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[2020] ZASCA 185
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Eskom Holdings SOC Ltd v Resilient Properties (Pty) Ltd and Others; Eskom Holdings SOC Ltd v Sabie Chamber of Commerce and Tourism and Others; Chweu Local Municipality and Others v Sabie Chamber of Commerce and Tourism and Others (663/2019; 664/2019; 583/2019) [2020] ZASCA 185; [2021] 1 All SA 668 (SCA); 2021 (3) SA 47 (SCA) (29 December 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 663/2019
In
the matter between:
ESKOM
HOLDINGS SOC LIMITED
APPELLANT
and
RESILIENT
PROPERTIES (PTY) LTD
FIRST RESPONDENT
CHANGING
TIDES 91 (PTY) LTD
SECOND RESPONDENT
RETRACTION
PROPS 7 (PTY) LTD
THIRD RESPONDENT
MOGWELE
TRADING 278 (PTY) LTD
FOURTH RESPONDENT
EMALAHLENI
MUNICIPALITY
FIFTH RESPONDENT
MEC:
COOPERATIVE GOVERNANCE
AND
TRADITIONAL AFFAIRS
MPUMALANGA
SIXTH RESPONDENT
MINISTER
OF ENERGY
SEVENTH RESPONDENT
NATIONAL
ENERGY REGULATOR
OF
SOUTH AFRICA
EIGHTH RESPONDENT
and
SAKELIGA
NPC
AMICUS CURIAE
Case
no: 664/2019
In
the matter between:
ESKOM
HOLDINGS SOC LIMITED
APPELLANT
and
SABIE
CHAMBER OF COMMERCE
AND
TOURISM
FIRST RESPONDENT
LYDENBURG
CHAMBER OF
COMMERCE
AND TOURISM
SECOND RESPONDENT
GRASKOP
CHAMBER OF
COMMERCE
AND TOURISM
THIRD RESPONDENT
THABA
CHWEU LOCAL
MUNICIPALITY
FOURTH RESPONDENT
MUNICIPAL
MANAGER: THABA
CHWEU
LOCAL MUNICIPALITY
FIFTH RESPONDENT
EXECUTIVE
MAYOR: THABA
CHWEU
LOCAL MUNICIPALITY
SIXTH RESPONDENT
CHIEF
FINANCIAL OFFICER: THABA
CHWEU
LOCAL MUNICIPALITY
SEVENTH RESPONDENT
NATIONAL
ENERGY REGULATOR
OF
SOUTH AFRICA
EIGHTH RESPONDENT
MINISTER
OF ENERGY
NINTH RESPONDENT
MEC:
COOPERATIVE GOVERNANCE
AND
TRADITIONAL AFFAIRS
TENTH RESPONDENT
MINISTER
OF COOPERATIVE
GOVERNANCE
AND TRADITIONAL
AFFAIRS
ELEVENTH RESPONDENT
and
SAKELIGA
NPC
AMICUS CURIAE
Case
no: 583/2019
In
the matter between:
THABA
CHWEU LOCAL MUNICIPALITY
FIRST APPELLANT
MUNICIPAL
MANAGER: THABA
CHWEU
LOCAL MUNICIPALITY
SECOND APPELLANT
EXECUTIVE
MAYOR: THABA
CHWEU
LOCAL MUNICIPALITY
THIRD APPELLANT
CHIEF
FINANCIAL OFFICER: THABA
CHWEU
LOCAL MUNICIPALITY
FOURTH APPELLANT
and
SABIE
CHAMBER OF COMMERCE
AND
TOURISM
FIRST RESPONDENT
LYDENBURG
CHAMBER OF
COMMERCE
AND TOURISM
SECOND RESPONDENT
GRASKOP
CHAMBER OF
COMMERCE
AND TOURISM
THIRD RESPONDENT
ESKOM
HOLDINGS SOC LIMITED
FOURTH RESPONDENT
NATIONAL
ENERGY REGULATOR
OF
SOUTH AFRICA
F
IFTH
RESPONDENT
MINISTER
OF ENERGY
SIXTH RESPONDENT
MINISTER:
COOPERATIVE GOVERNANCE
AND
TRADITIONAL AFFAIRS
SEVENTH RESPONDENT
MEC:
COOPERATIVE GOVERNANCE
AND
TRADITIONAL AFFAIRS
EIGHTH RESPONDENT
Neutral citation:
Eskom
Holdings SOC Ltd v Resilient Properties (Pty) Ltd and Others
(Case
no 663/19);
Eskom
Holdings SOC Ltd v Sabie Chamber of Commerce and Tourism, and Others
(Case no 664/19);
Thaba
Chweu Local Municipality and Others v Sabie Chamber of Commerce and
Tourism, and Others
(Case
no 583/19) [2020] ZASCA
185
(
29 December
2020)
Coram:
PETSE DP, CACHALIA, VAN DER MERWE and
MOCUMIE JJA and LEDWABA AJA
Heard
:
27 – 28 August 2020
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ legal representatives via e-mail,
publication on the
Supreme Court of Appeal website and released to SAFLII. The date and
time for hand-down is deemed to be
09
H
45
on
29 December
2020.
Summary:
Constitutional law
– section 41 of the Constitution of the Republic of South
Africa, 1996 – principles of cooperative
government and
intergovernmental relations – all spheres of government and all
organs of state obliged to make reasonable
effort in good faith to
settle intergovernmental disputes –
Intergovernmental Relations
Framework Act 13 of 2005
,
ss 40
and
41
.
Electricity
– Electricity Regulation Act 4 of 2006, s 21(5) –
interruption of electricity supply by Eskom to municipalities
in
financial crises and unable to pay for electricity supply –
municipalities constitutionally and statutorily obliged to
provide
basic services, inclusive of electricity, to communities – whether
Eskom entitled to interrupt electricity
supply due to non-payment.
Local
Government –
Local Government: Municipal Structures Act 117 of
1998
–
Local Government: Municipal Systems Act 32 of 2000
–
Local Government: Municipal Finance Management Act 56 of 2003
.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Hughes J sitting as court of
first instance): judgment reported
sub
nom Sabie Chamber of Commerce and Tourism and Others v Thaba Chweu
Local Municipality and Others; Resilient Properties (Pty)
Ltd and
Others v Eskom Holdings SOC Ltd and Others
[2019]
ZAGPPHC 112
Case
no 663/2019:
Eskom Holdings SOC Limited v Resilient Properties
(Pty) Ltd and Others:
The
appeal is dismissed with costs, including the costs of two counsel
where so employed.
Case
no 664/2019:
Eskom Holdings SOC Limited v Sabie Chamber of
Commerce and Tourism and Others
:
The
appeal is dismissed with costs, including the costs of two counsel
where so employed.
Case
no 583/2019:
Thaba
Chweu Local Municipality and Others v Sabie Chamber of Commerce and
Tourism and Others
:
1
The appeal against paragraph 2 of the order of the
high
court
is upheld.
2 The first,
second and third respondents shall pay the costs of the appeal
jointly and
severally, the one paying the others to be absolved.
3
Paragraph 2 of the order of the high court is set aside and in its
place is substituted
the following:
‘
The
costs of this application shall be borne by Eskom Holdings SOC
Limited, with the rest of the respondents being absolved.’
JUDGMENT
Petse
DP (C
achalia
,
V
an
der
M
erwe
and
Mocumie
JJA and
Ledwaba
AJA
concurring)
:
Introduction
[1]
These proceedings
encompass a trilogy of appeals, two of which primarily concern the
issue of whether the decisions taken by Eskom
Holdings SOC Limited
(Eskom) to interrupt the bulk supply of electricity to two
municipalities at scheduled times
are
defensible on both constitutional and statutory grounds. They arise
from two applications brought in the Gauteng Division of
the High
Court, Pretoria, sitting in Mpumalanga. Although these applications
were not formally consolidated, they were nonetheless
heard together
over several days. The high court (Hughes J) granted an order
reviewing and setting aside Eskom’s decisions,
together with
other ancillary relief.
[1]
Whether the high court rightly reviewed and set aside Eskom’s
decisions is the primary question confronting us in this appeal.
The
third appeal is confined to the issue of whether the high court
exercised its discretion judicially in awarding costs against
Thaba
Chweu Local Municipality, and three of its senior executives. The
appeals come before us with the leave of the high court.
[2]
The facts of these
appeals graphically illustrate the distressing state of municipal
governance in this country, which depict a
picture of the
dysfunctional state of affairs bedevilling local government. The
Emalahleni Local Municipality (ELM) and the Thaba
Chweu Local
Municipality (TCLM), the municipalities occupying centre-stage in
these proceedings, have been aptly referred to by
counsel as
financial delinquents, dysfunctional municipalities, and
municipalities plagued by poor governance and financial
mismanagement.
[3]
Eskom is a state-owned public company having a share capital,
incorporated in accordance with the company
laws of the Republic of
South Africa.
[2]
It is the
appellant in two of the three appeals. Where it is necessary to
distinguish between the two appeals, I shall, for convenience,
refer
to the appeal under case no 663/19 as Eskom I, and the appeal under
case no 664/19 as Eskom II.
[4]
The first to fourth appellants in the third appeal under case no
583/10 are the Thaba Chweu Local Municipality;
the Municipal Manager:
Thaba Chweu Local Municipality; the Executive Mayor: Thaba Chweu
Local Municipality; and the Chief Financial
Officer: Thaba Chweu
Local Municipality, respectively. For convenience, these appellants
shall be referred to collectively as the
Thaba Chweu Municipal
appellants.
[5]
The respondents in Eskom I are, respectively, Resilient Properties
(Pty) Ltd; Changing Tides 91 (Pty)
Ltd; Retraction Props 7 (Pty) Ltd;
Mogwele Trading 278 (Pty) Ltd; the Emalahleni Municipality; the MEC:
Cooperative Governance
and Traditional Affairs, Mpumalanga; the
Minister of Energy; and the National Energy Regulator of South Africa
(NERSA).
[3]
For convenience, the
first to fourth respondents shall collectively be referred to as
Resilient. The fifth to eighth respondents
shall be referred to,
respectively, as Emalahleni, the MEC, the Minister, and the NERSA.
[6]
The first to third respondents in Eskom II are, respectively, the
Sabie Chamber of Commerce and Tourism;
the Lydenburg Chamber of
Commerce and Tourism; and the Graskop Chamber of Commerce and
Tourism. For brevity, they will collectively
be referred to as the
Chambers. The fourth to eleventh respondents are, respectively, the
Thaba Chweu Local Municipality; the Municipal
Manager: Thaba Chweu
Local Municipality; the Executive Mayor: Thaba Chweu Local
Municipality; the Chief Financial Officer: Thaba
Chweu Local
Municipality; the NERSA; the Minister of Energy; the
MEC
:
Cooperative Governance and Traditional Affairs; and the
Minister
:
Cooperative Governance and Traditional Affairs. The fourth to seventh
respondents shall collectively be referred to as the municipal
respondents. For convenience, the eighth to the eleventh respondents
shall respectively be referred to as the NERSA, the MEC, and
the
Ministers. Where it is necessary to distinguish between the two
Ministers, the ninth respondent will be referred to as the
Minister
of Energy and the eleventh respondent simply as the Minister of
Cooperative Governance.
[7]
Resilient are all private companies who own the Highveld Mall, a
68 000m
2
retail shopping centre located within the jurisdiction of the ELM.
The mall has 185 retail tenants. These companies together employ
some
2 000 employees and more than 100 support staff. The mall
consumes a large amount of electricity supplied by the ELM,
which is
a licensed distributor of electricity it bulk-purchases from Eskom
for use by its residents. Resilient have dutifully
paid the ELM for
their consumption. The Chambers share a common interest with
Resilient in these proceedings. They represent various
businesses
that are affiliated to them. Despite Resilient and the Chambers
having fulfilled their payment obligations to the ELM
and TCLM,
the
two municipalities
have
repeatedly defaulted in making their payments to Eskom. This has
resulted in Eskom deciding to interrupt electricity supply
to them.
For Resilient and the Chambers, these electricity interruptions have
had
a
devastating effect as they ‘threaten the very fabric of
society’, with hospitals
, schools,
households and businesses severely disrupted.
[8]
Mr Gwilym Rees, who deposed to the founding affidavit of the
Chambers, elaborated on the effects of
electricity interruptions as
follows:
‘
Firstly,
when the power supply is cut, all sewage works immediately come to a
standstill. This means that sewage is not pumped to
the sewage
processing plants but instead, will simply sit (and will eventually
spill into the streets) for the duration of the
cut-off, with the
associated, serious risks to the health of the community.
Secondly, the
minute the power is shut off, the water purification and processing
plants as well as those pumping water to the community
to ensure
adequate water pressure come to an immediate standstill. This means
that taps run dry, households run out of water, and
critical water
based facilities will cease functioning. Even worse, when the supply
is reconnected, it will take some time for
an adequate reserve to be
generated to enable the community and business to recommence.
Thirdly …
any process (industrial, commercial or domestic) that is dependent on
electricity will immediately cease.’
[9]
Along similar lines, the deponent to the founding affidavit of
Resilient alleged:
‘
50.2 The
proposed interruptions will lead to the rapid collapse of the entire
Emalahleni water network
within 48 hours and it is likely that a
human and environmental disaster will follow;
50.3 Interruptions to the
electrical supply to the water purification system will lead to raw,
unpurified water flowing into reservoirs and creating a serious
health risk to the community;
50.4 There is a real risk that
Eskom’s planned interruptions will lead to a total collapse
of
the entire sewer system;
50.5
Interruptions to the electrical supply to the sewage works will
result in a situation where
raw sewage flows into the natural
waterways and ultimately finds its way into the Olifants River
catchment system, creating an
environmental hazard way beyond the
boundaries of Emalahleni.’
[4]
[10]
Sakeliga NPC (Sakeliga), a business interest organisation boasting a
countrywide membership of some 12 000
members, is a non-profit
company incorporated in terms of the
Companies Act 71 of 2008
. It was
admitted as an
amicus curiae
in both Eskom I and Eskom II. In
the high court, Sakeliga was admitted as an
amicus curiae
in
Eskom I but not in Eskom II. I interpose to observe that counsel for
Eskom, in Eskom II, made some play of the fact that Sakeliga
was not
admitted as an
amicus
in relation to the challenge of the
Chambers, contending that its submissions should not have been taken
into account by the high
court. In my view this complaint has no
substance. In this court, Sakeliga was, pursuant to its unopposed
application, admitted
as
amicus
and repeated the submissions
it advanced before the high court. Eskom must have been aware for
several months before the hearing
of the appeal, when Sakeliga’s
application for admission as
amicus
was served on all
interested parties, what its argument would entail. Thus, it was
well-prepared to contest, as it in fact did,
those submissions in
this Court. Indeed, before us counsel was not able to point to any
prejudice that Eskom had suffered as a
result of Sakeliga having been
allowed to present oral argument before the high court.
[11]
The government is Eskom’s sole shareholder. Eskom is also an
organ of state as contemplated in s 239 of the
Constitution of the
Republic of South Africa, 1996 (the Constitution).
[5]
In terms of its constituent Act, the
Eskom Conversion Act 13 of 2001
,
Eskom plays a developmental role and is charged with promoting
‘universal access to, and the provision of, affordable
electricity,
taking into account the cost of electricity, financial
sustainability and the competitiveness of Eskom’.
[6]
The litigation in the high court was precipitated by decisions
[7]
taken by Eskom to interrupt the bulk supply of electricity to the ELM
and the TCLM. Eskom asserts that it had to resort to what
it accepts
is a drastic measure because not only had the ELM and the TCLM
persistently failed over several years to pay for the
bulk
electricity supplied by Eskom, in breach of their contractual
obligations, they had also failed to honour their payment obligations
undertaken in terms of the acknowledgment of debt arrangements that
they had each respectively signed. In addition, Eskom asserted
that
its principal objective in resorting to the drastic measure of
interrupting the bulk supply of electricity to the ELM and
the TCLM
was to contain the spiralling of the electricity debt which, over the
years, had increased exponentially. Eskom further
alleged that
failure to take the drastic measures it had adopted would ultimately
impact negatively on its overall capacity to
generate electricity.
And that if it were pushed to a point where it could no longer
generate electricity, so the argument continued,
the whole country
would be plunged into darkness, with disastrous consequences on many
fronts.
[12]
Eskom is licenced by the NERSA to generate, transmit and distribute
electricity countrywide.
[8]
Currently, it is the only entity licenced to supply electricity to
municipalities in the country. The municipalities are in turn
licenced to sell electricity to their communities and other customers
or end-users within their areas. Eskom supplies bulk electricity
to
the municipal grid which is then distributed by municipalities
through their electricity supply networks to the end-users. It
is
common cause between the parties that the municipal electricity
supply networks are designed in such a way that it is not technically
possible for Eskom to isolate supply to selected end-users within
municipal areas, the municipal water purification system and
the
like.
[13]
In
Joseph and Others
v City of Johannesburg and Others
[9]
the Constitutional Court said, with reference to
Mkontwana
,
[10]
that: ‘[E]lectricity is one of the most common and important
basic municipal services and has become virtually indispensable,
particularly in urban society.’ This statement by the
Constitutional Court resonates with the facts of this case. In
Mkontwana
the Constitutional Court held that ‘[m]unicipalities are
obliged to provide water and electricity to the residents in their
area as a matter of public duty.’
[11]
That electricity is a component of the basic services that
municipalities are constitutionally and statutorily obliged to
provide
to their residents is therefore beyond question.
Factual
b
ackground
[14]
It is now opportune to set out a detailed background to this
litigation. As the two applications were brought on
essentially
similar grounds, and resisted by Eskom on virtually the same basis,
it is convenient to recount the facts in a consolidated
narrative.
[15]
The generation, transmission and distribution of electricity in this
country is regulated in terms of the Electricity
Regulation Act 4 of
2006 (the ERA). The NERSA, established in terms of the
National
Energy Regulator Act 40 of 2004
,
[12]
has, in terms of
s 3
of the ERA, been designated as the
custodian and enforcer of the regulatory framework of the ERA. As
Regulator it is empowered,
amongst other things, to consider
applications for licences and issue licences for the generation,
transmission or distribution
of electricity.
[13]
Eskom is licenced by the NERSA to generate, transmit and distribute
electricity. The ELM and the TCLM are, for their part, licenced
by
the NERSA to reticulate
[14]
electricity supplied to them in bulk by Eskom. The ELM and the TCLM
in turn on-sell or supply electricity to the customers or end-users
within their respective municipal areas at a marked-up tariff in
order to raise revenue for themselves. The contractual relationship
between Eskom on the one hand and the ELM and the TCLM on the other
is, apart from the ERA, also regulated in terms of written
electricity supply agreements (ESAs) concluded between the parties.
Clauses 9.1 and 9.2 of the ESAs provide:
‘
Electricity
accounts for all charges payable under this Agreement shall be sent
to the DISTRIBUTOR
[15]
as soon as possible after the end of each month (i.e. meter-reading
month, as per the definition of “month” in the
Eskom
Schedule of Standard Prices), and each account shall be due and
payable on the date the account is received by the DISTRIBUTOR,
which
date, for purposes of this Agreement, shall be as set out in
subclause 25.2.
Should
payment not be received within a period of 10 (ten) days from the
date the account is deemed to have become due and payable
in terms of
subclause 9.1, ESKOM may discontinue the bulk supply to the DISTRUTOR
and/or terminate the electricity supply agreement
after having given
the DISTRIBUTOR 14 (fourteen) days written notice. The amount
outstanding shall bear interest compounded monthly
from the due date
to date of payment, at a rate per annum equal to the prevailing prime
overdraft rate charged by Firs National
Bank of Southern Africa
Limited plus 5% (five per centum).’
[16]
Clause 22.3 of the ESAs, in turn, provides:
‘
Should
the DISTRIBUTOR fail to pay any electricity account in accordance
with the provisions of Clause 9, ESKOM may discontinue
the bulk
supply to the DISTRIBUTOR and/or terminate this Agreement, without
prejudice to any claim ESKOM may have for electricity
supplied or for
damages suffered by the default on the part of the DISTRIBUTOR,
subject to the proviso that ESKOM shall give the
DISTRIBUTOR prior
notice thereof by facsimile or some other electronic medium. ESKOM
shall afford the DISTRIBUTOR a period of 48
(forty-eight) hours
within which to rectify the said default. The bulk supply shall be
restored as soon as practicable after the
DISTRIBUTOR has remedied
the default and paid the requisite reconnection fee.’
[17]
Eskom asserted that in breach of their respective contractual
obligations, the ELM and the TCLM failed to pay for
the electricity
that they had purchased for distribution to their customers, the
end-users. As a result, their accounts with Eskom
fell into arrears.
By June 2017 the collective debt owed to Eskom by various
municipalities in the country had reached alarming
proportions.
[16]
The ELM and the TCLM have been two of the notable serial
defaulters
[17]
of their
payment obligations for electricity supplied by Eskom. When the debt
owed by the ELM and the TCLM had reached intolerable
levels, Eskom
threatened to cut off its electricity supply to the ELM and the TCLM
to induce them to pay. In order to stave off
Eskom’s threatened
action, the ELM and the TCLM signed acknowledgements of debt in
favour of Eskom in terms of which they
undertook to pay off the
accumulated debt in agreed monthly instalments. At the same time,
they also undertook to pay for future
monthly electricity consumption
in full upon Eskom rendering its monthly invoices. These undertakings
came to naught for both the
ELM and the TCLM defaulted on their
payment plans agreed with Eskom to settle the debt. In consequence,
the arrears continued to
mount as the ELM and the TCLM, apart from
the sporadic payments that they made, failed to pay for their ongoing
current consumption,
the historical debt and interest accruing
thereon.
[18]
When Eskom’s tactic of adopting ‘a carrot and stick
approach’ to extract payment from the defaulting
municipalities
failed to yield the desired outcome, it published notices declaring
its intention to interrupt the bulk electricity
supply at scheduled
times, to wit: from 06h00 to 08h00 and again from 17h00 to 19h30
during the week; and from 08h30 to 11h00 and
again from 15h00 to
17h30 on weekends. These times were to be extended, incrementally,
until the point of a total termination of
electricity supply unless
the ELM and the TCLM made substantial payments to Eskom to reduce
their indebtedness. In the notices,
Eskom invited members of the
public and interested parties to make representations on why it
should not proceed with the proposed
electricity supply
interruptions. Resilient made representations to Eskom to dissuade it
from proceeding with the threatened action.
No representations were
received from the Chambers or from residents within the municipal
area of the TCLM.
[19]
Eskom was not moved by the representations made by Resilient. It gave
notice that it would implement its decision
to interrupt the bulk
electricity supply to both the ELM and the TCLM as they had
repeatedly failed to honour their payment arrangements.
In
justifying its stance, Eskom stated that
Resilient,
the Chambers and any other similarly situated parties
were
not without a remedy. It
was
open to them, assert
ed
Eskom, to apply to a court and seek a
mandamus against the ELM and the TCLM directing them to pay their
debts which would then obviate
the need for Eskom to implement its
decision to interrupt the supply of electricity.
I
observe in passing, that i
t is
cold comfort
to
suggest that
end-user
s
of electricity
could
seek a mandamus directing
a
delinquent municipality to pay
its debts in circumstances where it is known that it is unable to
do so
.
[20]
The stance adopted by Eskom precipitated the litigation that ensued
in the high court. Both Resilient and the Chambers
brought separate
applications on an urgent basis in which they sought interim and
final relief. With respect to the interim relief,
they sought orders,
in essence, directing Eskom to restore the full supply of electricity
pending the final determination of the
relief sought in part B of
their notices of motion. With respect to final relief, they, so far
as is relevant for present purposes,
sought orders in the following
terms:
(a)
declaring that the interruption decision is unconstitutional and
invalid;
(b)
reviewing and setting aside the interruption decision;
(c)
declaring that
s 21(5)
of the ERA is inconsistent with the
Constitution and invalid; and
(d)
interdicting Eskom from disconnecting the electricity supply for the
purpose of compelling the municipalities
to pay their arrear debts to
Eskom.
[21]
The case of Resilient and the Chambers is that it is unconstitutional
and
unlawful for
Eskom to enforce its debt against the ELM and the TCLM by
interrupting the electricity supply in circumstances where
they, as
end-users, have met their payment obligations to the municipalities.
They assert that: (a) they have dutifully paid for
their electricity
but cannot compel the ELM and the TCLM to pay Eskom; (b) Eskom has
been dilatory in failing to recover the escalating
debt from the
municipalities and allowed it to escalate to unsustainable levels,
and (c) the interruption of electricity created
a public health and
environmental emergency because it threatened the functioning of the
municipal water reticulation and sewage
systems.
[22]
Accordingly, the case of Resilient and the Chambers was based on the
following grounds: First, Eskom was obliged
to supply electricity to
all end-users in terms of clauses 3.1 and 3.2 of its distribution
licence. Therefore, its decision to
interrupt the supply of
electricity to the entire municipality was not consonant with its
licence conditions. Second, Eskom’s
decision was tantamount to
an impermissible exercise of self-help and thus inconsistent with the
rule of law under s 1
(c)
of the Constitution and the right of
access to courts under s 34. Third, the decision was in breach of
s 6(2)
(e)
(iii) of the Promotion of Administrative Justice
Act 3 of 2000 (PAJA) because in taking it, Eskom failed to have
regard to all the
relevant considerations, particularly the potential
damage to the environment as a result of sources of water being
contaminated
due to damage to the municipal water and sewage systems.
It thereby put the health of the local residents at risk Fourth,
Eskom
had not exhausted the mechanism provided for in s 41 of the
Constitution and s 40 of the Intergovernmental Relations Framework
Act 13 of 2005 (IRFA) to resolve its disputes with the ELM and the
TCLM before taking its interruption decision.
[23]
For its part, Eskom contended that: first, there was no contractual
nexus between it on the one hand and Resilient
and the Chambers on
the other and, therefore, that it bore no constitutional obligation
to supply them with electricity. Secondly,
it was entitled to rely on
clause 9.2 of the ESAs, which accorded it the contractual right to
interrupt or even terminate altogether
the supply of electricity to
the ELM and the TCLM. Thirdly, its contractual right to interrupt or
terminate the supply of electricity
was buttressed by s 21(5)
(c)
of the ERA, which authorises it to reduce or terminate the supply of
electricity to the affected municipalities, when they have
contravened the payment conditions of its distribution licence.
Fourthly, s 41 of the Constitution and ss 40 and 41 of the
IRFA
were not implicated because there existed no dispute between it on
the one hand and the ELM and the TCLM on the other. On
this score,
Eskom asserted that the two municipalities had unequivocally admitted
liability to it, undertook to settle the existing
debt over an agreed
period, pay for their current consumption of electricity when billed
therefor by Eskom, but failed to honour
their undertaking. As a
further justification for its decision, Eskom asserted that it was
statutorily obliged to take the action
it did because s
51(1)
(b)
(i)
[18]
of the Public Finance Management Act 1 of 1999 (PFMA) obliges it to
recover revenue owed to it.
[24]
Although Eskom had consented to the grant of interim relief (albeit
at different times) in terms of which it was
directed to restore full
supply of electricity to the ELM and the TCLM, it nevertheless made
clear that it would resist the grant
of final relief.
[25]
In its answering affidavit in Eskom II, Eskom emphasised that the
failure of the municipalities to settle their
debts threatened its
financial viability. It stated:
‘
Between
the periods March 2016 to November 2016, total municipal debt owed to
Eskom had increased to R10.2 billion. As at the June
2017, the
overall municipal debts for various municipalities had risen
exponentially to R 11.45 billion of which R 2.536 billion
was owed by
various municipalities within Mpumalanga Province where the [TCLM] is
located. Eskom requires the income it earns from
the supply of
electricity to service its debts and meet is operational expenditure.
The debt owed to it adversely impact upon Eskom’s
financial
viability and its ability to deliver services to supply electricity
in the country.
In the
circumstances, it [became] unsustainable for Eskom to continue to
supply bulk electricity to municipalities that do not pay
for it. It
also [became] necessary for Eskom to take measures to reduce and
manage the rate of escalation of the debts in cases
where no payment
is received.
Eskom needs
to collect the outstanding debt to ensure its financial stability. It
has become urgent to collect revenue from all
offending
municipalities in order to ensure that: (i) its cost of debt for
capital expansion does not become unmanageable; (ii)
it is not
compelled to raise funds on the capital markets to meet operating
expenses; and (iii) it can maintain and expand electricity
generation
to meet the needs of all South Africans. This has become more
important in light of recent credit ratings downgrades
in relation to
Eskom’s debt.
…
Further, if
Eskom’s customers such as the municipality herein, do not pay
for the bulk electricity having been supplied with,
that will put
Eskom in a situation where it may not be able to deliver on its
mandate to generate electricity. That will lead to
the demise of
Eskom. Should that happen, the entire economy of the country will
collapse. No industry or institution will operate.
There will simply
be no economic activities that will take place in the country.
Therefore, the action taken by Eskom is necessary
in the
circumstances.
Eskom is,
moreover, statutorily obliged to collect all revenue owed to it in
terms of s 51(1)(
b
)(i) of the PFMA and municipalities have a
concomitant obligation to Eskom to pay for the electricity they
distribute to end-users.’
[26]
Eskom
then asserted
that
all of its engagements with the defaulting municipalities to recover
the debt and secure compliance with their obligations
have been
unsuccessful. Significantly, with respect to the acknowledgment of
debt by the TCLM the amount of some R400 million owing
was for the
period from 30 September 2002 to 7 June 2016. Yet, no concerted
effort was made to contain the debt before it spiralled
to an
unmanageable level over a 16 year period.
[27]
As already mentioned, in the high court the application for final
relief came before Hughes J who granted an order
reviewing and
setting aside Eskom’s decisions to embark on scheduled
interruptions of electricity to the ELM and the TCLM,
together with
ancillary relief.
[28]
It concluded that Eskom had the power under s 21(5)
of
the ERA to interrupt
the
supply of electricity. But it nevertheless held further that Eskom
had failed to comply with the requirements of cooperative
governance,
as prescribed in s 41 of the Constitution and read with ss 40 and 41
of the IFRA, before taking the impugned decision.
It reasoned as
follows:
‘
It
is apparent that there is a dispute with regards to payments due to
Eskom by the two municipalities concerned. It is common cause
that
both parties have constitutional duties and obligations towards the
public at large. Both parties in my view, have failed
the public at
large; on the one hand we have the delinquent municipalities and on
the [other] hand we have Eskom having not been
paid by the
municipalities opting to deprive the public of basic services in
terms of the Constitution and the Bill of Rights.
In conclusion it is
evident to me that Eskom and the municipalities failed to adopt the
dispute mechanism at their disposal in
terms of the IRFA.
In
terms of s 6(2)
(e)
(iii)
of the PAJA, the failure on the part of Eskom and the municipalities
to exhaust alternative remedies and procedures before
embarking on
the procedure of supply interruptions by Eskom, warrants the grant of
the review sought. This section makes provision
for a court to review
an administrative action if relevant considerations were not
considered. I agree with the amici that in this
instance, the failure
to pursue the process and mechanism, as is found in IFRA, would
constitute a ground for review.’
[19]
Constitutional
and statutory framework
[29]
Following upon the detailed factual background canvassed above, it is
now necessary to make reference to the constitutional
and statutory
obligations that municipalities in the local sphere of government
bear. First, s 151(1) of the Constitution establishes
the local
sphere of government, which consists of municipalities throughout the
territory of the Republic. Subsection (2) vests
the executive and
legislative authority of municipalities in their Municipal Councils.
Each municipality has ‘the right to
govern, on its own
initiative, the local government affairs of its community, subject to
national and provincial legislation, as
provided for in the
Constitution.’
[20]
[30]
Section 152, in turn, deals in broad terms with the objects of local
government. It provides:
‘
(1)
The objects of local government are—
(a)
to
provide democratic and accountable government for local communities;
(b)
to
ensure the provision of services to communities in a sustainable
manner;
(c)
to
promote social and economic development;
(d)
to
promote a safe and healthy environment; and
(e)
to
encourage the involvement of communities and community organisations
in the matters of local government.
(2) A
municipality must strive, within its financial and administrative
capacity, to achieve the objects set out in subsection (1).’
[31]
In order to fulfil its constitutional mandate as envisioned in s 152,
a municipality is required, in terms of s
153
(a)
, to
‘structure and manage its administration and budgeting and
planning processes to give priority to the basic needs of
the
community, and to promote the social and economic development of the
community’. It is also necessary to make reference
to s 154 of
the Constitution. The provision is headed ‘Municipalities in
cooperative government’ and provides as follows
in subsection
(1):
‘
The
national government and provincial governments, by legislative and
other measures, must support and strengthen the capacity
of
municipalities to manage their own affairs, to exercise their powers
and to perform their functions.’
[32]
Pursuant to the constitutional mandate conferred and the
constitutional duty imposed, national government enacted
various
legislative measures in order to give effect to the dictates of the
Constitution. Relevant for present purposes are: the
Housing Act 107
of 1997 (the
Housing Act), the
Local Government: Municipal Systems
Act 32 of 2000 (the Municipal Systems Act), and the Local Government:
Municipal Finance Management
Act 56 of 2003 (MFMA), the latter
applying to all municipalities, municipal entities, and to national
and provincial organs of
state to the extent of their financial
dealings with municipalities.
[21]
[33]
Section 4 of the Municipal Systems Act, dealing with the rights and
duties of municipal councils, provides
,
amongst others
in
subsection (2) that:
‘
The
council of a municipality, within the municipality’s financial
and administrative capacity and having regard to practical
considerations, has the duty to
-
…
(f)
give members of the local community equitable
access to the municipal services to which they are entitled…’
Moreover, s 73 states that:
‘
(1) A municipality must give effect to the
provisions of the Constitution and—
(a)
give
priority to the basic needs of the local community;
(b)
promote
the development of the local community; and
(c)
ensure
that all members of the local community have access to at least the
minimum level of basic municipal services.
(2) Municipal services must—
(a)
be
equitable and accessible;
(b)
be
provided in a manner that is conducive to—
(i) the prudent, economic, efficient
and effective use of available resources;
and
(ii) the improvement of standards of quality
over time;
(c)
be
financially sustainable;
(d)
be
environmentally sustainable; and
(e)
be
regularly reviewed with a view to upgrading, extension and
improvement.’
[34]
Section 9
of the
Housing Act, in
respect of the functions of
municipalities, reads as follows in subsection (1)
(a)
(iii):
‘
Every
municipality must, as part of the municipality's process of
integrated development planning, take all reasonable and necessary
steps within the framework of national and provincial housing
legislation and policy to—
(a)
ensure
that—
…
(iii) services in respect of water, sanitation,
electricity, roads, stormwater drainage and transport are provided
in
a manner which is economically efficient;’
[35]
The object of the MFMA is ‘to secure sound and sustainable
management of the fiscal and financial affairs
of
municipalities’.
[22]
It
seeks to do so by establishing norms and standards and other
requirements for, amongst other things, ‘the handling of
financial problems in municipalities’.
[23]
Section 139
, which is headed ‘[m]andatory provincial
interventions arising from financial crises’, provides in
subsection (1) that:
‘
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;
(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 (l)
(a)
and of any determination and
assessment received in terms of subsection (l)
(a)
(v)
(aa)
to—
(a)
the municipality;
(b)
the Cabinet member responsible for
local government: and
(c)
the Minister.
(3) An
intervention referred to in subsection (1) supersedes any
discretionary provincial intervention referred to in
section 137
,
provided that any financial recovery plan prepared for the
discretionary intervention must continue until replaced by a recovery
plan for the mandatory intervention.’
[36]
Section 139(5) of the Constitution provides:
‘
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 or its financial
commitments…’
[24]
If a provincial executive cannot, or does not, or does
not adequately exercise
the
powers or perform the functions referred to in subsections (4) and
(5), the national executive must intervene in the stead of
the
relevant provincial executive.
[25]
[37]
Finally, s 1 of the Constitution decrees that the Republic of South
Africa is a single, sovereign and democratic
state founded on certain
values ‘to ensure accountability, responsiveness and
openness’.
[26]
The
issues
[38]
The principal issues for adjudication in Eskom I and Eskom II are:
(a)
whether the contractual and constitutional disputes relating to the
moneys owed to Eskom and, in particular,
the manner in which Eskom
sought to recover them constituted intergovernmental disputes as
contemplated in s 41 of the Constitution
and s 40 of the IRFA;
(b)
whether Eskom was in law entitled to invoke s 21(5) of the ERA
without a court order authorising it
to do so.
The
subsidiary issues are whether:
(i)
Eskom’s decision to interrupt the bulk supply of electricity to
the ELM and the TCLM was
susceptible to review, and if so, whether
such decision was irrational and unconstitutional; and
(ii)
if s 41 of the Constitution and s 40 of the IRFA
are
found to apply, whether Eskom failed first to exhaust the alternative
avenues contemplated in s 41 and s 40 respectively.
[39]
With respect to the appeal of the Thaba Chweu
municipal
appellants, the sole issue is whether they should have been ordered
to bear the costs of the Chambers in Eskom II.
Discussion
[40]
The relevant provisions of the MFMA must now be considered in detail.
The overarching purpose of this Act is apparent
from its preamble. It
is to ‘secure sound and sustainable management of the financial
affairs of municipalities and other
institutions in the local sphere
of government. Section 44(1) provides that whenever a dispute of a
financial nature arises between
organs of state (one of which is a
municipality) the parties concerned must promptly take all reasonable
steps to resolve the dispute
out of court. Furthermore, subsection
(2) provides that if the National Treasury is not a party to the
dispute, the parties must
report the matter to National Treasury and
may request the latter to mediate or designate a person to mediate
between them.
[41]
In terms of s 135(1), the primary responsibility to identify and
resolve financial problems in a municipality rests
with the
municipality. Section 135(2) imposes a duty on a municipality to meet
its financial commitments. If a municipality encounters
a serious
financial problem, it must in terms of s 135(3)
(b)
‘notify the MEC for local government and the MEC for finance in
the province.’ Section 138 sets out criteria for determining
serious financial problems. It goes further to provide a list of
factors which either individually or cumulatively may indicate
a
serious financial problem. Two of those factors bear mentioning in
the context of this case. They are
:
(i) failure by a municipality to make
payments as and when due; and (ii) where a municipality has defaulted
on financial obligations
for financial reasons.
[42]
Section 136 imposes an obligation on the MEC for local government in
a province if
he or she
become
s
aware that a municipality is
experiencing a serious financial problem. In that event, the MEC is
obliged to promptly: (a) consult
the mayor to determine the facts;
(b) assess the seriousness of the situation and the municipality’s
response to that situation;
and most importantly (c) determine
whether the situation justifies or requires an intervention in terms
of s 139 of the Constitution.
Moreover, in terms of s 136(2) the
MEC must, if the financial situation has been caused by or resulted
in a failure by the
municipality to comply with an executive
obligation in terms of legislation or the Constitution, and the
conditions for intervention
in terms of s 139 of the Constitution are
met, promptly decide whether or not to intervene in the municipality.
[43]
Section 150 provides for the intervention of the national executive
where the provincial executive ‘cannot
or does not or does not
adequately exercise the powers or perform the functions’
referred to in s 139(4) or (5) of the Constitution.
It reads:
‘
(1)
If the conditions for a provincial intervention in a municipality in
terms of section 139(4) or (5) of the Constitution are
met and the
provincial executive cannot or does not or does not adequately
exercise the powers or perform the functions referred
to in that
section, the national executive must—
(a)
consult
the relevant provincial executive; and
(b)
act
or intervene in terms of that section in the stead of the provincial
executive.
(2) If the
national executive intervenes in a municipality in terms of
subsection (1)—
(a)
the
national executive assumes for the purposes of the intervention the
functions and powers of a provincial executive in terms
of this
Chapter;
(b)
the
Minister assumes for the purposes of the intervention the functions
and powers of an MEC for finance in terms of this Chapter;
and
(c)
a
reference in this Chapter—
(i) to a provincial executive must be
read as a reference to the national executive;
(ii) to an MEC for finance must be read as a
reference to the Minister; and
(iii) to a provincial intervention must be read as
a reference to a national intervention.’
[44] I revert briefly to the ERA. Section 2
thereof sets out its objects which,
in relevant part, are to:
‘
(a)
achieve the efficient, effective, sustainable and orderly development
and operation of electricity supply infrastructure
in South Africa;
(b)
ensure
that the interests and needs of present and future electricity
customers and end users are safeguarded and met…
(d)
facilitate universal access to electricity;
…
(g)
facilitate a fair balance between the interests of
customers and end users, licensees, investors in the electricity
supply industry
and the public.’
[45]
Section 27 then deals with the duties of municipalities with respect
to electricity reticulation. It reads:
‘
Each municipality must exercise its
executive authority and perform its duty by—
(a)
complying with all the technical and operational
requirements for electricity networks determined by the Regulator;
(b)
integrating its reticulation services with its
integrated development plans;
(c)
preparing, implementing and requiring relevant
plans and budgets;
(d)
progressively ensuring access to at least basic
reticulation services through appropriate investments in its
electricity infrastructure;
(e)
providing basic reticulation services free of
charge or at a minimum cost to certain classes of end users within
its available resources;
(f)
ensuring sustainable reticulation services through
effective and efficient management and adherence to the national
norms and standards
contemplated in section 35;
(g)
regularly
reporting and providing information to the Department of Provincial
and Local Government, the National Treasury, the Regulator
and
customers;
(h)
executing its reticulation function in accordance
with relevant national energy policies; and
(i)
keeping
separate financial statements, including a balance sheet of the
reticulation business.’
[46]
As can be seen from the provisions of s 27 quoted in the preceding
paragraph, it imposes certain obligations on
municipalities. Notably
amongst those obligations, in the context of the facts of these
appeals, is the duty to regularly report
and provide information on
electricity reticulation to the Department of Provincial and Local
Government, the Regulator and customers.
And, significantly, to ‘keep
separate financial statements, including a balance sheet of the
reticulation business’.
Section
21(5) of the ERA
[47]
I now proceed to consider the argument advanced in relation to s
21(5) of the ERA. From the perspective of Resilient,
the Chambers and
Sakeliga, this issue raises the question whether Eskom in effect
resorted to ‘self-help’ when it invoked
s 21(5). In
Chief
Lesapo v North West Agricultural Bank and Another
[27]
the Constitutional Court held:
‘
No
one is entitled to take the law into her or his own hands. Self help,
in this sense, is inimical to a society in which the rule
of law
prevails, as envisioned by section 1
(c)
of our Constitution, which provides:
“
The
Republic of South Africa is one, sovereign, democratic State founded
on the following values:
…
(c)
Supremacy of the constitution and the rule of
law.”
Taking
the law into one’s own hands is thus inconsistent with the
fundamental principles of our law.’
[28]
[48]
Section 21 of the ERA which is headed ‘Power and duties of
licensee’ provides in relevant part of subsection
(5) thereof
that:
‘
(5)
A licensee may not reduce or terminate the supply of electricity to a
customer, unless—
(a)
the customer is insolvent;
(b)
the customer has failed to honour, or refuses to
enter into, an agreement for the supply of electricity; or
(c)
the customer has contravened the payment
conditions of that licensee.’
[49]
In the high court, Eskom argued that it was empowered in terms of
s 21(5) to interrupt or
even terminate electricity supply, where
a customer fails to honour the terms of the agreement for the supply
of electricity or
has contravened the payment conditions of the
licensee. On this score Eskom strongly relied on the judgments of the
Constitutional
Court and this Court in
Rademan.
In
Rademan
v Moqhaka Municipality and Others
[29]
the question that confronted this Court was whether the respondent
municipality was empowered to interrupt the supply of electricity
without having to approach a court first to seek a court order
authorising it to discontinue the supply of services. In answering
this question in the affirmative, this Court said:
‘
Such
a proposition is both unrealistic and untenable. Given the rate of
the protests and demonstrations for delivery across the
country
concomitant with the refusal by ratepayers to pay their rates and
taxes and fees for municipal services, I am of the view
that it would
not be practical for municipalities to pursue these matters in court.
It cannot be gainsaid that such a step would
result in the
municipalities being mired in such cases, losing precious time in the
process and incurring high legal bills unnecessarily.
I have no
doubt these powers were given to municipalities to enable them to
collect all moneys that are due and payable to them
in the most
cost-effective manner. Commenting on the power of a municipality to
discontinue municipal service as a means of getting
the ratepayers to
pay their accounts, Yacoob J remarked as follows in
Mkontwana v
Nelson Mandela Metropolitan Municipality, Bisset and Others v Buffalo
City Municipality and Others; Transfer Rights
Action Campaign and
Others v MEC, Local Government and Housing, Gauteng and Others
(Kwazulu-Natal Law Society and Msunduzi Municipality
as Amici Curiae)
2005 (1) SA 530
(CC) para 52:
“
It
is emphasised that municipalities are obliged to provide water and
electricity and that it is therefore important for unpaid
municipal
debt to be reduced by all legitimate means. It bears repeating that
the purpose is laudable, has the potential to encourage
regular
payments of consumption charges, contributes to the effective
discharge by municipalities of their obligations and encourages
owners of property to fulfil their civic responsibility.”’
[30]
[50]
A further appeal against this judgment to the Constitutional Court
was unsuccessful.
[31]
Dealing
with s 21(5)
(b)
,
the Constitutional Court said that the provision contemplates two
scenarios. The first is where there is an agreement between
a
resident and the municipality to supply electricity by the
municipality to the customer, and the customer refuses to honour the
agreement. The other is where there is no agreement for the supply of
electricity and the customer refuses to enter into an agreement.
The
Court concluded that ‘[i]n either case the municipality would
be entitled to cut off the supply of electricity to the
resident or
customer if it were already supplying electricity to the
customer’.
[32]
[51]
Eskom submitted that here there was no dispute between it on the one
hand and the ELM and the
TCLM
on the other. This was because the two municipalities admitted that
they owed money to Eskom and signed acknowledgments of
debt in terms
of which they undertook to settle the debt in agreed monthly
instalments. When they failed to comply with the agreement
Eskom was
left with no other option but to implement its decision to interrupt
bulk electricity supply. In this regard Eskom, as
previously stated,
relied both on s 21(5) of the ERA and clauses 9.1, 9.2 and 22.4 of
the ESAs.
[52]
In their heads of argument Resilient, the Chambers and Sakeliga
respectively contended that it was not open to
Eskom to invoke s
21(5) without recourse to litigation. They argued that to construe s
21(5) to mean that Eskom could interrupt
or terminate the electricity
supply to an entire municipality without judicial supervision would
be a violation of ss 1
(c)
and 34
[33]
of the
Constitution. However, when it soon became clear that this contention
was running into headwinds, counsel for Resilient
found himself
unable to press the argument. But counsel for the Chambers and
Sakeliga persisted. They argued that in the context
of the ERA a
municipality which is a licensee in its own right, and licenced by
the NERSA to reticulate or on-sell electricity
distributed to it by
Eskom to end-users cannot be regarded as a customer.
[53]
Relying on
Jaftha v
Schoeman and Others, Van Rooyen v Stoltz and Others
[34]
and certain other decisions of the Constitutional Court,
[35]
counsel for the Chambers submitted that because of the egregious
nature of the rights likely to be violated by the termination
of
electricity to a municipality, s 21(5) should be interpreted so as to
require prior judicial authorisation of any decision by
Eskom to
interrupt or terminate the supply of electricity to a municipality.
In
Jaftha
the Constitutional Court had occasion to say the following:
‘
Judicial
oversight permits a magistrate to consider all the relevant
circumstances of a case to determine whether there is good
cause to
order execution. The crucial difference between the provision of
judicial oversight as a remedy and the possibility of
reliance on ss
62 and 73 of the Act is that the former takes place invariably
without prompting by the debtor. Even if the process
of execution
results from a default judgment the court will need to oversee
execution against immovables. This has the effect of
preventing the
potentially unjustifiable sale in execution of the homes of people
who, because of their lack of knowledge of the
legal process, are
ill-equipped to avail themselves of the remedies currently provided
in the Act.’
[36]
There,
the applicants in the two cases had their homes sold in execution for
paltry amounts after they had fallen into arrears with
their
payments. They applied to the high court for orders setting aside the
sales in execution, and interdicting the registration
of transfer of
their homes to the persons who had purchased them by challenging the
constitutionality of s 66(1)
(a)
of Act 32 of 1944 to the
extent that it permitted the sale of a debtor’s home without
affording the debtor adequate protection.
The applicants failed in
the high court but were successful before the Constitutional Court.
[54]
Counsel for the Chambers, therefore, contended that Eskom’s
reliance on the Constitutional Court’s
judgment in
Rademan
was misplaced. In developing this argument, it was submitted that
Rademan
is authority only for the proposition that ‘the
supply of electricity may be terminated or interrupted on the basis
of s
21(5) of the ERA by a municipality, for non-payment of any type
of municipal service, without the sanction of a court order. And,
further, for confirmation that the constitutional rights of residents
to receive electricity from a municipality are in fact limited
by the
provisions of s 21(5) of the ERA’. It certainly, argued
counsel, is no authority for the proposition that Eskom may
interrupt
or terminate the electricity supply to an entire municipality upon
default of payment by the municipality and, as a result,
adversely
affect even electricity consumers who are up to date with their
payments. This must be so, proceeded the argument, because
Eskom’s
power ‘is subject to the implied requirement of prior judicial
oversight’ given its far-reaching implications.
Counsel
accepted that in order to sustain this argument it would be necessary
to read in words to the effect that Eskom is required
to apply to
court on notice to all interested parties for an order authorising it
to exercise its power under s 21(5).
[55]
There is no merit in this contention. It cannot be sustained unless
the plain meaning of the language used in s
21(5), read contextually
and purposively, is supplemented by reading in the words suggested by
counsel for the Chambers. Indeed,
counsel readily and fairly accepted
this to be the case. As the constitutional validity of s 21(5) is not
in issue, it is not open
to this Court to adopt the construction that
counsel attributes to the section.
[37]
However, that is not to say that, in interpreting s 21(5), this Court
must not promote the spirit, purport and objects of the Bill
of
Rights as required by s 39(2) of the Constitution.
[38]
It is therefore correct, as counsel for Eskom argued, that s 21(5) of
the ERA empowers Eskom to reduce or terminate the supply
of
electricity to its customers in the circumstances spelt out in the
section. And that it may exercise that power without prior
authorisation by a court. All of the decisions upon which counsel for
the Chambers heavily relied turned on their peculiar facts
which are
materially distinguishable from the facts of the Eskom appeals. To
conclude, there can be no doubt that s 21(5) was adopted
with the
manifest purpose of obviating obstacles that distributors of
electricity would encounter if, in the circumstances spelt
out in the
section itself, they were required to seek prior judicial
authorization before interrupting or terminating the supply
of
electricity to a customer who refuses or is unable to pay for it.
[56]
However, this is not the end of the matter. It necessarily raises the
question whether, in the context of the ERA,
a municipality to which
Eskom supplies electricity as a distributor and licensee is,
vis-a-vis Eskom, a ‘customer’.
This is because Sakeliga
argues that a municipality is a licensee and not a ‘customer’
as envisaged in s 21(5). Section
1 of the ERA provides that, unless
the context indicates otherwise, ‘customer’ means ‘a
person who purchases
electricity or a service relating to the supply
of electricity’. It further defines ‘person’ to
‘include
any organ of state as defined in s 139 of the
Constitution’. A ‘distributor’ is defined as ‘a
person who
distributes electricity’ and ‘licensee’
in turn means ‘the holder of a licence granted or deemed to
have
been granted by the Regulator’ under the ERA. There can be
no doubt that for purposes of the ERA both the ELM and the TCLM
are
licensees and distributors of the electricity supplied to them by
Eskom, which they in turn supply to their customers or end-users.
[39]
[57]
Sakeliga’s contention does not bear scrutiny. To uphold it
would result in Eskom being precluded from invoking
s 21(5) not only
against municipalities which are distributors in their own right but,
crucially, also against any other entity
that distributes bulk
electricity supplied by Eskom. Thus, on a contextual and purposeful
construction of s 21(5) the contention
for which Sakeliga contends is
untenable.
[58]
But when it comes to municipalities as distributors of electricity,
further considerations would come into play.
Terminating the supply
of electricity to an entire municipality in the circumstances
provided for in s 21(5) would be a radical
step. Such reduction or
termination of the supply of electricity would adversely affect every
consumer within the affected municipality.
Indeed, it would have the
effect of collapsing the entire municipality, rendering it unable to
fulfil its constitutional and statutory
mandate to provide basic
services. The objects of local government spelt out in s 152 of the
Constitution would be subverted. And
a municipality whose electricity
supply is terminated by Eskom would not be able to ‘give
members of the local community
equitable access to the municipal
services to which they are entitled’ as required by s 4(2)
(f)
of the Municipal Systems Act. Nor would such a municipality be able
to provide services in respect of water, sanitation and electricity
in terms of
s 9(1)
(a)
(ii) of the
Housing Act as
these services
rely on electricity for their functionality.
[59]
There can be no doubt about the developmental role of legislative
measures like the Municipal Structures Act which,
in its preamble,
recognises, amongst other things, the fundamental importance of local
government to democracy. The Municipal Structures
Act also seeks to
ensure sustainable, effective and efficient municipal services, and
to promote social and economic development
in a safe and healthy
environment. Without the supply of electricity to a municipality, all
of these developmental and transformative
goals would be nothing more
than a dream deferred with deleterious effects to local communities.
Thus, it is manifest that these
legislative measures seek to foster
an integrated co-ordinated approach to the provision of municipal
services to local communities.
[60]
It is as well to remember that s 1 of the Constitution constitutes
the Republic of South Africa as ‘one,
sovereign, democratic
state’ founded on certain fundamental values. In addition, s
154 of the Constitution decrees that the
‘national government
and provincial governments, by legislative and other measures, must
support and strengthen the capacity
of municipalities to manage their
affairs, to exercise their power and to perform their duties’.
There is also s 4(2) of
the Municipal Systems Act that imposes a duty
on municipalities together with other organs of state, like Eskom, to
contribute
to the progressive realisation of the fundamental rights
contained in ss 24, 25, 26, 26, 27 and 29 of the Constitution.
Accordingly,
before Eskom decides to invoke its power under s 21(5)
to interrupt the supply of electricity to an entire municipality, it
must
,
as
an organ of state, be mindful of its constitutional obligations.
Intergovernmental
disputes
[61]
Was Eskom required to comply with s 41(3) of the IRFA before taking
the decision to interrupt electricity supply
to the municipalities
herein concerned because of their failure to pay for the electricity
supplied? The short answer to this question
is: Yes. I elaborate on
this below. Section 41 of the Constitution deals with principles of
cooperative government and intergovernmental
relations. It provides
in relevant part that:
‘
(1)
All spheres of government and all organs of state within each sphere
must—
(a)
preserve
the peace, national unity and the indivisibility of the Republic;
(b)
secure
the well-being of the people of the Republic;
(c)
provide
effective, transparent, accountable and coherent government for the
Republic as a whole;
…
(h)
cooperate with one another in mutual trust and
good faith by—
…
(ii) assisting and supporting one another;
(iii) informing one another of, and consulting one
another on, matters of common interest;
(iv) coordinating their actions and legislation
with one another;
(v) adhering to agreed procedures; and
(vi) avoiding legal proceedings against one
another.’
[62]
Section 41 goes on to state as follows:
‘
An
organ of state involved in an intergovernmental dispute must make
every reasonable effort to settle the dispute by means of mechanisms
and procedures provided for that purpose, and must exhaust all other
remedies before it approaches a court to resolve the dispute.’
[40]
The
importance of this mandate is then bolstered by subsection (4), which
empowers courts to decline entertaining disputes that
have not first
legitimately travelled through the extra-curial mechanisms designed
and available for that purpose.
[63]
The IRFA is the legislative measure contemplated in s 41(2) of the
Constitution. In its preamble, the broad object
of s 41 is taken
further by stating, amongst other things, that ‘all spheres of
government must provide effective, efficient,
transparent,
accountable and coherent government for the Republic to secure the
well-being of the people and the progressive realisation
of their
constitutional rights’. It goes on to state that the pervasive
need for government to redress the legacies of apartheid
and
discrimination are ‘best addressed through a concerted effort
by government in all spheres to work together and to integrate
as far
as possible their actions in the provision of services, the
alleviation of poverty and the development of our people and
our
country’. Whilst recognising that piecemeal legislation exists
to regulate this area in particular parts of the government,
it
deemed it necessary ‘to establish a general legislative
framework applicable to all spheres and in all sectors of government
to ensure the conduct of intergovernmental relations in the spirit of
the Constitution’.
[64]
The long title of the IRFA states that the object of the Act is ‘to
establish a framework … to promote
and facilitate
intergovernmental relations; to provide for mechanisms and procedures
to facilitate the settlement of intergovernmental
disputes’. In
particular, s 4 of the IRFA states that its object is:
‘
[T]o
provide within the principle of co-operative government
…
a framework for the national government,
provincial governments
and
local governments, and all organs of state
…
to facilitate coordination in the implementation
of policy and legislation including
—
…
(b)
effective provision of services;
…
(d)
realisation of national priorities’.
Accordingly,
there can be no doubt that there are important consequences flowing
from this particular relationship, meaning that
disputes arising
between different spheres of government and other state organs are
subject to the strictures of the IRFA.
[65]
Section 40 of the IRFA, which is headed ‘Duty to avoid
intergovernmental disputes’ provides:
‘
(1)
All organs of state must make every reasonable effort—
(a)
to
avoid intergovernmental disputes when exercising their statutory
powers or performing their statutory functions; and
(b)
to
settle intergovernmental disputes without resorting to judicial
proceedings.
(2) Any
formal agreement between two or more organs of state in different
governments regulating the exercise of statutory powers
or
performance of statutory functions, including any implementation
protocol or agency agreement, must include dispute-settlement
mechanisms or procedures that are appropriate to the nature of the
agreement and the matters that are likely to become the subject
of a
dispute.’
[66]
Section 41 of the same Act, on the declaration of ‘formal
intergovernmental disputes’, reads:
‘
(1)
An organ of state that is a party to an intergovernmental dispute
with another government or organ of state may declare the
dispute a
formal intergovernmental dispute by notifying the other party of such
declaration in writing.
(2) Before
declaring a formal intergovernmental dispute the organ of state in
question must, in good faith, make every reasonable
effort to settle
the dispute, including the initiation of direct negotiations with the
other party or negotiations through an intermediary.’
It
is important to note that the s 41(2) obligation, to ‘make
every reasonable effort to settle the dispute’, is already
relevant before a dispute is declared a ‘formal
intergovernmental dispute’. Thus, in effect, organs of state
are obliged
at two (separate) stages of the process to resolve their
disputes with each other, by means of whatever mechanism or procedure
available to them in the circumstances, outside of the courts.
[67]
Both s 40 and s 41 make plain that an organ of state, as Eskom is,
has a constitutional and statutory duty to avoid
judicial proceedings
before a genuine attempt has been made to settle the dispute. To that
end, state organs must make every reasonable
effort, in good faith,
to settle the dispute without recourse to litigation. Moreover, where
a dispute is of a financial nature,
as in these proceedings, Eskom
and the ELM and the TCLM were required to promptly take all
reasonable steps necessary to resolve
the dispute. To this end,
organs of state have a statutory duty to report the matter to the
National Treasury for the latter to
mediate the dispute.
[41]
Contentions
of the parties
[68]
The contentions of counsel for Eskom (in both appeals) were
essentially threefold. First, it was submitted that
the IRFA found no
application in this litigation because the proceedings in the high
court were instituted by private entities
and not by one organ of
state against another. Furthermore, and in any event, continued the
submission, even accepting that the
IRFA applied, this would not
avail Resilient and the Chambers because the three organs of state,
that is Eskom and the two municipalities,
had, as amongst themselves,
reached agreement in relation to the amounts owed by the two
municipalities to Eskom and how they were
to be paid off.
[69]
In addition, counsel in Eskom II argued that, in any event, s 41 of
the IRFA was not raised in the papers and therefore
not dealt with by
Eskom either in its opposing papers or in argument in the high court.
Thus, counsel contended that it was not
open to the Chambers and
Sakeliga to raise it on appeal. Counsel emphasised that the issue of
whether or not s 41 of the IRFA had
been complied with was a
fact-based enquiry that could not be raised at the eleventh hour on
appeal. But even if it had timeously
been raised, s 41 of the IRFA,
being a law of general application, would still not apply when s 30
of the ERA which is the specific
legislation dealing with disputes
between licensees under the ERA was of direct application. Of course,
the latter contention accords
with the principle that where a
statutory provision in a general legislative instrument regulates the
same subject dealt with in
a specific legislative instrument, the
latter takes precedence over the former.
[42]
[70]
For its part, Sakeliga submitted in its heads of argument that Eskom
and the municipalities concerned did ‘not
fully exhaust other
interventions and dispute resolution mechanisms first in order to
address’ the failures by the ELM and
the TCLM to meet their
payment obligations to Eskom before the latter resorted to its
decision to interrupt the electricity supply
‘with potentially
disastrous consequences to the local communities and the local
economies’, thereby adversely affecting
paying customers.
[71]
In opposing Eskom’s appeals, counsel for Resilient, the
Chambers and the ELM made common cause. Broadly stated,
their
contentions, so far as they are relevant to this aspect of the
appeals, were:
(a)
Eskom failed to comply with the constitutional requirements of
cooperative governance as given effect
to by the IRFA particularly
having regard to the fact that: (i) the interruption decision would
have ‘catastrophic implications
for [other] organs of state’
(ie the ELM and the TCLM); (ii) Eskom had for several years remained
supine whilst the electricity
debt soared to unsustainable levels for
the two local municipalities involved;
(b)
that the dispute amongst the parties related to both the quantum of
the debt and the manner in which
it could be liquidated;
(c)
Eskom’s decisions amounted to self-help which is inconsistent
with the Constitution when
there was no statutory power authorising
Eskom to disconnect electricity to an entire municipality;
(d)
that the decisions were not rationally related to the purpose for
which they were taken; and
(e)
the interruption decisions were unconstitutional to the extent that
their implementation would
render the ability of the municipalities
concerned to comply with their constitutional obligations to provide
basic services unattainable.
[72]
Before considering the contentions of the parties, it is necessary to
determine the antecedent issue of what constitutes
a dispute.
[43]
This is necessary because Eskom argues that there was no dispute
between organs of state. An analogous point to the one under
consideration here was considered over seven decades ago in
Williams
v Benoni Town Council
[44]
in which the registered owner of an agricultural holding contested
the assessment rate levied by a municipal council in respect
of his
property. The council argued that there was no dispute because the
parties were still engaged in discussions to resolve
the impasse. In
rejecting this argument, Roper J who gave the judgment in the case,
said:
‘
I
am unable to agree
…
that there is
no “dispute” until the parties are at arm’s length.
A dispute exists when one party maintains one
point of view and the
other party the contrary or a different one. When that position has
arisen the fact that one of the disputants,
while disagreeing with
his opponent, intimates that he is prepared to listen to further
argument, does not make it any the less
a dispute.’
[45]
[73]
Most recently, the Constitutional Court was called upon in
Competition
Commission of South Africa v Hosken Consolidated Investments Ltd and
Another
[46]
to determine whether there was a ‘live dispute’ or merely
‘a difference of opinion’ between the parties
in that
matter.
The Court
had
the following to say (para 85):
‘
The
mere fact that parties had a difference of opinion regarding an
important jurisdictional issue suggests that there was a live
dispute. This is particularly so where the difference of opinion
existed between an important statutory entity such as the Commission
and parties who are involved in a proposed transaction that may
trigger the far reaching investigative powers of the Commission.’
[47]
[74]
As to the question
whether there is a dispute between Eskom on the one hand and the ELM
and the TCLM on the other, the following
bears emphasis. It is true
that there is no real dispute as to the existence of the debts owed
to Eskom by both the ELM and the
TCLM. Nor is there a dispute as to
the inability of these municipalities to make any meaningful payments
themselves due to their
parlous financial state. The real disputes
concerned the manner in which these two municipalities could be
enabled or empowered
to pay their debts to Eskom and thus whether it
was appropriate in the circumstances to interrupt the supply of
electricity to
exact payment from them. It was in relation to these
disputes that Eskom and the affected municipalities, in collaboration
with
the other state role players, were constitutionally obliged to
make ‘every reasonable effort’ to avoid or settle, but
failed to do so.
[75]
I am therefore persuaded that there was a live dispute between Eskom
on the one hand and the ELM and the TCLM on
the other, in relation to
the manner as to how the debt would be liquidated and the remedies
available to Eskom in the event of
default. That the two
municipalities involved signed acknowledgments of debt detailing how
the debt was to be liquidated cannot
assist Eskom. This must be so
because the acknowledgments of debt themselves under the heading
‘Default’ provided in
terms that ‘Eskom may
with
due regard to all the relevant legislation
… take whatever
legal remedies available to it including disconnection of supply of
electricity …’ (my emphasis).
In the context of the
facts of these proceedings the ‘relevant legislation’ is
the IRFA, s 139 of the MFMA and PAJA
[76]
Moreover, in signing the acknowledgments of debt the municipalities
did not thereby consent to the interruption
of electricity. On the
contrary, all indications point to the fact that there were always
sharp disagreements between the parties
as to whether it was open to
Eskom to interrupt electricity supply as a measure to coerce the ELM
and the TCLM to pay. This is
borne out by the fact that the ELM and
the TCLM applied for and were granted interim relief directing Eskom
to restore the electricity
supply following on the disastrous
consequences of the enforced interruption a few days earlier. There
can be little doubt that
in signing the acknowledgments of debt, the
municipalities sought to stave off the interruptions of bulk
electricity supply that
Eskom had all along threatened. And it was
unrealistic of Eskom to expect the ELM and the TCLM to pay off a debt
that had accumulated
over 15 years within 12 months when it was known
that they were in financial crisis.
[77]
In support of the contention that there was no dispute of the kind
contemplated in ss 40 and 41 of the IRFA and
s 44 of the MFMA, Eskom
heavily relied on an unreported judgment of the Free State Division
of the high court delivered on 28 May
2015.
[48]
There, the court held that where a municipality: (a) admits its
liability to Eskom in the amount claimed; (b) admits that it is
in
arrears; and (c) does not dispute that ‘it is obliged to pay
such arrears and any current liabilities’ no dispute
exists and
ss 40 and 41 of the IRFA therefore find no application. In my view
this judgment is not directly on point as it was
decided on its
peculiar facts. On a careful reading of the judgment it can hardly be
understood to mean that where a dispute does
indeed exist Eskom is
free from the strictures of ss 40 and 41 of the IRFA and s 44 of the
MFMA. In these proceedings, Eskom was,
at all times, aware that the
financial situation within the ELM and the TCLM was dire. This is
clear from what Eskom itself alleged
in its answering affidavit that:
‘there is a constitutional obligation on the part of the
National Department of Cooperative
Governance and Traditional Affairs
to intervene in the affairs of the municipality where the latter is
unable to fulfil its constitutional
obligations to provide services’.
[78]
I elaborate on why I earlier held that Eskom was required to comply
with s 41(3) of the IRFA before embarking on
the course it had chosen
in order to extract payment from the ELM and the TCLM. Municipalities
bear certain obligations to provide
their communities with basic
services, including electricity. The source of these obligations is
the Constitution itself, buttressed
by a number of statutory
provisions.
[49]
If anyone of
these obligations is breached by a municipality, the Constitution
provides the necessary remedies to resolve the breach.
[79]
As an organ of state, Eskom bears certain constitutional duties. The
relationship between Eskom on the one hand
and the ELM and the TCLM
on the other is more than merely a contractual one regulated purely
in terms of the ESAs that the parties
concluded. Eskom supplies bulk
electricity to the municipalities which, in turn, have a concomitant
duty to supply it to the end-users.
The unique feature of this
relationship is that Eskom, as an organ of state, supplies
electricity to local spheres of government
to secure the economic and
social well-being of the people. This then brings the relationship
within the purview of the IRFA.
[80]
It must therefore perforce follow that Eskom is under a
constitutional duty to ensure that municipalities, which
are solely
dependent on it for electricity supply, are enabled to discharge
their obligations under the Constitution. Thus, it
goes without
saying that Eskom cannot act in a way that would undermine the
ability of municipalities to fulfil their constitutional
and
statutory obligations to the citizenry. For as Froneman J said, in
Allpay Consolidated
Investment Holdings (Pty) Ltd and Others v Chief Executive Officer,
South African Social Security Agency and
Others
:
[50]
‘
Organs
of state have obligations that extend beyond the merely contractual.
In terms of s 8 of the Constitution, the Bill of
Rights binds
all organs of state. Organs of state, even if not state departments
or part of the administration of the national,
provincial or local
spheres of government, must thus “respect, protect, promote and
fulfil the rights in the Bill of Rights”.’
Accordingly,
Eskom’s decision to interrupt or terminate bulk electricity
supply to the entire municipality without prior compliance
with ss 40
and 41 of the IRFA, is inimical to the constitutional obligations
that it bears.
[8
1
]
In paragraph 77 above, mention is made that Eskom itself realised
that the parlous state in which the ELM and the
TCLM are warranted
intervention by the provincial government and, if need be, the
national government. But this avenue was not
explored because Eskom
was not prepared to wait for that process to unfold. The irony about
Eskom’s obdurate stance was that
(it had indulged the ELM and
the TCLM for far too long) Eskom had inexplicably failed to make any
serious attempt for more than
ten years to act in terms of
legislative prescripts like s 51(1) of the PFMA. As already
indicated, s 41(3) requires organs of
state to exhaust all other
remedies to resolve disputes before they approach a court. True, in
this instance, Eskom never approached
a court. Instead, it took the
impugned decisions to interrupt electricity supply to the
municipalities, hoping that doing so would
coerce the municipalities
to pay for the electricity supplied over several years. This, Eskom
asserts, had the desired effect in
the Sabie matter that was settled
between the parties. In taking this route, Eskom in effect
circumvented the consequences that
flow from the prohibition
contained in ss 40 and 41 of the IRFA against instituting proceedings
in a court to settle intergovernmental
disputes if the dispute has
not been declared a formal intergovernmental dispute, and all efforts
to resolve that dispute have
not been exhausted in terms of chapter 4
of the IRFA and proved unsuccessful. Nothing less than a ‘reasonable
effort, in
good faith’ to resolve the dispute will suffice.
[8
2
]
There was some suggestion that Eskom had complied with its statutory
duty under the IRFA in that it held meetings
with the ELM together
with the Premier of Mpumalanga, the provincial MEC and at one stage
including the Minister of Cooperative
Governance to seek a solution
to the ELM’s inability to pay. At these meetings the
representatives of the ELM once more undertook
to settle their debt
to Eskom in monthly instalments which the municipality still failed
to honour. I shall not burden this judgment
with the details of those
meetings ostensibly held to find a lasting solution to the financial
crisis facing several municipalities
within Mpumalanga. Suffice it to
say that these attempts came to naught and were insufficient for
compliance with the precepts
of s 41 of the Constitution and ss 40
and 41 of the IRFA. Importantly, no attempt was made to engage the
National Treasury as required
by s 44 of the MFMA.
[8
3
]
Counsel for Eskom had another string in their bow. They argued that
even if it were found that there was a dispute
between the parties,
ss 40 and 41 of the IRFA would not be implicated. Counsel submitted
that s 39 of the IRFA provides that chapter
4
[51]
of the Act does not apply ‘to the settlement of specific
intergovernmental disputes in respect of which other national
legislation
provides resolution mechanisms or procedures’. They
contended that as the dispute in these proceedings arose out of the
supply
of electricity under the ERA, it was s 30
[52]
of the ERA that would find application.
[8
4
]
These contentions cannot be upheld. Section 30 deals with disputes
arising out of the ERA, and even then only if the
dispute is between
licensees, and the Regulator has been requested ‘by both
parties to the dispute’ to act as a mediator.
It therefore
cannot apply to a dispute where Eskom seeks to interrupt bulk
electricity supply to a municipality which, although
willing to
settle its indebtedness, is unable to do so because it is not only
facing financial crisis but also contests Eskom’s
right to
interrupt electricity. Such a dispute would trigger the application
of ss 40 and 41 of the IRFA. And absent every reasonable
effort to
settle the dispute, including negotiations through an intermediary,
it was not open to Eskom to implement its interruption
decision
without first exhausting the avenues prescribed under ss 40 and 41.
In addition, there is s 41 of the MFMA which prescribes
the process
that must be followed whenever a dispute of a financial nature arises
between organs of state one of which is a municipality.
This section
too requires the organs concerned to take all reasonable steps
necessary to resolve the dispute out of court.
Irrationality
challenge
[8
5
]
The two decisions taken by Eskom in issue in these proceedings were
also impugned on the basis that they were irrational.
When a decision
is sought to be reviewed on the basis of irrationality, the test of
rationality is concerned with the evaluation
of the relationship
between the means employed and the ends to be achieved. The
evaluation of the relationship seeks to determine,
not whether there
are means that can achieve the same purpose better than those chosen,
but whether the means employed are rationally
related to the purpose
for which the power was conferred.
[53]
[8
6
]
A rationality review also determines whether the process leading up
to the decision and the decision itself are rational.
The
Constitutional Court cautioned that it should not be lost from sight
that where there is an overlap between the reasonableness
and
rationality evaluations one is nevertheless dealing with discrete
concepts. In
Albutt
v Centre for the Study of Violence and Reconciliation and Others
the following was stated:
[54]
‘
The
executive has a wide discretion in selecting the means to achieve its
constitutionally permissible objectives. Courts may not
interfere
with the means selected simply because they do not like them, or
because there are other more appropriate means that
could have been
selected. But, where the decision is challenged on the grounds of
rationality, courts are obliged to examine the
means selected to
determine whether they are rationally related to the objective sought
to be achieved. What must be stressed is
that the purpose of the
enquiry is to determine not whether there are other means that could
have been used, but whether the means
selected are rationally related
to the objective sought to be achieved. And if, objectively speaking,
they are not, they fall short
of the standard demanded by the
Constitution.’
[8
7
]
Eskom’s avowed purpose for the interruptions of the supply of
electricity was stated in its heads of argument
as ‘two
pronged’. Eskom asserted that ‘First, it was to collect
[the outstanding] debt; second … to reduce
and manage the rate
of escalation of the debt’. Eskom contested its adversaries’
assertions that there were less drastic
means available to it to
address the failure of the ELM and the TCLM to honour their financial
obligations, describing these as
misplaced. The less drastic means
suggested by Eskom’s adversaries were: (i) withdrawal of the
distribution licences issued
by NERSA to the ELM and the TCLM; (ii)
recommending to the minister to appoint alternative licensees in
their stead; (iii) Eskom
itself taking over the distribution
functions. But Eskom argued that the measures suggested by its
adversaries fail to take account
of the historical debt currently
overdue and how it would be paid.
[
88
]
There is one crucial fact that is uncontentious in relation to
Eskom’s appeals. It is that Eskom’s decision
to interrupt
bulk electricity supply to the ELM and the TCLM was used as a
leverage to extract payment. This drastic measure, with
its
catastrophic consequences as detailed above, was decided upon at a
time when Eskom knew full well that it would not result
in the
financially strapped municipalities settling their debt, at least
within the short space of time allowed by Eskom when they
had all
along struggled to do so for several years, and since 2002 in the
case of the TCLM. And these measures were adopted by
Eskom against
the backdrop that Eskom itself had come to realise that without the
intervention of both the national government
and the provincial
government it was beyond the power of the ELM and the TCLM to turn
their fortunes around on their own. Eskom
sought to justify its
decisions by contending that the other reason why it embarked on is
chosen course was to contain the spiralling
of the debt. I have
already explained above that Eskom, as an organ of state, cannot act
in a manner that renders another organ
of state unable to discharge
its constitutional and statutory obligations. It must therefore
follow that Eskom’s impugned
decisions were irrational.
[
89
]
Finally, I deal briefly with the other basis upon which the high
court found that Eskom's impugned decisions fell
to be reviewed and
set aside under s 6(2)(1)(iii)of PAJA. In this regard the high court
said the following (para 54):
‘
In
terms of section 6(
e
)(iii)
of PAJA, the failure on the part of Eskom and the municipalities to
exhaust alternative remedies and procedures before embarking
on the
procedure of supply interruptions by Eskom, warrants the grant of the
review sought. This sections makes provision for a
court to review an
administrative action if relevant considerations were not
considered.’
[
90
]
There can be no doubt that Eskom’s decisions constitute
administrative action as contemplated in s 1 of PAJA.
In
Minister
of Defence and Military Veterans v Motau and Others
(2014) ZACC 18
;
2014 (5) SA 69
(CC) para 33 the Constitutional Court
held that administrative action, in essence, comprises the following
elements: (a) a decision
of an administrative nature; (b) by an organ
of state or a natural or juristic person; (c) exercising a public
power or performing
a public function; (d) in terms of legislation or
empowering provision; (e) that adversely affects rights; (f) has
direct and external
legal effect; (g) that does not involve the
excluded categories.
[55]
[
91
]
It will be recalled that Eskom took its impugned decisions for two
reasons. The first was to force the ELM and the
TCLM to pay the
arrear debt. This was despite the fact that Eskom well knew that this
purpose could not be achieved as the two
municipalities were unable
to pay the arrears within the time stipulated. In addition, the
planned interruptions of bulk electricity
supply also failed to
address the underlying reasons for the inability to pay both the
arrear and current debt. Thus, the decisions
precipitately taken by
Eskom failed to take into account relevant considerations that should
have informed those decisions. Accordingly,
the high court cannot be
faulted for concluding that Eskom’s impugned decisions fell to
be set aside on this basis too.
Costs
[
92
]
For the aforegoing reasons it must follow that Eskom’s appeals
fall to be dismissed. The dismissal of Eskom’s
appeals must
necessarily carry with it a costs order against Eskom. But such costs
order will be restricted only to Eskom’s
adversaries with the
exclusion of the amicus curiae. This must be so for as the
Constitutional Court pertinently remarked ‘it
is unusual and
indeed it will rarely be appropriate for costs to be awarded in
favour of an amicus curiae’.
[56]
Conclusion
[
93
]
There is one final issue to address in relation to the Eskom appeals.
Earlier, I mentioned that although the NERSA,
the Minister of
Cooperative Governance and the MEC were cited as necessary parties in
the high court proceedings, none of them
participated in the
litigation. They all elected to remain supine. But the record
discloses that the Minister of Cooperative Governance
and the MEC
were cited for good reason. This litigation brought to the fore the
question whether the ELM and the TCLM had the requisite
capacity to
effectively manage their affairs. All concerned knew for a
considerable time that they were facing a colossal crisis.
To this
end, s 155(6) and (7) of the Constitution provide that:
‘
(6)
Each provincial government must establish municipalities in its
province in a manner consistent with the legislation enacted
in terms
of subsections (2) and (3) and, by legislative or other measures,
must—
(a)
provide
for the monitoring and support of local government in the province;
and
(b)
promote
the development of local government capacity to enable municipalities
to perform their functions and manage their own affairs.
(7) The
national government, subject to s 44, and the provincial governments
have the legislative and executive authority to see
to the effective
performance by municipalities of their functions in respect of
matters listed in Schedules 4 and 5, by regulating
the exercise by
municipalities of their executive authority referred to in s 156
(1).’
[
94
]
The overwhelming evidence that emerges from the record demonstrates
that the ELM and the TCLM have been in financial
crisis for nearly
two decades. During 2016 and 2017 appeals were made to the Minister
of Cooperative Governance, the Premier of
Mpumalanga, and the MEC, by
Eskom and the municipalities in an attempt to rescue the ELM and the
TCLM from their financial quagmire.
But the endeavours fell short of
what is required by ss 41(1)
(h)
and 41(3) of the Constitution and ss 40 and 41 of the IRFA. When
agreement was reached between Eskom and the municipalities
on how
their substantial debt would be liquidated, there does not appear to
have been any monitoring, by the national government
and provincial
executive, of the implementation of the payment plan. The two
municipalities, hopelessly languishing in financial
distress, were
still left to their own devices at a time when it must have been
obvious that they lacked the capacity to turn their
fortunes around
on their own. And given their parlous financial state, it is hardly
surprising that they defaulted on their payment
arrangements with
Eskom.
[9
5
]
As already indicated above, Eskom is a business enterprise, albeit
with a developmental objective. As its constituent
Act decrees, it is
required, in playing its developmental role, to take into account its
financial sustainability and competitiveness.
It is estimated that
Eskom is currently owed some R 31 billion by municipalities
countrywide. The question then arises: can Eskom
on its own resolve
the widespread failure by some of the municipalities to pay for
electricity? It remains to be seen. But what
emerges from the record
in these proceedings is that without the constitutionally
[57]
and statutorily
[58]
mandated
intervention by both the national and provincial governments, the
prospect of Eskom recovering its debt seems bleak. This
is an
untenable situation, which is precisely what s 41 of the Constitution
was designed to avert.
[9
6
]
A situation where Eskom, as an organ of state, is driven to resorting
to all manner of ways to coerce municipalities
which are a critical
sphere of government in the constitutional scheme,
to
pay when they are unable to do so
is
plainly undesirable. This dire situation obliges the national and
provincial governments to intervene, consonant with the letter
and
spirit of the constitutional
[59]
and statutory prescripts to which reference has been made in this
judgment.
[9
7
]
On this score, what the Gauteng Division of the High Court said in
Cape Gate (Pty) Ltd
and Others v Eskom Holdings (SOC) Ltd and Others
,
[60]
with reference to s 139(7) of the Constitution, bears repeating. It
said:
‘
[T]here
are only two sources of funds on which Eskom can rely for payment in
respect of on-going supply of electricity to Emfuleni.
The one is
Emfuleni’s paying consumers, and the other is, ultimately,
national treasury. And since in this country civilized
society cannot
exist and the economy cannot function without Eskom remaining
economically viable, national treasury and ultimately
National
Government must inevitably step in when and where local authorities
fail; that is what the Constitution expressly envisages.’
[61]
What
this means is that without the national and provincial governments’
intervention in the financial crises experienced
by the ELM and the
TCLM – and many other similarly-situated municipalities –
all are doomed. It is indeed a distressing
feature of this litigation
that those who are charged with certain responsibilities in terms of
the Constitution and other statutory
prescripts appear to be failing
the people they are required to serve.
Case
no 583/2019: Thaba Chweu Local Municipality and Others v Sabie
Chamber of Commerce and Tourism and others
[
98
]
As already indicated, the appeal of the TCLM appellants is just about
the costs order made against them by the high
court and nothing else.
It is trite that an award of costs is a matter which is pre-eminently
in the discretion of the court considering
the issue of costs. It
enjoys a wide discretion, to be exercised judicially on a proper
consideration of all the relevant circumstances.
[
99
]
Cognisant of the fact that the high court – which sat as a
court of first instance – was vested with a
discretion in the
strict sense to determine the question of costs in the light of the
peculiar circumstances of the case, this
Court, sitting as a court of
appeal, will require cogent reasons before it can interfere with the
exercise of the high court’s
discretion. Thus, in
Giddey
NO v J C Barnard and Partners
[62]
the Constitutional Court, in a comparable situation, reiterated the
general rule that the approach of an appellate court to an
appeal
against the exercise of a discretion in the strict sense will largely
depend on the nature of the discretion concerned.
[10
0
]
Accordingly, where the discretion entails that the court of first
instance may have regard to a wide range of considerations,
an
appellate court will not readily interfere with the exercise of that
discretion on appeal. In
Giddey
,
O’Regan J explained it thus:
‘
The
ordinary approach on appeal to the exercise of a discretion in the
strict sense is that the appellate court will not consider
whether
the decision reached by the court at first instance was correct, but
will only interfere in limited circumstances; for
example, if it is
shown that the discretion has not been exercised judicially or has
been exercised based on a wrong appreciation
of the facts or wrong
principles of law. Even where the discretion is not a discretion in
the strict sense, there may still be
considerations which would
result in an appellate court only interfering in the exercise of such
a discretion in the limited circumstances
mentioned above.’
[63]
[
101
]
The Constitutional Court went on to say that the court of first
instance is best placed to make the assessment, noting that:
‘
it
would not be appropriate for an appellate court to interfere with
that decision as long as it is judicially made, on the basis
of the
correct facts and legal principles. If the court takes into account
irrelevant considerations, or bases the exercise of
its discretion on
wrong legal principles, its judgment may be overturned on appeal.
Beyond that, however, the decision of the court
of first instance
will be unassailable.’
[64]
[
102
]
More than a century ago, in
Fripp
v Gibson and Company
1913 AD 354
, Lord De Villiers CJ said (at 357-358):
‘
In
appeals upon questions of costs two general principles should be
observed. The first is that the Court of the first instance
has a
judicial discretion as to costs, and the second is that the
successful party should, as a general rule, have his costs. The
discretion of such Court, therefore, is not unlimited, and there are
numerous cases in which courts of appeal have set aside judgments
as
to costs where such judgments have contravened the general principle
that to the successful party should be awarded his costs.’
[
103
]
In order to succeed in their appeal, the TCLM appellants must, having
regard to the principles set out above, demonstrate that
the high
court failed to exercise its discretion judicially. This necessarily
entails that there must be grounds underpinning the
exercise of the
discretion because a discretion exercised on no grounds at all or
that was based on a misapprehension of the correct
facts cannot be
judicial. Where the court of first instance has exercised its
discretion capriciously or upon a wrong principle,
or has not brought
an unbiased judgment to bear on the question or has not acted for
substantial reasons, the appellate court would
be justified to
interfere.
[65]
[
104
]
The costs order of the high court, so far as it relates to the TCLM
appellants, was assailed on several grounds. These were that
the high
court failed to have proper regard to the fact that: (i) the
municipality was in a parlous financial state; (ii) its financial
capacity was severely constrained; (iii) the applicants before it had
abandoned the relief sought against them including the prayer
for
costs. It was therefore contended that having regard to these factors
the high court ‘failed to properly consider the
question of
costs’ thereby rendering its costs award vulnerable to
interference by this Court.
[
105
]
Against the backdrop set out above, the high court’s reasons
for lumping the TCLM appellants with, for example, Eskom whose
action
had precipitated the litigation in its costs award is dealt with in a
few laconic lines
[66]
as
follows:
‘
I
see no need to deprive the victorious party of its costs. I am also
not convinced that either Eskom or the municipalities should
not be
liable to pay costs. The matter is before court due to their actions
or non-actions… Therefore, costs are to follow
the result…’
The
high court made no attempt to explain why the TCLM appellants, in
particular, should still be mulcted in costs despite the fact
that
they had not opposed the application and, most importantly, no relief
was in the end sought against them. The fact that the
principal
target of the relief sought was Eskom, whose decision to interrupt
bulk supply of electricity to the TCLM was at the
core of the
dispute, was overlooked by the high court. Moreover, that the
Chambers as applicants had, during the hearing, unequivocally
abandoned the prayer for costs against the
TCLM
appellants does not appear to
have received the attention that it merited from the high court.
[
106
]
In the absence of any evidence that the TCLM appellants had directly
brought about the litigation or had done something wrong
connected
with the conduct of the litigation, I can see no justification for
mulcting them in costs. This conclusion ineluctably
drives me to find
that the high court did not exercise the wide discretion it enjoyed
judicially.
[
107
]
It remains to deal with the issue of costs in relation to this
appeal. The TCLM appellants were represented by two counsel at
the
hearing. And leading counsel asked for costs of two counsel. As
indicated earlier, two counsel were employed for the limited
purpose
of preparing heads of argument on costs and appearance in this Court
to argue the appeal. In response to a question from
a member of the
Bench, counsel readily accepted that the employment of two counsel
for this limited purpose was not reasonably
necessary. Thus, costs of
one counsel will be allowed.
[
108
]
In all the circumstances, therefore, the appeals in Eskom I and Eskom
II must fail and the appeal of the
TCLM
appellants must succeed.
[
109
]
The following orders are made:
Case
no 663/2019:
Eskom Holdings SOC Limited v Resilient Properties
(Pty) Ltd and Others
:
The
appeal is dismissed with costs, including the costs of two counsel
where so employed.
Case
no 664/2019:
Eskom Holdings SOC Limited v Sabie Chamber of
Commerce and Tourism and Others
:
The
appeal is dismissed with costs, including the costs of two counsel
where so employed.
Case
no 583/2019:
Thaba Chweu Local Municipality and Others v Sabie
Chamber of Commerce and Tourism and Others
:
1
The appeal against para
graph
2
of the order of the
high court
is
upheld.
2 The first,
second and third respondents shall pay the costs of the appeal
jointly and
severally, the one paying the others to be absolved.
3 Paragraph 2
of the order of the high court is set aside and in its place is
substituted
the following:
‘
The
costs of this application shall be borne by Eskom Holdings SOC
Limited, with the rest of the respondents being absolved.’
X
M PETSE
DEPUTY
PRESIDENT
SUPREME COURT
OF APPEAL
Appearances
For Appellant
in
case no
663/2019:
L T Sibeko SC (with him N H Moloto)
Instructed by:
Ngeno & Mteto
Inc., Pretoria
Kramer
Weihman & Joubert Attorneys, Bloemfontein
For First,
Second,
Third and
Fourth
Respondents:
M Chaskalson SC (with him C van der Spuy)
Instructed
by:
Kokinis Inc., Pretoria
McIntyre van der Post Attorneys, Bloemfontein.
For
Fifth Respondent: L B van Wyk SC (with him N
C Hartman)
Instructed
by:
Neuhof Khoza
Attorneys, Witbank
Hill, McHardy & Herbst Inc.,
Bloemfontein
For
amicus
curiae
: A T
Lamey
Instructed
by:
Kriek Wassenaar
& Venter Inc., Pretoria
Rosendorff Reitz Barry, Bloemfontein
For Appellant
in
case no
664/2019:
V S Notshe SC (with him M Gwala SC)
Instructed by:
Ngeno
& Mteto Inc., Pretoria
Kramer
Weihman & Joubert Attorneys, Bloemfontein
For First,
Second and
Third
Respondents:
A Katz SC (with him S Pudifin-Jones)
Instructed
by:
Van der Merwe & Ass Inc., Pretoria
Honey Attorneys, Bloemfontein.
For
amicus
curiae
: A T
Lamey
Instructed
by:
Kriek Wassenaar &
Venter Inc., Pretoria
Rosendorff Reitz Barry, Bloemfontein
For Appellant
in
case no
583/2019:
W Mokhare SC (with him Z Gumede)
Instructed by:
Matsane Attorneys
Inc., Nelspruit
Matsepes
Attorneys Inc., Bloemfontein
For
First, Second
and
Third
Respondents: A Katz SC
(with him S Pudifin-Jones)
Instructed
by:
Van der Merwe &
Ass Inc., Pretoria
Honey Attorneys, Bloemfontein.
[1]
Sabie Chamber of Commerce and Tourism and
Others v Thaba Chweu Local Municipality and Others; Resilient
Properties Proprietary
Limited and Others v Eskom Holdings SOC Ltd
and Others
[2019] ZAGPPHC 112. The
review applications were heard together from 13-18 August 2018, with
the order following on 7 March 2019.
[2]
See the long title of the
Eskom Conversion Act 13 of 2001
.
[3]
The National Energy Regulator of South Africa (NERSA) is a
regulatory authority, established as a juristic person, in terms of
s 3
of the
National Energy Regulator Act 40 of 2004
.
[4]
These allegations were confirmed in a supporting affidavit deposed
to by Resilient’s expert.
[5]
See para
(b)
(ii) of the definition of ‘organ of state’
which includes:
‘
(b)
any other
functionary or institution—
(i) …
(ii) exercising a public
power or performing a public function in terms of any legislation,
but does not include a court or a judicial officer…’
[6]
See
s 6(5)
(a)
and
(b)
of the
Eskom Conversion Act.
[7]
Eskom’s decisions to interrupt the bulk supply of electricity
to the TCLM and the ELM were taken on 15 September and 29
November
2017, respectively.
[8]
See, generally, Chapter III of the ERA.
[9]
Joseph and Others v City of Johannesburg and
Others
[2009] ZACC 30
;
2010 (4) SA 55
(CC) para 34. (Citations omitted.)
[10]
Mkontwana v Nelson Mandela Metropolitan
Municipality and Another;
Bissett
and Others v Buffalo City Municipality and Others; Transfer Rights
Action Campaign and Others v MEC, Local Government
and Housing,
Gauteng, and Others (KwaZulu-Natal Law Society and Msunduzi
Municipality as Amici Curiae)
2005 (1)
SA 530
(CC) para 38.
[11]
Ibid. (Citations omitted.)
[12]
The
National Energy Regulator Act established
, under
s 3
, the
National Energy Regulator of South Africa as a juristic person to
undertake, amongst other things, the functions set out
in
s 4
of the
ERA.
[13]
The powers and duties of the NERSA are set out in
s 4
of the ERA:
‘The Regulator—
(a)
must—
(i) consider
applications for licenses and may issues licenses for—
(aa)
the operation of generation, transmission or distribution
facilities;
(bb)
the import and export of electricity;
(cc)
trading;
(ii) regulate prices and
tariffs;
(iii) register persons who are
required to register with the Regulator where they are not
required
to hold a licence;
(iv) issue rules designed to
implement the national government's electricity policy framework,
the integrated resource plan and this Act;
(v) establish and manage
monitoring and information systems and a national information
system, and co-ordinate the integration thereof with other relevant
information systems;
(vi) enforce performance and
compliance, and take appropriate steps in the case of
non-performance;
(b)
may—
(i) mediate disputes
between generators, transmitters, distributors, customers
or end
users;
(ii) undertake
investigations and inquiries into the activities of licensees;
(iii) perform any other act
incidental to its functions.’
[14]
For purposes of the ERA ‘reticulation’ is defined in s 1
to mean ‘trading or distribution of electricity and
includes
services associated therewith’. Properly construed,
reticulation appears to refer to the infrastructure necessary
to
connect individual end-users to a single supply point for which
municipalities are responsible.
[15]
‘Distributor’ is a reference to the ELM and the TCLM.
[16]
As at April 2020 the combined municipal debt for electricity in the
country stood at approximately R 30 billion.
[17]
When litigation commenced some two and a half years ago, the ELM
owed Eskom over R1.2 billion and the TCLM owed approximately
half a
billion Rand.
[18]
Section 51(1)
(b)
(i)
reads:
‘
An
accounting authority for a public entity—
…
(b)
must take effective and appropriate steps to—
(i) collect all
revenue due to the public entity concerned…’
[19]
Sabie Chamber of Commerce and Tourism
(above fn 1) paras
53-54.
[20]
Section 151(3) of the Constitution.
[21]
Section 3(1) of the MFMA. Subsection (2) goes on to state that:
‘In the event of
any inconsistency between a provision of this Act and any other
legislation in force when this Act takes
effect and which regulates
any aspect of the fiscal and financial affairs of municipalities or
municipal entities, the provision
of this Act prevails.’
[22]
Section 2 of the MFMA.
[23]
Ibid para
(f)
. Chapter 13 of the Act (ss 135-162) deals with
the resolution of financial problems. Provincial interventions make
up part 2
of this chapter and are provided for in ss 136-150.
[24]
There are two requirements for this, as listed in s 139(5)
(a)
(i)
and (ii) of the Constitution. The provincial executive must impose a
recovery plan 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.’
[25]
See s 139(7) of the Constitution.
[26]
See s 1
(d)
of the Constitution.
[27]
Chief Lesapo v North West Agricultural Bank
and Another
[1999] ZACC 16
;
2000 (1) SA 409
(CC) para
11. (Citations omitted.)
[28]
See also:
Public
Servants Association obo Ubogu v Head, Department of Health, Gauteng
and Others
[2017] ZACC 45
;
2018 (2) SA
365
(CC) paras 66-67;
Gundwana v Steko
Development CC and Others
[2011] ZACC
14
;
2011 (3) SA 608
(CC) para 45.
[29]
Rademan v Moqhaka Municipality and Others
[2011] ZASCA 244; 2012 (2) SA 387
(SCA).
[30]
Ibid paras 16-17.
[31]
See
Rademan v Moqhaka Local Municipality
[2013] ZACC 11; 2013
(4) SA 225 (CC).
[32]
Ibid para 36.
[33]
Section 34 reads:
‘Everyone has the
right to have any dispute that can be resolved by the application of
law decided in a fair public hearing
before a court or, where
appropriate, another independent and impartial tribunal or forum.’
[34]
Jaftha v Schoeman and Others, Van Rooyen v
Stoltz and Others
2005 (2) SA 140
(CC).
[35]
Chief Lesapo v North West Agricultural Bank
and Another
[1999] ZACC 16
;
2000 (1) SA 409
(CC);
Gundwana v Steko Development CC and
Others
2011 (3) SA 608
(CC);
University of Stellenbosch Legal Aid
Clinic and Others v Minister of Justice and Correctional Services
and Others; Association
of Debt Recovery Agents NPC v University of
Stellenbosch Legal Aid Clinic and Others; Mavava Trading 279 (Pty)
Ltd and Others
v University of Stellenbosch Legal Aid Clinic and
Others
[2016] ZACC 32
;
2016 (6) SA 596
(CC) para 59.
[36]
Jaftha
(above fn 32) para 55.
[37]
National Coalition for Gay and Lesbian
Equality and Others v Minister of Home Affairs and Others
2000
(2) SA 1
(CC) paras 23-34.
[38]
Section 39(2) of the Constitution reads:
‘(2) 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.’
[39]
The word ‘supply’ is defined in the ERA to mean ‘trading
and the generation, transmission or distribution of
electricity’.
[40]
Section 41(3) of the Constitution.
[41]
See para 40 above.
[42]
See:
Sidumo and Another v Rustenburg Platinum Mines Ltd and
Others
2008 (2) SA 24
(CC) para 103.
[43]
Section 1 of the IRFA defines ‘intergovernmental disputes’
as:
‘a dispute between
different governments or between organs of state from different
governments concerning a matter—
(a)
arising from—
(i) a statutory
power or function assigned to any of the parties; or
(ii) an agreement between
the parties regarding the implementation of a statutory power
or
function; and
(b)
which is
justiciable in a court of law,
and includes any
dispute between the parties regarding a related matter…’
[44]
Williams v Benoni Town Council
1949 (1) SA 501 (W).
[45]
Ibid at 507.
[46]
Competition Commission of South Africa v
Hosken Consolidated Investments Ltd and Another
[2019]
ZACC 2
;
2019 (3) SA 1
(CC) para 23.
[47]
Ibid para 85.
See also
Frank R Thorold
(Pty) Ltd v Estate Late Beit
[1996] ZASCA 79
;
1996 (4) SA 705
(A) at 708J-709A,
in which this court held that for a dispute to arise there must
exist two or more parties, who are in controversy
with one another,
in the sense that they are advancing irreconcilable contentions.
[48]
Ngwathe Local Municipality v Eskom Holdings SOC Limited and
Others
FB 28-05-2015 case no 4428/2014.
[49]
The
Housing Act, the
Municipal Systems Act, the Structures Act and
the MFMA.
[50]
Allpay Consolidated Investment Holdings (Pty)
Ltd and Others v Chief Executive Officer, South African Social
Security Agency and
Others
[2014]
ZACC 12
;
2014 (4) SA 179
(CC) para 49.
(Citations omitted.)
[51]
Chapter 4 regulates resolution of intergovernmental disputes.
[52]
Section 30 which is titled ‘Resolution of disputes by
Regulator’ provides:
‘(1) The Regulator
must, in relation to any dispute arising out of this Act—
(a)
if it is a dispute between licensees, act as a mediator if so
requested
by both parties to the dispute.’
[53]
See
Democratic Alliance v President of the Republic of South
Africa and Others
2012 [ZACC] 24;
2013 (1) SA 248
(CC) para 32.
[54]
Albutt v Centre for the Study of Violence and
Reconciliation, and Others
[2010] ZACC
4
;
2010 (3) SA 293
(CC) para 51.
[55]
Section
1 defines administrative action to mean ‘any decision taken or
any failure to take a decision, by–
(a)
an organ of state, when-
(i)
. . .
(ii)
exercising a public power or performing a public function in
terms
of any legislation;’.
And see
further:
Mazibuko and Others v City of Johannesburg and Others
2010 (4) SA 1(CC)
para 130.
[56]
See:
President of the Republic of South Africa and Another v
Modderklip Boerdery (Pty) Ltd
[2005] ZACC 5
;
2005 (5) SA 3
(CC)
para 67.
[57]
See s 139 of the Constitution.
[58]
See ss 139 and 150 of the MFMA.
[59]
See also s 154(1) of the Constitution, which commands the National
Government and provincial government to support and strengthen
the
capacity of municipalities to manage their own affairs, to exercise
their powers and to perform their functions.
[60]
Cape Gate (Pty) Ltd and Others v Eskom
Holdings (SOC) Ltd and Others
[2018]
ZAGPPHC 599; 2019 (4) SA 14 (GJ).
[61]
Ibid at 148E-G. (Citations omitted.)
[62]
Giddey NO v J C Barnard and Partners
[2006] ZACC 13
; 2007 (5) 525 (CC).
[63]
Ibid para 19. (Citations omitted.)
[64]
Ibid para 22.
See also
Erf One Six
Seven Orchards CC v Greater Johannesburg Metropolitan Council
(Johannesburg Administration) and Another
[1998] ZASCA 91
;
1999 (1) SA 104
(SCA)
at 109A-B.
[65]
See, in this regard,
Techmed (Pty) Ltd v Eastern Cape Provincial
Tender Board and Others
[2000] ZASCA 148
;
2001 (3) SA 735
(SCA) 741E-F.
[66]
Sabie Chamber of Commerce and Tourism
(above
fn 1) para 56.