Glencore 1, municipalities 0
Mining companies go to court to force local governments to do their jobs
It’s a story familiar to big corporates: dragging deficient local municipalities to court to get them to do their jobs. In a recent instance, the Supreme Court of Appeal (SCA) had to adjudicate between mining companies and two constitutionally overstepping municipalities in Mpumalanga. The companies stepped out of the ring triumphant.
Miner and trader Glencore, with coal affiliates of Phembani Group and two others, sued the eMalahleni and Govan Mbeki local municipalities, claiming the councils overstepped their legislative powers. The municipalities published new bylaws within a week of each other in February 2016, placing excessive restrictions on the transfer of land.
The municipalities, whose bylaws looked similar, decreed that a landowner was not allowed to transfer land unless all spatial planning, land use management and building regulation conditions or approvals for the land unit had been complied with. The transfer of land could only happen when the municipality was satisfied that these obligations had been met and a certificate to this effect issued by the local government. The restriction of transfer was placed on the registrar of deeds, who handles the legal transfer of all properties.
The mining companies were understandably distraught. After the high court in Middelburg found in favour of the mining companies in January
2021, two of the three original municipalities turned to the SCA. The Steve Tshwete local municipality opted out of the appeal.
SCA judge Gayaat SalieHlophe found that the municipalities had usurped a competency, namely the transfer of land, from the national government by restricting transfer. The mining companies argued that the restrictions offended their constitutional right in terms of section 25 of the constitution, by depriving them of their property.
The court did not entertain this argument, focusing instead on the two local governments overstepping their constitutional competencies.
And it seems that the municipalities won’t back down. In a response to questions, Glencore spokesperson Shivani Chetram says: “The matter may still be finally determined by the Constitutional Court and therefore Glencore will not be able to provide comments.”
Neither of the two municipalities responded to questions from the FM.
This is but one example of local governments having to be taken to court to force them to do their jobs. Other examples in Mpumalanga are rife. The Albert Luthuli local municipality ignored a court order obliging it to remove illegal land occupiers from a farm for more than 10 years. The Mbombela municipality failed to pay a supplier R3.1m almost four years after a service was delivered. The Thaba Chweu local municipality went behind a development contractor’s back and started selling stands. The court blocked the transfer of these stands.
The situation in Mpumalanga’s municipalities is so dire that more than a third of its 17 local governments may not continue as going concerns. Auditor-general (AG) Tsakani Maluleke highlighted this and other financial ailments yet again in her 2020/2021 report on the state of SA’s municipal finances.
“Ineffective financial and asset management, especially around budgeting, revenue generation and revenue collection, further illustrates the lack of fundamental management disciplines,” she says in an overview of Mpumalanga’s municipal finances.
“Thirteen municipalities (65%) overspent their budgets, resulting in unauthorised expenditure during the year under review. This poor financial discipline continued to cripple municipalities’ financial health and seven municipalities (35%) disclosed significant doubt about their ability to continue operating as a going concern in the near future.”
This is the case despite the province’s municipalities having spent R820m on getting their annual financial statements ready, according to the AG’s report. Nevertheless, the inefficient collection of revenue remains an obstacle for Mpumalanga’s municipalities, hampering service delivery and the ability to attract competent staff. Infrastructure is also crumbling, opening the door for potential claims because of accidents and service delivery protests.
“Due to the lack of financial resources, municipalities did not budget enough for infrastructure asset maintenance, which resulted in ageing infrastructure, significant water and electricity losses, and — consequently — the underachievement of service delivery targets,” says the AG’s report. “Municipalities were also unable to accurately bill residents for basic services and did not collect as much as possible of what they had billed, with 60% of the debt balance in the province provided for as irrecoverable.”
Given these management and financial constraints in Mpumalanga’s municipalities, it’s no wonder that companies operating in this province often need to drag local governments to court in a hopeful bid they’ll start to do their jobs.