Local Government, Environmental Affairs and Development Planning
With regard to the Kannaland Municipality:
- (a) When was the Municipality placed under administration and (b) what are the details thereof;
- (a) for what period since the commencement of the intervention was there no administrator appointed and (b) why was there no administrator appointed;
- (a) for how long has the current administrator been in the position and (b) when does his/her appointment end;
- how has the appointment of an administrator contributed to the successful implementation of the Financial Recovery Plan to date;
- since the commencement of the provincial intervention to date, what part of the Financial Recovery Plan (a) has been completed successfully, (b) has not been completed and (c) must still be commenced and completed;
(a) when did the Cabinet become aware of the unaffordable solar energy and water public–private partnership that the Municipality is reportedly pursuing, (b) how did the Cabinet become aware of this project, (c) what steps have been taken by the Cabinet since becoming aware of the matter to prevent the project from going ahead and (d) how is it possible that the Municipality can proceed with this project while there is still an administrator appointed?
(1)(a&b) Following previous interventions by the Provincial Executive in the Kannaland Municipality,
On 8 March 2017, the Provincial Executive resolved to impose the Financial Recovery Plan on the Municipality, subject to the approval of the Provincial Minister of Finance, in accordance with the requirements of section 139(5) of the Constitution, read with the relevant provisions of the MFMA. The said plan was approved by the Provincial Minister of Finance in terms of section 143(2)(a) of the MFMA and became effective on 17 March 2017.
Notwithstanding the support provided to the Municipality by the Department of Local Government, Provincial Treasury, National Treasury, and other National and Provincial departments and stakeholders with regards to the implementation of the Financial Recovery Plan, in 2018 the Municipality indicated that (i) limited progress was being made by the Municipality in giving proper effect to the said plan; (ii) the Municipality was no longer in a position to take executive measures necessary to give effect to such plan; and (iii) the Provincial Executive needed to take certain actions to ensure the proper implementation of the said plan.
As a result, on 5 December 2018, the Provincial Executive resolved to assume responsibility, in terms of section 139(5)(c) of the Constitution, for the implementation, in its entirety, of the approved Financial Recovery Plan, given that the Municipality cannot take executive measures necessary to ensure the proper implementation of the said plan.
(2)(a&b) There was no Administrator (Financial Recovery) from 17 March 2017 till 5 Decmber 2018 as the Municipality was responsible for implementing the Financial Recovery Plan.
Following a direct request by the Municipality itself, the 05 December 2018 Resolution envisaged that the Administrator (Financial Recovery) would be sourced and appointed for this purpose.
A suitable person was then identified to be seconded from a neighbouring Municipality and an Administrator (Financial Recovery) was appointed from 1 March 2019 till 31 July 2019. Due to operational reasons, the Administrator (Financial Recovery)’s envisaged term was terminated early by agreement.
No Administrator (Financial Recovery) was appointed from 1 August 2019 till the current Administrator (Financial Recovery) commenced his appointment on 6 September 2019.
(3)(a&b) The current Administrator (Financial Recovery) commenced his appointment on
6 September 2019 and his appointment has been extended until the conclusion of the 2021 Local Government Elections and the proper handover by the Administrator (Financial Recovery) to the newly elected Municipal Council.
(4) Notable achievements made by the Administrator (Financial Recovery) during his appointment to date include the following:
- Administrator (Financial Recovery) has introduced weekly, structured management, monitoring and reporting meetings (which includes the monitoring of the implementation of the approved Financial Recovery Plan), as well as conducting regular scheduled engagements with the Executive Mayor, Speaker and Municipal Manager of the Municipality;
- Administrator (Financial Recovery) has further achieved the re-design of the Organisation, which, once implemented, will yield significant cost savings through organisational staffing restructuring;
- Given that the Municipality’s staffing costs were bloated as a result of the excessive number of contract workers, this matter, with the aid of Administrator (Financial Recovery), has been procedurally addressed and the organisational staffing structure is now more efficiently established; and
- Administrator (Financial Recovery) has assisted the Municipality to conclude a number of payment arrangements to address the Municipality’s outstanding debt. This has afforded some alleviation to the cashflow issues experienced by the Municipality.
(5) (a) The measurement tool records that 97% of the current Financial Recovery Plan has been completed with a focus primarily on emergency projects.
(b) This plan was regarded as phase 1 of the Financial Recovery Process – where additional projects, with a more medium-term impact will now be introduced, these include:
- Filling of critical vacancies.
- Establishing internal controls.
- mSCOA implementation.
- finalising a creditor payment strategy.
- finalising Cash Management improvement plan
- procuring a backup server for the Municipality.
- complete the property valuation process.
- finalise improvements to the Ladismith landfill site in terms of the MOU with the Western Cape Government.
- finalise reviewed Municipal Code and policies.
- develop a customer care system.
(c) All the projects listed in (b) above have been commenced with and are in different stages of completion.
It should, however, be noted that on 17 June 2020 the Western Cape Provincial Minister of Finance and Economic Opportunities requested the National Minister of Finance, in terms of Section 144 of the Local Government Municipal Finance Management Act (MFMA), that the Municipal Financial Recovery Service (MFRS) review and amend the Financial Recovery Plan. The abovementioned request was approved by the National Minister of Finance. The MFRS have prepared a draft of the revised Financial Recovery Plan, in accordance with the requirements for such a plan set out in section 142 of the MFMA.
It is envisaged that the amended Financial Recovery Plan will address:
- the finalisation of the abovementioned projects.
- gaps and shortcomings in the current Financial Recovery Plan.
- The general implementation of the completed projects to ensure the success of the changes already effected.
(6) (a) The Provincial Cabinet became aware of the solar energy and water public–private
partnership that the Municipality was pursuing in December 2020.
(b) Cabinet became aware of this project in a briefing memo prepared by Provincial
Treasury and Department of Local Government.
(c) The Administrator (Financial Recovery) issued a series of resolutions regarding the project. He noted that both National Treasury and the Provincial Treasury had highlighted ‘a number [of] legal and technical issues’, and that the matter should be dealt with so as to avoid ‘unnecessary intergovernmental conflict and potential legal proceedings and costs’. He also emphasised the importance of the Municipality making a properly informed decision about so significant an endeavour, and of ensuring that ‘risk is minimised at all costs’.
The Administrator (Financial Recovery) suspended the process to establish a PPP with Inovasure, instructed the Municipal Manager not to sign the PPP agreement or the ‘Energy Security Management and Administration Agreement’ with Inovasure. Furthermore, the administrative leadership of the Municipality was instructed to request, in the spirit of cooperative governance, National Treasury and the Western Cape Government to:
- embark on a process of consultation to obtain consensus on the legality of the process followed in respect of the unsolicited bid;
- advise the Municipality and reach a collective viewpoint on how best to initiate and finance catalytic projects to meet the developmental needs of the Municipality; and
- obtain an unbiased and objective opinion on the benefits of the project for the Municipality to minimise and mitigate potential financial risks.
Due to the ongoing financial crisis within the Municipality and the resultant mandatory provincial intervention, the Municipal Council does not have ‘autonomous decision-making powers’ regarding financial matters: any such powers much align with the Financial Recovery Plan and be regulated or exercised by the Administrator (Financial Recovery). The abovementioned resolution by the Administrator (Financial Recovery) curtailed the actions which could be taken by the Municipality to go ahead with the project.
Numerous correspondence was sent by myself, Western Cape Provincial Minister of Finance and Economic Opportunities, the Department of Local Government, Provincial Treasury and State Attorney to the Municipality.
The Western Cape Government has brought an urgent application in the Western Cape High Court against Kannaland Municipal Council representatives and senior officials for their attempts to push through a raft of new “political” staff appointments as well as other potentially prejudicial and unlawful transactions.
(d) The actions taken under the leadership of the Deputy Mayor disregard the mandatory provincial intervention, the Financial Recovery Plan and the authority of the Provincial Executive and the Administrator (Financial Recovery). The recent decisions taken by the Municipal Council undermine the Municipality’s financial recovery and are unlawful.
