The Premier of the Western Cape v Overberg District Municipality

The Overberg District Municipality's council consisted of 20 members from four political parties (9 ANC, 2 NPP, 8 DA, 1 ID), with the ANC-NPP coalition forming the governing majority. At a council meeting on 13 April 2010, a proposed budget was tabled (less than 90 days before the financial year starting 1 July 2010) and approved for publication. At the same meeting, the speaker resigned and was replaced only for that meeting, leaving the council without a speaker thereafter. The majority coalition repeatedly requested the municipal manager to convene a meeting to elect a new speaker and approve the budget, but the manager refused based on legal advice (later conceded to be incorrect) that he could only convene the first meeting after an election. On 9 July 2010, after the financial year had commenced without an approved budget, the 11 coalition members convened their own meeting without notifying other council members, elected a speaker, and purported to approve the budget. The provincial cabinet, acting on advice that s 139(4) of the Constitution mandated dissolution when a budget was not approved before 1 July, dissolved the council on 14 July 2010, appointed an administrator, and approved a temporary budget.

• Whether s 139(4) of the Constitution mandates dissolution of a municipal council that fails to approve an annual budget before the start of the financial year
• Whether the term 'must intervene by taking any appropriate steps...including dissolving the Municipal Council' in s 139(4) is peremptory or discretionary
• Whether a municipal council has authority to approve a budget after the start of the financial year
• Whether the provincial executive's decision constituted executive action reviewable for legality despite not being administrative action under PAJA
• Whether non-compliance with s 16(1) of the MFMA (requiring budget approval before the financial year) affects the validity of a budget approved after that deadline

The appeal was dismissed with costs, including costs of two counsel. The decision of the Western Cape High Court (Bozalek J) setting aside the provincial cabinet's decision to dissolve the council was upheld.

Section 139(4) of the Constitution confers discretion on provincial executives to determine appropriate steps to ensure budget approval when a municipality fails to do so timeously; it does not mandate dissolution of the municipal council. The word 'must' in s 139(4) creates an imperative to intervene, not to dissolve. Dissolution is mentioned as one option among appropriate steps because it is the most drastic measure available. The provincial executive must exercise its discretion to select steps that are suitable to ensure budget approval in the particular circumstances. A failure to exercise this discretion by misconstruing s 139(4) as mandating dissolution constitutes illegality reviewable under the constitutional principle of legality, which applies to all exercises of public power, not only administrative action. The principle of legality requires holders of executive power not to misconstrue their powers. Such misconstruction also violates s 41(1)(e) and (f) of the Constitution, which requires all spheres of government to respect the constitutional status, powers and functions of other spheres and not to assume powers not conferred by the Constitution.

Brand JA noted (without deciding definitively) that s 139(4) likely empowers the provincial executive to authorize a council to approve a budget after 1 July, even if the MFMA would otherwise prevent this, as any such limitation in the MFMA would be unconstitutional if it restricted the Constitution's grant of discretion to take 'any appropriate steps'. The Court observed that requiring dissolution in all cases would lead to absurd results, such as where a budget was approved one day late or where the council was prevented from timely approval by factors beyond its control. Brand JA also noted that the prospect of dissolution should be sufficient to spur a recalcitrant council into action without actually requiring dissolution in every case. Streicher JA, in his separate judgment, expressed the view that municipal councils do retain authority to approve budgets after 1 July, relying on s 27(4) of the MFMA which provides that non-compliance with budget process provisions does not affect validity of an annual budget. He outlined a process whereby upon failure to approve a budget before 1 July: (i) the council should reconsider until approved; (ii) the mayor must report to the MEC; (iii) the provincial executive must intervene with appropriate steps; (iv) the executive is not obliged to dissolve but may use other means including persuasion; and (v) dissolution becomes appropriate only if the council continues to fail to approve a budget.

This judgment is significant for establishing the boundaries of provincial intervention in local government under s 139(4) of the Constitution. It affirms that provincial executives have discretion in determining appropriate intervention measures and are not obligated to take the most drastic step of dissolution in every case of budget non-approval. The case protects local government autonomy by requiring provincial executives to respect municipalities as a separate sphere of government and to consider less intrusive interventions before dissolution. It clarifies that executive action, though excluded from PAJA, remains subject to judicial review under the constitutional principle of legality, particularly where public power is misconstrued. The judgment demonstrates that deadlines in the MFMA relating to budget approval are not necessarily peremptory and that their breach does not automatically invalidate subsequent budget approval. It emphasizes the importance of cooperative governance principles in intergovernmental relations and restraint in provincial interference with democratically elected local councils.