INTERGOVERNMENTAL RELATIONS

EXECUTIVE SUMMARY

[PMG Ed. Note: footnotes have not been included]

Defining intergovernmental relations.

Intergovernmental Relations [IGR] are conventionally defined ‘as important

interactions between governmental units of all types and levels.’ In this Audit,
Intergovernmental Relations are defined as an interacting network of
institutions at national, provincial and local levels, created and refined to
enable the various parts of government to cohere in a manner more or less
appropriate to our institutional arrangements. It is an evolving system of
institutional co-operation that seeks to address the relations of equality and
interdependence as defined by the Constitution.

Backgound

The Presidential Review Commission recommended an Audit of IGR in

February 1998 , identifying the main challenges as establishing a balance
between the natural evolution of intergovernmental relations and the need for
prescription. It also called for a review of the multiple structures established to
promote intergovernmental relations and for proposals to improve the weak
intergovernmental relations between local government and the other two
spheres..

Meanwhile the Department of Constitutional Development (now Department of

Provincial and Local Government) conducted a Functional Audit of the main
instruments of intergovernmental relations and issued a Status Report on the
IGF and the MINMECs for Local Government and Traditional Affairs. This was
followed by a Discussion Document (March 1999) announcing the present
Audit [in collaboration with the University of Fort Hare and the University of the
Western Cape] for an enquiry into the existing intergovernmental structures
throughout the country. A Conference on IGR in the same month served to
provide the vision of intergovernmental relations as expressed by the
President and also the framework for the Audit, especially the view:

 that the intergovernmental relations system be seen in the context of social,

political and economic realities;
 that the institutional and legislative framework serve to guide developments,
not control them.

The Audit:

The Audit Team’s primary role was to make recommendations for overcoming
the many serious challenges impeding the development of a sound culture of
intergovernmental relations and to inquire into those practices that inhibit the
development of an effective and unifying system. Some of the constraints
were caused by the hasty establishment of intergovernmental relations
instruments to attain the rudimentary objectives of policy and planning in the
wake of the transition from apartheid.

The chief objectives of the Audit were:

 to map the numerous instruments of intergovernmental relations,

intergovernmental processes, and the current reality of intergovernmental
relations across the different spheres of government;.

 to assess the strengths and weaknesses of the system and to provide some
insights into the desirability of regulation;

 to inquire into the practice of national government supervision of the

provinces and provincial supervision of local government;.

 to examine the efficacy of intergovernmental relations in the legislative

branch of government – the role and function of the National Council of
Provinces (NCOP), including its oversight functions and role in interventions of
the national and provincial spheres.

 to examine the reasons for disputes between and within the spheres.

The constitutional context:

The Audit has addressed the fundamentals of the system. The constitution
establishes norms of co-operative government in which the spheres [as
opposed to subordinate tiers] are distinctive, interdependent and inter-related.
Distinctiveness is defined as the degree of legislative and executive power
each sphere has to make laws and to execute them. Their interdependence is
seen to rest on the degree of dependency they have on one another for the
proper fulfilment of their constitutional functions -- and their inter-
relatedness is defined as the duty of each to co-operate with the other in
mutual trust and good faith.. There are, however, inherent tensions in the
power relations which the Audit has not overlooked.

Theoretically, the concept provides for a structure in which all three spheres
co-ordinate their actions in such a way as not to infringe on the integrity of any
of the other spheres. In practice the relationship is far more sensitive. For
example, at one level there is the duty of the national and provincial spheres
to empower, and at another level, to intervene, as shown in the section on the
supervision of Local Government and the complexities of Intergovernmental
Fiscal Relations. Co-operation is thus central to the system . The instruments
of IGR facilitate this and reflect the concept of co-operative government
whose principles underline the predominance of the national interest and
require from each sphere that it respect the constitutional status, powers and
functions of the other spheres.

The Instruments of Intergovernmental Relations:

The co-operative government framework described above is what determines

the distinctive features of the instruments of IGR and sets them apart from
comparative, more conventional conceptions. Accordingly, the emphasis of
the Audit has been on identifying the weaknesses of the existing structures,
strengthening the mechanisms for intergovernmental co-operation and
seeking ways to mediate tensions so as not to impair the integrity of the
spheres but to elevate their overall unity. The Audit recognised that reform or
regulation in itself might not lead to dramatic improvements in performance as
poor IGR co-ordination is frequently a problem of capacity and management
rather than a problem of inappropriate intergovernmental relations. The
recommendations proposed by the Audit Team were accordingly designed to
improve accountability and efficiency and provide an enabling framework for
the regulation of IGR ‘in ways that would maintain the balance between an
evolutionary system and the need for prescription.’ The recommendations
were therefore the product of a careful review of the structures and functions
of these instruments and the realities on the ground, as well
as the perceptions of the elected and appointed officials interviewed by the
Audit Team.

The instruments examined in depth comprised those so far developed in an

evolving system of IGR. They are at once the institutions and actors in the
system -- assessed according to the efficacy of their interaction between the
spheres and within them for planning and integrated development. The
instruments included, first, the executive branch of government and second,
the legislative, which has its own role of developing co-operation between the
national assembly and the provincial legislatures, through the National Council
of Provinces. They include:

 the national inclusive fora such as the IGF;

 the recently created national/ provincial forum, the Presidential Co-

ordinating Council [PCC]

 the informal national-provincial sectoral fora [in the financial and educational
sectors respectively], such as the MINMECs

 the statutory MINMECS, fora formally derived from legislation, e.g. the
Budget Council and HEDCOM

 the administrative/ technical forum, FOSAD [the Forum for South African
Directors’ General]

 the intersectoral cabinet "cluster committees"

 those at provincial and local government level, such as Organised Local

Government and the Provincial Intergovernmental Fora

 those at the legislative level, namely the NCOP and its interaction with the
National Assembly and the provincial legislatures.

Where formerly the IGF was seen as the instrument at the apex of the
intergovernmental relations system, it was, in the view of the Audit Team, an
early instrument of IGR whose structure and functions were mutually
incompatible. The Audit examined it closely. Although the restructuring of the
presidency has provided the strategic architecture to integrate development
planning through its intersectotal cluster committees and cabinet offices, there
is still considerable need to develop adequate linkages between these and the
IGR instruments for the greater coherence of the system. Similarly the
creation in June 1999 of the Department of Provincial and Local Government
has enabled the national government to improve its monitoring and oversight
capacity and, through the department, provide greater strategic direction for
intergovernmental co-operation. As indicated in the Audit, this arrangement
was more sustainable than replacing the representation afforded by the IGF
with any other forum at the centre of the system. The PCC, for
instance,among others, technically assisted by the six inter sectoral
committees in the Cabinet Office would therefore jointly have the responsibility
of advancing the culture of co-operative governance.
The sectoral structures such as the MINMECs – a layer between the national
and provincial governments -- were seen to be at the "coalface" of IGR. The
recommendations [referred to below] to enact enabling legislation for their
regulation is to provide a framework for their activities without imposing an
inflexible regime upon them. Assymetry in the design of regulation was
possible so long as it was not inconsistent with the general principles
underlying the proposed legislation.

The practice of supervision and support

The Audit Team noted the failure at the provincial level to develop the
necessary co-operative government framework, although an encouraging sign
of progress was the Memorandum of Understanding between the Eastern
Cape Provincial Legislature and the Eastern Cape Local Government
Association which ,if acted upon, would regulate their interaction with
Organised Local Government and, in so doing, encourage emulation by other
provinces for improved co-operation with municipalities and metros.

In assessing the practice of monitoring, support and intervention by provinces,

the Audit assessed the use of Section 139 of the Constitution and the
obligation of the province to oversee the capacity of local government to
deliver services effectively. The role and oversight function of the NCOP were
equally addressed. The case studies on Tweeling in the Free State and
Warrenton in the Northern Cape Province, provide insights into the role,
relations [with province and NCOP] and the capacity of organised local
government to discharge its services responsibly

A number of general conclusions flowed from the study, notably [in respect of
the intervention in Warrenton] that with a proper monitoring system and use of
the right measures of support, the intervention could have been prevented.
The case of Tweeling, in the Free State was an example of political and
administrative mismanagement on the part of the TLC. Among the lessons
learned from the case study was that in this instance the intervention also
could have been prevented, if the provincial department had understood its
supporting role better and adopted the problem-solving role played by the
NCOP after the intervention. Recommendations for the national supervision of
provinces and conclusions drawn from the case studies extend the scope of
IGR.

Intergovernmental Relations in the legislative branch of government

The Audit examined the NCOP’s function of articulating and promoting
provincial interests through the legislative, executive and judicial branches of
government. Since this function is exercised by all three components of
government, the NCOP is regarded by the Audit Team as an important
instrument for giving effect to intergovernmental relations. Moreover, its
powerful review function – scrutinising specific national and provincial
executive actions affecting the distinctiveness of another sphere, with the
power to overturn or approve those actions -- makes its role in IGR significant.
The Audit was critical of the NCOP at a number of levels, noting its functional
overload, limited resources and dis-empowering legislative process. The
consideration of Section 76 bills was seen to be its pre-eminent role and the
one for which it was best equipped and structured.

The substance of the critique in respect of overload, is that the NCOP is

inundated with work due to its broad mandate in which it scrutinises both
Section 75 and 76 bills. As special delegates play little part in the committee
system, the scrutiny of all bills rests with only the permanent delegates. The
problem is compounded by the smaller 30 member provincial legislatures,
where approximately half the members are free to do Committee work. The
legislatures simply do not have the resources to cope with the exacting
demands of legislative scrutiny or to deal with bills expeditiously within the
legislative cycle. Hence there is hardly an opportunity for a considered view to
be heard from the provincial legislatures.

The most persistent critique of the NCOP is, however, that executive IGR
processes have effectively eclipsed its function, that is to say, that when
legislation comes before the NCOP, provincial interests have already been
articulated by the MEC’s in the MINMEC or through other IGR processes.
Respondents felt that little value was added to the debate and the
NCOP appeared to them as simply a "rubber stamp" of the National
Assembly.

In its oversight function the NCOP had not carried out its role as competently
as it is required to do. The internal organisation of the Select Committees was
found to be seriously wanting in regard to their management and the issues to
be probed.. However the NCOP’s current interventionist review approach was
seen more positively, although it was likely to impact detrimentally on its
limited resources.

The Audit presents a number of policy options – the way forward - in which
NCOP activities would focus on IGR.
Intergovernmental Fiscal relations

The Audit Report maps out the constitutional responsibilities of the spheres in
their fiscal relations and the inherent tensions in the system – reflecting the
conceptual inconsistencies in the power relations between the spheres
[referred to earlier in the Audit]. In elaborating the financial framework
provided by the constitution for the provinces, this section considers the
question of revenue raising – primarily reserved for national government but
balanced by the provincial right to its equitable share .A critical review of the
provincial intergovernmental fiscal institutions is provided, dealing with their
roles and functions, alignment, and sequencing and inconsistencies in the
intergovernmentaL budget process. A review is made of the part played by the
Medium Term Expenditure Framework [MTEF]; the Budget Council, Finance
and Fiscal Commission , the Departments of Finance and State Expenditure
and the Department of Provincial and Local Government. Policy options for
improving provincial fiscal relations call for a re-assessment of the roles and
responsibilities of provincial and national goverbnment with regard to
concurrent functions to bring consistency into the process and set norms,
standards and policy objectives. A reassessment of the present revenue
assignment is recommended, including increased taxation powers at
provincial level.. Monitoring, co-ordination and alignment are seen as
important in accelerating budget reform and improving co-ordination. An
innovative aspect of this section of the Audit is the discussion on Key
indicators -- both Outcome and Processed based -- for measuring the health
of IGR.

The Settlement of Intergovernmental Disputes:

The final section of the Audit refers to the avoidance of legal proceedings
against one another, by the spheres. This is a duty imposed by the
Constitution. Whilst the latter foresees the likelihood of a breakdown between
and within spheres, it imposes a duty on organs of state, in the event of a
dispute, to exhaust all other remedies before approaching a court. An act of
Parliament is required under S 41 (2)(b) of the Constitution to provide for such
alternative[non judicial] mechanisms. In the absence of such an Act, disputes
have to be settled politically and/or by means of intergovernmental relations.
The Audit addresses these and recommends that legislation be delayed. It
sees no compelling urgency to enact this legislation. Moreover, delay might
allow best practices to emerge which can later be captured in effective
legislation.. The duty to exhaust all procedures before resorting to judicial
remedies will obviously continue to apply. Sectorally-based legislation is
however encouraged for settling disputes within a sector [vide the National
Environmental Management Act].. Such legislation is essentially issue-
sensitive and can give content to a normative framework in terms of which
disputes can be settled. The recommendations that follow encapsulate this
approach.

The recommendations of the Audit appear below as a separate section

to this summary.

RECOMMENDATIONS

1. Introduction:
The following are the main recommendations of the Intergovernmental
Relations Audit. The chapters referred to appear in the same order in the Final
Report.

2. Chapter 2: Instruments of intergovernmental relations

2.1 Intergovernmental Forum

2.1.1 A failed attempt at IGR?

During the course of the audit, a process of review of the IGF was under way. As an
inclusive body, the IGF was initially seen to be important for consultation between
provincial and national government. Potentially it was well placed to facilitate planning
and co-ordinate the activities of the three spheres of government. but its lack of focus,
"all-in" audience, and generalised presentations prevented this. Since it brought
together most of the top leadership in the country, it was important for receiving (rather
than sharing) information and should have provided opportunities for networking beyond
the confines of political parties. It did, however, serve as a forum for members to receive
information on important, often sensitive issues, requiring more inter-governmental
consultation, co-operation and co-ordination than the forum was able to provide. On the
whole, the Audit Team found that it failed as a multilateral, intergovernmental, policy-
planning body upon whom government could rely for support, advice and the
implementation of its development programme.

2.1.2 A programme review body

The recommendation of the Audit Team is that this body should not be disestablished. It
should be a smaller forum which meets twice a year after the President’s address to
Parliament. This would enable the government to meet and plan a programme of action
based on the government’s priorities. A second meeting should take place at the end of
the year after Parliament has convened in mid-June/July to reflect on government’s
outputs and achievements. The first meeting should be used by the President to set out
the priorities of government and these should be filtered down to the national, provincial
and local levels. The purpose of the second meeting should be to review progress of
objectives set out in the first meeting. In this way, "the IGF should be used as an
instrument to co-ordinate government programmes and enhance and add value to
Cabinet decisions." The presence of elected persons and officials is seen to be
important to generate a sense of achieving the unity and common purpose of
government.

2.2 President’s Co-ordinating Committee (PCC)

2.2.1 Focus of the PCC

The remit of the PCC should be what the premiers themselves had realised was
previously a lack of synergy between the provinces and the other spheres with respect
to planning, policy and legislation. In addition, the new Council would need to include in
their brief the terms of reference appropriate to the extensive executive authority
prescribed for premiers by the Constitution (S 125[1] and [2]; S 127[1] and [2]). In order
to achieve this, the PCC will perforce create new linkages with the other
intergovernmental relations for a, such as the MINMECs, statutory co-ordinating
institutions and other bodies. Given the experience of the previous forum, this is
unquestionably a priority.

2.2.2 National-provincial co-ordination

The creation of the PCC should help to improve co-ordination between national and
provincial government and, with the development of appropriate linkages between the
formal and informal institutions of IGR, serve to integrate planning and development
across all the spheres. The reference point for the new forum is the constitutional
responsibility of premiers to exercise their executive authority (together with their Excos)
to promote good governance in the province. Inter alia, this involves the development of
provincial policy, championing development and the administration of key concurrent
functions shared with the national government. What separates the national-provincial
forum from the previous body is its emphasis on these core activities within a co-
operative government framework. An important feature of this framework is the formal
responsibility of premiers to use their executive authority to ensure the delivery of
services through co-operative interaction with local government.

2.2.3 Agenda

A "strategic agenda" should inform its deliberations and enable it collectively, with the
advice and support of the national Department of Provincial and Local Government, to
deal with the substantive issues confronting provincial government.

2.3 MINMECs (Intergovernmental Relations Committee(s) of Ministers and

Members of Provincial Councils)

2.3.1 Accountability
There are seldom mechanisms in the provinces to deal with recommendations and it is
unclear whether MECs regularly make full reports to their Excos or whether line
ministers refer matters with any regularity or detail to Cabinet. The flow of information
between provincial and national departments is one of the serious problems raised by
respondents. The recommendation (see below) for an Act to regulate IGR structures is
designed to address this.

2.3.2 Regulation

The Audit Team recommends that legislation be enacted forthwith. While section 41(2)
of the Constitution requires an Act of Parliament to "establish or provide a structure and
institutions to promote and facilitate intergovernmental relations", it does not specify
when this legislation should be enacted, or prescribe its nature.

Such legislation should be broadly enabling and set out

such basic requirements as terms of reference, membership, criteria for
compliance, technical support structures, and the assignment of responsibility
for compilation of agendas, minutes of meetings, regular reports, a
consultative process, linkages with other sectors, clusters and fora, and
reports to provincial Excos and the Cabinet Office. Communication and
information between the MINMEC structures, the provincial executive
committees, appropriate national departments and the Presidency should be a
requirement.

As the Act should be enabling, rather than prescriptive, regulation may be

applied asymmetrically for each structure, provided that it is not inconsistent
with the legislation.

While the requirements of the sector will determine specific objectives, the Act
would establish general criteria such as would require MINMECs to act as a
means of co-operation, alignment and co-ordination of policies, and to
facilitate the interaction of national and provincial government and, wherever
applicable, in local government, according to the principles of Section 41 of
the Constitution.

It is recommended that the proposed legislation require MINMECs to include

mechanisms for the settlement of potential disagreements in the regulations
governing their procedures.

Accountability should include the relevant portfolio committee(s) to ensure that

the structure works in a way that best served the sector and its related parts,
within a co-operative governance framework.
2.3.4 Unco-ordinated growth of IGR structures

The growth of IGR structures is acceptable in an evolving system. However, the

proliferation of structures needs to be co-ordinated to avoid duplication and to ensure
linkages with other IGR fora. The proposed legislation should address the above and
help to co-ordinate the system.

2.3.5 Attendance

Irregular attendance affected continuity and communication. Attendance tended to

fluctuate with the relevance of the MINMEC to the activity of the sector as a whole, the
opportunity-cost of attending in terms of value added, and the logistical difficulties for
MECs where their portfolios were not configured to deal with a single sector, as was the
case with the national departments. Regulation alone would not remedy this. Effective
management, proper sequencing of meetings and a co-operative style of management
are necessary to ensure the success of IGR structures. The personality and style of the
minister are also important. Generally, the presence of the MEC (properly mandated by
the provincial Exco) is necessary for the success of the MINMEC.

2.3.6 Provincial portfolios

These should, where possible, be congruent with their national counterparts so as to

facilitate scheduling of meetings and participation of MECs in the proceedings of
MINMECs.

2.3.7 Disputes

There are currently no mechanisms to deal with disputes. It is recommended (see

above) that the proposed legislation to regulate IGR structures require MINMECs to
include mechanisms for the settlement of potential disagreements in the regulations
governing their procedures. As decisions are not constitutionally binding on the parties
to MINMECs, the effect of a dispute is to prevent recommendations from being
unanimous, with particular implications for the alignment of policy, integrated
development planning and service delivery. It is rare (although not unknown) that a
recommendation would be made without due consensus. In the view of the Audit Team,
disputes were manageable provided there were mechanisms to resolve them.

2.3.8 Linkages between MINMECs and other IGR structures

The absence of structured linkages between the MINMECs and other IGR institutions
was a major weakness in the IGR system. The proposed legislation is designed to
address this.

2.4 Statutory MINMECs: The Budget Council

2.4.1 Alignment with proposed regulation

If the recommendation for legislation is accepted (see above), it will be necessary to
revisit the terms of reference of existing statutory MINMECs to ensure that their
structure and the procedures governing their existence are consistent with the
framework of the new legislation. The experience of these structures should be of
importance when new structures are created or existing MINMECs formally established
according to the proposed legislation.

Note should be taken of the considerable groundwork required before binding

instruments into statutory structures and the experience of the Budget Council
in this respect is instructive. Before this body became a statutory instrument a
team was established, then legislation was passed. It is imperative that "best
practices" be sought before MINMECs enter the statutory dispensation. For
example, a notable shortcoming of current practice is the Budget Council’s
under-resourced support service and absence of links between expenditure
and service delivery. MINMECs may monitor this.

2.4.2 Monitoring

Commitment to a publicly stated medium-term expenditure and delivery framework is a

powerful means of enhancing accountability within government. From it flows a
sustained pressure for efficiency gains that translate into either service extension or
service improvement. In order to install appropriate monitoring systems, it is important
to ensure that information systems are put in place that will enable information on
service delivery to be linked with information on financial flows. Proper costing systems
need to be developed and fed into the Budget Council.

2.4.3 Local budget committees

The creation of local "councils" at provincial level is recommended. These would

analyse the budgets of departments, oversee spending patterns and identify early
warning signals of potential financial crises. They would also have a monitoring function.

2.4.4 Interaction with the Finance and Fiscal Commission (FFC)

There is little interaction with the FFC except at the Budget Council, which the FFC
attends as an observer. The role of the FFC needs further clarification and its contact
with provinces needs to improve.

2.5 Forum for South African Directors-General (FOSAD)

2.5.1 A new role or disestablishment?

A diminished role is recommended as indicated below. FOSAD’s broad objective is

currently to assist good governance and best practice within the public service and to
promote the basic values as set out in sections 41 and 195 of the Constitution. Its five
cluster committees were established to facilitate this. Translated into practical activity at
a narrower level, this meant promoting co-ordination between national and provincial
departments on policy implementation and passing on expertise and advice to Cabinet
and Exco respectively. Essentially, this referred to its expertise and ability to advise
government on interdepartmental or transversal matters of policy, service delivery,
financial issues and information dissemination. In the view of the audit, this would
duplicate the activities of the intersectoral Cabinet committees and, to some extent, the
respective technical units of the Cabinet Office. It would also be expensive. It is
recommended that the role and structures of FOSAD be revisited and that its meetings
be reduced to biannual sessions to provide guidance to public sector management and
to facilitate the sharing of information on best practice.

2.5.2 Role and structure

FOSAD’s role would include oversight of professional management and the impact of
policy on service delivery. It could continue to review strategic direction of cross-cutting
issues, and submit recommendations to the Cabinet structures on monitoring policy
alignment. Its structure should reflect its new functions. Rather than being purely
technical, it should concern itself with serious strategic management and its approach
should be efficient governance generally, not performance management. The latter
should be left to the minister.

In summary, it should do the following, but not duplicate the activities of the
Cabinet committees:

_ consider specific strategic policy matters;

_ satisfy themselves that enabling mechanisms are in place to help fast-track

the implementation of national policies;

_ ensure that policy decisions go through all the different processes;

_ satisfy themselves that they are cost-effective (this will entail a monitoring
exercise);

_ ensure that they do not duplicate other initiatives; and

_ use their expertise to confirm that policies are viable and make
recommendations accordingly.

2.6 Organised local government

2.6.1 Policy options for provincial intergovernmental fora

There is a need to develop a policy framework for provincial intergovernmental fora
which should plan and co-ordinate the programmes outlined at national level. An option
would be to develop a policy framework for MECCOMS, i.e. MECs and Chairpersons of
Standing Committees in Municipalities, based on the MINMEC model and comprised of
all MECs and their DGs, mayors, Exco chairs, and representatives of organised local
government. This would help:

_ to clarify roles between provincial and local government;

_ to focus on policy alignment in, for example, the following areas: housing,
economic development, transport systems and tourism; and

_ to interrogate capacity problems in local government.

2.6.2 A new legislative framework for intervention

As a matter of urgency, a new legislative framework needs to be developed for

interventions. (See Chapter 3 on the Practice of Supervision and Support.)

2.6.3 Capacity development

In all provinces, there was an emphasis on the need for capacity building within SALGA.
The Association was seen as ineffectual for a range of reasons – political, financial, and
because of its lack of capacity to facilitate co-operation between provinces and
municipalities. There is, in fact, a general dissatisfaction among local government
regarding the intergovernmental co-operation between provinces and municipalities. In
some cases there is little interaction between organised local government and the
province because of political differences. Lack of capacity to address some of the major
problems confronting local government is the cause of the problem.

2.6.4 Communication flow

There appears to be a problem of communication flow from national down to local level.
Very often, issues, addressed in national level structures such as the IGF and
MINMEC, in which SALGA is represented, do not filter down to local level. Some
respondents also remarked upon the preparation of local government representatives
who attend the MINMEC meetings. SALGA needs to address this as part of its
programme to build internal capacity.

2.6.5 Poor linkages

The relationship between the provincial and local government is poor in most provinces
and needs to be addressed with urgency. The absence of structured relationships
between local government and the provinces has resulted in the programmes and
policies not being co-ordinated and aligned. Many provinces tend to act as "big brother".
Many respondents expressed the view that it should be appreciated that both levels of
government are important in the governance process. The absence of an effective
working relationship between the provinces and the provincial local government
associations does not help this.

2.6.6 Growth and development

Fora need to be developed to deal with planning, growth and development. There are
few linkages between the provinces and local government on growth and development.
(For example, there is very little interaction (if any) with regard to the formulation of
IDPs). There is no strategy in place to address issues. Communication takes place on
ad hoc basis. In some provinces the MEC meets with Exco chairs from time to time.
Most provinces compile their budgets in isolation. There is no consultation with local
government thus resulting in duplication and wasting of resources. In some provinces
(e.g. Eastern Cape), because of the lack of interaction, communities are able to apply to
both province and local government for funding of the same project.

2.6.7 Observers

In order to bridge the divide between the two spheres of government, a need was
expressed to develop a policy framework that would allow councillors to
become participating observers in provincial standing commitees. As already indicated,
this facility exists in Gauteng and a few provinces (where observers may not vote but
verbal interventions are allowed). However, it is not standard practice and there are
reservations about councillors’ participation. This should be followed up with the
provinces.

3. Chapter 3: The practice of supervision and support

3.1 National supervision of provinces

3.1.1 Monitoring

While all the provinces accept that monitoring is required by the Constitution, there
should be clarity about what monitoring entails. As a minimum, it entails the due
performance of provinces’ statutory executive obligations. Whether such obligations are
fulfilled requires monitoring, and processes giving effect to it should be devised.
Because monitoring in terms of section 100 is in and of itself an intervention, it should
preferably be spelled out in legislation.

_ A second level of monitoring concerns the performance of provinces in

delivering services. This is a qualitative monitoring of good and efficient
governance not linked to specific statutory obligations. In this area there
should be agreement between the provinces and the national government of
how performance is to be measured. Key indicators should be defined and
agreed upon by all parties concerned.
_ The national department’s lack of co-ordination of monitoring activities
imposed unnecessary obligations on provinces. This often led to a waste of
time and resources. Co-ordination of monitoring activities is thus essential.
This includes the sharing of information obtained from provinces. As the
Department of Provincial and Local Government is the department concerned
with provincial affairs, it should play a lead role in co-ordinating monitoring
activities, distributing information and evaluating the overall health of
provinces.

3.2 Intervention

Section 100(3) provides that "national legislation may regulate the process established
by this section". Because of the intrusive nature of the supervision process and its
encroachment on the functional and institutional integrity of the provincial sphere, it
would be advisable for the sake of clarity and avoidance of future disputes to define and
describe the process closely in legislation.

3.3 Provincial supervision of local government

3.3.1 Budgeting for support, monitoring and intervention

Provinces do not appear to have budgets for municipal support, monitoring or

interventions. The result is that there is little incentive to monitor, assist or intervene.
Indeed, with no budget available for interventions, a provincial department must scratch
around within its existing budget for funds to employ outside agencies to assume the
responsibility for a municipality’s unfulfilled executive obligations. In this sense,
provinces have created a situation where the duty to monitor, assist and intervene is
experienced as an unfunded mandate. Provincial budgeting for monitoring, support and
intervention is thus essential.

3.3.2 Monitoring powers

At present the powers of supervision vary across sectors. Because this form of
intervention can be very intrusive, it should be defined in legislation.

3.3.3 Intervention powers

_ There was a high level of misunderstanding of the purposes and

procedures contained in section 139. Because of these misunderstandings, the process
was conceived as more complex and cumbersome than it should be. A manual on how
to apply section 139 would thus be a useful tool to ensure that the section is properly
used and that there is a measure of consistency in its application.

_ In the long-term, legislation would be beneficial to structure the process

effectively and efficiently. With the increased utilisation of these constitutional
provisions, the difficulties of interpretation and implementation make it
imperative that legislation should give some flesh to section 139.

_ The redrafting of section 139 of the Constitution may also be necessary. In

terms of the concept of three spheres of government, the national department
has direct relations with local authorities. This relationship includes having
monitoring powers over municipalities. However, when it comes to enforcing
executive obligations imposed by national legislation, the national government
does not have any powers of intervention. In this respect the Constitution still
works with the notion of tiered relations between national, provincial and local
governments. There is thus a real disjuncture between intergovernmental
relations in general and the structuring of supervision. Section 139 needs to
be revisited to deal with this issue.

4. Chapter 4: Intergovernmental relations in the legislative branch of government:

The role of the National Council of Provinces (NCOP)

4.1 Functions and structures

The NCOP is perceived as not working effectively and its functions and structures need
to be reviewed for the following reasons, some of which are operational, while others
are structural. These include:

_ There are too few permanent members to deal with the large number of bills
especially since both section 75 and 76 bills receive its attention.

_ The system is too complex and the resources are too limited.

_ The special delegates play little or no part in the committee system.

_ There is very little time to study documentation sent by the NCOP to the
provinces.

_ The provincial legislatures are unable to apply their minds to issues (due to
the shortness of the legislative cycle).

_ Provinces do not have the required research capacity or available MPLs to

make informed decisions.

_ Tight time-frames set by the NCOP make it difficult for all concerned to deal
expeditiously with the legislative cycle and there is hardly an opportunity for
a considered view to be heard from the provincial legislatures through public
hearings.
4.2 Critique of the legislative process

The following contentions need to be addressed:

_ that executive IGR processes have effectively eclipsed the NCOP’s function;

_ that provincial interests have already been articulated by the MECs in the
MINMEC or through other IGR processes;

_ that the NCOP is simply a rubber stamp of the National Assembly; and

_ that when the bill arrives at the NCOP, it is a fait accompli.

4.3 Select committees and oversight function

The NCOP needs to carry out its oversight function more competently and select
committees need to be more active. The internal organisation of the select committees
has been found seriously wanting in regard to their management and the awareness of
delegates of the issues to be probed. (Note: There is no specific constitutional provision
that mandates the NCOP to perform an oversight function. Where it does exercise this
function, it should be situated within the framework of its overall objective as stated in
section 42[4].)

4.4 South African Local Government Association (SALGA)

There is a strong need for SALGA to improve its participation. It is currently viewed as
neither having sufficient capacity nor attending proceedings regularly enough to make a
difference. While the NCOP has gained a high profile in local government through its
review of provincial interventions, SALGA’s role in the NCOP has been limited.
SALGA’s view that its "under-participation" is due to the lack of resources needs to be
addressed. The fact that SALGA has no permanent members in the NCOP, also
requires attention.

4.5 Providing a greater IGR focus to NCOP activities

A number of reforms are needed for the NCOP to achieve this. There is a strong view
that, despite its limitations, the NCOP could play an effective role if the following were
addressed:

_ if its activities were focused and concentrated on its constitutional mandate;

_ if it concentrated more on the provinces;

_ if it had a more focused orientation, e.g. on specific issues; and

_ if it was not seen to duplicate the National Assembly.

Given its limited resources, time pressures and lack of political clout hitherto,
the perception is that the obvious way forward is to ensure that the NCOP has
a definite IGR focus. This should apply in particular to its legislative and
oversight functions.

4.6 Legislative function – Section 75 bills

The only function with regard to section 75 bills should be:

_ to convey the national perspective to the provinces; and

_ to keep the provinces informed of such legislation. (Of particular importance

is the annual Division of Revenue Bill, which divides the revenue raised
nationally between the three spheres in equitable portions.)

4.7 "Mixed bills"

There is considerable artificiality in splitting bills into their section 75 and section 76
components, requiring the devising of most complex procedures. It is recommended
that this distinction be addressed. Although the differentiation between the categories of
legislation remains fundamental to the constitutional dispensation, it should be applied
more flexibly in practice without introducing unnecessary rules that are not required by
the Constitution. The option that mixed bills should not be in the Constitution but should
be regulated by legislation, warrants consideration.

4.8 Introducing section 76 bills in the NCOP

This is a policy option to be addressed. If followed, it is likely that section 76 bills would
have a provincial perspective, which is currently missing in the early debating stages of
these bills. It might also generate enthusiasm in the provinces about participating in the
national legislative process. In order for the NCOP and the provinces to be able to
perform this primary legislative task adequately they would have to be well versed in the
relevant issues to deal competently with complex bills. This again calls for focused
capacity building in the areas of provincial competencies. (Note: The NCOP has the
power to initiate and prepare section 76 bills other than money bills. It could also be
more proactive by using its powers to propose section 75 legislation.)

4.9 Oversight function

This should be confined to:

_ steering clear of duplicating the roles of either the National Assembly or

provincial legislatures;
_ concentrating on its own unique role of being concerned with provincial and
local government issues; and

_ limiting its oversight function to issues dealing directly with the executive
conduct of intergovernmental relations such as:

(a) national executive actions that affect provinces and local government,
including:

_ the implementation of section 76 legislation;

_ the review of subordinate legislation issued in terms of section 76

legislation;

_ the national determination of policy affecting provinces; and

_ the implementation of national policies by provinces, such as the

determination of teacher/pupil ratios in education and labour contracts, etc.

(b) national interaction with provinces and local government, including:

_ the functioning of the instruments and procedures of IGR such as the IGF,
MINMECs, the Forum for South African Directors-General (FOSAD), etc; and

_ the monitoring and support of provinces.

(c) provincial executive actions that affect local government, including:

_ monitoring and support of local government.

4.10 Constitutional reform

Although it may be too soon to speculate on alternative ways of restructuring the NCOP
and the provincial legislatures, particularly if the informal reforms are effected, the
various proposals made by respondents in this audit merit debate. (See Chapter 4,
paras 7.3.3.1 and 7.3.3.2 of this Report.)

4.11 Membership qualities

The following criteria for membership need to be debated.

Members selected:

_ should have political status in their own right;

_ should be selected for their sensitivity to the perspectives of their provinces;

_ should be chosen for their commitment to retaining their provincial linkages

and their commitment to their allocated constituencies, even though they are
based outside the province during part of the legislative cycle; and

_ should also be skilled in managing tight timetables in the NCOP and the
provincial legislatures.

4.12 Special delegates

There is a strong perception that the constitutional provision for special delegates needs
to be addressed for the following reasons:

_ that special delegates play a minimal role in proceedings;

_ that "there is no role for special delegates"; and

_ that they have "very little impact on legislation" and "would be rehashing the
work that they have already done at MINMECs".

4.13 Reforming the composition of the NCOP

A number of options need to be considered:

_ Replacing the special delegates with 40 additional permanent

delegates: The main reason for the increase in the number of permanent
delegates is to capacitate the NCOP to fulfil its constitutional obligation more
effectively.

_ An alternative appointment procedure: Linked to increasing the number of

permanent delegates, would be the institution of an alternative appointment
procedure which would ensure that the NCOP is composed of those who have
the suggested qualifications. Direct elections are a further option. (Note: A
similar reduction in the provincial legislatures or even the National Assembly
would cancel out any additional costs.)

4.14 Representation of SALGA in the NCOP

The proposal that there should be more appropriate representation for SALGA in the
NCOP, including voting rights, should be addressed. SALGA would then come into the
NCOP as a sphere of government. (Note: Currently, each provincial association elects
10 representatives to the NCOP, while SALGA would select 10 representatives from the
90 provincial nominees for a particular meeting. The SALGA representatives in the
NCOP are thus in continuous flux. The deputy chair of SALGA regarded this practice as
being democratic, but lacking continuity. She proposed that "this lack of continuity and
consistency could be addressed if the same principle applicable to provinces is applied,
that is, provincial associations should choose six permanent and four special
delegates.")

5 Chapter 5: Financial intergovernmental relations

5.1 Addressing the inherent tensions

It is recommended that government re-assess the roles and responsibilities of provincial

and national governments with regard to concurrent functions to ensure that there is
consistency between setting norms and standards and that policy objectives are
congruent with intergovernmental financing and implementation.

_ Government should re-assess the present revenue assignment. Increased

taxation powers at provincial level could help enhance accountability at the
margin for provincial expenditures.

_ Provincial taxation powers will also have an impact on the Department of

Finance, which will need to put in place mechanisms to monitor provinces to
ensure that provincial taxation policies do not materially and unreasonably
prejudice national economic policies, economic activities across provincial
boundaries, or the national mobility of goods, services, capital or labour.

_ A more asymmetric approach to provincial governments could be

considered in the further evolution of the system to take capacity
considerations into account. This could be based on the extent of institutional
development of each particular province.

5.2 Monitoring, co-ordination and alignment

5.2.1 Shortcomings of the Medium Term Expenditure Framework

The shortcomings of the Medium Term Expenditure Framework (MTEF) should be

addressed. The most noticeable shortcoming of the current system is that there is no
link between expenditure and service delivery.

It would be preferable to introduce a performance-based budgeting system,

which would link planning, resource allocation and service delivery.

Commitment to a publicly stated medium-term expenditure and delivery

framework is a powerful means of deepening accountability within
government. The system needs to be monitored.
5.2.2 Information and costing systems

In order to install appropriate monitoring systems, it is important to ensure that

information systems are put in place that will enable information on service delivery to
be linked with information on financial flows. In addition, proper costing systems need to
be developed which can feed into both the Cabinet and Budget Council.

5.2.3 Capacity-building programme

In order to implement the above recommendations a significant capacity-building

programme should be developed. It should not be ad hoc but rather requires a proactive
and systemic approach. In addition, the appropriate infrastructural development should
be considered at the same time.

5.3 Addressing unfunded mandates

In addressing the issue of unfunded mandates, the following actions are necessary:

_ In any proposed legislation, the functions of each sphere need to be clearly

defined as well as the sectors within each sphere. For instance, the Child
Justice Bill has implications for both the Departments of Welfare and Justice
within the national sphere as well as the Departments of Welfare and
Education in the provincial sphere. Cost implications for the affected spheres
and sectors need to be considered.

_ All proposed legislation should be costed using technically sound

methodologies, in order to adequately evaluate the financial implications of
passing a particular piece of legislation.

_ The costing should be included in the proposed legislation, and not done as
an afterthought.

_ Government should build internal capacity for costing and policy analysis.
Where this capacity is to be located requires further investigation.

5.4 Key indicators for measuring the health of IGR

There are broad categories of indicators that need to be considered with regard to
intergovernmental relations. (See Chapter 5 para 4.4.1.) These ought to be developed
further.

5.5 Policy options for improving local government intergovernmental fiscal

relations

5.5.1 Monitoring, co-ordination and alignment

The introduction of budget reform processes would go a long way towards improving
monitoring, co-ordination and alignment at the local government level. To this end, the
introduction of an MTEF and output-based budgeting at a local government level is
crucial.

5.5.2 Improved information systems

Attention needs to be given to the fact that the information available at a local level is
presently inadequate for any type of comprehensive, in-depth analysis. The Department
of Provincial and Local Government has made some leeway in this regard with Project
Viability. However, more emphasis should be placed on detailed information collection.

5.5.3 Sustainability of demarcation

Demarcation of municipalities should be underpinned by a thorough technical analysis

of financial sustainability, which has not been done as yet. Up until the present, the
process has been largely a political one. A thorough cost-benefit analysis has not been
rigorously applied to the demarcation process in South Africa.

5.5.4 Capacity building

It is vital to have structured capacity-building programmes in budgeting and financial

management at the local government level. In the past two years there have been
dramatic improvements in provincial budgeting, partly due to the government’s
increased allocation for conditional grants aimed at building financial management
capacity and financial management systems. The same level of commitment should
happen at the local level.

6. Chapter 6: The settlement of intergovernmental disputes

6.1 Enactment of national legislation to provide for non-judicial dispute settlement

mechanisms and procedures while national legislation must still be enacted to provide
for dispute settlement mechanisms and procedures, it is recommended that the
legislation be delayed. Although the legislative duty in section 41(2)(b) is explicit, "An
Act of Parliament must provide for appropriate mechanisms and procedures to facilitate
settlement of intergovernmental disputes", it does not have to be immediate. Parliament
is obliged to enact this Act "within a reasonable period of the date the new Constitution
took effect".1 The reasonableness of the period should, however, be judged by the
nature of the Act and its function to facilitate effective and efficient government.

6.1.1 Delaying enacting legislation

In the experience of the Audit Team, there would appear to be no compelling urgency to
enact this legislation. First and foremost, delaying the legislation does not impede non-
judicial dispute settlement; to the contrary, it might allow best practices to emerge which
can then be captured in effective legislation. Rather than regulating dispute settlement
processes too much, too early, it would be in the interests of developing sound
intergovernmental relations to allow the maximum of flexibility and informality in view of
the complex web of intergovernmental relations in which the array of organs of state are
involved. Creating inappropriate formal structures and procedures may encourage
more, rather than less, disputes.

Second, the absence of legislation does not create a legal vacuum. The
general duty to pursue non-judicial means of dispute resolution still applies.
Every organ of state remains under the general constitutional obligation of co-
operative government of avoiding legal proceedings against another organ of
state. Likewise, the duty to exhaust all other non-judicial remedies before
approaching a court, remains operative. Practice suggests that the various
organs of state are indeed heeding this constitutional mandate. Disputes
between and among spheres of government have not been disruptive of
intergovernmental relations. Practice suggests that where disputes did arise,
they were approached in the spirit of co-operative government by seeking
compromises through the political process. Litigation, where it did occur, has
not been destructive or unnecessary; the Constitutional Court has in a number
of judgments given more flesh to the bare bones of the Constitution.

Third, there is already legislation in some sectors. The National Environmental

Management Act is an example of how detailed procedures can be developed
for disputes arising within a specific sector. Sectorally-based legislation should
be encouraged as it is issue-sensitive and can give content to a normative
framework in terms of which disputes should be settled. These reasons are
sufficient justification for delaying the enactment of a specific Act of
Parliament without breaching the constitutional obligation set out in section
41(2)(b).

6.1.2 Elements of an Act

The experience gleaned from practice suggests that when the legislation is drafted the
focus should be on the process of dispute settlement rather than the creation of new
structures. Furthermore, in prescribing mechanisms and processes a minimalist
approach should be taken.

6.1.2.1 Focus on process

The focus should be on promoting the process of dispute settlement rather than the
creation of new structures. Section 41(2) makes a clear distinction between
Parliament’s obligation to "establish or provide for structures and institutions to promote
and facilitate intergovernmental relations" and its obligation to "provide for appropriate
mechanisms and procedures to facilitate settlement of intergovernmental disputes".
With the promotion and facilitation of intergovernmental relations, the focus is
necessarily on institution building – the creation of fora in and through which co-
operative government can be effected. In contrast, where disputes develop, the focus is
properly on the processes of dispute settlement, rather than on creating new institutions
for this purpose.

6.1.2.2 Minimalist approach

The audit has revealed that intergovernmental disputes include constitutional issues,
legislative interpretation and policy, and factual disagreements. The nature of the
disputes differs as well as the need for expeditious settlement. It would neither be
desirable nor practicable to prescribe a uniform mechanism and procedure for the
settlement of all these disputes. The fear was expressed by interviewees that legislation
should not make the process of dispute resolution inflexible or too cumbersome which
would then defeat the object of the exercise. Examples were mentioned where a dispute
had to be resolved within 24 hours. In view of the wide variety of disputes that may arise
between a wide array of organs of state, the Act should list the broad range of dispute
settlement mechanisms and procedures.

A wide choice should be available because the nature of a dispute and the
position of the parties involved are important factors in determining an
appropriate dispute settlement mechanism or procedure. The choice should
be left to the parties. Where they cannot come to an agreement, the court
which is approached by one party, may well refer the dispute back; a failure
even to agree on a method of non-judicial dispute settlement could well be
evidence that "every reasonable effort to settle" has not been made.

6.1.2.3 Investigative powers

An important element of the envisaged Act should be appropriate investigative

procedures and powers. Factual or policy conflicts can be resolved through independent
investigative bodies and procedures. At present premiers can only appoint commissions
of inquiry in their area of jurisdiction. To deal with some interprovincial disputes,
legislative authorities should authorise the establishment of joint provincial
commissions. Provisions similar to those in the National Environmental Management
Act with regard to fact finding and evaluation would also be useful to include.

6.2 Policy on and practice of dispute settlement

In the absence of national legislation of a general nature, much can be done at an

executive level to facilitate effective and efficient dispute settlement. In this field the
Department of Provincial and Local Government has a lead role to play in giving effect
to its constitutional obligation of providing support for other spheres of government.

6.2.1 Intergovernmental agreements on the provision of goods and services

Intergovernmental agreements on the provision of goods and services have in the past
given rise to disputes, and they are bound to do so in the future. This is particularly the
case with agency agreements and other contractual relationships of a continuous
nature. Measures can be taken to ensure that these disputes be settled effectively and
efficiently within the spirit of co-operative government.

First, there should be a drive towards regularising relationships between

organs of state by reducing to writing agency agreements and other contracts.
Second, it would be imperative that such agreements include appropriate
dispute settlement mechanisms and procedures. Third, the agreements
should also develop and articulate co-operative government norms that are
appropriate to the subject of the agreement.

The Department of Provincial and Local Government should play a facilitative

role by developing model agency and other agreements for use by provinces
and municipalities. Such agreements should include appropriate dispute
settlement mechanisms and procedures and a normative framework within
which the agreements should be executed and disputes settled. Through the
appropriate instruments of intergovernmental relations such as the MINMEC
on Local Government and its technical committees, the department can, then,
advance the implementation of this policy.

6.2.2 Facilitation service

Any non-judicial dispute settlement mechanism or procedure usually includes the offices
of a mediator, conciliator or arbitrator. It is not recommended that organs of state should
perform this function as it blurs the distinctiveness of spheres. Independent facilitators
and arbitrators would be more appropriate to fulfil this function. The Department of
Provincial and Local Government should, however, play a facilitative role by keeping a
list of accredited mediators and arbiters. The list may specify specialists in particular
fields of intergovernmental relations, such as local government or finance.

Notes

1 Schedule 6 item 21(1) Constitution.