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MUNICIPAL SYSTEMS ACTMUNICIPAL SYSTEMS ACT
SECTION 78 ASSESSMENTSSECTION 78 ASSESSMENTS
Implementing the Division of Powers and Implementing the Division of Powers and
Functions for Water ServicesFunctions for Water Services
LEGISLATIVE OVERVIEWLEGISLATIVE OVERVIEWNovember 2003November 2003
Legislative Overview: Version 1 November 2003
Purpose of the PresentationPurpose of the Presentation
S78 assessments in the context of powers and functions Introduction to S78 assessments S78 triggers Different types of service delivery mechanisms The S78 process step by step Criteria and decisions Important considerations Community participation Implementation (procurement & service delivery agreements)
To facilitate a common understanding of the section 78 process through the following topics:
S78 ASSESSMENTS IN THE S78 ASSESSMENTS IN THE CONTEXT OF POWERS AND CONTEXT OF POWERS AND
FUNCTIONSFUNCTIONS
Legislative Overview: Version 1 November 2003
Powers and Functions...Powers and Functions...
The division of powers and functions for water services became effective on 1 July 2003
Implementing powers and functions is linked to municipal establishment, budgets, IDP review, capacity building and so on
S78 assessments are a critical milestone in measuring the success of the implementation of powers and functions
Legislative Overview: Version 1 November 2003
Powers & Functions: The Trigger Powers & Functions: The Trigger for S78 Assessmentsfor S78 Assessments
S77(a)(iii) of MSA states that a municipality must review & decide on appropriate mechanism/s in the municipality, or part thereof, when the municipality is restructured or re-organised in terms of the Structures Act
The division of powers and functions constitutes a restructuring or re-organisation in terms of the Structures Act and therefore triggers the need for S78 assessments
Legislative Overview: Version 1 November 2003
Where services are provided through an internal mechanism by the “former WSA”, the “new WSA” must review and decide on appropriate mechanisms in municipality or part thereof
Where services are provided through an external mechanism by “former WSA”, the “new WSA” will be the successor in title to the Service Delivery Agreement (SDA)
A S78 assessment therefore does not have to be undertaken in areas covered by an external service delivery mechanism, but the division of powers and functions remains a legislative trigger
Powers & Functions: The Trigger Powers & Functions: The Trigger for S78 Assessmentsfor S78 Assessments
Legislative Overview: Version 1 November 2003
Where a service is provided through an internal mechanism, the municipality must review & decide on appropriate mechanism/s in the whole or part of the municipal area
The S78 assessment can therefore be undertaken for the “former WSA” area only
Powers & Functions: The Trigger Powers & Functions: The Trigger for S78 Assessmentsfor S78 Assessments
Legislative Overview: Version 1 November 2003
Powers & Functions: The Powers & Functions: The Scope of S78 AssessmentsScope of S78 Assessments
The scope and area covered by the S78 is in the discretion of the municipality
Some considerations … Political implications Scale of expenditure
Importance of service Potential for community & labour conflict
Geography & demographics
Urgency (time, levels of services, legislative non-compliance)
Legislative Overview: Version 1 November 2003
National Gov. recommends that S78 as a result of p&f be done for whole area (irrespective of internal or external mechanism in place) to ensure consideration of: Benefits of scale Efficiency Integration
Where a service is provided through an external mechanism, any amendments to the contract informed by S78 must be done in accordance with the provisions of the contract
Powers & Functions: The Powers & Functions: The Scope of S78 AssessmentsScope of S78 Assessments
INTRODUCTION TO S78 INTRODUCTION TO S78 ASSESSMENTS ASSESSMENTS
Legislative Overview: Version 1 November 2003
What is a Section 78 Assessment?What is a Section 78 Assessment?
A section 78 assessment is a process A section 78 assessment is a process required by the Municipal Systems Act to required by the Municipal Systems Act to assess assess potential service delivery potential service delivery mechanismsmechanisms for the provision of a for the provision of a municipal servicemunicipal service
Section 78 assessments are required Section 78 assessments are required under certain legislated circumstances under certain legislated circumstances (which are called “triggers”)(which are called “triggers”)
Legislative Overview: Version 1 November 2003
The Importance of S78 The Importance of S78 AssessmentsAssessmentsFOR MUNICIPALITIES - May have long term service delivery implications
Has financial implications
Decisions may be challenged
FOR NATIONAL & PROVINCIAL GOV. – Appropriate, sustainable service delivery mechanisms
Continued service delivery
Improvement in service delivery
Legislative Overview: Version 1 November 2003
Urgency for Completing S78’sUrgency for Completing S78’s
Administrative units & other arrangements are interim
Interim arrangements pose difficulties in respect of – Effective management Political imperatives Certainty both in respect of staff and future
service delivery mechanism Stability in the “new and former WSAs”
Legislative Overview: Version 1 November 2003
National Government Timeline National Government Timeline for Completion of S78 for Completion of S78 AssessmentsAssessments
Jan ‘03Jan ‘03
Announcement Announcement of P&F for WSof P&F for WS
Effective date Effective date of P&F for WS of P&F for WS & MEC & MEC adjustmentsadjustments
Implementation Implementation of P&F for WS of P&F for WS and MEC and MEC adjustments adjustments completecomplete
1 July ‘031 July ‘03 1 July ‘041 July ‘04Dec ‘03Dec ‘03
Announcement Announcement of adjustments of adjustments of P&F byof P&F by MECsMECs
THE ‘TRIGGERS’THE ‘TRIGGERS’
Legislative Overview: Version 1 November 2003
Powers & Functions ‘Triggered’ Powers & Functions ‘Triggered’ the Need to Undertake S78 the Need to Undertake S78 AssessmentsAssessments
A number of triggers are provided for in the A number of triggers are provided for in the ActAct
There are different triggers where services There are different triggers where services are provided through internal and external are provided through internal and external mechanismsmechanisms
The division of powers and functions is a The division of powers and functions is a trigger trigger
It is however necessary to take note of other ‘triggers’..
Legislative Overview: Version 1 November 2003
When Must a S78 Process Be When Must a S78 Process Be Applied? The ‘Triggers’Applied? The ‘Triggers’
A review is required by an intervention in terms of A review is required by an intervention in terms of the Constitutionthe Constitution
A new municipal service is to be provided A new municipal service is to be provided Requested by the local community through Requested by the local community through
mechanisms, process and procedures established mechanisms, process and procedures established in terms of the MS Actin terms of the MS Act
A review of its IDP requires a review of the A review of its IDP requires a review of the delivery mechanismdelivery mechanism
A municipality must review and decide on appropriate A municipality must review and decide on appropriate mechanism/s to provide a municipal service in the mechanism/s to provide a municipal service in the municipality or a part of the municipality when –municipality or a part of the municipality when –
Legislative Overview: Version 1 November 2003
What are the ‘Triggers’ when a What are the ‘Triggers’ when a Service is Provided through an Service is Provided through an InternalInternal Mechanism? Mechanism?
An existing municipal service is to be An existing municipal service is to be significantly upgraded, extended or significantly upgraded, extended or improvedimproved
A performance evaluation in terms of the A performance evaluation in terms of the MS Act requires a reviewMS Act requires a review
The municipality is restructured or The municipality is restructured or reorganised in terms of the Municipal reorganised in terms of the Municipal Structures ActStructures Act
Legislative Overview: Version 1 November 2003
What Are the ‘Triggers’ When a What Are the ‘Triggers’ When a Service Is Provided Through an Service Is Provided Through an ExternalExternal Mechanism? Mechanism?
A performance evaluation in terms of the MS Act requires a review
The Service Delivery Agreement (SDA) is anticipated to expire or be terminated within the next 12 months
An existing municipal service is to be significantly upgraded, extended or improved and this is not addressed in the SDA
THE DIFFERENT TYPES OF THE DIFFERENT TYPES OF SERVICE DELIVERY SERVICE DELIVERY
MECHANISMSMECHANISMS
Legislative Overview: Version 1 November 2003
What are the Different Types of What are the Different Types of Mechanisms?Mechanisms?
Internal mechanisms External mechanisms
Internal mechanisms
WSA
External mechanisms
Inside the municipality
Entities outside the municipality
Legislative Overview: Version 1 November 2003
What are What are InternalInternal Mechanisms? Mechanisms?
Department or Administrative Unit within the municipality's administration
Business Unit
Internal Municipal Service District
Internal mechanismsWSA
Legislative Overview: Version 1 November 2003
What is a What is a DepartmentDepartment or or Administrative UnitAdministrative Unit??
The Act does not define ‘department’
There is no clear legal or academic definition
Traditionally, a ‘department’ is an institutional arrangement where the responsibility for the delivery of a particular service is carried by more than one unit
Legislative Overview: Version 1 November 2003
What is a What is a DepartmentDepartment or or Administrative UnitAdministrative Unit??
This is currently the most common mechanism used by municipalities to provide municipal services
One department/ administrative unit usually takes responsibility for technical aspects while others take responsibility for aspects such as financial, legal, social and human resources...
Legislative Overview: Version 1 November 2003
What is a What is a Business UnitBusiness Unit??
A business unit - operates within municipality’s
administration, under council’s control and in accordance with operational &
performance criteria of council There is no clear legal or academic definition
The Act does not define a ‘business unit’
Legislative Overview: Version 1 November 2003
What is a What is a Business UnitBusiness Unit??
Can be defined as a ring-fenced unit within the municipality, operating in a defined framework and fully accountable for all aspects of service delivery
Is similar to a department/ administrative unit as it’s an integral part of the municipality and does not have a separate legal personality
Is responsible for all aspects of a service and is ring-fenced in respect of income and expenditure
Legislative Overview: Version 1 November 2003
What Is an What Is an Internal Municipal Internal Municipal Service DistrictService District??
Established, regulated and managed in terms of a municipal policy framework that must reflect –
A balance of development needs & priorities of the designated area against whole area
The extent to which LED will be promoted in the whole municipal area
The extent to which it will enhance social, economic and spatial integration
It may not entrench or contribute to further disparities in service provision
Legislative Overview: Version 1 November 2003
Established in a part of the municipality to facilitate the provision of a municipal service
Must establish separate accounting and record-keeping systems
May establish committee to act as a consultative and advisory forum
What Is an What Is an Internal Municipal Internal Municipal Service DistrictService District??
Legislative Overview: Version 1 November 2003
The municipality must – Consult communities on boundaries,
the nature of services, method of financing and mechanism for delivery
Obtain the consent of the majority that will have to contribute
What Is an What Is an Internal Municipal Internal Municipal Service DistrictService District??
Legislative Overview: Version 1 November 2003
What Are What Are ExternalExternal Mechanisms? Mechanisms?
Municipal Entity Municipal Entity Another municipalityAnother municipality Organ of state (including a traditional authority) Organ of state (including a traditional authority)
CBOCBO NGONGO Any other institution or entity legally competent to Any other institution or entity legally competent to
operate a business activityoperate a business activity
External mechanisms
Competitive tenderingCompetitive tendering
Service D
elivery Ag
reemen
ts m
ust b
e entered
into
Legislative Overview: Version 1 November 2003
What Are What Are Municipal EntitiesMunicipal Entities??
Private Company
Service Utility
Multi- Jurisdictional Service Utility (MJSU)
The Act no longer allows the following as municipal entities:
Section 21 companies, trusts, etc.
Legislative Overview: Version 1 November 2003
Establishment of Establishment of Municipal Municipal EntitiesEntities: General Information: General Information
When considering establishing or participating in a municipal entity, a municipality must first -
determine precisely the service that such entity would perform on behalf of the municipality, and
make an assessment of the impact of shifting that service to the entity on the municipality’s staff, assets and liabilities, including an assessment of… —
Legislative Overview: Version 1 November 2003
Establishment of Establishment of Municipal Municipal EntitiesEntities: General Information : General Information (cont.)(cont.)
the number of municipal staff to be transferred to the entity
the number of municipal staff that would become redundant as a result of shifting the function or service
the cost to the municipality of any staff retrenchments or the retention of redundant staff
any assets of the municipality to be transferred to the entity
any assets of the municipality that would become obsolete because of shifting the service
any liabilities of the municipality to be ceded to the entity
any debt of the municipality attributed to that service which the municipality would retain
Legislative Overview: Version 1 November 2003
A municipality may establish or participate in a municipal entity only if, prior to the council meeting to approve this, it has —
made a public information statement setting out the municipality’s plans for the municipal entity, together with the assessment which the municipality must conduct,
invited the local community and other interested persons to submit comments or representations in respect of the proposed entity..
Establishment of Establishment of Municipal Municipal EntitiesEntities: General Information: General Information
Legislative Overview: Version 1 November 2003
solicited the views and recommendations of the National Treasury, DPLG and the MEC for LG in the Province, and
taken into account— the impact assessment any comments or representations on the matter received
from the local community, organised labour and other interested persons
any written views and recommendations on the matter received from the NT, DPLG and the MEC
Establishment of Establishment of Municipal Municipal EntitiesEntities: General Information : General Information (cont.)(cont.)
Legislative Overview: Version 1 November 2003
The functioning of municipal entities are regulated in terms of the MFMA in respect of -
Financial governance
Financial accountability
Reports and reportable matters
Functioning of Functioning of EntitiesEntities: : Municipal Finance Management Municipal Finance Management Act (MFMA)Act (MFMA)
Legislative Overview: Version 1 November 2003
The functioning of municipal entities are regulated in terms of the MSA in respect of -
Duties of municipalities
Municipal representatives may be councilors or officials
Governance
Councilors, officials, members of National Assembly & representatives in NCOP may not be Directors
Functioning of Functioning of EntitiesEntities: : Municipal Systems ActMunicipal Systems Act (MSA)
Legislative Overview: Version 1 November 2003
What Are What Are Private CompaniesPrivate Companies??
Pty (Ltd) Companies are referred to in section 19 and 20 of the Companies Act No 61 of 1973
Established and subject to the Companies Act
Juristic persons (separate legal entities) Johannesburg Water (Pty) Ltd is an example
of a similar entity Must enter a Service Delivery Agreement
(SDA)
Legislative Overview: Version 1 November 2003
Who may hold interests in Who may hold interests in private companiesprivate companies??
A municipality may:
establish or participate in establishing, or acquire or hold an interest in a private company
either acquire or hold full ownership, or acquire or hold a lesser interest – minority shareholding is possible
acquire or hold a lesser interest only if all the other interests are held by another municipality or municipalities or national or provincial organ/s of state
Legislative Overview: Version 1 November 2003
Who may hold interests in Who may hold interests in private companiesprivate companies? (cont.)? (cont.)
A municipality may acquire or hold an interest in a private company in which an investor (other than another municipality or a national or provincial organ of state) has an interest, but only if:
the municipality, or another municipality (or both municipalities) have effective control in the private company -- private shareholding is possible
“Effective control” means the power a shareholder has to appoint or remove at least the majority of the Board of Directors, or to control at least the majority of the voting rights, at a general meeting.
Legislative Overview: Version 1 November 2003
Are there conditions precedent Are there conditions precedent for establishing for establishing private private companiescompanies??
In the case of one municipality:
A municipality may establish a private company or acquire an interest in such a company only - for the purpose of utilising the company as a
mechanism to assist it in the performance of any of its functions or powers
if the municipality can demonstrate that- there is a need to perform that function or power in
accordance with business practices in order to achieve its strategic objectives more effectively
the company would benefit the local community
Legislative Overview: Version 1 November 2003
Are there conditions precedent Are there conditions precedent for establishing for establishing private private companiescompanies??
If two or more municipalities intend to establish a private company or to acquire interests in it, each of those municipalities must also -
consider and reach agreement on proposals for shared control of the company, and
consider cash flow projections of the company's proposed operations for at least three financial years
Legislative Overview: Version 1 November 2003
Rules that apply to Rules that apply to private private companiescompanies
A private company which is a municipal entity -
must restrict its activities to the purpose for which it is used by its ‘parent’ municipality
has no competence to perform any activity which falls outside the functions and powers of its establishing municipality
Legislative Overview: Version 1 November 2003
What Are What Are Service UtilitiesService Utilities??
Service utilities are:
established by a bylaw
juristic persons (separate legal entities)
under the sole control of the establishing municipality
Legislative Overview: Version 1 November 2003
Are there conditions precedent Are there conditions precedent for establishing for establishing service utilitiesservice utilities??
A municipality may establish a service utility only -
as a mechanism to assist the municipality in the performance of its functions or powers, and
if the municipality can demonstrate that -
the function or power could be performed more efficiently by a separate structure in order to achieve the strategic objectives of the municipality
the service utility would benefit the local community
Legislative Overview: Version 1 November 2003
What Rules Apply to What Rules Apply to Service Service UtilitiesUtilities??
No by-law may confer any functions or powers falling outside the competence of the parent municipality on a service utility
A service utility - must restrict its activities to the purpose for
which it was established has no competence to perform any activity
which falls outside its functions or powers in terms of the by-law
Legislative Overview: Version 1 November 2003
What are What are Multi Jurisdictional Multi Jurisdictional Service UtilitiesService Utilities (MJSUs)? (MJSUs)?
Established by a written agreement between two or more municipalities
Minister may request establishment in consultation with Minister of DWAF
The Act states what must be provided for in agreement Agreement is similar to a SDA Controlled by a governing body which is a juristic
person (independent legal entity) Accountable to municipalities
Legislative Overview: Version 1 November 2003
What rules apply to What rules apply to MJSUsMJSUs??
The MJSU: must restrict its activities to the purpose for
which it was established has no competence to perform any activity
which falls outside its functions in terms of the agreement
Legislative Overview: Version 1 November 2003
Rules that apply to Rules that apply to Other Other MunicipalitiesMunicipalities
Where a municipality decides to enter into a SDA with another municipality, the other municipality must conduct a Feasibility Study (FS)
The FS must be taken into account before the SDA is entered into
Legislative Overview: Version 1 November 2003
Rules that apply to Rules that apply to Other Other MunicipalitiesMunicipalities Feasibility Study must include an assessment of:
the impact on its budget, assets, liabilities and staff expenditure, for each financial year that it intends to serve as an external service provider
whether it will be necessary to increase the number of staff to enable it to be an external service provider, and whether it will be necessary to transfer or second any staff
Its ability to absorb any commitments, liabilities or employees involved, if and when the appointment as external service provider ends
Legislative Overview: Version 1 November 2003
What rules apply to What rules apply to Organs of Organs of StateState??
Example: Water boards
Any organ of state is subject to the PFMA and must inform National Treasury in writing and obtain approval from Minister of DWAF
Legislative Overview: Version 1 November 2003
What rules apply to What rules apply to CBOsCBOs, , NGOsNGOs and the and the Private SectorPrivate Sector??
Competitive procurement
The Municipal Finance Management Act regulates Public Private Partnerships
Legislative Overview: Version 1 November 2003
Public Private PartnershipsPublic Private Partnerships (PPPs)(PPPs)
The term ‘PPP’ is not defined in the Act
National Treasury regulations define PPPs in the context of national and provincial govt.
NT regulations provide a useful definition in the municipal context
Legislative Overview: Version 1 November 2003
Public Private PartnershipsPublic Private Partnerships
In NT Treasury regulations, national & provincial PPPs are defined as commercial transactions between an institution and a private party, in terms of which –
the private party either performs an institutional function on behalf of the institution for a specified or indefinite period, or acquires the use of state property for its own commercial purposes for a specified or indefinite period…;
Legislative Overview: Version 1 November 2003
Public Private PartnershipsPublic Private Partnerships (cont.)(cont.)
In the NT Treasury regulations, the private party receives a benefit for performing the function or by utilising state property, either by way of:
compensation from a revenue fund; charges or fees collected by the private party
from users or customers of a service provided to them; or
a combination of such compensation and such charges or fees
Legislative Overview: Version 1 November 2003
Public Private PartnershipsPublic Private Partnerships
Municipalities may enter into PPP agreements, but only if they can demonstrate that the agreement will -
provide value for money to the municipality;
be affordable for the municipality; and
transfer appropriate technical, operational and financial risk to the private party
Legislative Overview: Version 1 November 2003
A PPP agreement must comply with any prescribed regulatory framework for PPPs
If the PPP involves the provision of a municipal service, it must comply with Chapter 8 of the MSA
Before a PPP is concluded, the municipality must conduct a Feasibility Study…
Public Private PartnershipsPublic Private Partnerships
Legislative Overview: Version 1 November 2003
The Feasibility Study (FS) must –
explain the strategic and operational benefits of the PPP for the municipality in terms of its strategic objectives;
take into account all relevant information; describe in specific terms -
the nature of the private party’s role in the PPP the extent to which this role can be performed
by a private party…
Public Private PartnershipsPublic Private Partnerships
Legislative Overview: Version 1 November 2003
describe in specific terms how the proposed agreement will –
provide value for money to the municipality
be affordable for the municipality
transfer appropriate technical, operational and financial risk to the private party
impact on the municipality’s revenue flows and its current and future budgets
The FS must also motivate for the capacity of the municipality to effectively monitor, manage and enforce the agreement
Public Private PartnershipsPublic Private Partnerships
Legislative Overview: Version 1 November 2003
Before submitting the FS report and other relevant documents to Council for an in principle decision, the municipality must – make public the particulars of the proposed PPP
including the FS report, invite the local community and other interested
persons to submit comments or representations in respect of the proposed PPP, and
solicit the views and recommendations of National Treasury, DPLG and DWAF if the PPP involves the provision of water
Public Private PartnershipsPublic Private Partnerships
THE S78 PROCESS THE S78 PROCESS ‘STEP BY STEP’‘STEP BY STEP’
Legislative Overview: Version 1 November 2003
STEP 7: DECIDE
STEP 5A: ASSESS EXTERNAL SERVICE
DELIVERY MECHANISMS
B: CONDUCT FEASIBILITY STUDY
STEP 4: IMPLEMENT APPROPRIATE INTERNAL
SERVICE DELIVERY MECHANISMS
• Allocate sufficient human, financial and other resources necessary for proper provisioning of the service
STEP 2: ASSESS INTERNAL SERVICE DELIVERY MECHANISMS
STEP 3:DECIDE on appropriate internal
service delivery mechanismto explore external service
delivery mechanisms
STEP 6GIVE NOTICE TO THE LOCAL
COMMUNITY
on internal mechanism
on external mechanisms
STEP 1: STATUS QUO ASSESSMENT
CRITERIA AND DECISIONS CRITERIA AND DECISIONS IN EACH STEPIN EACH STEP
Legislative Overview: Version 1 November 2003
Step 1: Status Quo AssessmentStep 1: Status Quo Assessment
The purpose of the status quo assessment is to identify water services challenges in the area and to have basis to evaluate the various mechanisms against these challenges
This approach is called a gap analysis It is important that all WSAs apply their minds
and evaluate service delivery mechanisms in their areas against existing challenges
Legislative Overview: Version 1 November 2003
Step 2: Assess Internal Step 2: Assess Internal MechanismsMechanisms
The municipality must assess the following in respect of providing the municipal service through an internal mechanism – Direct & indirect costs and benefits including
expected effect on environment, human health, well-being & safety
Existing & future capacity to furnish skills, expertise and resources
Criteria that applyCriteria that apply
Legislative Overview: Version 1 November 2003
Internal Assessment Criteria Internal Assessment Criteria (cont.)(cont.)
Extent to which the re-organisation of its Extent to which the re-organisation of its administrationadministration and the development of the and the development of the human resource capacity could be utilisedhuman resource capacity could be utilised
Likely impact on development, job creation, Likely impact on development, job creation, and employment patterns in the municipalityand employment patterns in the municipality
Views of organised labour Views of organised labour
May take developing trends into accountMay take developing trends into account
Legislative Overview: Version 1 November 2003
Step 3: Step 3: Decide on appropriate internal Decide on appropriate internal mechanism or, before taking a mechanism or, before taking a decision, explore the decision, explore the possibility of external possibility of external mechanismsmechanisms
Internal mechanism
OR
Assess external
mechanisms
WSA
Legislative Overview: Version 1 November 2003
Step 4: Implement Internal Step 4: Implement Internal MechanismMechanism
When implementing an internal mechanism, the municipality must make the necessary:
human,
financial and
other resources available, and
transform the provision of services
..in accordance with the Municipal Systems Act
Legislative Overview: Version 1 November 2003
Step 5a: Assess External Step 5a: Assess External MechanismsMechanisms
When municipality has decided to explore external mechanisms, it must give notice to the local community of its intention
The municipality must assess the different service delivery options, taking into account – The direct & indirect costs and benefits incl.
expected effect on environment, human health, well-being & safety
The provider's existing & future capacity to furnish skills, expertise and resources
Criteria that apply
Legislative Overview: Version 1 November 2003
External Criteria (continued)External Criteria (continued)
Views of local communities
Views of organised labour
Likely impact on development, job creation, and employment patterns in the municipality
Legislative Overview: Version 1 November 2003
Step 5b: Conduct a Feasibility Step 5b: Conduct a Feasibility StudyStudy FS must be taken into account and must
include: a clear identification of the municipal service
for which the municipality intends to consider an external mechanism,
an indication of the number of years for which the provision of the municipal service through an external mechanism might be considered,
the projected outputs the provision of the municipal service through an external mechanism might be expected to produce,
Legislative Overview: Version 1 November 2003
Feasibility Study to include..Feasibility Study to include..
an assessment of the extent to which the provision of the municipal service through an external mechanism will - provide value for money
address the needs of the poor
be affordable for the municipality and residents
transfer appropriate technical, operational and financial risk
the projected impact on the municipality's staff, assets and liabilities,
Legislative Overview: Version 1 November 2003
Feasibility Study to include..Feasibility Study to include..
the projected impact on the municipality's Integrated Development Plan (IDP),
the projected impact on the municipality's budgets for the period for which an external mechanism might be used, including impacts on revenue, expenditure, borrowing, debt and tariffs, and
any other matter that may be prescribed.
Legislative Overview: Version 1 November 2003
Step 6: Give Notice to the Step 6: Give Notice to the Local CommunityLocal Community
The community:
must be informed when the municipality considers external mechanisms
must be consulted and informed of the contents of a service delivery agreement before the agreement is signed (see both MSA & MFMA)
must be consulted and informed on the establishment of municipal entities and PPPs
The community’s views on external service delivery mechanisms must be assessed
Legislative Overview: Version 1 November 2003
Step 7: Make the DecisionStep 7: Make the Decision
Decide on and implement appropriate internal mechanism or external mechanisms
Council resolution:Delivery mechanism
Council resolution:Delivery mechanism
IMPORTANT IMPORTANT CONSIDERATIONSCONSIDERATIONS
Legislative Overview: Version 1 November 2003
Considerations when Considerations when conducting S78 Assessmentsconducting S78 Assessments
Is the service a municipal service?
Do you have a budget allocated to undertake the assessment/s?
What should the scope and extent of the assessment/s be?
What regional efficiencies & benefits of scale should be considered in the municipal area and in respect of neighboring municipalities?
What are the requirements of sector legislation?
What other processes are impacting on the assessments?
Community participation
Legislative Overview: Version 1 November 2003
What is a Municipal Service?What is a Municipal Service?
Municipal Systems Act definition:
“a service that a municipality, in terms of its powers and functions, provides to or for the benefit of the community, irrespective of whether…”
the service is provided or will be provided through an internal or external service delivery mechanism, or
fees, charges or tariffs are levied in respect of the service or not
Legislative Overview: Version 1 November 2003
What is a Municipal Service?What is a Municipal Service?
The powers & functions of municipalities are listed in the Constitution and the Municipal Structures Act
Not all the matters listed in the Constitution and Municipal Structures Act are municipal services
Legislative Overview: Version 1 November 2003
Funding Section 78 AssessmentsFunding Section 78 Assessments
Budget allocations for section 78 assessments must be informed by the scope and extent of assessment/s
National government funding is available
Legislative Overview: Version 1 November 2003
DWAF: Provides direct support and oversight to
municipalities on identified strategic focus areas
Strategic focus areas are municipalities – receiving transfer of DWAF schemes
with institutional complexities
with regional schemes are affected by P&F
Funding Section 78 AssessmentsFunding Section 78 Assessments
Legislative Overview: Version 1 November 2003
DPLG FUNDING:DPLG FUNDING: MSIG to DMs to strengthen institutional
capacity within DMs and LMs Key focus areas of funds:
Establishment and governance IDP Performance Management System Establishment & Operation of PMMS Centres Implementation of P & F
Use of flexible portion is at the discretion of municipalities - may be used for S78
Flexible PortionFlexible Portion
Legislative Overview: Version 1 November 2003
The scope and area covered by the S78 is in the discretion of the municipality
Some considerations …
Political implications Scale of expenditure
Importance of service Potential for community & labour conflict
Geography & demographics
Urgency (time, levels of services, legislative non-compliance)
Factors that Influence the Scope Factors that Influence the Scope of S78 Assessmentsof S78 Assessments
Legislative Overview: Version 1 November 2003
Regional Efficiencies and Regional Efficiencies and Benefits of ScaleBenefits of Scale
How can regional efficiencies be achieved?
How can benefits of scale be maximised?
What are the potential benefits of partnering with a neighboring municipality?
Legislative Overview: Version 1 November 2003
Section 11: In ensuring access to water services, a WSA must take into account, among other factors:
alternative ways of providing access to water services
the need for regional efficiency
the need to achieve benefit of scale
the need for low costs
the requirements of equity
the availability of resources from neighboring WSAs
Considerations in terms of the Considerations in terms of the Water Services ActWater Services Act
Legislative Overview: Version 1 November 2003
Water Services Act and ContractsWater Services Act and Contracts
Section 19:
A WSA may only enter into a contract with a private sector water services provider after it has considered all known public sector water services providers which are willing and able to perform the relevant functions.
SECTOR POLICY: The Strategic Framework for Water Services
Legislative Overview: Version 1 November 2003
Transfer of National Water Transfer of National Water Services Works and S78 Services Works and S78 AssessmentsAssessments
S78 assessments run parallel with National Gov. programme for transfer of nationally owned water services works to municipalities
S78 assessments to be completed by ‘04
Transfer agreements to be signed by ‘05
S78 & Transfers require decisions on appropriate service delivery mechanism/s
Legislative Overview: Version 1 November 2003
Transfer of National Water Transfer of National Water Services Works and S78 Services Works and S78 AssessmentsAssessments
Section 78 assessments should include areas served by National government water services works in section 78 assessments to avoid duplication of processes and appropriate decision-making in respect of whole area
Legislative Overview: Version 1 November 2003
Transfer of National Water Transfer of National Water Services Works and S78 Services Works and S78 AssessmentsAssessments
Example: significant extension of area
Does it make sense to do S78 for P&F now and S78 for transfers later?
Appropriate service delivery in WHOLE municipal area is important Area where DWAF owns &
operates WS works
Area to which Municipality currently provides services
Municipal area of jurisdiction
DECISION MAKINGDECISION MAKING
Legislative Overview: Version 1 November 2003
Decision makingDecision making
Final decision is an administrative action Administrative action is regulated by the
Promotion of Administrative Justice Act 3 of 2000
Anyone that feels that their rights have been adversely affected may take decisions on review
A number of grounds may give rise to review Important to undertake S78 assessments and
decisions in a manner that will not give rise to a review
COMMUNITY PARTICIPATIONCOMMUNITY PARTICIPATION
Legislative Overview: Version 1 November 2003
Community ParticipationCommunity Participation
The Municipal Systems Act emphasises and creates legislative obligations for municipalities
The Act obliges municipalities to develop a culture of municipal governance that complements formal representative government with a system of participatory governance
Municipalities must therefore encourage and create conditions for local communities to participate in the affairs of the municipality, including in strategic decisions relating to the provision of municipal services
Legislative Overview: Version 1 November 2003
Who is the Local Community?Who is the Local Community?
The Act defines the “local community” as that body of persons comprising -
the residents or ratepayers of the municipality
any civic organisations, NGOs, private sector or labour organisations involved in local affairs
Others residing outside the municipal area who make use of services or facilities provided by the municipality
and specifically includes the poor and other disadvantaged groups
Legislative Overview: Version 1 November 2003
Community Participation & S78Community Participation & S78
Remember that the community:
must be informed when the municipality considers external mechanisms
must be consulted and informed of the contents of a service delivery agreement before the agreement is signed (see both MSA & MFMA)
must be consulted and informed on the establishment of municipal entities and PPPs
The community’s views on external service delivery mechanisms must be assessed
Legislative Overview: Version 1 November 2003
What mechanisms for What mechanisms for community participation?community participation?
Local communities must participate in the affairs of the municipality through -
political structures (such as ward committees) the mechanisms, processes and procedures for
participation in municipal governance established in terms of the MSA
other appropriate mechanisms, processes and procedures established by the municipality
councillors
Legislative Overview: Version 1 November 2003
A municipality must establish mechanisms and procedures to enable the local community to participate in its affairs, and provide for -
receiving, processing and considering petitions and complaints
notification and public comment procedures public meetings and hearings by the municipal
council, political structures and office bearers consultative sessions with locally recognised
community organisations and, where appropriate, traditional authorities
report-back to the local community
Mechanisms for community Mechanisms for community participationparticipation
Legislative Overview: Version 1 November 2003
What mechanisms for community What mechanisms for community participation?participation?
When establishing participation mechanisms, the municipality must take into account the special needs of people who cannot read or write, people with disabilities, women and other disadvantaged groups
Legislative Overview: Version 1 November 2003
What information must be What information must be communicated?communicated?
Municipalities must:
communicate any information concerning available participation mechanisms to encourage and facilitate community participation
when communicating information, take language preferences and usage, and the special needs of people who cannot read or write, into account
Legislative Overview: Version 1 November 2003
How does communication take How does communication take place?place?
When the municipality needs to notify the community through the media in terms of this Act or any other applicable legislation, it must be done - in the local newspaper or newspapers in the area
in a newspaper or newspapers circulating in its area and determined by the council as a newspaper of record; or
by means of radio broadcasts covering the municipality’s area
Legislative Overview: Version 1 November 2003
How does communication take How does communication take place?place? Any notification must be in the official languages
determined by council with regard to language preferences and usage in the area
A copy of each notice published in the Provincial Gazette, media or legislation must be displayed at the municipal offices
When the local community is invited to submit written comments or representations, it must be stated in the invitation that assistance will be provided to transcribe comments or representations
Legislative Overview: Version 1 November 2003
How does communication take How does communication take place?place?
All documents that must be made public in terms of the MSA, the MFMA or other legislation, must be conveyed to the local community -
by display at the municipality's head and satellite offices and libraries
by display on the municipality's official website
by notifying the local community where detailed particulars can be obtained
If appropriate, any notification must invite the local community to submit written comments or representations
IMPLEMENTING S78 IMPLEMENTING S78 DECISIONS DECISIONS
Legislative Overview: Version 1 November 2003
Implementing S78 DecisionsImplementing S78 Decisions
When implementing an internal mechanism: Must make the necessary human, financial and
other resources available, and transform the provision of services in accordance with the Municipal Systems Act
When implementing an external mechanism:
Consider municipal responsibilities
Consider procurement
Service delivery agreements
Legislative Overview: Version 1 November 2003
External Mechanism: Municipal External Mechanism: Municipal ResponsibilitiesResponsibilities
The municipality:
remains responsible for ensuring that the service is provided to the local community
must regulate the provision of the service
must monitor and assess the implementation of SDA (including the performance of the service provider/s)
Legislative Overview: Version 1 November 2003
External Mechanism: Municipal External Mechanism: Municipal ResponsibilitiesResponsibilities
The municipality must also:
perform its functions and exercise its powers in terms of the IDP & performance management if the municipal service falls within IDP development priorities
Control the setting and adjustment of tariffs within the tariff policy determined by the municipal council
Legislative Overview: Version 1 November 2003
External Mechanism: Municipal External Mechanism: Municipal ResponsibilitiesResponsibilities
The municipality must exercise its authority to ensure uninterrupted service delivery
The SDA must ensure continuity of the service if the service provider is unable to continue performing its functions
The municipality must, where applicable, take over the municipal service, including all assets, when the service delivery agreement expires or is terminated
PROCUREMENT, PROCUREMENT, NEGOTIATION AND NEGOTIATION AND
CONCLUDING SERVICE CONCLUDING SERVICE DELIVERY AGREEMENTSDELIVERY AGREEMENTS
Legislative Overview: Version 1 November 2003
Type of ProcurementType of Procurement
Where a municipal entity, another municipality, or an organ of state is selected:
No competitive procurement is required
The municipality may negotiate and enter into a SDA
The SDA must include matters provided for in S81 of MSA and regulations made under S19 of Water Services Act
Legislative Overview: Version 1 November 2003
Type of ProcurementType of Procurement
Before entering into an agreement: Municipal entity: may be established after
assessment and consultation requirements are met
Another municipality: a feasibility study must be conducted
Organ of state: inform National Treasury and obtain DWAF approval
The community must be consulted and informed on the contents and implications of agreements
Legislative Overview: Version 1 November 2003
Type of ProcurementType of Procurement
Where any other entity (private sector, NGO or CBO) is selected: MFMA PPP requirements to be met (feasibility study
and consultation requirements) prior to procurement
Competitive procurement required prior to negotiation of SDA
MSA S83 applies
MFMA supply chain management provisions apply
Legislative Overview: Version 1 November 2003
Competitive Procurement: S83 Competitive Procurement: S83 of the MSAof the MSA
Selection processes must – comply with MFMA supply chain management allow all prospective service providers to have equal
and simultaneous access to information relevant to the bidding process
minimise the possibility of fraud and corruption make the municipality accountable to the local
community on progress with selecting service provider and the reasons for any decisions
take into account the need to promote the empowerment of small and emerging enterprises
Legislative Overview: Version 1 November 2003
Competitive Procurement: S83 Competitive Procurement: S83 of the MSAof the MSA
A municipality may determine a preference for categories of service providers to advance the interest of persons disadvantaged by unfair discrimination in accordance with the Preferential Procurement Policy Framework Act
Such preference may not compromise or limit the quality, coverage, cost and developmental impact of the services
Legislative Overview: Version 1 November 2003
Competitive Procurement: S83 Competitive Procurement: S83 of the MSAof the MSA
The selection process must be fair, equitable, transparent, cost-effective and competitive, and as provided for in other applicable national legislation
In selecting a service provider, the criteria listed in section 78 as well as any preference for categories of service providers, must be applied
Legislative Overview: Version 1 November 2003
MFMA: Supply Chain ManagementMFMA: Supply Chain Management
Applies to the selection of external mechanisms (other than another organ of state) for the provision of municipal services
Must be read with sections of the Act on the disposal of capital assets
Municipality and each municipal entity must have and implement a supply chain management policy which gives effect to the provisions of the Act
Legislative Overview: Version 1 November 2003
The supply chain management policy of a municipality or municipal entity must be fair, equitable, transparent, competitive and cost effective, comply with a prescribed regulatory framework and provide for specified matters
Councillors may not be members of tender committees
MFMA: Supply Chain ManagementMFMA: Supply Chain Management
Legislative Overview: Version 1 November 2003
After selecting a prospective service provider, the municipality must negotiate the final SDA on the basis of the bidding documents, any addenda, amendments or variations provided to all the bidders
The community to be consulted and informed on contents of the agreement
Must enter into such an agreement on terms and conditions specified in the bidding documents, as modified or supplemented in the negotiations (modifications may not compromise the integrity of the bidding process)
Negotiating the SDA with the Negotiating the SDA with the Preferred Bidder/sPreferred Bidder/s
Legislative Overview: Version 1 November 2003
The SDA must include matters provided for in S81 of MSA and regulations made under S19 of Water Services Act
If municipality and selected service provider fail to reach agreement within a reasonable time, the municipality may negotiate with the next-ranked service provider
Negotiating the SDA with Negotiating the SDA with Preferred Bidder/sPreferred Bidder/s
Legislative Overview: Version 1 November 2003
On concluding the SDA, the municipality must: make copies of the agreement available at its
offices for public inspection
give notice in the media of:
particulars of service that will be provided under the agreement
the name of the selected service provider; and
the place and the period for which copies of the SDA are available for public inspection
Negotiating the SDA with Negotiating the SDA with Preferred Bidder/sPreferred Bidder/s
Legislative Overview: Version 1 November 2003
Contracts having future Contracts having future budgetary implications (more budgetary implications (more than 2 years)than 2 years)
A municipality may enter into a contract which will impose financial obligations on the municipality beyond a budget year
If this is the case, it may only do so if, prior to the meeting of the council at which the contract is to be approved, it has…
Legislative Overview: Version 1 November 2003
made the draft contract and information statement summarising the municipality’s obligations public
invited the local community and other interested persons to submit comments or representations in respect of the proposed contract
solicited the views and recommendations of the National Treasury, DPLG and DWAF if the contract involves the provision of water
Contracts having future Contracts having future budgetary implications (cont.)budgetary implications (cont.)
Legislative Overview: Version 1 November 2003
and taken into account— the municipality’s projected financial obligations in terms
of the proposed contract for each financial year covered by the contract;
the impact of those financial obligations on the municipality’s future municipal tariffs and revenue;
any comments or representations on the proposed contract received from the local community and other interested persons; and
any written views and recommendations on the proposed contract by the NT, DPLG and DWAF
Contracts having future Contracts having future budgetary implications (cont.)budgetary implications (cont.)
Legislative Overview: Version 1 November 2003
and has adopted a resolution in which —
it determines that the municipality will secure a significant capital investment or will derive a significant financial economic or financial benefit from the contract;
it approves the entire contract exactly as it is to be executed; and
it authorises the municipal manager to sign the contract on behalf of the municipality
Contracts having future Contracts having future budgetary implications (cont.)budgetary implications (cont.)
Legislative Overview: Version 1 November 2003
The process does not apply to -
contracts for long-term debt regulated elsewhere in MFMB
employment contracts
contracts for categories of goods as may be prescribed
Contracts having future Contracts having future budgetary implicationsbudgetary implications
Legislative Overview: Version 1 November 2003
The process also does not apply to - Contracts in terms of which the financial obligation
on the municipality is below - a prescribed value; or
a prescribed percentage
of the municipality’s approved budget for the year in which the contract is concluded
Contracts having future Contracts having future budgetary implicationsbudgetary implications
Thank You