Curtly Stevens | Apr 10, 2020

Courts forcing provinces to intervene in dysfunctional municipalities: case study of Makana Local Municipality

When a municipal council delays or fails to implement a financial recovery plan imposed by the province, can the provincial executive dissolve the council? More specifically, should the provincial executive dissolve the municipal council in terms of section 139(1)(c) or section 139(5) of the Constitution?

The rise of judicial mandatory interventions

When a municipal council delays or fails to implement a financial recovery plan imposed by the province, can the provincial executive dissolve the council? More specifically, should the provincial executive dissolve the municipal council in terms of section 139(1)(c) or section 139(5) of the Constitution? This article engages these questions with reference to the Unemployment Peoples Movement (UPM) judgment delivered by the Makhanda High Court, Eastern Cape Division, on 14 January 2020.

For the past 20 years, all nine provincial governments have often intervened in dysfunctional municipalities. At times, however, we have observed that while some municipalities are intervened into, others despite being in similar troubles are not. It is said that the reluctance or failure of provinces to intervene timeously in failing municipalities is due to political factors and not legal imperatives. The UPM judgment is a case in point. It concerned Makana Local Municipality (Makana), which despite numerous interventions, remained in a state of collapse largely because its municipal council failed to implement a Financial Recovery Plan. This plan, dated February 2015, which was imposed by the Eastern Cape Provincial government aimed to secure the Municipality’s ability to meet its service delivery and financial commitments.

Discretionary and mandatory interventions

Section 139 of the Constitution provides for three forms of interventions. This section will only briefly consider the two forms of interventions provided in section 139(1)(c) and section 139(5) of the Constitution as the judgment revolved around these two sections.

Discretionary: If a municipality cannot or does not fulfil an executive obligation in terms of the Constitution or legislation, a provincial executive ‘may’ take the following intervention steps: a) issuing of directives; b) assumption of the relevant obligation; or c) dissolution of the municipal council [Section 139(1)]. As the most intrusive step, a provincial executive may dissolve a municipal council ‘if exceptional circumstances warrant such a step’. This means that it should only be used in rare instances, in particular, where the municipal council’s conduct is the cause of the continued failure to comply with the executive obligation.  

Mandatory interventions: A provincial executive ‘must’ intervene in a municipality, 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 meet its financial commitments [section 139(5)]. Given the deep-seated problem which this intervention seeks to address, the intervention entails a mandatory directive to develop and adopt a financial recovery plan. Only the Municipal Financial Recovery Service, a unit in the National Treasury, may prepare a financial recovery plan for a mandatory provincial intervention [section 141(2) MFMA]. The approved plan binds the municipality in the exercise of its legislative and executive authority, but only to the extent necessary to solve the financial crisis. Unlike the discretionary intervention, a provincial executive has no option but to promptly intervene in the municipality by imposing a financial recovery plan as soon as it can be established that any of the criteria mentioned above apply. When the municipal council fails to adopt a budget or revenue-raising measures to give effect to the recovery plan, the provincial executive must dissolve the municipal council concerned and appoint an administrator to give effect to the Financial Recovery Plan.

The Coetzee and Others v Premier, Mpumalanga Province and Others matter made it clear that, if the provincial executive fails to adequately exercise its intervention powers, courts may compel a Provincial Executive to intervene in a municipality in terms of section 139(5) – especially if all the jurisdictional facts as outlined in sections 139 and 140 of the Municipal Finance Management Act are present. 

Background

The facts of the UPM case are largely well-known, which is now briefly stated. The Makana Local Municipality, as of February 2015, is a municipality that has faced and continues to face various challenges in terms of service delivery, financial management and administration. These challenges had been highlighted repeatedly in the Auditor General’s annual audit reports. In an attempt to address these challenges, the Eastern Cape Provincial Executive, in 2015, intervened in the Makana Municipality and imposed a Financial Recovery Plan. Yet despite the 2015 intervention, which was set to last until 2017, Makana remained in a state of administrative, financial and managerial collapse. For example, the municipality often diverted funds due to Eskom to pay salaries.

The Unemployment Peoples Movement (UPM), a civil organisation acting on behalf of the residents of Makanda and deeply dissatisfied with the poor implementation of the Final Recovery Plan approached the Eastern Cape High Court in 2019, seeking a court order instructing the Eastern Cape Provincial Executive to dissolve the municipal council of Makana.

The respondents, in particular, the Eastern Cape Provincial Executive did not dispute that a crisis existed in the financial affairs of Makana. Indeed, this crisis had resulted in Makana being in a serious and persistent material breach of its obligations to provide basic services. To this end, the respondents argued that under these circumstances it would be appropriate for the provincial executive to intervene in terms of section 139(5) of the Constitution. The applicants, however, relied on section 139(1)(c) of the Constitution. The applicants argued that a new financial recovery plan administered by the same municipal council will not be the panacea to the worsening problems confronting Makana. In other words, any solution which does not dissolve the municipal council is doomed to fail, so it was alleged. Nevertheless, the Provincial Executive, on 29 May 2019, albeit, tentatively adopted a resolution to intervene in Makana in terms of section 139(5). According to the respondents, this resolution rendered the applicant's case moot.

Issue

The crisp issue which the Court had to determine was whether it could still order the provincial executive to dissolve the council in terms of section 139(1)(c) despite the fact that the provincial respondents had already taken a decision in terms of section 139(5)? 

Judgment

The Court in its judgment penned by Justice Stretch held that a section 139(5) intervention is sensible, logical, practical and obvious in this case. It thus rejected the UPM (Applicants) argument that the province should intervene in terms of section 139(1)(c). The Court found that all the requirements for a mandatory intervention were present. The fact that the UPM (Applicants) relied on section 139(1)(c) and not 139(5) did not preclude the Court from instructing the province to dissolve Makana’s municipal council. In fact, the Court did not only base its reasoning on section 139(5)(b). It also referred to the 2015 Financial Recovery Plan itself – which in no uncertain terms stated that ‘[s]hould the municipality delay or fail to implement the Financial Recovery Plan, the Provincial Government must consider alternative measures including … the dissolution of council.’ Instead of allowing the provincial government to develop a new Financial Recovery Plan, the Court ordered the province to make use of the 2015 Financial Recovery Plan. This plan which was often avoided or ignored, unlike before, could no longer be escaped. It is now considered as a ‘living document’ which binds the Makana Municipal Council. The Court on the undisputed facts further found that Makana Municipality violated section 152(1) and 153(a) of the Constitution in failing to ensure the provision of services in a sustainable manner, in failing to promote a safe and healthy environment for its community.  

Discussion

The UPM judgment alongside the Coetzee case establishes a jurisprudential trend that local communities can through mandatory interventions hold provinces accountable for failing to supervise municipalities in line with the Constitution. Moreover, the judgment sets the following precedent: First, if a municipal council fails to implement a financial recovery plan, a Court may instruct a provincial executive to dissolve a municipal council in terms of section 139(5)(b) of the Constitution. Significantly, Courts may also rely on the conditions stipulated in Financial Recovery Plan when making their decision such as directing a provincial government to intervene. Second, provinces, as demonstrated in the UPM case must before exercising their mandatory intervention powers, establish why previous financial plans failed. This is necessary particularly in the case of repeated interventions – instances where municipalities are subject to more than one intervention over a time period without yielding any success. The UPM judgment is different from the Coetzee case. In the Coetzee case the Court ordered the Provincial Executive to request the National Treasury’s Municipal Financial Recovery Service Unit to develop a recovery plan. However, in the UPM judgment, the Court specifically instructed the Provincial executive to use the 2015 Financial Recovery Plan. Whether or not this amounts to judicial overreach is an issue that is currently on appeal. The Dullah Omar Institute will continue to trace the case in the Courts and provide relevant analysis. 

By Curtly Stevens 

The publication of the Bulletin is made possible with the support provided by the Hanns Seidel Foundation and the Bavarian State Chancellery.

                                                                               

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