Drew Forrest
Simmering tensions between the national Treasury and local government actors were underscored this week by a judgement in the Pietermaritzburg High Court and fierce objections to a new Bill regulating municipal finances.
Acting high court Judge Anton van Zyl ruled “inconsistent with the Constitution and invalid” a provision in last year’s Division of Revenue Act that allocates no central government money to district councils.
Treasury is known to be deeply worried about a move which it identifies with the Municipal Demarcation Board, among others to entrench district councils as the primary service providers. It argues that the move is ideologically driven and may undermine the finances of established town councils.
The decision to exclude districts from the Revenue Act was challenged by Uthukela, Zululand and Amajuba district councils in KwaZulu-Natal. The judge ruled that the exclusion would prejudice countless citizens and residents employed in those areas, according to the Natal Witness.
At the same time, the Demarcation Board has hit out at the recently published Municipal Finance Management Bill, arguing that it gives an excessive role to Treasury, an unelected body, and that it treats constitutionally independent municipal sphere as Treasury’s “step-child”.
A local government source complained that a situation was emerging where local government fell under two ministries those of finance and provincial and local government.
In a submission drafted for Parliament’s finance committee, Demarcation Board chairperson Mike Sutcliffe takes particular exception to the Bill’s provision for a National Financial Emergency authority, which would step in to rescue municipalities from financial collapse.
“No serious policy-related proposals have been put forward by Treasury to justify this … this means that national government becomes the judge, jury and prosecutor in assessing emergencies.”
The Treasury’s chief director for intergovernmental relations, Ismail Momoniat, replied that Bill was designed along the same lines as the Public Finance Management Act, which regulates central and provincial government. Its purpose was to ensure good financial governance at local level and proper budgeting in line with council policy.
This week Momoniat was reported as saying that the Constitution would have to be amended to allow for an emergency authority, as it ran counter to the principle of independent government spheres.
In his submission, Sutcliffe argues that the Bill authorises Treasury to prescribe to municipalities by regulation, instruction and guidelines. “It is reasonable to assume they may undermine, or at least weaken, the role to be played by elected bodies such as municipal councils and provincial governments.”
The Bill, and particularly Treasury’s role, may upset checks and balances for maintaining three separate government spheres, he adds.
He also objects that local government differs from the provincial and national tiers by generating most of its own revenue. Despite this, “wide-ranging powers are now given to Treasury to intervene in both the legislative and executive affairs of local governments”.
Suggesting at numerous points that the Bill is unconstitutional, Sutcliffe objects:
That only Minister of Finance Trevor Manuel rather than the local government minister and MECs may introduce amendments to the legislation;
That a provision for municipal managers to submit information, returns, documents and explanations to Treasury “may place an unnecessary burden on municipalities … to the detriment of … service delivery”;
That the Bill disregards the constitutional duty of provincial governments to monitor, and intervene in, councils.
While supporting the need for legislation on municipal finances, the Demarcation Board rejects the current version as doing “little to strengthen constitutional democracy, and to deal with key financial issues at local level”.
The board took a prominent role last year in opposing Treasury-proposed constitutional amendments giving national government the power to intervene directly in local government. The amendment has been withdrawn.