Respondent: Adv R
Buchanan SC
Instructed
by:
Peyper Attorneys c/o
Struwig
Jaftha Potgieter Inc, Gqeberha
Date
Heard:
22
February 2024
Date
Delivered:
09 April 2024
[1]
Act
3 of 2000.
[2]
Promulgated
in terms of the Municipal Finance Management Act in Government
Notice R493 published in Government Gazette 29967 on
15 June 2007,
as amended by Government Notice R1146 published in Government
Gazette 41996 on 26 October 2018.
[3]
Act
32 of 2000.
[4]
Section
93E and 93G of the Systems Act.
[5]
Section
93J.
[6]
Clause
7 of the Service Delivery Agreement concluded in July 2022.
[7]
In
terms of rule 53(1)(b).
[8]
Initially
the record was incomplete, but the missing portion was provided on
17 January 2024.
[9]
Act
No 13 of 2005.
[10]
Section
45(1) provides: ‘No government or organ of state may
institute judicial proceedings in order to settle an
intergovernmental dispute unless the dispute is declared a formal
intergovernmental dispute in terms of section 41 and all efforts
to
settle the dispute in terms of the Chapter were unsuccessful.’
[11]
See
Basic
Education for All and Others v Minister of Basic Education and
Others
2014 (4) SA 274
(GP) at para 33.
[12]
Section
93A and 93D(2)(a).
[13]
Published
under Government Notice 21 in Government Gazette 37245 of 17 January
2014 in terms of the Systems Act.
[14]
Section
120 empowers the Minister to make regulations and issue guidelines
by notice in the gazette and after consultation with
organised local
government representing local government nationally concerning
numerous issues relating to the Systems Act.
[15]
Section
93J(1) of the Systems Act provides that: ‘The board of
directors of a municipal entity must appoint a chief
executive
officer of the municipal entity’.
[16]
Section
93J(2) of the Systems Act.
[17]
Section
93A(b) of the Systems Act provides that: ‘The parent
municipality of a municipal entity must allow the board of
directors
… of the municipal entity to fulfil their responsibilities.’
[18]
Afriforum
NPC v Minister of Tourism and Others and a similar matter
2022 (1) SA 359
(SCA) at para 49; and
Minister
of Education v Harris
2001 (4) SA 1297
(CC) para 17-19.
[19]
Section
72(2A) of the Systems Act.
[20]
Section
72(1) of the Systems Act.
[21]
Section
54A relates to the appointment of municipal managers and acting
municipal managers in a municipality.
[22]
Section
56 provides for the appointment of managers directly accountable to
municipal managers in a municipality. They do
not find
application to CEOs in a municipal entity.
[23]
The
functions of the selection panel are circumscribed in regulations
13, 14, 15 and 16.
[24]
Regulation
17(2).
[25]
Section
93J and 93A(b).
[26]
Published
under Government Notice 493 in Government Gazette 29967 of 15 June
2007.
[27]
Section
93 of the Systems Act.
[28]
Section
95 of the MFMA.
[29]
Section
96 and 97 of the MFMA.
[30]
Section
107 of the MFA.
[31]
The
competency regulations were issued by the Minister pursuant to the
powers vested in him in s 168 of the MFMA.
[32]
The
material portion of the regulation states: ‘The …
chief executive officer of a municipal entity must ensure
that
competency assessments of all financial officials and supply chain
management officials are undertaken in terms of Regulation
16 of the
Local Government: Regulations on Appointment and Conditions of
Employment of senior managers in order to identify
and address gaps
in competency levels of those officials, as part of the recruitment
process.’
[33]
In
terms of the definitions of the section contained in the competency
regulations ‘financial official’ is defined
to include
an accounting officer.
[34]
Natal-Joint
Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593 (SCA).
[35]
Para
18
[36]
Competency
regulation 16(1)(a).
[37]
Competency
regulation 16(1)(b)(i).
[38]
In
terms of s 107 of the MFMA.
[39]
See
s 2 of the MFMA.
[40]
Regulation
2(2) of the competency regulations.
[41]
Regulation
3 of the competency regulations.
[42]
At
the hearing of the review application Mr Qaba contended that he had
now achieved the required competency levels. No verifiable
proof for the assertion has been produced and the board did not
support him on this.
[43]
State
Information Technology Agency SOC Limited v Gijima Holdings
(Pty)
Ltd
2018 (2) SA 23
(CC) at para 53;
Bengwenyama
Minerals (Pty) Ltd and Others v Genorah Resources (Pty) Ltd and
Others
2011
(4) SA 113
(CC) at para 82.