Posted on June 11, 2021

A Business Took a Failing Municipality to Court in a Landmark Case

Business Tech, June 8, 2021

In April, the South African High Court ordered the national government to intervene in the affairs of a municipality for the first time. The intervention was a result of an ongoing financial and service delivery crisis in the Lekwa local municipality in Mpumalanga.

The issue was brought by poultry producer Astral Foods, which said that the municipality had not been able to provide clean water or electricity. The group claimed that 40% of its production was under threat due to the crisis.

Businesses are increasingly losing the battle against poor service delivery in South Africa. Dairy group Clover has announced that it is shutting down its factory in Lichtenburg over similar service delivery failures – opting to shift its operations to Durban instead.

Commenting on the ruling, deputy finance minister David Masondo said that while the case may be the first of its kind, it was likely to set a precedent for other communities who have had their fair share of poor service delivery and ‘general municipal ineptness’.

“Lekwa is not the only municipality to have failed in terms of the constitutional and developmental mandate assigned to local government.

“Regrettably, 25 years into a new local government dispensation, after the introduction of progressive and enabling municipal legislation, extensive capacity-building efforts and increased grant allocations, there are 39 other municipalities in a situation as critical as Lekwa.”

There are also 163 municipalities in financial distress and 108 municipalities that have passed an unfunded budget in 2020/21 financial year, Masondo said.

“The crisis at Lekwa is unfortunate. Even more unfortunate, is that being ordered by the High Court to intervene goes against the very essence of our cooperative intergovernmental system.

“But in any crisis, there are also opportunities. Opportunities to redefine what is acceptable and what is not, opportunities to remind ourselves of our duty to serve, opportunities that force us to rethink our approach.”

Masondo said that several valuable lessons for all three spheres of government will emerge from this experience.

“Perhaps the most explicit lesson to emerge right from the outset, is that where municipalities fail to heed the call of their communities, and provinces fail to act in addressing municipal dysfunctionality timeously and appropriately, the courts will provide recourse if approached.”

The case also shows that political and administrative leadership is fundamental to creating a viable municipal sector, he said.

“In our experience, we can confidently say, that a financial and service delivery crisis starts with a crisis in management and leadership.

“It is also perpetuated by a failure to deal decisively with disruptive management and leadership issues. If we are serious about fixing a financial and service delivery crisis, we need to first fix the political and administrative leadership crisis.”