THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No:  801/2010

In the matter between:

THE PREMIER OF THE WESTERN CAPE

FIRST APPELLANT

THE MINISTER FOR LOCAL GOVERNMENT,
ENVIRONMENTAL AFFAIRS AND DEVELOPMENT
PLANNING, WESTERN CAPE

SECOND APPELLANT

THE CABINET OF THE WESTERN CAPE
PROVINCE

THIRD APPELLANT

and

OVERBERG DISTRICT MUNICIPALITY

FIRST RESPONDENT

EVE CATHERINE MARTHINUS

SECOND RESPONDENT

ISAK STEVENS

THIRD RESPONDENT

JAN CORNELIUS GELDERBLOEM

FOURTH RESPONDENT

FUNEKA CAROLINE KHOHLAKALA

FIFTH RESPONDENT

CHRISTINE VUYELWA MAZEMBE

SIXTH RESPONDENT

PATRICK THAMSANQA PONI

SEVENTH RESPONDENT

DEANNA CLAUDINE RUITERS

EIGHTH RESPONDENT

JOANA JANUARIE

NINTH RESPONDENT

DAVID JOHANNES ABRAHAMS

TENTH RESPONDENT

JOHN CHARLES OCTOBER

ELEVENTH RESPONDENT

ELLEN ROSALINE JANSEN

TWELFTH RESPONDENT

Neutral citation:
The Premier of the Western Cape v Overberg District
Municipality (801/2010) [2011] ZASCA 23 (18 March 2011).

Coram:
Harms DP, Streicher, Brand, Shongwe and Theron JJA
Heard:
1 March 2011
Delivered:  18 March 2011

Summary:
Council of first respondent dissolved by provincial executive in
terms of s 139(4) of the Constitution of the Republic of South Africa, 1996 –
decision based on erroneous interpretation of section – exercise of executive
power reviewable for illegality.
________________________________________________________________

ORDER
________________________________________________________________

On appeal from:
Western Cape High Court (Cape Town) (Bozalek J sitting as
court of first instance):

The appeal is dismissed with costs, including the costs of two counsel.
________________________________________________________________

JUDGMENT
________________________________________________________________

BRAND JA (Harms DP, Shongwe and Theron JJA concurring):

[1] This matter turns on the provisions of s 139(4) of the Constitution.1 By the
nature of things, I shall presently return to a discussion of these provisions in
some detail.  Broadly stated for present purposes, however, s 139 of the
Constitution permits and requires provincial governments to supervise the affairs
of local governments and to intervene when things go awry. More particularly,
s 139(4) deals with the situation where a local government fails to approve an

1 Constitution of the Republic of South Africa, 1996.

annual budget or revenue raising measures necessary to give effect to the
budget. In that event, so the subsection provides, the provincial executive must
intervene by taking appropriate steps, including dissolving the municipal council,
to ensure that the budget or the revenue raising measures are approved.

[2] Relying on these provisions, the provincial executive of the Western Cape
– or the provincial cabinet as it is known in that province2 (the cabinet) – decided
on 14 July 2010 to dissolve the council of the Overberg District Municipality (the
council) in the light of its failure to approve an annual budget for the municipal
financial year which started on 1 July 2010. The cabinet further decided to
approve a temporary budget for the municipality and to appoint an administrator
until the election of a new council.

[3] This gave rise to an application by the Overberg District Municipality itself
and eleven former members of the council to the Western Cape High Court,
Cape Town, for the setting aside of these decisions by the cabinet. In the event,
the application proved to be successful in that Bozalek J granted the order,
essentially in the terms that it was sought. In subsequent proceedings he
afforded the appellants leave to appeal to this court, but ordered implementation
of his original order in terms of rule 49(11) of the Uniform Rules, pending the
outcome of the appeal.

[4] The underlying reasoning of the court a quo as well as the opposing
contentions by the parties on appeal will be best understood against the
background that follows. The three appellants are the Premier of the Western
Cape; the Member of the Executive Council – known in the Western Cape3 as
the Provincial Minister – for Local Government, Environmental Affairs and
Development Planning; and the cabinet itself. The 12 respondents, who were the
applicants in the court a quo, are the Overberg District Municipality  and the 11

2 By virtue of s 35 of the Constitution of the Western Cape, 1 of 1998.
3 Again by virtue of s 35 of the Western Cape Constitution.

members of the council (the individual respondents) who have since been
reinstated as council members by the interim order of the court a quo.

[5] The 11 individual respondents were not the only members of the council.
In fact, the council consisted of 20 members representing four political parties.
Nine of them belonged to the African National Congress (the ANC), two to the
National Peoples’ Party (the NPP), eight to the Democratic Alliance (the DA) and
one to the Independent Democrats (the ID). The governing majority consisted of
a coalition between the nine members of the ANC and the two representing the
NPP. They are the 11 individual respondents.

[6] What gave rise to the impugned decision by the cabinet was the failure of
the council to approve an annual budget for the municipality before the start of
the financial year on 1 July 2010. Municipal budgets are governed by chapter 4
of the Local Government: Municipal Finance Management Act (the MFMA).4
Chapter 4 consists of ss 15 to 33. In terms of s 15 the municipality may incur no
expense except in accordance with an approved budget. Section 16(1) provides
that ‘[t]he council of a municipality must for each financial year approve an
annual budget for the municipality before the start of that financial year’. Read
with the definition of ‘financial year’ in s 1, it means before 1 July.

[7] Coupled with the provisions of s 16(1), is the requirement in s 16(2) that
the proposed budget must be tabled at a council meeting at least 90 days before
the start of the budget year. In this case the proposed budget was tabled at a
council meeting which was held on 13 April 2010. Though this was less than 90
days before 1 July 2010, this flaw in the procedure turned out to be of no
consequence in these proceedings. What did turn out to be of consequence was
that at the same meeting the speaker of the council resigned. Moreover, for
reasons unexplained on the papers, the council resolved to elect a speaker for
that meeting only. After the meeting the council was therefore without a speaker.
This is in conflict with s 36 of the Local Government: Municipal Structures Act

4 Act 56 of 2003.

(the Municipal Structures Act)5 which anticipates that ‘[e]ach municipal council
must have a chairperson who will be called the speaker’.

[8] At the meeting of 13 April 2010 the proposed budget was approved for
purposes of publication and comment. Thereafter it was duly made public and
submitted to both the National Treasury and the treasury of the province as
required by s 22 of the MFMA. The only outstanding prerequisite to render the
budget effective was approval by the council. That approval could only be
obtained at a council meeting. At the heart of the problem in the case lies the fact
that there was no meeting of the council before 1 July 2010. The reason why the
meeting did not take place has to do with s 29 of the Municipal Structures Act.
The relevant part of this section provides:
‘Meetings of municipal councils
(1)
The speaker of a municipal council decides when and where the council meets
. . . but if a majority of the councillors requests the speaker in writing to convene a
council meeting, the speaker must convene a meeting at a time set out in the request.
(2)
The municipal manager of a municipality . . . must call the first meeting of the
council of that municipality within 14 days after the council has been declared
elected . . . ’

[9] Because the council resolved on 13 April 2010 to elect a speaker for
purposes of that meeting only, there was no speaker after the meeting to
convene the next meeting. The individual respondents, constituting the majority
of the council, then requested the municipal manager in writing to convene a
meeting of the council, amongst other things, to elect a new speaker and to
approve the annual budget. They did so on numerous occasions during May and
June 2010.

[10] These requests led the municipal manager to seek advice from a member
of the Cape Bar as to how he should proceed. The advice he thus obtained was,
in essence, that his authority to convene meetings of the council was limited, by

5 Act 117 of 1998.

the provisions of s 29(2) of the Municipal Structures Act, to the first meeting after
the election of the council. In the light of this advice the municipal manager
steadfastly refused to convene a council meeting, despite the numerous requests
by the individual respondents to do so. Counsel for the appellants since
conceded, both in this court and in the court a quo, that the advice was wrong
and that, in the circumstances, the municipal manager was indeed able to
convene a council meeting.6 But this concession, of course, did not avoid the
deadlock that arose at the time. The deadlock situation persisted until after the
commencement of the new financial year on 1 July 2010.

[11] Eventually, the individual respondents obtained legal advice of their own.
Acting on this advice, they again approached the municipal manager on 9 July
2010 with a written request to convene a council meeting for 15h00 on the same
day. This time they added a rider that if the municipal manager should refuse to
cooperate, the meeting would nonetheless proceed. Since the municipal
manager remained resolute, the individual respondents resorted to the fall-back
position reserved in their letter. Consequently, a meeting was held at 15h00 on 9
July 2010. It was attended by the 11 individual respondents only, because, so it
appears, no other council member had been notified. At the meeting the
individual respondents summarily elected one of their number as the new
speaker and unanimously approved the proposed budget for the 2010/2011
financial year.

[12] In the meantime the municipal manager had informed the Provincial
Minister for Finance in the Western Cape the previous day (ie 8 July 2010) that
the municipality had failed to approve a budget for the financial year. In this light
the second appellant, as the Provincial Minister responsible for Local
Government, sought advice from legal experts in the field as to the options
available to him.

6 As authority for their concession they relied on the provisions of ss 51(3) and (4)(c) of the
Western Cape Municipal Ordinance 20 of 1974 read with schedule 6 of the Constitution.

[13] The advice he received was that in terms of s 139(4) of the Constitution
read with s 26(1) of the MFMA, he had no alternative but to request the provincial
cabinet to dissolve the council. The second appellant in turn conveyed this
advice in a submission to the cabinet at its meeting of 14 July 2010. In relevant
part the submission read as follows:
‘●
where a municipality has not approved an annual budget by the commencement
of the new financial year, there is . . . no statutory basis for the municipality to approve a
budget;
●
as the approval of a budget is a constitutionally entrenched  legislative power of
municipalities, the Provincial Executive may only consider and approve a temporary
budget;
●
where an annual budget has not been approved by the due date, the applicable
legislation indicates that the dissolution of council is compulsory and only after a new
council has been elected, it regains its authority to approve a budget for the
municipality.’

[14] The submission by the second appellant also informed the cabinet that a
budget had been approved by the council members from the ruling coalition, on 9
July 2010. It conveyed the opinion, however, that the approval was invalid for two
reasons. First, because the meeting did not qualify as a properly constituted
council meeting. Secondly, because in terms of the MFMA, the council had no
authority to approve a budget after the first day of the financial year.

[15] In the light of the submission by the second appellant, the cabinet took the
impugned decision, essentially by reason of its belief that it had no option to do
otherwise. In short, the appellants’ argument in defence of the decision, both in
this court and in the High Court, rested on the narrow basis that the belief on
which the cabinet’s decision was founded is borne out by a proper interpretation
of s 139(4) of the Constitution and s 26(1) of the MFMA. Because s 26(1) of the
MFMA does no more than to echo the provisions of s 139(4) of the Constitution
in identical terms, brevity dictates that I deal with the latter section only.

[16] Section 139(4) provides:

‘If a municipality cannot or does not fulfil its obligation in terms of the Constitution or
legislation to approve a budget or any revenue-raising measures necessary to give
effect to the budget, the relevant provincial executive must intervene by taking any
appropriate steps to ensure that the budget or those revenue-raising measures are
approved, including dissolving the Municipal Council and -
(a)
appointing an administrator until a newly elected Municipal Council has been
declared elected; and
(b)
approving a temporary budget or revenue-raising measures to provide for the
continued functioning of the municipality.’

[17] What the section means, so the appellants contended, is that in the
circumstances contemplated, the provincial executive is obliged to dissolve the
council and to take the steps referred to in (a) and (b). The argument in support
of the contention relied on the supposition that ‘including’ is the equivalent of
‘incorporating’. Accordingly, the ‘appropriate steps’ must incorporate the three
steps specifically mentioned in the section. In addition, the argument relied on
the term ‘must’ which is ordinarily understood as an imperative.

[18] Any other interpretation, so the appellants’ argument went, would render
the specific reference to the three steps redundant. If the legislature intended to
say that the provincial executive can do whatever steps it finds appropriate, so
the appellants rhetorically asked, why would the three steps be mentioned at all?
These steps would in any event be included in the open-ended category of ‘any
appropriate steps’.

[19] Let me start by saying that I do not agree with the appellants’
interpretation of the section. To me the meaning of the section is quite plain. It
provides that in the circumstances contemplated, the provincial executive must
intervene. That is the imperative. Not that it must dissolve the council.
Accordingly the executive is obliged to take some steps. It cannot do nothing. But
the actual steps to be taken are left to the discretion of the executive. The only
limitation imposed on that discretion is twofold. First, the steps must be
‘appropriate’, that is, the steps must be suitable. Secondly, these steps must be

suitable for a particular purpose, that is, to ensure the approval of the annual
budget.

[20] The reason why dissolving the council is specifically mentioned, as I see
it, is that it is the most drastic step the provincial executive can take, while the
two steps referred to in (a) and (b) are concomitant to the most drastic step. It
must be borne in mind that s 139(4) was introduced through a constitutional
amendment7 together with other additions to s 1398 which, for the first time,
made reference to dissolution of the municipal council as a measure available to
the provincial executive. Prior to 2003 there was uncertainty as to whether the
provincial executive was empowered to take that drastic step.9 The specific
reference to dissolution of the council was therefore aimed at removing the
uncertainty that formerly prevailed.

[21] The interpretation contended for by the appellants raises the difficulty that
it renders the reference to ‘appropriate steps’ in s 139(4) superfluous. If the
provincial executive is compelled to dissolve the council what other appropriate
steps could there be? The appellants’ answer was that ‘appropriate steps’ must
be understood to refer to the preparatory steps that the provincial executive may
regard as appropriate to properly approve a temporary budget. But if this was the
intention, the wording of the section would, in my view, have been quite different.
It would have indicated that the executive council must take appropriate steps to
dissolve the council and to achieve the results specifically mentioned in (a) and
(b).

[22] The appellants’ further contention was that there are compelling policy and
strategic reasons why, in the circumstances contemplated, dissolving the council
should be peremptory. Any other approach, so the argument went, would mean
that a council can degenerate to a level where it can ignore statutorily imposed

7 In terms of s 4 of the Constitution Eleventh Amendment Act of 2003.
8 In s 139(1)(c) and 139(5)(b).
9 See eg Yonina Hoffman-Wanderer and Christina Murray ‘Suspension and Dissolution of
Municipal Councils under Section 139 of the Constitution 2007 TSAR 141-142.

instructions to adopt a budget on time with impunity. Conversely, the appellants
argued, the dismissal of a recalcitrant council which cannot even timeously adopt
the most basic of instruments needed for delivery of services, would convey the
message that there are definite limits to local politicking at the expense of
residents.

[23] I believe there are two answers to this argument. The first is that the mere
prospect of its dissolution by the provincial executive should be enough to spur
the recalcitrant or incompetent council into action. But the second answer is, in
my view, even more pertinent in the present context. It is this. The appellants’
argument pre-supposes that the council’s failure to approve a budget is invariably
attributable to incompetence or recalcitrance. The invalidity of the assumption is
demonstrated by the very facts of this case. In this case the council was both
willing and able to approve the budget timeously but it was prevented from doing
so by factors beyond its control.

[24] In these circumstances it seems not only inappropriate but downright
absurd not to allow the council to approve the budget, which has already passed
through all the preliminary procedures, but to dissolve the council instead. Of
course, one can think of examples of even more glaring absurdity, for instance
where the budget was in fact approved, but one day late. What the argument
amounts to is that, though the extreme measure of dissolution may be
nonsensical in a particular case, it is dictated by the necessity to set an example
for others who are indeed recalcitrant and incompetent. My short answer is that I
cannot ascribe that intention to our Constitution.

[25] For their final contention the appellants sought to rely on those provisions
of the MFMA which provide, in seemingly prescriptive terms, that municipal
councils are to approve their annual budgets before the start of the financial year.
Pertinent amongst these is the stipulation in s 16(1) that:

‘The council of a municipality must for each financial year approve an annual budget for
the municipality before the start of that financial year.’10

[26] In addition the appellants refer to s 27(2) of the MFMA. The import of the
section is that the MEC for Finance in a province may, on application and on
good cause shown by a municipality, extend any deadline or time limit pertaining
to the tabling or approval of annual budgets stipulated in the MFMA or in any
other legislation. But the section pertinently renders the MEC’s authority subject
to two provisos. First, that he cannot extend the deadline in s 16(1) and, second,
that any extension he affords may not compromise compliance with s 16(1).

[27] In the light of these provisions, the appellants’ argument proceeded along
the following lines. After the commencement of the financial year there is no legal
basis for the municipal council to adopt a budget and a provincial executive has
no power to authorise something which the MFMA does not allow. Since the
Constitution itself reserves the approval of an annual budget for the municipal
council,11 the provincial executive has no power to do so – even on a temporary
basis – while the council exists. The provincial executive therefore has no choice.
It is bound to dissolve the council so that it can approve a temporary budget itself
in terms of s 139(4)(b), otherwise the municipality will be without any budget and
therefore unable to operate. Consequently these provisions of the MFMA support
the interpretation of s 139(4) of the Constitution that the appropriate steps
available to the provincial executive are confined to those expressly mentioned in
the section. These are to dissolve the council in order to restore democratic
government and, in the meantime, to appoint an administrator and to approve a
temporary budget. For this line of argument the appellants found direct support in
the writings of learned authors in the field.12

10 See also s 24(2) to the same effect.
11 See s 160(2) of the Constitution.
12 N Steytler & J De Visser Local Government Law of South Africa at 15-40; N Steytler & J De
Visser in S Woolman Constitutional Law of South Africa Vol 2 2 ed at 22-125.

[28] Despite this direct support, I cannot agree with this argument. As a point
of departure it must be accepted, in my view, that the MFMA can only inform the
provisions of s 139(4) of the Constitution. Any contradiction of, or departure from
those provisions by the MFMA will inevitably be unconstitutional and thus invalid.
On my interpretation of s 139(4), it does not limit ‘appropriate steps’ to dissolution
of the council. Any limitation to that effect imposed by the MFMA must therefore
be invalid for unconstitutionality. But I do not understand the MFMA to impose a
limitation of that kind on the discretion bestowed upon the provincial executive in
terms of s 139(4).

[29] For the sake of argument, I accept that the council has no authority to
approve an annual budget after the start of the financial year. Moreover, a
council that has failed to approve its budget by 1 July cannot approach the MEC
for finance in the province. He or she has no authority to extend the deadline in
terms of s 16(1). A council that finds itself in that situation has no option but to
approach the provincial executive for guidance.13 In terms of s 139(4) of the
Constitution and s 26(1) of the MFMA the matter is then in the hands of the
provincial executive. That body must then take any steps it regards as
appropriate to ensure approval of the budget.

[30] The real question is thus whether there is anything in the MFMA which
excludes a directive by the provincial executive that compels approval of the
budget by the council after 1 July, from the wide ambit of ‘any appropriate steps’.
The answer to this question, I believe, is that the MFMA imposes no such
limitation on the powers of the provincial executive. At the risk of repetition, I
point out that, as I see it, ‘any appropriate steps’ in s 139(4) clearly include a
directive by the provincial executive that enables the council to approve the
annual budget. Any exclusion of that power in the MFMA would therefore impose
a limitation on the powers bestowed upon the provincial executive by the
Constitution itself. Since the MFMA contains no express limitation to that effect, it

13  In terms of s 55 of the MFMA.

would have to be implied. Needless to say, in my view, that one could hardly
imply a limitation into legislation that would be unwarranted by the Constitution.

[31] The fact that in terms of s 27(2) the MEC cannot extend the deadline
imposed by s 16(1) does not mean that the provincial executive cannot do so
under s 139(4) of the Constitution. In short, s 27(2) imposes a limitation on the
powers of the MEC which has nothing to do with the powers of the provincial
executive under s 139(4) of the Constitution and s 26(1) of the MFMA.

[32] In a situation where the budget is ready and awaiting approval after 1 July
a directive to approve the budget within a stipulated time would clearly be the
appropriate step. In other situations a directive of this kind may not be
appropriate. It is because situations that may potentially arise after 1 July are so
varied and different, that the Constitution left it to the discretion of the provincial
executive to take any steps it regards as appropriate in the circumstances to
ensure approval of the budget. Should the council be directed to approve a
budget within a stipulated period, s 26(4) and (5) of the MFMA completes the
picture by providing how municipal expenses can be met, pending approval of
the budget in terms of s 139(4) of the Constitution and 26(1) of the MFMA.14

[33] The reasons why I not have to come to any firm conclusion as to whether
the MFMA prevents a municipal council from approving a budget after 1 July, are
twofold. The first is the one I have already given, namely, that the provincial
executive is in any event empowered in s 139(4) of the Constitution, to direct the

14 Section 26(4) and (5) read as follows:
‘(4)
Until a budget for the municipality is approved in terms of subsection (1), funds for the
requirements of the municipality may, with the approval of the MEC for finance in the province, be
withdrawn from the municipality’s bank accounts in accordance with subsection (5).
(5) Funds withdrawn from a municipality’s bank account in terms of subsection (4) -
(a)
may be used only to defray current and capital expenditure in connection with votes for
which funds were appropriated in the approved budget for the previous financial year;
and
(b)
may not –
(i)
during any month, exceed eight per cent of the total amount appropriated in that
approved budget for current expenditure, which percentage must be scaled down
proportionately if revenue flows are not at least at the same level as the previous
financial year; and
(ii)
exceed the amount actually available.’

council to do so. The second reason is that the situation where the council has
approved a budget after 1 July does not arise in this case. That situation would
have arisen if the council validly approved a budget at the meeting arranged by
the individual respondents on 9 July. But it is common cause that the meeting
was not validly constituted because the other members of the council were not
properly notified.

[34] Section 139(4) of the Constitution does not seem to contemplate the
situation where the provincial executive is confronted with a budget which had
been approved by the municipal council after 1 July. As to what would be the
position in that hypothetical situation, there appears to be two possible answers.
The first is that ‘any appropriate steps’ confers the power on the provincial
executive to bestow validity on a belated approval by the council that would
otherwise be invalid. The second possible answer is that the MFMA does not
render the belated approval of the budget by a council after 1 July invalid. If that
were so, there would be no appropriate steps that the provincial executive can
take to achieve a purpose which had already been achieved. But as I have said, I
do not believe that we are called upon to resolve a hypothetical question that
does not arise in this case.

[35] The court a quo arrived at the same interpretation of s 139(4) of the
Constitution as I did, albeit along a somewhat different route. It essentially
assumed that the meaning of the section is ambiguous. Departing from that
premise it proceeded to the context of the Constitution as a whole. It then came
to the conclusion that the context favours a wide discretion on the part of the
provincial executive rather than a narrow one which is limited to dissolution of the
council. The context of the Constitution the court referred to related in the main to
those provisions which recognise local authorities as a separate sphere of
government, independent of superior legislatures.15 In this context, so the court a
quo concluded, one should avoid an interpretation of s 139(4) which limits the

15 See ss 40 and 41 of the Constitution. See also Fedsure Life Assurance Ltd v Greater
Johannesburg Transitional Metropolitan Council 1999 (1) SA 374 (CC) para 26.

authority of the provincial executive to the most drastic interference into the
affairs of the local authority. Though I do not differ from the approach adopted by
the court a quo, I find it unnecessary to follow that route, because I find the
interpretation of s 139(4) contended for by the appellants simply untenable.

[36] The conclusion I arrive at is therefore that in this matter the cabinet had
been wrongly advised and consequently erred when it acted on the assumption
that it had no other option but to dissolve the council. The effect of the mistake
was, of course, that the cabinet had failed to exercise the discretion bestowed
upon it by s 139(4) properly, if at all.

[37] The long and the short of all this is the finding that, because of the error in
its interpretation of s 139(4), the cabinet failed to consider less drastic means,
other than to dissolve the council, to meet the desired end of an approved
budget. Counsel for the appellants conceded that the impugned decision cannot
survive this finding. I believe the concession was rightly made. It is true that the
decision constituted executive action, as opposed to administrative action. In
consequence it is not judicially reviewable under the provisions of the Promotion
of Administrative Justice Act (PAJA).16 Yet, this does not shield the decision from
a challenge on the basis of illegality.

[38] This is so because it has by now become settled law that the constitutional
principle of legality governs the exercise of all public power, rather than the
narrower realm of administrative action as defined in PAJA.17 And in President of
the Republic of South Africa v South African Rugby Football Union18 the
Constitutional Court pertinently held that the principle of legality requires the
holder of executive power not to misconstrue that power. As I see it, it follows
that in the circumstances the impugned decision of the cabinet offended the

16 Act 3 of 2000. In terms of s 6 of PAJA judicial review is reserved for ‘administrative action’ as
defined, while the executive powers of a provincial executive under s 139 of the Constitution are
expressly excluded from the ambit of the definition of ‘administrative action’ by s 1(bb) of PAJA.
17 See eg Fedsure Life Assurance Ltd para 59; Pharmaceutical Manufacturers Association of SA:
In re Ex parte the President of the Republic of South Africa 2000 (2) SA 674 (CC) para 85.
18 2000 (1) SA 1 (CC) para 148.

principle of legality, because it directly resulted from the cabinet misconstruing its
powers under s 139(4) of the Constitution. Stated slightly differently: by deciding
to dissolve the council without considering a more appropriate remedy, the
cabinet, in my view, offended the provisions of s 41(1) of the Constitution which
requires all spheres of Government to respect the constitutional status, powers
and functions of Government in other spheres19 and ‘not [to] assume any power
or function except those conferred on them in terms of the Constitution’.20 It
follows that in my view the High Court was right in setting the impugned decision
aside on the basis of illegality.

[39] For these reasons the appeal is dismissed with costs, including the costs
of two counsel.

…………………….
F D J BRAND
JUDGE OF APPEAL

STREICHER JA:

[40] I agree with my colleague Brand JA that the appeal should be dismissed
with costs including the costs of two counsel.

[41] The Overberg District Municipality failed to approve an annual budget
before the start of the budget year whereupon the provincial executive of the
Western Cape on 14 July 2010 decided to dissolve the council. The provincial
executive took the decision to dissolve the council on the basis that it was in
terms of s 139(4) of the Constitution obliged to do so.  The court below held that

19 Section 41(1)(e).
20 See s 41(1)(f).

the provincial executive misinterpreted the section in assuming that the council
did not have the power to approve the budget after the start of the budget year. It
is common cause between the parties that if that was the position the appeal
should fail.

[42] Section 26(1) of the Local Government: Municipal Finance Management
Act 56 of 2003 follows the wording in s 139(4) and reads:
‘If by the start of the budget year a municipal council has not approved an annual budget
or any revenue-raising measures necessary to give effect to the budget, the provincial
executive of the relevant province must intervene in the municipality in terms of section
139 (4) of the Constitution by taking any appropriate steps to ensure that the budget or
those revenue-raising measures are approved, including dissolving the council and-
(a) appointing an administrator until a newly elected council has been declared
elected; and
(b) approving a temporary budget or revenue-raising measures to provide for the
continued functioning of the municipality.’

[43] Like s 26(1), s 139(4) of the Constitution provides that if by the start of the
budget year a municipal council has not approved an annual budget or any
revenue-raising measures necessary to give effect to the budget the ‘provincial
executive must intervene by taking any appropriate steps to ensure that the
budget  or those revenue-raising measures are approved, including dissolving
the Municipal Council and- (a) appointing an administrator until a newly elected
Municipal Council has been declared elected; and (b) approving a temporary
budget or revenue-raising measures to provide for the continued functioning of
the municipality.’

[44] In my view there is no basis on which s 139(4) can be interpreted to mean,
as was submitted by the appellant, that every appropriate step that may be taken
must include the dissolution of the municipal council. Appropriate steps to ensure
the approval of a budget include the dissolution of the municipal council ie
dissolution of the council is but one of the steps that can be taken to ensure the
approval of a budget. I agree with my colleague and with the court below that the

reason why dissolving the council is specifically mentioned is that it is the most
drastic step of others that may possibly be appropriate.

[45] Relying on s 16 and s 24 of the Act the appellant submitted that a
municipal council has no authority to approve an annual budget after the start of
the relevant financial year and that an appropriate step to ensure that a budget is
approved can only be a step that includes the dissolution of the council, the
appointment of an administrator until a newly elected council has been declared
elected and the approval of a temporary budget or revenue-raising measures to
provide for the continued functioning of the municipality. I do not agree. For the
reasons that follow I agree with the court below that a local authority does have
authority to approve an annual budget after the start of the relevant financial
year.

[46] The approval of a budget is a non-delegable function conferred on a
municipal council by the Constitution.21 Section 16(1) of the Act provides that the
council of a municipality must for each financial year approve an annual budget
for the municipality before the start of that financial year. Section 24 requires that
the municipal council must at least 30 days before the start of the budget year
consider approval of the annual budget and then repeats that the budget must be
approved before the start of the budget year.

[47] Appropriate intervention in terms of s 139 of the Constitution includes the
dissolution of the council by the provincial executive. It follows that a municipal
council which fails to approve an annual budget by the start of the budget year
runs the risk of being dissolved. It does however not necessarily follow that
having failed to do so the municipal council no longer has the authority to
approve a budget for the relevant financial year or that a budget approved by the
municipal council after the start of the financial year would be invalid. That will
only be the case if it was the intention of the legislature that it should be invalid.22

21 Section 160(2)(b) of the Constitution.
22 Standard Bank v Estate Van Rhyn 1925 AD 266 at 274.

In Nkisimane and others v Santam Insurance Co Ltd 1978 (2) SA 430 (A) at
433H-434B Trollip JA referred to the traditional categorization of statutory
requirements as ‘peremptory’ and ‘directory’ and stated that care must be
exercised not to infer merely from the use of such labels what degree of
compliance is necessary and what the consequences are of non- or defective
compliance.  He added:
‘These must ultimately depend upon the proper construction of the statutory provision in
question, or, in other words, upon the intention of the lawgiver as ascertained from the
language, scope and purpose of the enactment as a whole and the statutory
requirement in particular (see the remarks of VAN DEN HEEVER J in Lion Match Co Ltd
v Wessels 1946 OPD 376 at 380).’
In regard to the use of the word ‘shall’ he said that ‘such seemingly imperative
language is not necessarily decisive in favour of peremptoriness’. The same
would apply to the use of the word ‘must’.23

[48] It could in my view not have been the intention of the legislature that upon
failure of a municipal council to approve a budget before the start of the financial
year the council would no longer have authority to do so. One can think of many
circumstances which would make such an interpretation quite untenable. My
colleague mentions some of those circumstances. However, in his view they
indicate that ‘appropriate circumstances’ in the Constitution include extension by
the provincial executive of the time within which a budget may be approved.  In
my view they indicate that it could not have been the legislature’s intention that
failure of a municipal council to approve a budget before the start of a financial
year would invalidate the approval of a budget after the start of the financial year.
The object of s 26(1) is to ensure that a budget is approved by a municipal
council. If that object is achieved before dissolution of a council it would in my
view make no sense to invalidate the approval.

[49] Section 26(1) repeats the wording of s 139(4) of the Constitution. The
legislature therefore probably intended the phrase ‘appropriate steps including

23 At 435B.

dissolving the council and . . . .’ to have the same meaning as in s 139(4). If that
is the case the legislature could not have intended a municipal council not to
have authority to approve a budget after the start of the budget year. If the
council can no longer approve a budget there will be no steps that can be taken
by the provincial executive to ensure that a budget is approved other than
dissolving the council and appointing an administrator until a newly elected
council has been declared elected and approving a temporary budget or
revenue-raising measures to provide for the continued functioning of the
municipality.

[50] The Act contains many seemingly imperative provisions relating to the
budget process. In terms of s 21 the mayor ‘must’ do various things. He ‘must’ for
example table in the municipal council a time schedule outlining key deadlines for
various steps that have to be taken. Section 22 prescribes the steps that ‘must’
be taken after an annual budget has been tabled in a municipal council. The
views of the local community, the National Treasury, the relevant provincial
treasury and any provincial or national organs of state or municipalities which
made submissions on the budget ‘must’ in terms of s 23(1) be considered by the
municipal council. After having considered all budget submissions the council
‘must’ give the mayor an opportunity to respond and if necessary revise the
budget (s 23(2)). The municipal council ‘must’ at least 30 days before the start of
the budget year consider approval of the annual budget (s 24(1)). The annual
budget ‘must’ be approved before the start of the budget year (s 24(2)(a)) and
‘must’ be approved together with the adoption of necessary resolutions, amongst
others, imposing any municipal tax for the budget year and setting any municipal
tariffs for the budget year (s 24(2)(c)). The accounting officer of the municipality
‘must’ submit the approved annual budget to the National Treasury and the
relevant provincial treasury (s 24(3)).

[51] Section 27(4) provides:
‘Non-compliance by a municipality with a provision of this Chapter relating to the budget
process or a provision in any legislation relating to the approval of a budget-related
policy, does not affect the validity of an annual or adjustments budget.’

It could hardly have been the intention of the legislature to exclude the failure to
submit the approved budget to the National Treasury and the relevant provincial
treasury, being the last step in the process referred to above. The legislature
must therefore have intended the budget process to include all the steps referred
to above, ie all the steps up to the submission of the approved budget to the
National Treasury and the relevant provincial treasury. It follows that the
legislature specifically provided that the approval of an annual budget after the
start of the budget year does not affect the validity of the annual budget.

[52] The appellant placed reliance on the provisions of s 27(1) and (2) of the
Act. They are to the effect that the MEC for finance may, on application by the
mayor of a municipality extend any time limit or deadline contained in the Act
except the deadline contained in s 16(1) and provided that no such extension
may compromise compliance with s 16(1). An extension of the time for the
approval of a budget will of course relieve the pressure on a municipal council to
approve the budget or run the risk of being dissolved. There is in my view no
reason to believe that the legislature by prohibiting the extension of the time limit
imposed for the approval of a budget intended more than to maintain the
pressure on a municipal council to approve the budget before the start of the
budget year.

[53] In summary I am of the view that upon a proper interpretation of the Act a
municipal council must approve a budget before the start of the budget year,
should it fail to do so –
i)
It should reconsider the budget within 7 days and repeat the process
until a budget is approved.

ii)
The mayor must report the matter to the MEC of local government in
the province and may recommend an appropriate provincial
intervention in terms of s 139 of the Constitution.
iii)
The provincial executive must intervene in terms of s 139(4) of the
Constitution by taking any appropriate steps to ensure that the budget
is approved.
iv)
The provincial executive is under no obligation to dissolve the council
and may ensure the approval of the budget by any legitimate means
such as for example persuading the council under threat of being
dissolved to approve a budget.
v)
For as long as the council fails to approve a budget it may be an
appropriate step in terms of s 139(4) to ensure the approval of  a
budget to dissolve the council and to (a) appoint an administrator until
a newly elected council has been declared elected; and (b) to approve
a temporary budget.

[54] For these reasons I agree that the appeal should fail.

_____________________
P E STREICHER
JUDGE OF APPEAL

Counsel for Appellants:

J C Heunis SC

G A Oliver

Instructed by:

State Attorney

CAPE TOWN

Correspondents:

State Attorney

BLOEMFONTEIN

Counsel for First Respondent:
D Potgieter SC

G Potgieter

Instructed by:

Webber Wentzel Attorneys

CAPE TOWN

Correspondents:

Lovius Block Attorneys

BLOEMFONTEIN
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
18 March 2011
Status:
Immediate

THE PREMIER OF THE WESTERN CAPE & OTHERS v OVERBERG DISTRICT
MUNICIPALITY & OTHERS

Please note that the media summary is intended for the benefit of the media and
does not form part of the judgment of the Supreme Court of Appeal

On 18 March 2011 the SCA dismissed the appeal by the Premier and the Cabinet of
the Western Cape against a judgment of the High Court, Cape Town in favour of the
Overberg District Municipality and 11 individual members of the council of that
municipality (the council).

The case arose from a decision by the Western Cape cabinet on 14 July 2010 to
dissolve the council in the light of its failure to approve an annual budget for the
2010/2011 financial year of the municipality, before 1 July 2011, as it was obliged to
do in terms of the Municipal Finance Management Act 56 of 2003. The cabinet
further decided to approve a temporary budget and to appoint an administrator for
the municipality until the election of a new council. This gave rise to an application
by the respondents in the Cape High Court for an order setting these decisions of
the cabinet aside. The application was granted by the High Court and it is that
judgment which gave rise to the unsuccessful appeal to the SCA.

The decisions were taken by the cabinet in terms of s 139(4) of the Constitution of
South Africa, 1996. Section 139 permits and requires a provincial government to
supervise the affairs of local governments and to intervene when things go awry.
More particularly s139(4) deals with the situation where a local government fails to
approve an annual budget before the start of the financial year on 1 July. In that
event, so the subsection provides, the provincial cabinet must intervene by taking
appropriate steps, including dissolving the municipal council, to ensure that the
budget is approved.

At its meeting of 14 July 2010 the cabinet was presented with legal advice that on a
proper interpretation of s 139(4), it had no alternative, in the circumstances
contemplated, other than to dissolve the council. The impugned decisions were
taken on the basis of that advice.

Both the High Court and the SCA decided, however, that the advice received by the
cabinet was wrong. What s 139(4) means, so both courts held, is that the cabinet
has a wide discretion to take any appropriate steps to ensure approval of the budget,
including dissolving the council. In this case the evidence showed that the council
was willing and able to approve its annual budget but was prevented from doing so
before 1 July 2010 by factors beyond its control. In the circumstances, so both
courts held, dissolution of the council was not the appropriate step.