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I am happy to welcome all of you to this the first meeting of the Consultative Committee on Maluti-A-Phofung Municipality.
 
First, let me give some background.
 
A request for intervention was made by the business community in Harrismith, Nestle in particular, as far back as 2015, citing electricity and water infrastructure failures.  The electricity supply to Nestle and surrounding factories did not conform to the minimum requirements as prescribed by the National Electricity Regulator and continuous power interruptions caused water shortages in Harrismith costing business millions of rands in profits each time a failure is experienced.
 
During that time some progress was made to address the concerns of business such as the building of a 11kv overhead electricity line to the water filtration works and to the Nuwejaarspruit pump station which was completed during June 2016.  However, much more needs to be done to address the service delivery challenges such as aging water and electricity infrastructure e.g. transformers blowing out on a regular basis.  These matters will form part of the Recovery Plan that should, in terms of the Settlement Agreement, be submitted to my office in December 2018.
 
 
3.         Maluti-A-Phofung Local Municipality – Current Status
 
3.1      During my Budget Vote speech in Parliament in May 2018, the Maluti-A-Phofung (MaP) local municipality was identified as one (1) of the 87 municipalities that are in distress due to political/governance, service delivery and financial management challenges experienced.  The MaP was also placed under section 139(1)(b) intervention, subsequent to the Free State Provincial Executive Councils’ (PEC) decision to intervene which commenced on 10 February 2018.
 
The Free State PEC declared that the municipality met the criteria for determining serious financial problems as contemplated in section 138 of the Municipal Finance Management Act of 2003 (MFMA) due to the municipality’s inability to make payments as and when due, defaulting on financial obligations for financial reasons e.g. payments to SARS and the Auditor-General, as well as:
(a)  The actual current expenditure of the municipality has exceeded the sum of its actual current revenue plus available surpluses for at least two consecutive financial years;
(b)          The municipality had an operating deficit in excess of five per cent of revenue in the most recent financial year for which financial information is available;
(c)          The municipality is more than 60 days late in submitting its annual financial statements to the Auditor-General in accordance with section 126;
(d)          The Auditor-General has withheld an opinion or issued a disclaimer due to inadequacies in the financial statements or records of the municipality, or has issued an opinion which identifies a serious financial problem in the municipality;
 
3.2      Since the invocation of Section 139(1)(b) in February 2018 and the subsequent deployment of the Administrator (Mr M Moremi) and Acting Municipal Manager (Mr K Masekoane) and the support team from the FS CoGTA department good strides have been made to address some of the above mentioned challenges which were the main reasons for invoking section 139(1)(b).
 
 
According to reports tabled by the Administrator to the Technical Interventions Steering Committee (TISC) established by my department areas of good progress were as follows:
 
The Administrator secured control over management of municipality’s bank account.
 The draft Budged was tabled on 19 June 2018 and approved on 28 June 2018;
The assistance of National Treasury was obtained for the development of the Financial Recovery Plan.  The Financial Recovery Plan was approved by Council in October 2018 and will be made available to stakeholders.
Cost cutting measures were implemented such as containment of overtime, acting allowances, travel & subsistence, etc
Draft policy framework on “Organisational Structure” developed which advocates for the reduction of directorates in MaP from nine to five.
Executive Decisions under review and decision to transfer officials to positions which renders them “redundant” already reversed.
Agreement with unions to pay remaining outstanding contributions over a period of 4 months.
Critical section 55 and 56 vacancies (MM, CFO and Director Technical Services) were advertised and the closing date was 22 June 2018.
Acting Municipal Manager appointed on 1 April 2018 (seconded from COGTA)
The process of terminating illegal appointments of assistant general workers has been concluded on 23 May 2018.
Organogram of Maluti-a-Phofung is being reviewed and will be processed through the Local Labour Forum.
 
3.3      The team from the Directorate for Priority Crime Investigation (DPCI) is currently conducting investigations at the Maluti-A-Phofung municipality on tender irregularities and it is anticipated that the investigation will be completed before the end of December 2018.
 
 
 
4.   Harrismith (Maluti-A-Phofung) Settlement Agreement
 
Applicants (Harrismith Business Forum and 13 others) applied to court in two parts. Part A was on an urgent basis and pertained to an order sought against Eskom preventing it from terminating or interrupting the electricity supply to the Applicants. Part A of the Application was heard on 26 April 2018 and an interim order was given in favour of the Applicants. In the interim order, the Court ordered that the Applicants pay directly to Eskom and not to the Municipality.
 
In Part B of the Application, the Applicants sought an order that the First to the Twelfth Respondents of which the Presidency was the Fifth, be directed to attempt to resolve the issues of compliance in terms of Section 41 of the Constitution. The Minister of CoGTA was later joined to the matter as the Thirteenth Respondent. The position that taken by the Minister was that this matter, and other similar matters be resolved amicably without the court’s involvement. To this end, the legal teams acting for the Minister of CoGTA and the Presidency held various engagements with the applicants’ legal team and other relevant parties. The purpose of these engagement was to explore ways in which the litigation could be resolved amicably without the intervention of the courts, in line with the “cooperative governance” relief sought by applicants as contemplated in section 41 of the Constitution deals with the principles of Co-operative Government and Intergovernmental Relationships.
 
On 22 October 2018, the matter had been set down for hearing. The settlement agreement that had been agreed upon between the parties was made an order of court.
 
The Harrismith Court Oder and Settlement Agreement was signed on 22 October 2018. The parties agreed that the Court Order is suspended subject to Clause 4 of the Settlement Agreement which can be considered a mediatory approach for the parties to resolve the issue without the court directing the parties to perform their functions.
 
The following sections of the Settlement Agreement relates directly to the Minister:
Clause 4.1.3 – The Minister is to appoint 2 representatives from National Government to the Consultative Committee;
Clause 4.2 - The Minister will appoint a Chairperson to preside over and chair the consultative committee;
Clause 4.3.2 - The Consultative Committee will convene for the first time on15th November 2018;
Clause 4.3.3 - Within two days of each meeting the Chairperson of the Consultative Committee with send a Memorandum to the following people:
Error! Filename not specified.                  The Minister or his nominee;
Error! Filename not specified.                  The Applicant’s attorney; and
Error! Filename not specified.                  Eskom
 
Clause 4.4 - is a dispute clause, the clause only states that the Minister must be fully apprised if any disagreement or disputes between members of the Consultative Committee and the nature of such disagreement or impasse.
 
Clause 4.5 The Consultative Committee will present a proposed recovery plan to the Minister or his nominee within 60 days from signature of the court order. The order was granted on the 22 October 2018, therefore the proposed plan will need to be presented to the Minister by 21 December 2018. (Note the Consultative Committee will only be meeting for the 1st time on the 15th November 2018, there is a 23 day delay before the Committee meets).
 
Clause 4.6 - state that the Minister and MEC for Finance will consider the proposed recovery plan and report back to the Consultative Committee with 15 days on the following:
The extent to which the proposed Recovery Plan has been approved by the department of Cogta and the steps to be instituted in order to implement the recovery Plan;
 
Clause 5 - The Minister or his nominee will through the Chairperson of the Consultative Committee report back on the progress of the implementation of the recovery plan adopted
.
Clause 6 – States that if the Applicants are of the view that the that during the consultative process the municipality’s governance, financial or technical aspects have not effected appropriate changes, the they may approach the court to implement clause 1.2 and 1.3 of the settlement agreement.
 
5.         Recommendations
a)            The Consultative Committee should present a proposed recovery plan to the Minister or his nominee within 60 days from signature of the court order. The order was granted on the 22 October 2018, therefore the proposed plan will need to be presented to the Minister by 21 December 2018.  It should however be noted that the Consultative Committee met for the 1st time today (15th November 2018) and that there is a 23-day delay between the date of the court order and before the Committee has met.  This implies that the Recovery Plan should be submitted to the Minister and MEC Finance on 14 January 2018.  However, in view of the holiday period it is proposed that the timeframes outlined in the recommendations below be adhered to if this is acceptable by all Committee representatives.
 
MEMBERS OF THE COMMITTEE
 
COGTA
Mr Ntandazo Vimba, CEO: Municipal Infrastructure Support Agent (MISA)
Mr Themba Fosi: Deputy Director General, Dept of Cooperative Governance
 
Free State Province
Mr TL Ramaema – Head: Provincial Strategic Planning, Policy and Research in the Office of the Premier and designated as Chairperson of this Committeer)
Mr Mokete Duma – HoD CoGTA
 
National Treasury: Municipal Recovery Services
Ms Thalitha Cossa – Municipal Recovery Services
 
Maluti –A-Phofong
 Mr TM Moremi – Administrator
Mr K Masekoane – Acting Municipal Manager
 
NERSA
Mr Brian Sechothlo (Acting Executive Manager: Electricity Regulation)
Mr Sandile Dlamini (Head of Department: Legal Advisory Services)
Mr Chris Forlee – CEO of NERSA
 
ESKOM
Ms Ayanda Noa – Eskom: Group Executive, Customer Services
 
Business Representatives
Mr B Deysel – Highway Group
Mr Zweli Mnisi – Nestle
Mr Johan Wessels –Afgri
Mr David Drew – Boxmore
Mr Nicholas Nouwens – Monn Carpets
 
I wish you all of the best as you work hard to produce a recovery plan that will give hope to the people of Harrismith and surroundings.
 
Working together we will find lasting solutions to the problems facing Maluti-A-Phofung.
 
Issued by Ministry of Cooperative Governance and Traditional Affairs