Once-off gratuity payment to non-returning councillors

12 August 2016

It is generally acknowledged that the departure of any experienced leader from public office would, at least to some extent, be quite deleterious. This is true with councillors who will not be returning post the 03 August 2016 local government elections.

The majority of councillors occupy office on a part-time basis, but serve their communities full-time, as some of them do not have formal employment. Many of the non-returning councillors, will be without any income post the elections, despite the contributions they have made during the last term of office.

Leading up to the 2009 National and Provincial Elections, the Independent Commission for the Remuneration of Public Office-bearers (“the Commission”) in October 2008, recommended a once-off gratuity or terminal benefit in the following terms:

1. A member of Parliament or of the provincial legislature who has served a period of 5 years or less should not be entitled to a pension but rather a to a once-off terminal payment equal to 45% of pensionable salary for every year of service; and

2.  A member of Parliament or of the provincial legislature who has served more than 5 years and whose term of office has ended, be entitled to a once-off gratuity equal to 4 months pensionable salary for every 5 years of service or a pro-rata part of the 5 year period.

Within the context of the once-off gratuity payment recommendation made for MPs and MPLs post the national and provincial government elections in 2009, it was recommended that the benefit also be extended to councillors’ post the 2011 local government elections. 

On 29 August 2011, the Commission recommended that qualifying non-returning councillors who had served a full-term of office during the last tenure of the office councillors (i.e. from 1 March 2006 to 18 May 2011) and did not return be paid a once-off gratuity equal to three months’ pensionable salary. This was to be paid from the national fiscus.

This was to allow such councillors with a breathing space to solicit other remunerative employment of their choice.

For the purpose of this statement, it is important to outline the reasons for the need, in general, as to why a gratuity is paid:

1. It is an amount that is received by an employee from his/her employer in gratitude for the services offered by the employee in the company.

2.  The main purpose and concept of gratuity is to help the workman after the retirement; it is the amount which is not connected with any consideration and has to be considered as something given freely for the service the employee has rendered to the organisation.

Working on the gratuity for the councillors post the 2016 elections, we are also taking into consideration the experience in 2011, where:

1. Many councillors lost their property (cars and houses) when they left office, and mostly because the gratuity was paid after many months exiting local government.

2. Some councillors were unable to service their debts, buy basic living requirements, as well as even pay school fees for their children.

It would therefore be remiss of government to not take into cognisance the immediate hardships that outgoing councillors and their families will be faced with.

To this effect in 2011, more than 4000 individual applications were submitted in this regard screened and a total of R139,337 million was subsequently paid to former councillors that served from 2006 to 2011. The payment of this gratuity was done in an open and a transparent manner, hence this process received no audit queries.

Therefore, the same process is currently unfolding to pay the once-off gratuity to non-returning Local Councillors post the 03 August 2016 local government elections whose term has ended. The payment will be based on three months of their last earned salary, and on a sliding scale, depending on the time (number of months) spent in office. That is, the longer a councillor was in office, the greater will be the gratuity.

To this effect, Minister for Cooperative Governance and Traditional Affairs, honourable Des van Rooyen has, in consultation with various stakeholders, including National Treasury, agreed with the Cabinet approved once off gratuity to be paid non-returning councillors post the 03 August 2016 polls. National Treasury has already made available an amount of R309,3 Million over the 2016 MTEF to pay the gratuity of the non-returning councillors.

It is, however, important to note that the exact number of councillors that will be eligible for receiving the gratuity, and the amount of the gratuity, will only be finalised after all municipal councils have been constituted, as it is only after that process that we will be able to identify those councillors that will not be returning to office.

Regardless of the number of councillors not returning to office, the department will have to stay within the budgeted amount of R309 million.

Tax Directive

In terms of the Income Tax Act, 1962 (Act No. 58 of 1962), the gratuity, as is the case with all other ex-gratia payments, will be subjected to taxation, in accordance with the normal tax rules that are issued by the South African Revenue Service. Before any payments are made, a tax directive must be obtained from the South African Revenue Service in compliance with the Income Tax Act, 1962 (Act No. 58 of 1962). As such

SARS will be requested to provide an input in this regard when councillors / municipalities are being advised (circular).

To this effect, “On behalf of all South Africans, I wish to appreciate the sterling work done by the non-returning councillors during their terms of office, especially their selfless contribution in moving our country forward as we envisage in vision 2030, the National Development Plan (NDP)”, said Minister van Rooyen.

As true leaders they were able to distinguish between right and wrong, taking decisions that moved us through unchartered territories as part of the journey that the democratic local government undertook in the last 15 years.

We hope that the new councillors will continue and improve on where the outgoing councillors left off, thereby working with all stakeholders and role-players motivated by the indomitable spirt of the founding father of our democracy, the late former President Nelson Mandela. This work ethic and ethos speak to our resolve as government to deliver services that are geared to improving the lives of all communities in our country.

Statement issued by Legadima Leso Department of Cooperative Governance and Traditional Affairs, 12 August 2016