Municipalities III: Assessing provincial intervention in local government. Are provinces doing too little or too much?

Introduction

The recent decision by the North West provincial executive to intervene in an additional seven municipalities has again placed the spotlight on provincial intervention mechanisms, their implementation and whether they yield results.1 The latest list of interventions means that 15 of the 21 municipalities in the North West are subject to some form of intervention, and this by a province that itself was placed under administration by national government in May 2018. This foreshadowed the Auditor-General’s latest report on municipal audit results which recorded another plunge in municipal performance and financial management.2

The rate at which provinces are employing this mechanism is alarming, particularly given the autonomy that the Constitution confers on local government. Provinces are permitted, and indeed encouraged, to monitor and support municipal performance and strengthen municipal capacity to fulfil the developmental mandate of local government.3 Where necessary, this includes intervention as endorsed by the Constitution. But it must be done in terms of the law. This brief examines the legal framework for provincial intervention provided by the Constitution, the frequency with which the mechanisms are employed and the main legal questions that arise with their implementation.

Intervention in the context of local government autonomy

Under the Constitution, local government is an autonomous sphere of government entitled and empowered to govern the local government affairs of its community on its own initiative.4 This status has been asserted in the Constitutional Court on multiple occasions.5 But it must be exercised within the confines of cooperative governance and constitutionally permitted supervision and intervention by national and provincial government.6 It is within this context that provincial governments must approach any intervention in the affairs of local governments.

The practice of provincial intervention in local government

The Constitution, together with the Municipal Finance Management Act (“MFMA”),7 essentially advances four types of provincial interventions:8

1. Where a municipality is unable to fulfil an executive obligation, the province may intervene by issuing a directive, assuming responsibility or, in exceptional cases, dissolving the municipal council.9
2. Where there is a serious financial problem in a municipality which has been caused by a municipality’s failure to comply with an executive obligation in terms of legislation or the Constitution, the province may take appropriate steps to intervene in terms of the MFMA.10 Unlike intervention (1) above, this mechanism does not apply to provincial intervention which is unrelated to a financial problem in a municipality.
3. Where a municipality fails to approve a budget or any revenue-raising measure necessary to give effect to the budget, the province must intervene to ensure the budget is approved.11
4. Where 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, the province must intervene, including taking steps to impose a recovery plan, dissolve the council or assume responsibility.12

The first two interventions are discretionary in nature. The latter two are peremptory when the relevant circumstances arise. Provincial executives seem to prefer intervening through the first mechanism, particularly by assuming responsibility of a specific executive obligation.13 This being the case, the rest of the discussion on provincial intervention will focus largely on the first mechanism.

Intervening upon municipal failure to fulfil an executive obligation: Some issues

Section 139(1) of the Constitution lays the foundation for the first mechanism of intervention. While it sets out substantive and procedural requirements, the Constitution also allows for the enactment of legislation to implement it.14 Parliament has not yet passed legislation, and the gap has caused significant uncertainty in practice.

The first problem is definitional. Provincial intervention using section 139(1) of the Constitution is only constitutionally sanctioned if a municipality fails to fulfil an “executive obligation”. Without clearly identifying which executive obligation is failing, a province cannot lawfully intervene. The High Court has held that a distinction must be drawn between an executive obligation and a statutory obligation that is aimed at ensuring the effective performance by local government of its executive obligations.15 Non-compliance with these statutory obligations does not, on its own, mean that a municipality is failing to fulfil an executive obligation. Practice has shown that a significant portion of intervening provinces are unable to link, clearly and accurately, their intervention to an executive obligation.16 Provincial executives seem to be unsure of how correctly to identify and substantiate their reasons for intervening, and often get it wrong.

Another definitional problem exists when a provincial executive chooses to intervene by dissolving the municipal council. Intervention of this nature is only permitted in “exceptional circumstances”. Guidance on what constitutes exceptional circumstances has not yet been fleshed out in legislation or by the courts.

Secondly, when a provincial executive decides to intervene by assuming the responsibility to fulfil the executive obligation, the Constitution only permits it to the extent necessary to (i) maintain national standards or meet established minimum standards, (ii) prevent the municipal council from taking unreasonable action that will prejudice another municipality or the province, or (iii) maintain economic unity. But reports simply cite financial distress, collapse of service delivery and instability in council as reasons for provincial intervention.17 This may constitute failure of an executive obligation, but it extends beyond the conditions stipulated in the Constitution under which provincial executives are permitted, specifically, to assume responsibility and is likely to be declared unlawful if taken under judicial review. More appropriate intervention in these circumstances will be suited to (4) above.

Difficulties also arise when the provision is viewed together with the procedural requirements for assuming responsibility. The Constitution instructs the provincial executive to end its intervention if the Minister or the municipal council disapproves of the intervention within a stipulated timeframe. It also instructs the municipal council to review the intervention regularly and make any appropriate recommendations to the provincial executive. This suggests two things. At the outset, by including all three spheres of government in the process, the Constitution envisages the process be conducted in a manner that respects and promotes the principles of cooperative governance.18 But more importantly, it indicates that the municipal council maintains a voice in the intervention process – there must be a level of agreement and cooperation from the council.

Thirdly, it is not entirely clear whether or not the provincial executive must issue a notice before intervening. Given the fact that intervention should only take effect once mechanisms to monitor and support municipalities have failed, provinces would likely already have communicated their concerns. But whether this is sufficient to fulfil the natural prescripts of procedural fairness is unlikely, particularly given the incursion of provincial intervention on a municipality’s constitutionally entrenched autonomy. Nor does it reflect the principles of cooperative governance prescribed by the Constitution. That said, the Constitution does not explicitly require prior notice for provincial intervention in local government, although there is some debate whether a directive, in terms of section 139(1)(a) of the Constitution, is a compulsory step in the process of more drastic interventions.19 In practice, therefore, provincial executives rarely provide municipalities with formal prior notice of impending intervention.20

Lastly, practice shows that procedural requirements after intervention starts are not strictly adhered to within the stipulated time frames,21 which must render intervention invalid and unlawful, particularly because it entails approval from the relevant national executive and provincial legislatures.

Further guiding the process of provincial intervention

National government may enact legislation that further regulates the implementation of provincial intervention set out in the Constitution, including its process.22 But no legislation has been enacted yet. The MFMA provides some further guidance for intervention that is implemented when municipalities are experiencing financial problems.23 This hardly seems sufficient, though, particularly given the serious implications of provincial intervention on the constitutionally-entrenched ability of municipalities to govern their communities on their own initiative. All stakeholders will benefit from a distinct legislative enactment with clearly defined procedures, roles and timelines taking into account constitutionally entrenched principles of procedural fairness and cooperative governance.

Though the Constitution and the MFMA set the framework for intervention, practice highlights the definite need for further guidance and regulation.

Michelle Toxopeüs

Legal Researcher

michelle@hsf.org.za