Curative Measures in Law for Financially Distressed Municipalities

Abstract

This search for curative measures was initiated by the need for a law that regulates how the national and provincial government levels intervene in municipalities that cannot or do not fulfil their executive obligations (section 139(8) of the Constitution of South Africa). However, informed by current South African and international scholarship, this study argues for sparingly using law and regulation to solve implementation problems. It investigates the current legal framework by comparing international research on how the problem is addressed in other multilevel governments. It uses emerging insights to develop analytical tools to analyse the intergovernmental fiscal system and to propose legal solutions to address financially distressed municipalities. Unpacking the South African intergovernmental fiscal system helped to refine the analytic tool and apply it to the Intergovernmental Monitoring, Support, and Intervention Bill (IMSI). The analysis assesses the extent to which the Bill could serve as a curative measure in law. It assists in identifying existing curative measures in the intergovernmental fiscal system. The analysis showed that a nationally coordinated monitoring system with early warning mechanisms already exists in the law on paper. However, fragmentation and coordination weaknesses in how the national level (specifically the National Treasury, the Department of Cooperative Governance (DCOG), and their provincial equivalents) use these critical aspects result in them emphasising intervention (often too late) rather than consistent monitoring and support. The study proposes an urgent shift in the intergovernmental fiscal and performance monitoring system across the three spheres of government. It proposes strengthening government-wide capacity for pre-emptive financial and performance monitoring. Having identified the fragmentation of financial and performance coordination as a weakness in the intergovernmental fiscal system, it proposes bringing the separated monitoring regimes for financial and performance management together by formalising closer collaboration between the National Treasury and DCOG. It further recommends that financial resilience and environmental, social, and governance (ESG) principles be key components of municipalities’ internal financial and performance regimes. Finally, it recommends that the intergovernmental fiscal system be strengthened by amending existing municipal finance and performancemonitoring legislation.