THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case No: 747/2021

In the matter between:

MEMBER OF EXECUTIVE COUNCIL RESPONSIBLE
FOR LOCAL GOVERNMENT, WESTERN CAPE
APPELLANT

and

MATZIKAMA LOCAL MUNICIPALITY
FIRST RESPONDENT

CHARL STRYDOM N O
SECOND RESPONDENT

ESTELLE MYNHARDT N O
THIRD RESPONDENT

Neutral Citation:
MEC Responsible for Local Government, Western Cape v
Matzikama Local Municipality and Others (747/2021) [2022]
ZASCA 167 (30 November 2022)

Coram:
Plasket, Hughes and Mabindla-Boqwana JJA and Basson and
Mali AJJA

Heard:

10 November 2022

Delivered:

30 November 2022

Summary:

Constitutional law – provincial government powers in relation to
local government – s 106(1) of the Local Government: Municipal Systems Act 32 of
2000 – appointment of investigation into maladministration, fraud, corruption or other
serious malpractice in a municipality – Member of the Executive Council may, in terms
of s 106(1), appoint investigators to investigate allegations of theft.

____________________________________________________________________

ORDER
___________________________________________________________________

On appeal from: Western Cape Division of the High Court, Cape Town (Hockey AJ
sitting as court of first instance):

The appeal is upheld.
Paragraphs 3, 5 and 6 of the high court’s order are set aside and paragraph 3
is replaced with the following:

‘3.1 The applicant’s application is dismissed with costs, including the costs of
two counsel.

3.2 The respondent is directed to pay the applicant’s costs in respect of the
applications to amend the notice of motion and to strike out.’
___________________________________________________________________

JUDGMENT
___________________________________________________________________

Plasket JA and Basson AJA (Hughes and Mabindla-Boqwana JJA and Mali AJA
concurring)

[1] In terms of s 106(1) of the Local Government: Municipal Systems Act 32 of
2000 (the Systems Act), when a Member of the Executive Council responsible for local
government in a provincial government (the MEC) has reason to believe that certain
forms of abuse of power have occurred or are occurring in a municipality, they may
appoint one or more persons to investigate and report on the allegations. The section
reads as follows:
‘If an MEC has reason to believe that a municipality in the province cannot or does not fulfil a
statutory obligation binding on that municipality or that maladministration, fraud, corruption or
any other serious malpractice has occurred or is occurring in a municipality in the province,
the MEC must –
(a)
by written notice to the municipality, request the municipal council or municipal
manager to provide the MEC with information required in the notice; or

(b)
if the MEC considers it necessary, designate a person or persons to investigate
the matter.’

[2] In this appeal, the MEC for Local Government in the Western Cape provincial
government appointed two people in terms of s 106(1) – the second and third
respondents (the investigators) – to investigate allegations relating to a number of
abuses of power, including the theft of municipal money, in the Matzikama Local
Municipality (the municipality). The appeal concerns a narrow but important issue,
namely, whether s 106 empowers an MEC to appoint an investigation into criminal
conduct other than fraud or corruption, which are specifically mentioned in the section.
In order to answer the question raised, it is necessary to interpret s 106(1) and to
consider the judgment in City of Cape Town v Premier, Western Cape, and Others,1 a
matter that Hockey AJ in the Western Cape Division of the High Court, Cape Town
(the high court) considered himself bound by.

Litigation history
[3] In September 2019 eight complaints concerning misconduct in the
administration of the municipality were brought to the attention of the MEC. They
included the alleged irregular appointment of certain individuals without having the
requisite qualifications, the irregular appointment of two family members of the mayor,
the alleged theft of municipal funds in the amount of R 320 000 (the theft allegation)
and irregular payments made to a former ward councillor. After considering the
complaints and after having afforded the municipality an opportunity to make
representations as required by s 106(1)(a) and s 5 of the Western Cape Monitoring
and Support of Municipalities Act 4 of 2014, the MEC took a decision on 21 September
2020 that six of those allegations to which the municipality had given an inadequate
explanation should be investigated by the investigators. One of these complaints
related to the theft allegation.

[4] The municipality launched an urgent application against the MEC and the
investigators to interdict the implementation of the MEC’s decision, pending the
completion of a process of inter-governmental dispute resolution in terms of the

1 City of Cape Town v Premier, Western Cape, and Others [2008] ZAWCHC 52; 2008 (6) SA 345 (C)
(City of Cape Town).

Intergovernmental Relations Framework Act 13 of 2005 (the Framework Act). In the
alternative, it sought to review and set aside the MEC’s decision. The MEC launched
a counter-application in which he sought an order that the municipality, and all those
working for it, be directed to cooperate with the investigators.

[5] The municipality’s case changed fundamentally. It abandoned reliance on the
Framework Act as the basis for an interim interdict and applied to amend its notice of
motion to convert its case into a review of the MEC’s decision. Its application to amend
was granted. A second interlocutory application, brought by the MEC to strike out
matter from the municipality’s replying affidavit, was substantially unsuccessful.

[6] After the interlocutory issues had been dealt with, the key issue before the high
court was whether the MEC had reason to believe that ‘maladministration, fraud,
corruption or any other serious malpractice’ had occurred or were occurring in the
municipality. The high court was satisfied that the MEC had carefully considered all
the complaints with the information at his disposal and that he had ‘reason to believe
that serious malpractice has occurred or was occurring when he made the decision to
initiate the investigation’. It accepted that the MEC did not act with an ulterior motive
when he took the decision. It concluded that all of the allegations were of such a
serious nature that it could not be said that, if found to be true, they did not constitute
one or more of the forms of misconduct that may trigger a s 106(1) investigation. The
high court dismissed the municipality’s application (save in respect of the theft
allegation) and granted the MEC’s counter-application. It made an order that each
party pay its own costs.

[7] The high court, relying on the judgment in City of Cape Town, held that the MEC
had no power in terms of s 106(1) to refer the allegation of theft for investigation
‘especially in light of the fact that this issue had already been referred to the police for
criminal investigation’. The upshot of this finding is that allegations of criminal conduct
in a municipality, with the exception of fraud and corruption, may not be referred for
investigation in terms of s 106(1).

[8] The MEC sought and was granted leave to appeal against the setting aside of
the referral of the theft allegation to the investigators, as well as against the costs

order. These were embodied in paragraphs 3, 5 and 6 of the high court’s order. It
dismissed the municipality’s application for leave to appeal against the dismissal of
the bulk of its application and granted the MEC’s counter-application. This appeal was
unopposed and was disposed of in terms of s 19(a) of the Superior Courts Act 10 of
2013. I turn now to the issues that require determination.

The exclusion of theft from the investigation
City of Cape Town
[9] In City of Cape Town, the MEC had appointed an investigation in terms of
s 106(1) into certain alleged criminal conduct within the city and in a second
municipality. The Premier then appointed a commission, in terms of the Commissions
Act 8 of 1947, to investigate the same conduct. He later dissolved the commission and
simultaneously appointed a second commission with the same terms of reference.
When he did this, the high court held, it had the effect of dissolving the s 106(1)
investigation too.2 The issues for determination, when the city applied for the setting
aside of the appointment of the second commission, were whether the Premier could
appoint a commission to investigate local government affairs otherwise than through
s 106(1); and whether the Premier had appointed the commission for an ulterior
motive.

[10] During the course of reasoning that the appointment of the commission was
invalid on both accounts, the court made certain observations concerning s 106(1).
These included that it was undesirable for a commission to investigate criminal
conduct because this blurred the lines between the functions of the police and the
executive.3 More importantly, however, the court held:4
‘A power on the part of the Premier to appoint a commission to investigate suspected criminal
conduct in relation to a municipality, independently of the provisions of s 106 of the Systems
Act, would again result in the provisions of this section becoming superfluous. In such an
event, the Premier would be entitled to appoint a commission to investigate suspected criminal
conduct of whatever nature, and not merely fraud and corruption in relation to a municipality.
This would not only intrude upon the autonomy of the police to perform such a function, but
also the autonomy of local government.’

2 Ibid para 34.
3 Ibid para 154.
4 Ibid para 155.

[11] The court also held in the following paragraph that the effect of s 106 ‘is to limit
the power of the Premier to appoint a commission of inquiry, with coercive powers, to
investigate only the crimes of fraud and corruption in relation to a municipality.’5

[12] What stands out in the City of Cape Town judgment is that no contextual
process of interpreting s 106 was undertaken by the court. Instead, it appears to have
simply accepted that only the crimes of fraud and corruption may be investigated in
terms of s 106. In order to determine whether this conclusion is correct, and hence the
correctness of Hockey AJ’s setting aside of the referral of the theft allegation for
investigation, it is necessary to interpret s 106(1). We turn now to that exercise.

The scheme of s 106
[13] The power conferred upon the MEC by s 106(1) of the Systems Act is
dependent on the jurisdictional fact that the MEC has reason to believe that
maladministration, fraud, corruption or any other serious malpractices had occurred or
were occurring in the municipality. If this jurisdictional precondition is satisfied the MEC
may appoint an investigation.6 The MEC’s belief is objectively justiciable. That means
that the belief must be based on reasonable grounds.7

[14] Section 106(1) must be construed within the broader context of the Constitution
and the Systems Act.  On a general level, the constitutional values and principles
governing public administration set out in s 195 of the Constitution are implicated. The
Constitutional Court in Khumalo and Another v Member of the Executive Council for
Education KwaZulu-Natal8 emphasised that where ‘a responsible functionary is
enlightened of a potential irregularity, s 195 [of the Constitution] lays a compelling
basis for the founding of a duty on the functionary to investigate and, if need be, to
correct any unlawfulness through the appropriate avenues’ and that this duty ‘is
founded, inter alia, in the emphasis on accountability and transparency in

5 Ibid para 156.
6 Duncan v Minister of Law and Order 1986 (2) SA 805 (A) at 818F-I.
7 Minister of Law and Order and Others v Hurley and Another 1986 (3) SA 568 (A) at 578B-D and 579D-
F; Democratic Alliance Western Cape and Others v Minister of Local Government, Western Cape and
Another 2005 (3) SA 576 (C) para 25.
8 Khumalo and Another v Member of the Executive Council for Education KwaZulu-Natal [2013] ZACC
49; 2014 (5) SA 579 (CC) para 35.

s 195(1)(f) and (g) and the requirement of a high standard of professional ethics in
s 195(1)(a)’.

[15] Section 40 of the Constitution created government ‘as national, provincial and
local spheres of government which are distinctive, interdependent and interrelated’.
Section 151(3) provides that a municipality ‘has the right to govern, on its own initiative,
the local government affairs of its community, subject to national and provincial
legislation, as provided for in the Constitution’. Section 155(6) provides for the
establishment and monitoring of municipalities by provincial governments. The section
says:
‘Each provincial government must establish municipalities in its province in a manner
consistent with the legislation enacted in terms of subsections (2) and (3) and, by legislative
or other measures, must –
(a)
provide for the monitoring and support of local government in the province; and
(b)
promote the development of local government capacity to enable municipalities to
perform their functions and manage their own affairs.’

[16] Section 125 allocates a number of functions to provincial governments. Section
125(2)(g) allows for executive authority to be exercised by ‘performing any other
function assigned to the provincial executive in terms of the Constitution or an Act of
Parliament’. Section 105 of the Systems Act assigns a monitoring function to provincial
executives in respect of local governments. Section 105(1) states:
‘The MEC for local government in a province must establish mechanisms, processes and
procedures in terms of section 155(6) of the Constitution to-
(a)
monitor municipalities in the province in managing their own affairs, exercising their
powers and performing their functions;
(b)
monitor the development of local government capacity in the province; and
(c)
assess the support needed by municipalities to strengthen their capacity to manage
their own affairs, exercise their powers and perform their functions.’

[17] It is within this legislative context that s 106 is located. It is part of the system
for the monitoring, by provincial executives, of local governments so that the
performance of local governments may be strengthened and improved, and municipal
officials be held accountable for their administration. Section 106 is therefore a
mechanism by which an MEC may investigate allegations that serious problems have

arisen relating to the administration and governance of a municipality. The purpose of
activating the mechanism is to obtain the necessary facts so that the source of the
problem can be identified, with a view to remedying the weakness in the system.

[18] Section 106(1), when it refers to the crimes of fraud and corruption, does not
state expressly that only these crimes, and no others, may be investigated in terms
of the section. We would have expected this to have been stated clearly had that
been the intention of the legislature. The terms ‘maladministration’ and ‘serious
malpractice’ are broad enough to encompass both conduct that is criminal and
conduct that is not. For instance, the theft of money from a municipality by a
municipal official is, without doubt, a serious malpractice.

[19] The restricted interpretation of the section by the high court would have to
rely on a tacit exclusion of crimes other than theft or corruption, being read into the
section. There is no indication, whether from the context that we have outlined
above or from the provision itself that this was intended. Indeed, there are strong
indicators that pull in the opposite direction.

[20] First, such an interpretation is arbitrary and could lead to arbitrary results. It
is arbitrary because there is no apparent basis why investigators may investigate
allegations of fraud or corruption but not, for instance, theft. Its arbitrariness of
result may be illustrated by the following example: if investigators were appointed
to investigate allegations of fraud, and they found that the evidence they uncovered
proved theft, the restricted interpretation would mean that they could not report
their findings to the MEC because it would be beyond the scope of their mandate.
They would have to report that they found no evidence of fraud.

[21] Secondly, the restricted interpretation, as the above example illustrates,
would undermine the purpose of s 106. Only some forms of maladministration and
serious malpractices could be investigated and remedied, while those forms that
are tainted by criminality could not be. On the face of it, the more serious forms of
maladministration and serious malpractice would in this way be shielded from
investigation. When viewed in the context sketched above and of s 106 being a

purpose-built mechanism not only for monitoring and strengthening of local
government but also for accountability, the restricted interpretation is not a sensible
meaning to give to the section.

[22] Thirdly, it seems to us that the exclusion of all criminal conduct apart from
fraud and corruption from investigation may well have the effect of rendering s 106
investigations a dead letter. The Local Government: Municipal Finances
Management Act 56 of 2003 creates, in s 173, a broad range of criminal offences
related to maladministration of municipal finances. Other local government
statutes, including the Systems Act, create even more offences related to the way
in which municipalities are administered. Their combined effect is that a large
swathe of maladministration has been criminalised. The restricted interpretation
would block s 106 investigations into the very matters that it was meant for.

[23] Finally, the concerns expressed by the court in City of Cape Town about the
blurring of the lines between the executive and the police are, in our view, more
apparent than real. A criminal investigation and a s 106 investigation serve very
different purposes. One is aimed at detecting and punishing crime while the other,
as we have explained, is concerned with monitoring, remedying the problems
identified and holding municipal officials to account. Furthermore, specific,
objectively justiciable jurisdictional facts have to be present before the power to
appoint investigators is triggered. And administrative justice principles – whether
in terms of the Promotion of Administrative Justice Act 3 of 2000 or the principle of
legality – are designed to prevent any abuse of discretion on the part of MECs. In
particular, they may not exercise their powers for an improper purpose or an ulterior
motive, in bad faith or unreasonably. City of Cape Town is itself a good example of
this.

[24] For all of the above reasons, we conclude that s 106(1) does not mean that
only the crimes of fraud and corruption may be investigated and that other crimes,
such as theft, may not be. That means that we are of the view that City of Cape
Town was wrongly decided in this respect. It follows that the high court in this

matter erred in excluding from the investigation the theft allegations. The result is
that the MEC’s appeal on the merits must succeed.

Costs
[25] As stated above, two interlocutory applications served before the high court.
They were an application brought by the municipality to amend its notice of motion,
which was granted, and an application brought by the MEC to strike out several
paragraphs of the municipality’s replying affidavit, which was refused (save for one
paragraph). The court then dismissed the municipality’s application, save for the theft
allegation, and granted the MEC’s counter application. The high court held that each
party should pay its own costs. Two reasons were furnished for this order. First, the
MEC was ‘mostly successful in his opposition to the final interdict’ but ‘substantially
unsuccessful’ in opposing the application to amend and the application to strike out.
Secondly, both parties were litigating with public funds.

[26] A court of appeal will only interfere with the exercise of a discretion regarding
costs in circumscribed instances9 and would be slow to substitute its own decision
simply because it does not agree with a permissible option chosen by the lower court.10
It will, however, interfere if the court’s discretion was exercised on the basis of wrong
principles. In this matter, the high court equated the municipality’s limited success on
the two procedural points with the MEC’s substantive success on the merits. It also
took into account the irrelevant fact that public funds were used by both parties. The
high court misdirected itself in both respects, meriting interference on appeal. The
costs order therefore falls to be set aside and must be replaced with a costs order
in favour of the MEC on the merits, but the municipality’s success in the
interlocutory applications must also be accounted for in the order that we make.

The order
[27] In the result, the following order is made:
The appeal is upheld.

9 Public Protector v Commissioner for the South African Revenue Service and Others [2020] ZACC
28; 2022 (1) SA 340 (CC) para 31.
10 Florence v Government of the Republic of South Africa [2014] ZACC 22; 2014 (6) SA 456 (CC)
para 113; Public Protector v South African Reserve Bank [2019] ZACC 19; 2019 (6) SA 253 (CC)
para 144.

Paragraphs 3, 5 and 6 of the high court’s order are set aside and paragraph 3
is replaced with the following:

‘3.1 The applicant’s application is dismissed with costs, including the costs of
two counsel.

3.2 The respondent is directed to pay the applicant’s costs in respect of the
applications to amend the notice of motion and to strike out.’

_________________________
C PLASKET
JUDGE OF APPEAL

_________________________
A C BASSON
ACTING JUDGE OF APPEAL

APPEARANCES

For Appellant:

Karrisha Pillay SC (with her Cecily-Ann Daniels)

Instructed by:

State Attorney, Cape Town

State Attorney, Bloemfontein

For Respondents:

No appearance
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

30 November 2022

STATUS

Immediate

Please note that the media summary is for the benefit of the media and does not form part of
the judgment.

MEC Responsible for Local Government, Western Cape v Matzikama Local
Municipality and Others (747/2021) [2022] ZASCA 167 (30 November 2022)

MEDIA STATEMENT

The Supreme Court of Appeal (SCA) today upheld the appeal of the Member of the
Executive Council for Local Government in the Western Cape provincial government
(the MEC) against the Matzikama Local Municipality (the municipality).

The MEC had in terms of s 106(1) of the Local Government: Municipal Systems Act
32 of 2000 (the Systems Act) appointed two people to investigate allegations of
abuses of power within the municipality. The section empowered him to do so if he
had reason to believe that ‘maladministration, fraud, corruption or serious malpractice’
were occurring or had occurred in a municipality. One of the allegations which had
been referred for investigation was an allegation that R320 000 of municipal funds had
been stolen.

The municipality applied, in the Western Cape Division of the High Court, Cape Town
(the high court) for the review and setting aside of the MEC’s decision to appoint the
investigation. The MEC brought a counter-application for an order to compel the
municipality and its officials to co-operate with the investigators.

The high court granted the MEC’s counter-application and dismissed the municipality’s
application except for one issue. It held that the MEC had no power to refer the theft
allegation for investigation, as the only forms of criminal conduct he could refer for
investigation in terms of s 106 were fraud and corruption. The MEC sought and was
granted leave by the high court to appeal to the SCA against this finding.

The SCA held that the purpose of s 106 was to monitor the performance of local
governments with a view to remedying weaknesses, and to hold municipal officials to
account. The interpretation of the section favoured by the high court would undermine
this purpose and lead to arbitrary results. It could have the effect of rendering s 106 a
dead letter. The SCA held that s 106(1) meant that not only the crimes of fraud and
corruption could be investigated but that other crimes, such as theft, could also be.