Residents take on municipality over water crisis – and win a major court battle - IOL

Municipalities may appoint another organ of state urgently where a court order or emergency requires it, but the decision must still be rational, properly recorded and funded.

A residents’ association in Kgetlengrivier, North West, took control of the water and sewerage works in two towns after sewage polluted rivers supplying drinking water and the municipality failed to restore services. Nearly six years later, it has won a Supreme Court of Appeal battle overturning the municipality’s appointment of a water utility it had fired weeks earlier for poor performance.

The court set aside the Kgetlengrivier Local Municipality’s decision to appoint Magalies Water to operate its water and sanitation services, and the utility’s acceptance of the appointment. The three-year arrangement had a projected cost of R37.5 million, but the municipality could not produce a valid agreement, a record explaining its choice of contractor or evidence that the spending had been properly funded and authorised.

Raw sewage from treatment works in Koster and Swartruggens flowed into the Koster and Elands rivers, which supply drinking water. The Kgetlengrivier Concerned Citizens, a voluntary association representing residents, repeatedly went to court to compel the municipality to act.

An interim order on 18 December 2020 required the municipality to stop the spillages and repair their causes, but the association said the situation deteriorated, with no potable water in the reservoirs. On 7 January 2021, the association took control of the works.

A consent order on 12 January required the municipality to appoint a suitable implementing agent by the end of that month. It appointed Magalies Water the same day.

The municipality had terminated Magalies Water’s previous contract on 26 November 2020 because of poor performance, and on 5 January 2021 told the court under oath that the utility had failed and that a different provider would be appointed. The residents objected and repeatedly demanded the records behind the decision.

The municipality eventually supplied two documents: a letter of appointment dated 12 January 2021 and an operations and maintenance agreement dated 27 May 2020. The court found that the agreement predated the new appointment and related to the earlier, terminated contract, so it could not complete the appointment.

Acting Judge of Appeal G N Z Mjali said the municipality had failed to produce a valid agreement or a complete record of its decision, and there was no explanation of why Magalies Water was considered suitable. The court found the decision irrational and arbitrary, having ignored the municipality’s own assessment of the utility’s earlier performance.

Magalies Water argued that the appeal was moot because the three-year contract had expired, but the court said the water failures and the validity of the appointment made it a matter of public interest.

All five judges agreed on the order but differed on whether to decide if the municipality’s reliance on the exemption for contracts between organs of state breached the Constitution’s procurement rules. Mjali declined to, because the residents raised the question only on appeal.

In a separate judgment, Judge of Appeal K E Matojane, with three other judges concurring, said the exemption relieves a municipality of ordinary supply-chain procedures but not of the constitutional standard. Competitiveness will often have little work to do in such a contract, Matojane said, but transparency and cost-effectiveness remain.

Matojane said a municipality must still be able to show why it chose a particular state entity, what it agreed to pay and how the spending would be funded. In this case, Matojane found no record of the choice, no service-level agreement, no council resolution and no evidence that the spending had been budgeted for or authorised.

Magalies Water argued that the cost would be covered by the North West Department of Co-operative Governance, Human Settlements and Traditional Affairs. Matojane said the papers did not establish that arrangement and that, even if the department paid, the municipality remained accountable because the contract was in its name.

Municipalities may appoint another organ of state urgently where a court order or emergency requires it, Matojane said, but the decision must still be rational, properly recorded and funded.

The court also overturned the High Court’s costs order against the residents’ association. Mjali said the association had used litigation to enforce residents’ constitutional rights to potable water and sanitation, with no suggestion the cases were frivolous.

The municipality must pay the costs of the review application and the application for leave to appeal in the High Court, and Magalies Water the costs of the appeal, including two counsel.