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.
BACKGROUND
The 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.
DISCUSSION
Considering 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.”
DISCUSSION
The 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.
DISCUSSION
The 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 CoOperative 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.
DISCUSSION
Having 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).
DISCUSSION
Only 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
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