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[2015] ZAFSHC 71
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Democratic Alliance v Matjhabeng Local Municipality and Another (4309/2014) [2015] ZAFSHC 71 (19 March 2015)
IN
HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No. : 4309/2014
DATE:
19 MARCH 2015
In
the matter between:-
THE
DEMOCRATIC
ALLIANCE
..........................................................................................
Applicant
And
THE
MATJHABENG LOCAL
MUNICIPALITY
........................................................
1
st
Respondent
THE MUNICIPALITY
MANAGER:
MATJHABENG
LOCAL
MUNICIPALITY
.................................................................
2
nd
Respondent
JUDGMENT
BY:
MOCUMIE, J
HEARD
ON:
12 FEBRUARY 2015
DELIVERED
ON
:
19 MARCH 2015
MOCUMIE,
J
[1]
This is an application for a declaratory order. Applicant, The
Democratic Alliance, seeks an order declaring certain decisions
of
first and second respondent (respondents) as unlawful, invalid and
void
ab initio
.
The consequential relief sought is as per the Notice of Motion as
follows:
‘
1.The
first and/or second respondents’ ostensible decision of June
alternatively July 2014,increasing the tariffs by which
the first
respondent sells electricity units to the inhabitants of its
jurisdictional area at a rate and a tariff which was not
approved by
the Municipal Council of the first respondent, be declared unlawful
and void
ab initio.
2.
The first and second respondents be ordered to give effect to the
council of the first respondent’s resolution taken on
or about
30 March
[1]
2014,and whereby the
then existing tariffs had to be increased by 7,39% across the board.
The
application is opposed by respondents.
[2]
The municipality is a licensed electricity distributor. It buys
electricity in bulk from ESKOM. It then resells the electricity
to
the public, at an increased rate. The latter must be approved by the
National Energy Regulator of South Africa (NERSA). The
provision of
electricity by the municipality is also provided for in terms of the
relevant provisions of the Electricity Regulation
Act 4 of 2006 read
with certain provisions of the Local Government: Municipal Finance
Management Act, 56 of 2003(MFMA) and the
Local Government: Municipal
Systems Act 32 of 2000(the Systems Act).These two legislations
essentially turn on aspects of proper
budgeting, prior to any new
fiscal year and also impact upon the provision of electricity by the
municipality.
[3]
The municipality must also, in terms of s74 of the Systems Act, adopt
and implement a tariff policy on the levying of fees for
municipal
services provided for by the municipality or by way of service
delivery agreements.
[4]
A municipality has strict principles and deeming obligations dealing
with annual budgeting. A draft budget is to be prepared
and
published, no later than a specified time prior to the end of the
fiscal year. The municipality’s fiscal year ends on
30 June. In
terms of section 16 and 24 of the MFMA, the draft budget must also be
considered for approval-and finally approved
no later than 30 days
before the new fiscal starts.
[5]
Prior to the approval, and part and parcel of the consideration
effort, the municipality, must admit to the general public what
tariff increases it intends implementing. These increases are for all
municipal services-which includes water-and electricity supply.
This
allows for transparency, fairness and openness as far as local
government budget is concerned and also affords those affected
by
tariff increases, a proper opportunity to be heard.
[6]
After the draft budget has been tabled, public participation
facilitated and the draft budget properly debated, a municipal
council is entitled to finally approve the budget for the next fiscal
year including approval of rate increases for the supply
of
electricity.
[7]
It is common cause between the parties that on 27 March 2014 a second
ordinary meeting of the municipal council was convened.
The draft
annual budget of 2014/2015 financial year was on the agenda appended
to the papers as FA1.Under the executive summary
it is noted under
Part A(b) that there will be an across the board tariff increase of
7,39% in electricity tariffs for 2014/2015
financial year. Under the
heading
‘
Recommendations’
it is stated:
‘
That
a step up tariff must be introduced on water and electricity in order
to balance the general tariffs…’
[8]
On 30 May 2014 the third ordinary council meeting of the municipal
council was convened. The draft annual budget of 2014/2015
financial
year was on the agenda appended to the papers as FA3.The tariff
increase referred to in the second ordinary meeting is
still referred
to as such without any changes. The draft budget was then approved.
The minutes of such meeting are appended as
FA4 to the papers.
[9]
The only issue in dispute between the parties is whether the
increased tariff as set out hereunder was sanctioned by the municipal
council. Flowing from this issue is whether such a decision could be
delegated to any other institution or person by the municipal
council, outside the determined process provided for in s16 read with
s24 of the MFMA.
[10]
In its founding affidavit, applicant submits that subsequent to the
council meeting of 30 May 2014, and without intervention
of the
municipal council, respondents introduced electricity tariff
increases in respect of residential properties with effect
from 1
July 2014 as follows:
‘
13.1.1
A winter tariff in respect of usage of less than 350 units-of R1, 55
per unit.
13.1.2
A winter tariff in respect of usage in excess of 350 units –of
R1, 65 per unit.
13.1.3
A summer tariff in respect of usage less than 350 units-of R1, 35 per
unit.
13.1.4
A summer tariff in respect of usage in excess of 350 units –of
R1, 49 per unit.
’
[11]
This increase, applicant submits, was not approved and sanctioned by
the municipal council on 27 March 2014 or on 30 May 2014,
but
ostensibly announced by the municipal manager at a meeting of June
alternatively July 2014. The plaintiff submit further that
the
increase is unlawful because the tariff structure stated was not
reflected in the draft annual budget presented for the 2014/2015
financial year. It was not disclosed by the municipality to the
public. Neither was it reflected in any public participation
representation
document prepared and distributed by the municipality
amongst stakeholders and members of the community. Nor was it
reflected in
the budget which was approved by the municipal council
on 30 May 2014.It was simply not approved by the municipal council in
terms
of the provisions of s24 (2) (c) (ii) of the MFMA. The main
contention of applicant is in essence that respondents implemented
the step-up tariff without approval of the municipal council hence
the unlawfulness of the action. In the worst case scenario, as
I
understand applicant‘s contention correctly, the step-up tariff
should not have been implemented in the 2014/2015 financial
year, but
sometime in the future.
[12]
In the answering affidavit, respondents deny that the electricity
tariff increases in dispute were not approved by the municipal
council. The respondents submit that to the contrary, regard being
had to the minutes of the meeting of 30May 2014, ML10 page V,
the
municipal council resolved:
’
[t]he
minutes of the 2
nd
ordinary council meeting held on 27 March 2014 be approved. ’.
Respondents
submit further that from the minutes of the third ordinary council
meeting the municipal council had before it reviewed
draft IDP and
draft annual budget for the 2014/2015 financial year as well as
related policies for approval, it was then resolved
‘
that
council approves the medium term revenue and expenditure framework
2014/2015-16-17 financial year with the operating budget
of R1 954
071 637 [R1 609 153 696 (anticipated revenue) plus anticipated bad
debts] of R344 917 941 and the capital budget of R198
246 000 be
approved.The split capital of R198 246 000 be approved.The split
capital is as follows:
MID
R156 246 000
Internally
generated funds R 42 000 000
Total
capital funding R198 246 000
following
budget related policies
Matjhabeng
Municipality Indigent Policy,
Investment
Policy’
[13]
The
issue between the parties as
highlighted
in para
9
of this judgment must be understood in this context, which is also
not in dispute between the parties. On 20 March 2013, the National
Electricity Regulatory (NERSA) issued guidelines on electricity price
increase for 2014/2015 as per ML1 appended to the paper.
In terms of
ML1, NERSA approved a guideline increase for electricity tariffs for
municipalities. NERSA’s guidelines also
provided a detailed
methodology of the electricity tariff increases and the applicable
tables with their increases. In the application
to NERSA, ML 6,
respondents indicated to NERSA that
‘
Matjhabeng
shall develop, approve and at least annually review an indigent
[tariff increase policy] for the municipal area. This
policy shall
set out clearly Matjhabeng’s cost recovery policy in respect of
the tariff which it levies on registered indigent,
and the
implications of such policy for the tariffs which it imposes on other
users and consumers in the municipal area.
Removing
basic charges and transferring these charges to unit costs for all
domestic related tariffs will have an effect ’
[14]
From the above it is undoubtedly clear that (a)
the
tariff
incline/ step-up with a bias towards the indigent
within the jurisdiction of first respondent was specifically sought
by
respondents in the application to NERSA; (b) such request was
approved by NERSA (c)
the
incline
/step-
up tariff
increase first respondent introduced in July 2014 formed part of the
agenda of the second ordinary meeting which agenda was approved
and
adopted in the third ordinary meeting of 30 May 2014; (d)
respondents, particularly first respondent as a licensed electricity
distributor was within its powers to implement the incline/step-up
tariff as approved by NERSA.
[15]
Invariably, once respondents complied with NERSA’s electricity
tariff guidelines, they were not bound by any law to
approach NERSA again for the increased tariff rates which were
implemented from 1 July 2014.Applicant could point to none apart
from
reference to the MFMA and relevant legislations which I have already
found were complied with in the process preceding the
approval of the
budget. The announcement second respondent made in July was nothing
out of the ordinary. Due process which ought
to be followed in terms
of the MFMA that applicant is strenuously complaining was not
followed, had already been followed. Applicant’s
interpretation
of the decisions of 27 March and 30 May 2014 is unfounded and without
a basis to say the least. It read the two
decisions out of context
and without regard to the relevant policies, including the
indigent-biased policy, appended to the agenda
and discussed during
the meetings.
[16]
For the reasons set out in this judgment and the conclusion I have
come to, it is unnecessary to consider whether the municipal
council
could delegate powers within its exclusively domain under the
provisions of the MFMA and related legislations
,
to any institution or person, including
respondents.
[17]
For completeness, I consider the point in limine raised by
respondents settled, as counsel for respondents opted to abandon
it
during argument for the sake of a speedy resolution of this matter.
[18]
In the result, the following order is granted.
ORDER
The
application is dismissed with costs.
B.
C. MOCUMIE, J
[1]
30
March 2014 must certainly read 30 May 2014 as there is no reference
to March throughout the papers before me except in this
one
instance.