Western Cape Government approves Section 139 Intervention in Theewaterskloof Local Municipality

The Western Cape Government (WCG) has approved an intervention in the Theewaterskloof Local Municipality in terms of Section 139(5) of the Constitution. This decision was made following extensive assessments of the municipality’s financial position which highlighted risks in its ability to deliver services to residents. 

“Theewaterskloof has demonstrated prolonged financial instability, including mounting debt, severe cash flow issues, and challenges in revenue collection. This has limited the municipality’s ability to fund service delivery, and its ability to procure goods, services, and credit. This intervention is, therefore, essential to restore financial stability, and to ensure the continuation of services,” said Western Cape Minister of Finance, Deidré Baartman. 

“I welcome this intervention as it is impossible to deliver quality services to our residents if the local authority’s finances are not sustainable. I want to urge the municipality to work with the Department of Local Government, Provincial Treasury as well as the team from National Treasury,” Western Cape Minister of Local Government, Environmental Affairs and Development Planning, Anton Bredell, said.

The Minister asked residents to be patient and to allow the processes to unfold to return the municipality to a sound financial state.

The municipality's financial position rapidly declined between 2022 and early 2023. In the 2022/23 financial year, the municipality consistently collected over 95% of its planned revenue and closed the year with a surplus. However, by March 2023, problems were identified, including governance instability and obligations exceeding available cash. By August 2024, the collection rate dropped to 64%, well below the National Treasury recommended norm. Additionally, the municipality's cash and cash equivalents regressed from R70.96 million on 31 August 2023 to R43.28 million by August 2024, this while commitments increased to R43.73 million.

“As soon as the financial decline became evident, Provincial Treasury and the Western Cape Department of Local Government sought to provide immediate assistance to ensure that the financial challenges and looming service delivery decline in Theewaterskloof were addressed,” said Minister Baartman. 

The departments conducted various assessments, including a financial sustainability workshop and Supply Chain Management capacity-building training. A mid-year budget performance report was compiled which highlighted that the municipality's operating commitments exceeded available cash, and a diagnostic assessment was recommended to understand the root causes of the financial challenges – this was, however, not conducted due to the lack of a Council resolution.

On 16 September 2024, Minister Bredell issued a Section 136 notice to the municipality addressing concerns regarding its financial management and potential breaches of financial obligations. The purpose of the notice was to consult with the municipality, gather relevant information, and assess whether the situation justifies intervention. Despite municipal leaders denying allegations of material breaches of financial obligations in response to the notice, financial challenges and risks were evident. 

“The WCG was, therefore, left with no other option but to intervene formally under Section 139(5) of the Constitution in order to protect the residents of Theewaterskloof against potential service delivery collapse,” Minister Baartman continued. 

The conditions of the intervention are as follows: 

• Appointment of a financial administrator to oversee and guide the municipality’s financial recovery efforts.
• Development of a financial recovery plan focusing on debt management, revenue enhancement, and expenditure control.
• Regular monitoring and reporting mechanisms to ensure accountability and transparency throughout the recovery process.

The aim of this intervention is to stabilise Theewaterskloof’s finances and to bring it back to a position of financial viability while still maintaining essential services. The Western Cape Government remains committed to supporting the municipality through this period of recovery, with a clear focus on promoting good governance, fiscal responsibility, and improved service delivery for residents.