Thabile Chonco | Sep 14, 2021

Court orders national government to leapfrog into Lekwa Local Municipality

Failed service delivery at municipal level is not a new phenomenon. In recent times, however, communities, non-governmental organisations and private companies alike are growing impatient and resorting to court action to “straighten” failing municipalities. Such is the case of Astral Operations Limited (“Astral”), the largest business and employer in Lekwa Local Municipality (Lekwa) in Mpumalanga.

After continued service delivery failures by Lekwa, Astral approached the North Gauteng High Court in Pretoria to prod the national executive to intervene in the imploding municipality. On 12 April 2021, the Court ordered the national government to intervene in Lekwa and for National Treasury to prepare a financial recovery plan to be approved within six months of the court order.

Brief background

The instability in Lekwa has long been documented, with several cases brought against Lekwa for its inability to manage the affairs of the Municipality. Lekwa’s failures range from not providing a steady supply of water and electricity to the community, to continuously defaulting on payments to Eskom and the Rand Water Board. In 2017, the Municipality was operating at a deficit as the debt owed to Eskom and the Rand Water Board was in excess of R 750 million, yet its total annual revenue for the 2016/17 financial year was R 617 million and its expenditure was R952 million. As at June 2020, the debt owed to Eskom had risen to R1,1 billion.

Astral has previously intervened (and obtained interdicts) in litigation between Eskom and the Municipality, as well as Rand Water and the Municipality, when these two entities threatened to discontinue the supply of electricity and water, respectively, to Lekwa and the residents of Lekwa in 2017.

In 2018, Astral commenced litigation against Lekwa. Various measures were proposed during this time to try and improve the situation. Included in these measures was the appointment of the Municipal Infrastructure Support Agent, in 2018, to investigate the state of the municipal infrastructure and propose resolutions. Another measure was the institution of a section 139(1) intervention on 11 October 2018. The MEC for Finance in Mpumalanga, however, only approved the financial recovery plan on 14 October 2019, one year after the intervention was instituted. At that time, the litigation did not reach finality due to the institution of the above measures. Astral avers that none of the activities set out in the financial recovery plan were undertaken. Notwithstanding these (failed) measures, the Municipality’s infrastructure continued to deteriorate, the debt owed to Eskom and Rand Water increased and the interruptions of water and electricity supply to the community continued.

In 2020, Astral revived its litigation and ultimately called on the court to order a national intervention under section 139(7) of the Constitution, and section 150 of the Municipal Finance Management Act (MFMA), as a measure of last resort. Astral argued that the jurisdictional requirements for a national intervention had long been triggered, making the intervention a necessity. And the court responded to the call.

What triggered a section 139(5) & (7) intervention in this case?

Section 139(5) of the Constitution provides for mandatory provincial intervention prompted by a financial crisis in a municipality. The section provides that where a municipality continuously breaches its obligations to provide basic services or to fulfil its financial commitments materially, due to a financial crisis, the relevant provincial executive must:

  • intervene and impose a financial recovery plan that binds the municipality in the exercise of its legislative and executive authority (limited, however, to solving the crisis of a municipality’s financial affairs);
  • where the municipality cannot or does not approve a budget or any revenue-raising measure to give effect to the recovery plan, dissolve the municipal council and appoint an administrator who must approve a temporary budget or revenue-raising measures to give effect to the recovery plan; or
  • implement the recovery plan, should it choose not to dissolve the municipal council.

The triggering of the above underlined jurisdictional facts has a domino effect, prompting the application of section 139 of the MFMA that requires the relevant province to assess the municipality’s financial state, prepare a financial recovery plan and recommend changes to the municipality’s budget and revenue-raising measures to give effect to the recovery plan (s139(1)(a) MFMA). This provision basically reiterates section 139(5)(a) of the Constitution.

Where the provincial government cannot, does not or does not adequately perform the above in a mandatory intervention, then section 139(7) of the Constitution kicks in. This section provides for three scenarios: (a) where a province cannot intervene due to capacity constraints for example; (b) where a province refuses to intervene despite the presence of jurisdictional facts for a section 139(4) or (5) intervention; or (c) where a province intervenes but does so inadequately. The last scenario took place in Lekwa. Section 139(7) forces national government to undertake the mandatory intervention as if it were being undertaken by the provincial government.  Section 139(7) of the Constitution then prompts the application of section 150 of the MFMA, which reiterates:

  • Where a provincial executive fails to intervene (adequately) in terms of section 139(5) of the Constitution, the national executive must consult the provincial executive and take over the intervention (step into the provincial executive’s shoes); and
  • The national executive exercises the powers and functions that the provincial executive would otherwise exercise if it were undertaking the intervention.

The criteria provided in section 140 of the MFMA should be considered when determining whether the financial crisis faced by a municipality is so severe that it warrants an intervention in terms of section 139(5) of the Constitution. Lekwa was in serious or persistent material breach of its obligations to provide basic services to its community. It was also in persistent breach of meeting its financial obligations with Eskom and Rand Water, as a result of a crisis in its financial affairs. The provincial executive must intervene and take the necessary steps provided in section 139(5) of the Constitution, which it did although inadequately. Where the provincial executive fails to intervene (adequately), then the national executive must step into the province’s shoes per section 139(7) and intervene in terms of section 139(5) of the Constitution. National government has no discretion not to act in such a case. The applicable sections of the Constitution and MFMA undeniably pointed to the need for national intervention in Lekwa.

The national government argued before the Court that an intervention by the national government was a measure of last resort and that it would be premature for it to overstep the provincial executive’s resolution to intervene. It also argued that section 139(7) interventions were complex, policy-laden, required the entire cabinet’s participation and lastly that national interventions were politically sensitive requiring careful assessment. At the time that the initial application was made (May 2018), national government’s stance might have been correct. The provincial government only intervened (in October 2018) after Astral launched its initial application in court. This application was halted to allow for the intervention to gain course. Even after Astral allowed the provincial intervention to run its course, it was unsuccessful as the province failed to implement the financial recovery plan and the conditions in Lekwa continued to deteriorate. It was at this point that Astral resuscitated its application, calling for a court order forcing national government to intervene. And at this point, national government could no longer make ‘prematurity, measure of last resort or overstepping’ arguments as section 139(7) had been triggered and it was constitutionally obliged to intervene given the province’s failure.

Court order

The High Court in Pretoria ordered the national government to:

  • intervene in Lekwa, in terms of section 150(1)(b) of the MFMA, within 14 days from the date of the order (3 May);
  • start the process of preparing the financial recovery plan once the national intervention begins;
  • ensure the financial recovery plan is approved within 6 months from the date of the order (October 2021); and
  • empowering Astral to approach the court for supplementary relief should the national government or National Treasury and Lekwa fail to implement the financial recovery plan.

Commentary

The national executive has intervened in Lekwa. The first firm action taken was the national executive’s resolution to dissolve the municipal council of Lekwa, which was agreed upon on 12 May 2021. This resolution was followed by a notice of the said dissolution and the appointment of Mr Johann Mettler (a former DOI alumnus) as the administrator on 28 May 2021. The national executive did not first impose a financial recovery plan on Lekwa before dissolving its municipal council. Perhaps after assessing the Municipality’s state, the national executive realised that preparing and imposing a recovery plan, then waiting to see if the Municipality can or will impose it, or not, would waste time.

Regarding the preparation of the recovery plan, the Minister of Finance has insisted on preparing the recovery plan within a period not exceeding 90 days determined by the Minister (s139(1) MFMA timeframe). This differs to the timeframe of 6 months given by the court. When will the Minister make this determination? When will the said 90 days start running? These questions remain unanswered as the Minister has diverted from using the clear-cut timeframe proposed by the court, whilst he has failed to give his own clear-cut deadline to date.

The Municipal Financial Recovery Service will have to prepare the recovery plan within the timeframes provided, have it approved, initiate the relevant consultation processes and ensure its implementation as provided in sections 141, 142, 143 and 146 of MFMA. The national executive will also have to continuously monitor the situation in Lekwa to ensure compliance with the court order and recovery plan.

Lekwa must follow the measures instituted by Mr Mettler as the administrator. Once the financial recovery plan is completed, Lekwa must work with the administrator (and national executive) to implement the plan and report to the Minister of Finance on a monthly basis, on the implementation of the plan (section 146(1) MFMA).

Municipalities should draw lessons from this matter. What the latest judicially imposed section 139 intervention against Lekwa, and many other recent court orders, signals is the growing anger of communities and the judiciary’s impatience with the nonchalant attitude of municipalities, provinces and national government when it comes to the (non)delivery of basic municipal services. The problems in Lekwa were identified by national government and National Treasury back in April 2015, yet adequate attention was not given to the problems.

Growing frustration from businesses, such as Astral and Clover, over poor service delivery threatens the loss of businesses in municipalities. This results in increased unemployment in the relevant municipalities. This also takes away much-needed revenue from a municipality, as its biggest consumers of municipal services pack up shop.

The outcome of Astral’s litigation should propel municipalities to start asking their provincial governments for help, in the spirit of intergovernmental relations, before citizens approach the courts. Judicially imposed section 139 interventions are more onerous as municipalities have to abide by the court order, as well as the intervention that flows from the court order.

As policy-laden, complex and politically sensitive interventions are, this does not excuse provincial and national government from abiding by the Constitution and intervening when the jurisdictional facts have been triggered. Decisions to intervene (or not intervene) should not be driven by internal politics and political squabbles. They should be driven by the need to ensure that communities affected by poor municipal service delivery are prioritised and their needs attended to without delay.

Conclusion

Following the announcement that the local government elections will take place on 1 November 2021, many people may be wondering what will happen in Lekwa once a new council is elected following the elections. How will this change the role of the administrator, who has essentially replaced the council and executive mayor? What will the situation in Lekwa be after the elections? These are questions to ponder upon as the elections draw closer.

As we head towards the local government elections, municipalities should re-think their relationship with their communities and businesses within their areas. The priority of municipalities should be to comply with sections 152 and 153 of the Constitution, which stipulates that local government must provide democratic and accountable government; ensure the provision of services to communities; promote social and economic development; promote a safe and healthy environment; encourage public participation in local government matters and be developmental when pursuing these objectives. Astral’s win shows that where municipalities do not listen to the pleas of their communities and business community, the courts will. Judicially imposed interventions set a precedent, empowering citizens to hold their municipalities accountable for their constitutional obligations and forcing provincial and national governments to unfold their arms and intervene in dysfunctional municipalities.

 

By Thabile Chonco

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