THE CHALLENGES WITH IMPLEMENTING DISCRETIONARY FINANCIAL

INTERVENTIONS IN MUNICIPALITIES

10 OCTOBER 2013

BACKGROUND

The powers of the Executive and the Legislature of a provincial government are clearly set out in the Constitution. For the Executive it is contained in sections 125(1), 128(1), 132, 125 and 110, whilst the relevant provisions for the Legislature are contained in sections 114 to 116.

BACKGROUND

This separation must be seen in the full context of the separation of the different spheres of government as described in the recent case of Constitutional Judgment of Premier of the Western Cape v the Minister of Police 2013, and paragraphs 59 to 61 of City of Cape Town v Robertson 2005 (2) SA 323 (CC).

BACKGROUND

Section 154 (1) of the Constitution provides for the support by provincial government of municipalities. Section 155 (7) provides for the provincial governments to have “legislative and executive authority to see to the effective performance of municipalities of their functions …” These powers of “supervision”, “monitoring” and “support” are explained in the Certification Judgment (In Re : Certification of the Constitution of the Republic of South Africa 1996 – 1996 (4) SA 744 (CC)) in paragraphs 370 to 374.

BACKGROUND

An intervention into the powers and functions of a municipality is only authorised by section 139 of the Constitution. This section and the power to intervene was extended by an amendment to the Constitution in 2003. This is dealt with in Local Government Law of South Africa, Steytler and De Visser at pages 15-16 to 15-17 where it is stated that the principal instrument for intervention is and at all times remains section 139 of the Constitution.

BACKGROUNDThe development of the section is described as follows:

“3.10.1 In its original form Section 139 merely provided for a provincial executive to intervene by assuming control of the executive obligations which had not been complied with. No corrective measures were provided for.3.10.2 In 1998 an indirect amendment (to Section 159) resulted in the power to dissolve a municipal council.3.10.3 In 2003 Section 139 was significantly amended to include intervention in municipalities experiencing financial problems. These amendments provided the constitutional basis for the measures enacted in sections 136, 137 and others in the Local Government : Municipal Finance Management Act No. 56 of 2003 (“MFMA”).”

BACKGROUND

Indeed, the amended section 139 refers to the fact that national legislation may regulate the implementation of the section (section 139 (8)). There is a cross-reference to this in the MFMA where in sections 136 to 153 (the core provisions of Chapter 13) refer expressly to the power of intervention in terms of section 139 throughout.

BACKGROUND

It is therefore clear from the constitutional scheme that section 139 is the sole original power of intervention into the affairs of a municipality by provincial Executive Councils, whether in terms of section 139 of the Constitution itself, or in terms of the relevant provisions contained in the MFMA, although an argument could be made that the provisions of section 155(6)(a) and (7) provide ancillary powers of intervention. This is however a subject that requires further research, that may be of interest to academics and government in times to come.

BACKGROUND

The Constitutional Court has held that section 139 of the Constitution is the only legal means of intervention allowed in Johannesburg Municipality v Gauteng Development Tribunal and Others 2010 (6) SA 182 (CC) at paras 44 and 64 – 66. All of the above leads one to the conclusion that Chapter 13 of the MFMA is a regulatory machinery which is empowered by the scope of section 139 of the Constitution.

BACKGROUND

To the extent that any part of Chapter 13 strays beyond the authority given by Section 139, it would to that extent be unconstitutional. However, in any interpretational analysis an interpretation which results in compatibility will be adopted before any provisions of legislation are held to be unconstitutional.

DISCUSSIONConsidering the provisions of section 139(1) of the Constitution, it empowers a Provincial Executive Council to “taking any appropriate steps to ensure fulfilment of that obligation, including—

(a) issuing a directive to the Municipal Council, describing the extent of the failure to fulfil its obligations and stating any steps required to meet its obligations;(b) assuming responsibility for the relevant obligation in that municipality to the extent necessary to—

(i) to (iii) ….(c) dissolving the Municipal Council and appointing an administrator until a newly elected Municipal Council has been declared elected, if exceptional circumstances warrant such a step.”

DISCUSSIONThe question that then arises, is whether these three methods of intervention are the only three methods constitutionally acceptable or whether “any steps” contemplates further alternatives. I am of the view that sections 139(1)(a), (b) and (c) do not present a closed list, but could include further alternatives, such as that provided for in section 137 of the MFMA. This view is justified by the alternative method of intervention posed by section 137 of the MFMA, which is not expressly included in section 139(1)(a)(b) or (c) of the Constitution, and the adoption of an interpretation, which is aimed at reaching compatibility rather than unconstitutionality.

DISCUSSION

Furthermore it has been held that the word “including” (depending on its use) is a word of description or addition, not of limitation. It is therefore my view that section 139 of the Constitution permits further methods of intervention, provided that they are sanctioned by section 139 taken as a whole, including section 139(8) which empowers legislation to regulate the implementation of section 139. Another perfect example supporting this argument is the use of the word “including” in section 25(3) of the Constitution, which clearly refers to an open list rather than a closed list.

DISCUSSIONThe conclusion is that section 137 of the MFMA provides a further method of discretionary intervention, not specifically referred to in section 139(1)(a), (b) or (c) of the Constitution, but which constitutes one of “any steps”, contemplated in section 139(1), although it may be argued that such an intervention may fall within the ambit of a directive in section 139(1)(a) of the Constitution, together with “any steps” contemplated in that section, except for the fact that the practical implementation of a section 137 MFMA intervention mitigates against the argument that it is an intervention in terms of section 139(1)(a) of the Constitution.

DISCUSSION

This is the method of intervention utilised by the Executive Council of KwaZulu-Natal in several matters in the recent past. The Executive Council authorised the interventions in terms of section 139(1) of the Constitution (not section 139(1)(a), (b) or (c)), read with section 136(2) of the MFMA, as discretionary financial interventions in terms of the MFMA are not specifically catered for in section 139 of the Constitution.

DISCUSSION

In short, the Executive Council authorised the intervention described in section 137 of the MFMA. The notice requirements of this section are to give notice to the Minister for Co-Operative Governance. There is no requirement to give notice to the specific persons set out in section 139(2) and (3) of the Constitution, nor is there any time limit to the giving of such notice.

DISCUSSION

Section 137(3) of the MFMA expressly states that this type of intervention (“discretionary provincial intervention”) is not the type unrelated to a financial problem. It is important to note that if the discretionary financial intervention (section 137) fails, then the MEC for Finance in a Province must recommend a “mandatory provincial intervention” in terms of section 139(2) of the MFMA, read with either section 139(4) or (5) of the Constitution. All mandatory financial interventions are thus undertaken by the MEC for Finance in a Province, and not the MEC responsible for local government.

DISCUSSION

It is clear from the above that the “discretionary provincial intervention” envisaged by section 137 of the MFMA is a benign form of intervention, which does not require notice to the National Council of Provinces, with the powers that the NCOP has, if the Executive Council intervened in terms of section 139(1)(b) or (c) of the Constitution. Even the notice to be given to the Minister of Co-Operative Governance is for information only.

DISCUSSION

The authors of Local Government Law of South Africa (supra) refer to this sort of intervention as being similar in legal consequences to a directive, in terms of section 139(1)(a). This would logically justify the absence of oversight by the Minister and the NCOP, although the NCOP has challenged this view of the Province, and insisted on receiving notice of such “discretionary financial interventions”.

DISCUSSION

Notwithstanding the view of the NCOP and its advisors, it is clear that whilst the latest amendment to section 139 of the Constitution (139 (4) and (5)), clarifies the procedure to be followed when “mandatory financial interventions” are undertaken by a Provincial Executive Council, the same cannot be said for “discretionary financial interventions” in terms of the MFMA.

DISCUSSION

It appears that there have been numerous “discretionary financial interventions” in terms of the MFMA in various Provinces, without any reference to section 139 of the Constitution, mainly due to the argument that section 139(4) and (5) only deal with “mandatory financial interventions”, and do not refer to discretionary financial interventions at all.

DISCUSSIONHaving regard to the judgment in Johannesburg Municipality v Gauteng Development Tribunal and Other (supra), it is my belief that such interventions would be fatally flawed, and essentially void ab initio. In addition, it is my view that the opinion expressed in certain quarters that interventions in terms of section 139 is a closed list is incorrect, and that the introductory sentence of section 139 intended to include interventions not specifically catered for in sections 139(1)(a), (b) or (c).

DISCUSSIONOnly time will tell whether my views expressed in this presentation are correct, as there is currently no precedent dealing with a “discretionary financial intervention” in terms of sections 136 and 137 of the MFMA, and it is hoped that the proposed legislation on the implementation of sections 100 and 139 of the Constitution will put this issue to rest by specifically providing for the procedure to implement “discretionary financial interventions” in terms of the MFMA.

QUESTIONS

THANK YOU

14th Floor, South TowerNatalia Building

330 Langalibalele StreetPietermaritzburg, 3200

Tel: +27(0) 33 395 2942Fax: +27(0) 33 394 9714

E-mail: Heinz.Kuhn@kzncogta.gov.za

Website: www.kzncogta.gov.za