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[2020] ZASCA 125
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Mawonga and Another v Walter Sisulu Municipality and Others (574/2019) [2020] ZASCA 125; 2021 (1) SA 377 (SCA) (7 October 2020)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 574/2019
In
the matter between:
THEMBINKOSI
MAWONGA
FIRST
APPELLANT
INSTITUTE
FOR LOCAL
GOVERNMENT
INTERVENING
PARTY
and
WALTER
SISULU LOCAL MUNICIPALITY
FIRST
RESPONDENT
THE
EXECUTIVE COUNCIL FOR CO-OPERATIVE
GOVERNANCE
AND TRADITIONAL
AFFAIRS
N.O
SECOND RESPONDENT
THE
ADMINITRATOR OF THE WALTER
SISULU
LOCAL MUNICIPALITY
THIRD
RESPONDENT
Neutral
citation:
Mawonga and Another v
Walter Sisulu Municipality and Others
(Case no 574/19)
[2020]
ZASCA 125
(7 October 2020)
Coram:
PETSE
DP, MBHA, NICHOLLS JJA, EKSTEEN and UNTERHALTER AJJA
Heard
: 2
September 2020
Delivered
:
This judgment was handed down electronically by circulation to the
parties' representatives via email, publication on the Supreme
Court
of Appeal website and release to SAFLII. The date and time for
hand-down is deemed to be 10h00 on 7 October 2020.
Summary:
Local Government – municipal law –
Local Government:
Municipal Systems Act 32 of 2000
– in terms of
s 57(6)(a)
the
employment contract of a municipal manager has a maximum fixed term
of five years which cannot be renewed or extended –
once the
five years have elapsed the position of a municipal manager becomes
vacant as contemplated in
s 54A(4)
and thus subject to the nationally
competitive procedures prescribed in
s 54A
– any renewal
thereafter is null and void ab initio – this is irrespective of
whether the provisions of the employment
contract as municipal
manager stipulated the terms of its renewal within the meaning of
that expression in
s 57
(6)(c).
ORDER
On
appeal from:
Eastern Cape Division of the High Court,
Grahamstown (Lowe J sitting as court of first instance):
The
appeal is dismissed with costs.
JUDGMENT
Nicholls
JA (Petse DP, Mbha JA, Eksteen and Unterhalter AJJA concurring):
[1]
Can a municipal manager’s five-year term of employment be
extended before the
expiry date of the contract of employment or does
the position have to be advertised afresh? The answer to this
question has implications
for the appointment of senior managers in
the various municipal councils, in particular, the length of their
employment and the
procedure to be followed when they are appointed.
[2]
The appellant, Mr Thembinkosi Mawonga, is a former municipal manager
of the Walter
Sisulu Local Municipality, the first respondent (the
municipality). The second respondent is the Member of the Executive
Council
for Co-operative Governance and Traditional Affairs (the MEC)
and the third respondent is the administrator of the municipality.
No
relief was sought against either the second or the third respondent.
However, the MEC has actively participated in the proceedings.
The
Institute for Local Government Management in South Africa is the
intervening party. It has placed on record through its attorneys
that
owing to financial constraints it has not taken part in the appeal
proceedings but requests this Court to consider its detailed
submissions made before the court a quo.
[3]
In the high court, Mr Mawonga sought to set aside a decision of the
council of the
municipality which effectively terminated his
employment as municipal manager, after he had occupied the position
for more than
ten years. His contract had recently been renewed for
four years, with the potential of another year being added. In
effect, Mr
Mawonga’s employment as municipal manager would have
lasted for 15 years. The court dismissed Mr Mawonga’s
application
and granted the MEC’s counter application to set
aside the appointment of Mr Mawonga on the basis that such
appointment was
null and void. The court a quo refused leave to
appeal.
[4]
On petition to this Court leave to appeal was granted on the
following three issues:
‘
3.1
Where the employment contract of a Municipal Manager contains the
terms for its renewal in terms
of s 57(6)(c) of the Municipal Systems
Act 32 of 2000, (the MSA) and it has been renewed prior to the expiry
of the fixed term
of five years, does the post of Municipal Manager
nonetheless become vacant in terms of s 54A(4) of the MSA on the
expiry of the
fixed term requiring the post to be advertised
nationally.
3.2
Whether the provisions of the appellant’s employment contract
as Municipal Manager
of the respondent stipulated the terms of its
renewal within the meaning of that expression in s 57(6)(c) of the
MSA.
3.3
Whether the appellant’s employment contract was validly renewed
by way of the resolution
of the respondent on 28 July 2017 to renew
it.’
[5]
These three issues necessitate the interpretation and application of
s 57(6)(c) of
the Municipal Systems Act 32 of 2000 (the MSA) and s
54A of the Municipal Systems Amendment Act 7 of 2011 (the Amendment
Act) which
came into operation on 5 July 2011. Before discussing the
legislative regime governing the appointment of municipal managers,
it
is necessary to briefly set out the facts
.
[6]
Mr Mawonga was appointed as municipal manager of the Gariep Local
Municipality commencing
on 1 August 2007. At that time, his
appointment was governed by s 82 of the Municipal Structures Act 117
of 1998 which did not
require a competitive process.
[1]
The first contract of employment (the original contract) was for a
five-year period terminating ‘without further notice’
on
31 July 2012. It was recorded that there was no legitimate
expectation that the contract would be renewed or extended beyond
the
five-year period. The contract would lapse automatically on 31 July
2012 ‘subject to any extension or renewal.’
No terms of
renewal were stipulated in the original contract.
[7]
Before the termination date of Mr Mawonga’s original contract,
on 24 April 2012,
the Gariep Local Municipality resolved to renew the
appellant’s contract for a further five-year period on the same
terms
and conditions. An agreement extending the appointment until 31
July 2017 (the first renewal) was subsequently concluded which again
recorded that the appellant’s employment would terminate
without further notice, and ‘automatically on 31 July 2017,
subject to any extension or renewal’. The terms of the first
renewal, signed on 31 July 2012, were substantially the same
as the
original contract.
[8]
During the term of the first renewal, on 18 August 2016, the Gariep
Local Municipality
was disestablished and merged with Maletswai Local
Municipality to form the Walter Sisulu Municipality, the first
respondent. Mr
Mawonga’s contract was duly transferred to the
first respondent.
[9]
The contract, which is the subject matter of this appeal, is the
second extension
to the original contract (the second renewal). On 20
July 2017, the council of the first respondent resolved to extend Mr
Mawonga’s
contract of employment for a further four years and
that ‘after serving four years his performance [would] be
assessed, and
if satisfactory he [would] be allowed to serve the
fifth year.’ In line with the resolution, on 28 July 2017,
three days
before the expiry of the first renewal, an agreement was
signed extending the employment contract from 1 August 2017 to 31
July
2021 with the option of a further extension for one year ‘by
mutual agreement . . . subject to any extension or renewal’
(the second renewal). Again, the terms largely mirrored those in the
original contact.
[10]
Soon after the first renewal, on 5 July 2012, s 54A was promulgated
by the Amendment Act. This
repealed s 82 and introduced a nationally
competitive process to appoint municipal managers if the post were to
become ‘vacant’.
[11]
A judgment dealing with this section,
Xuma
v Engcobo Local Municipality,
[2]
was
handed down by the Eastern Cape High Court on 8 August 2017. In that
matter the court rejected the municipality’s argument
that s
54A did not apply where a contract was renewed. It ordered strict
compliance with the provisions of the section irrespective
of whether
a new contract was being concluded or an existing contract was being
extended or renewed.
[12]
In response to the
Xuma
judgment, the MEC issued a circular in
which it instructed all municipal councils to rescind the contracts
of renewal and follow
the steps set out in s 54A, in line with the
judgment. This required the post to be advertised nationally to
procure a suitably
skilled and qualified candidate. Although
the municipality did not receive the circular, the contents were
bought to its
attention and on 8 January 2018, by special resolution,
the council resolved to rescind Mr Mawonga’s appointment. He
was
informed of the decision by a letter dated 10 January 2018, in
which it was stated that his contract of employment had been
terminated
with immediate effect. What triggered Mr Mawonga’s
application to the high court in February 2018, was the appearance of
an advertisement for the position of municipal manager. On enquiry,
Mr Mawonga was advised by the council on 17 January 2018 that
he was
at liberty to re-apply for the position, which would be dealt with in
terms of the applicable legislation.
[13]
There is no dispute that Mr Mawonga’s original contract of
2007, and the two subsequent
renewals in 2012 and 2017, were subject
to s 57 of the MSA which came into operation in November 2000.
Section 57(6) provides
that:
‘
The
employment contract for a municipal manager must-
(a)
be for a fixed term of employment up to a maximum of five years,
not exceeding a period ending one year after the election of the
next
council of the municipality;
(b)
include a provision for cancellation of the contact . . .
(c)
stipulate the terms of the renewal of the employment contract,
but only by agreement between the parties;
(d)
…’
[14]
The defining issue is the impact of the Amendment Act on Mr Mawonga’s
contract of employment.
Of particular significance is s 54A, which in
relevant part provides:
‘
(3) A
decision to appoint a person as municipal manager, and any contract
concluded between the municipal council and that person
in
consequence of the decision, is null and void if-
(a) the person appointed
does not have the prescribed skills, expertise, competencies or
qualifications; or
(b) the appointment was
otherwise made in contravention of this Act.
(4) If the post of
municipal manager becomes vacant, the municipality must-
(a) advertise the post
nationally to attract a pool of candidates nationwide; and
(b) select from the pool
of candidates a suitable person who complies with the prescribed
requirements for appointment to the post.
(5) The municipal council
must re-advertise the post if there is no suitable candidate who
complies with the prescribed requirements.
(6) (a) The municipal
council may request the MEC for local government to second a suitable
person, on such conditions as prescribed,
to act in the advertised
position until such time as a suitable candidate has been appointed.
(b) If the MEC for local
government has not seconded a suitable person within a period of 60
days after receipt of the request referred
to in paragraph (a), the
municipal council may request the Minister to second a suitable
person, on such conditions as prescribed,
until such time as a
suitable candidate has been appointed.
(7) (a) The municipal
council must, within 14 days, inform the MEC for local government of
the appointment process and outcome,
as may be prescribed.
(b) The MEC for local
government must, within 14 days of receipt of the information
referred to in paragraph (a), submit a copy
thereof to the Minister.
(8) If a person is
appointed as municipal manager in contravention of this section, the
MEC for local government must, within 14
days of receiving the
information provided for in subsection (7), take appropriate steps to
enforce compliance by the municipal
council with this section, which
may include an application to a court for a declaratory order on the
validity of the appointment,
or any other legal action against the
municipal council.
(9) Where an MEC for
local government fails to take appropriate steps referred to in
subsection (8), the Minister may take the steps
contemplated in that
subsection.’
[15]
Section 54A(4) introduced the requirement of a suitably skilled
person to be appointed as municipal
manager after the position had
become ‘vacant’. In addition, the selection process
compelled the municipality to advertise
the post nationally. Thus,
the first question to be determined is whether the post becomes
vacant within the meaning of s 54A where
the employment contract is
renewed prior the expiry of the fixed five-year period in terms of s
57(6)(a) and where it contains
the terms of its renewal as stipulated
in s 57(6)(c). There is no disagreement that where the terms of
renewal are not stated,
the post will become vacant after the expiry
of the fixed term which will trigger the application of s 54A(4).
This gives rise
to the second question, which is whether the
provisions of Mr Mawonga’s contract stipulated the terms of its
renewal as contemplated
in s 57(6)(c).
[16]
The argument of the appellant, reduced to its essentials, is as
follows. Renewals or extensions
of a contract concluded before the
expiry of the contract period, do not give rise to a vacancy as
contemplated in s 54A(4). Instead,
the municipality is required to
reconsider the employment of the municipal manager, at most, every
five years and decide whether
it wishes to renew the term or not.
Such renewals or extensions continue to be valid in terms of s
57(6)(c), a section unchanged
by the Amendment Act. A renewal is not
an ‘appointment’ and s 54A and s 57(6)(c) are applicable
to different situations.
If one reviews the Amendment Act in context,
together with its subordinate legislation, a distinction is drawn
between renewals
or extensions which are provided for in the original
contract. These are valid until the contract lapses or is renewed,
prior to
its expiry. A post can only become ‘vacant’
within the meaning of s 54A, absent a renewal. Therefore, an
appointment
presupposes a vacancy which only arises when the contract
lapses or is terminated. The Amendment Act did not change any aspect
of the renewal regime and its preamble makes no mention of renewals
or a compulsory and competitive five-year fixed term. Nor does
it
seek to include renewals as a form of appointment which would render
all statutory provisions regulating renewals meaningless.
[17]
The appellant contends that support for its stance is to be found in
the transitional arrangements
set out in s 16 of the Amendment Act
which expressly protects existing contracts and provides:
‘
16. Transitional
arrangements
This Act does not affect
the employment contract of a municipal manager or a manager directly
accountable to the municipal manager
entered into before this Act
took effect, and such contract continues until it lapses or is
terminated’.
[18]
The intervening party supported Mr Mawonga in the high court, arguing
that a ‘renewal’
of a contract is not an ‘appointment’.
Therefore, if the contract is renewed before the expiry of the
current employment
contract, then the position does not become
‘vacant’ and s 54A(4) is not of application. As vacancy
is a condition
precedent for the need to advertise, it was not
necessary to advertise the position on a national basis, or at all.
[19]
The high court held that renewals and extensions were not saved by s
16 and that the section
applied only to existing contracts concluded
before the amendment, not those which had been renewed or extended
after s 54A was
introduced. The court found that the original 2007
contract failed to stipulate terms of renewal as required by s
57(6)(c), and
for that reason, too, it was not saved by s 16. The
first and second renewals, in 2012 and 2017 respectively, flowed from
the original
contract which did not stipulate any terms of renewal
and therefore, any subsequent contract was a contract de novo.
Further, it
was held that s 54A does not prohibit renewals but any
renewal must be in terms of a competitive process and s 57(6)(c) does
not
entitle the parties to agree to a new contract, absent compliance
with 54A(4).
[20]
For these reasons, the high court dismissed Mr Mawonga’s
application and granted the MEC’s
counter application to
declare the appointment of Mr Mawonga null and void. The 2017
decision of the municipality to renew the
contract of employment was
also found to be null void for want of compliance with s 54A. On this
basis the high court found it
unnecessary to deal with the January
2018 decision which it said was clearly flawed.
[21]
The first point to be made is that s 54A was introduced to curb the
prevailing mismanagement
of municipalities. This much was stated by
the Constitutional Court in
South African Municipal Workers’
Union v Minister of Co-Operative Governance and Traditional Affairs
which characterised the purpose of the Amendment Act to:
‘…
.address
what was perceived to be an alarming increase in the instances of
maladministration within municipalities. The Amendment
Act introduced
measures to ensure that professional qualifications, experience and
competence were the overarching criteria governing
the appointment of
municipal managers or managers directly accountable to municipal
managers in local government, as opposed to
party political
affiliation.’
[3]
[22]
The preamble of the MSA states that its purpose is, inter alia:
‘
. . .to provide
for procedures and competency criteria for such appointments, and for
the consequences of appointments made otherwise
than in accordance
with such procedures and criteria.’
What
this illustrates is that the legislature was alive to the need to
prevent irregular appointments of inadequately skilled persons
for
extended periods and to ensure that the person appointed as a
municipal manager is suitably qualified with the necessary expertise
and competencies.
[23]
Section 57(6)(a) makes it clear that the employment contract of a
municipal manager is limited
to a maximum fixed term of five years,
not exceeding a period ending one year after the election of the next
municipal council.
The 2006 regulations are to like effect.
[4]
Insofar as the section has been interpreted by the high court to mean
that until the promulgation of the Amendment Act, it was
permissible
to extend contracts for more than five years where the terms of
renewal were stipulated, this is, in my view, incorrect.
A renewal in
terms of s 57(6)(c) can only occur if the maximum period of five
years has not run its course (and if the terms of
the renewal are
stipulated). In other words, if the term of the contract does not run
for the maximum five years permissible, then,
and only then, would an
extension be lawful, subject to compliance with s 57(6)(c), in that
the terms of renewal would have to
have been stipulated in the
contract and agreed between the parties.
[24]
The relevant provisions in s 57(6) may appear to be in conflict: the
employment contract is for
a fixed term up to a maximum of five
years, yet the contract may stipulate the terms of its renewal. The
high court read these
provisions to mean that the contract is for a
maximum period of five years, but subject to renewal as stipulated in
the contract.
That resolution of the apparent conflict is
unpersuasive. First, the legislature has determined that the contract
must be for a
fixed term that cannot exceed five years. These are
cumulative requirements. Second, can s 57(6)(c) be interpreted to
permit the
parties an unbounded power of renewal? So, for example, if
the parties agreed to a renewal that was of indeterminate duration,
subject only to termination for breach or retirement, would that fall
within the permissible bounds of contractual competence? Such
a
permissive construction would allow the significance of s 57(6)(a) to
lose its limiting force because the contract would de facto
be
neither of a fixed term, nor of five years duration. Third, if the
competence to agree a renewal is to be read subject to the
stipulations of s 57(6)(a), a coherent interpretation can be
achieved. That is so because the parties may conclude a fixed term
agreement for a period of less than five years, with an option to
renew that does not violate the five-year maximum. Such an
interpretation
reconciles s 57(6)(a) and (c) whereas the contrary
position renders s 57(6)(a) subject to circumvention in ways that
would undermine
its central purpose.
[25]
The competitive process introduced by s 54A of the Amendment Act
should be understood in this
context. First, s 54A does not determine
when a vacancy occurs, that is a function of the fixed term agreed
under the discipline
of s 57(6). Second, as s 54A also does not
determine the regime of permissible renewal of an existing contract,
that too is determined
by s 57(6). Third, s 54A(4) introduced further
requirements as to how a vacancy must be filled, and the consequences
of a failure
to do so. Therefore, s 57(6) determines the limits of
the contract that may be concluded, and hence when a vacancy arises,
while
s 54A(4) stipulates how an appointment is to take place to fill
that vacancy.
[26]
It is indeed correct, as Mr Mawonga argued, that the Amendment Act
did not seek to change the
renewal regime. But the reason is not, as
he would have us accept, so that the employment contract of a
municipal manger could
continue indefinitely as long as the renewal
occurred before the expiry of the contract, but because a fixed term
contract could
not, in any event, be longer than five years. Any
appointment made thereafter would be subject to the procedural
constraints of
s 54A(4) requiring a nationally competitive process.
[27]
Take for example, Mr Mawonga’s second renewal signed in July
2017. The parties entered
into a four-year contract, with an option
of a further extension for one year. If this had been his original
contract, and if the
terms of his renewal were stipulated, once the
four-year period had lapsed, there would be no need for the extension
to be advertised
nationally. This requirement would only occur after
the five-year period expired. Thereafter, the provisions of s 54A
would be
triggered. Of course, this would not prevent an incumbent
from applying for the position, but under the competitive conditions
brought about by advertising the vacancy.
[28]
As pointed out in
Xuma
,
the legislature requires stringent compliance with s 54A in all
circumstances, including renewals and extensions of contracts.
This
is evident in s 54A, which gives the MEC and the Minister for Local
Government and Traditional Affairs a supervisory role
in relation to
the appointment of municipal managers.
[5]
In terms of s 54(6), the municipality must inform the MEC of the
appointment process and in terms of s 54(7), the MEC is obliged
to
enforce compliance, even approaching a court for a declaratory order
if necessary. If the MEC fails to act appropriately, then
s 54(9)
entitles the Minister to intervene. Were this not the case, then an
employment contract of under-skilled and unqualified
municipal
manager could be extended in perpetuity, by employing a simple
stratagem of renewing the contract before the expiry date,
with the
MEC and Minister being powerless to intervene.
[29]
Mr Mawonga’s contract commenced on 1 August 2007 and lapsed on
31 July 2012, a fixed period
of five years. Once the maximum five
years permissible in terms of s 57(6)(a) had lapsed, it was not an
option open to the municipality
to extend or renew the contract. This
means that on the harmonious interpretation of s 57(6)(a) and (c) and
s 54A set out herein,
not only was the second renewal void ab initio,
but also the first renewal. Therefore, my finding on the first
question is that
where an employment contract of a municipal manager
has been renewed prior to the expiry of the fixed term of five years,
the post
becomes vacant as contemplated in s 54A (4) of the MSA upon
the expiry of the fixed term of five years, requiring the post to be
advertised nationally. This finding makes it unnecessary to deal with
the second question as to whether the employment contract
stipulated
the terms of its renewal within the meaning of s 56(7)(c).
[30]
With regard to the third question, once it is found that any five
year contract which has run
its course is subject to the procedural
requirements of s 54A, it follows that the resolution of the council
of 20 July 2017 renewing
Mr Mawonga’s contract, was invalid for
want of compliance with the section.
[31]
The application brought by Mr Mawonga in the high court was to review
and set aside the
decision taken by the council on 8 January 2018,
rescinding its resolution of 20 July 2017 where it resolved to extend
and renew
Mr Mawonga’s contract for a second time. In a counter
application, the MEC sought to review and set aside the council’s
decision of 20 July 2017. The high court granted the order as sought
by Mr Mawonga that the decision of 8 January 2018 was set
aside.
However, that order was of no practical consequence because the court
below also held that the counter application succeeded,
and hence Mr
Mawonga’s appointment as the municipal manager on 20 July 2017
was also set aside. No appeal was brought in
respect of the order
made in favour of Mr Mawonga, no doubt because its efficacy was
overtaken by the order granted in favour of
the second respondent. As
a result, there is no reason to interfere with the order made by the
court below. The appeal before this
court fails, and the costs must
follow the result.
[32]
In the result I make the following order:
The
appeal is dismissed with costs.
________________________
NICHOLLS
CH
JUDGE
OF APPEAL
Appearances
For
appellant: H Drake
Instructed
by: Honey Attorneys, Bloemfontein
For
first and third respondents: A Byleveld
SC
Instructed
by: Wheeldon Rushmere & Cole Inc, Grahamstown
Symington
& De Kock, Bloemfontein
For
second respondent: A Bodlani (with him V Madokwe and L
Ntikinca)
Instructed
by: State Attorneys, Port Elizabeth
State
Attorney, Bloemfontein
[1]
Section 82 of the Local Government: Municipal Structures Act was
repealed by the s 15 of the Local Government: Municipal Systems
Amendment Act 7 of 2011.
[2]
Xuma v
Engcobo Local Municipality
[2017] ZAECMHC 35; 2017 JDR 1522 (ECM).
[3]
South
African Municipal Workers’ Union v Minister of Co-Operative
Governance and Traditional Affairs
[2017] ZACC 7
;
2017 (5) BCLR 641
(CC) para 4 and fn 7 where
reference is made to the debates in the National Assembly on 24
March 2011, as reflected in Hansard
at 2006-2010.
[4]
GNR 805 of 1 August 2006- regulation 2(3) mirrors s 57(6) and
regulation 17 (a) states the contract of employment will
automatically
terminate on the expiry of the term referred to in the
contract, subject to any extension or renewal.
[5]
Xuma
fn 3 above paras 12 and 13.