This article, part of a series covering the Public Procurement Act, discusses the delegation of law-making powers to the responsible Minister.
Municipal expenditure, financial management and procurement
Financial health and sustainability remain one of the foundation blocks for functioning municipalities. Without good financial management, municipalities are unable to fulfil their mandates and deliver uninterrupted services.
The self-review of procurement decisions by governmental institutions, such as municipalities, has again come under the spotlight in a recent Constitutional Court ruling involving the Greater Tzaneen Municipality.
The concept of decentralisation has been discussed widely in literature as a key approach for bringing development closer to the citizenry. The effective allocation and use of scarce resources underpins this concept through the promotion of popular participation and social accountability.
The long-awaited Public Procurement Bill (Bill 2023) will be introduced in Parliament for debate in the second quarter of 2023, after being in the making since 2014. A key question is whether the 2023 Bill in its current form is constitutional. Specifically, does the establishment and the powers assigned to the Central Procurement Office in the Bill encroach on the autonomy of municipalities? This question is likely to be subject of the vetting for constitutional compliance, currently being undertaken by the Office of the Chief State Law Advisor.
Increasing 4.4% to R34.9 billion in 2023/24, the budget of the National Department of Human Settlements serves as the primary means for government to achieve its goal of integrated, sustainable human settlements. The new budget allocates R14.9 billion for the Human Settlements Development Grant (HSDG), while the Urban Settlements Development Grant (USDG) increases to R8.15 billion and the ISUPG to R8.6 billion.
The case of Imvusa Trading 1581 BK v Oudtshoorn Municipality is about a monetary claim arising from a contract between the Oudtshoorn Local Municipality and Imvusa Trading 1581 (Imvusa). The Municipality contracted Imvusa to repair potholes on its behalf without following the requirements set out in the Constitution and the Municipal Finance Management Act of 2003 (MFMA). The Court held that concluding procurement contracts by deviating from legislated procurement requirements renders such contracts unlawful and therefore invalid.
In the space of one week in September, the country’s load shedding status sent any sniff of foreign investors scurrying for cover, and the City of Tshwane narrowly averted being plunged into complete darkness after settling its outstanding debt to Eskom of over R1,6bn. It joined the City of Johannesburg, Ekurhuleni, and a long list of smaller municipalities which continually roll over debt, and default on payment settlement plans until the threat of Doomsday. Pay up, or we throw the big switch.
The National Prosecuting Authority (NPA) must prosecute corruption at all levels of government. While much of the focus has been on the capture of national government and national state-owned enterprises (SOEs), there has also been widespread corruption in municipalities.
In Nelson Mandela Bay Metropolitan Municipality v Erastyle (Pty) Ltd, the Court had to decide whether Erastyle (Pty) Ltd (Erastyle, the first defendant of eight defendants) was lawfully appointed to provide a service to Nelson Mandela Bay Metropolitan Municipality (the Metro). Secondly, whether the payments received by Erastyle from the Metro amount to irregular expenditure in terms of section 32 of the Local Government: Municipal Finance Management Act (MFMA).
The Dullah Omar Institute (DOI) is one of 18 international partners of the LoGov project titled ‘Local Government and the Changing Urban-Rural Interplay’. The project seeks to establish an international and intersectoral training and research network to identify, and evaluate best-fit practices for local governments in order to address the changing urban-rural interplay and manage its impacts. It is funded by the European Commission as part of the EU-Rise Horizon 2020 Marie Skłodowska-Curie Actions (MSCA).
The School for Public Leadership at Stellenbosch University in partnership with the Hanns Seidel Foundation conducted a research study on the impact of the Covid-19 pandemic on municipal fiscal sustainability in the Western Cape (WC) province, which completed in April 2021. The local municipalities (LMs) in the sample included Stellenbosch, Drakenstein (large municipalities), Bergrivier, Hessequa (medium sized municipalities) and Swellendam, Kannaland and Laingsburg (small municipalities). This article aims to distil the key findings from that study.
This article explores the adequacy of the Local Government Equitable Share intergovernmental grant received annually by municipalities, in the main to fund the provision of basic services, as external cost pressures which lie outside the control of individual municipalities intensify, and revenue bases are eroded in the wake of the Covid-19 pandemic.
Year after year, the Auditor General exposes how too many municipalities incur significant amounts of fruitless and wasteful expenditure. The Municipal Finance Management Act of 2003 (MFMA) defines fruitless and wasteful expenditure as ‘expenditure that was made in vain and would have been avoided had reasonable care been exercised’.
Separating politics from administration is the cornerstone of the fight against corruption and maladministration in municipalities. When councillors meddle in the administration, and/or administrators interfere with politics, bad governance and, ultimately, service delivery failure is almost always the result.
On 29 March 2021, the Dullah Omar Institute convened a webinar on the financial impact of Covid-19 on district and local municipalities. The webinar was attended by close 80 participants, drawn from government, civil society, the private sector and academia. The theme was unpacked with Prof Tania Ajam, professor in Public Policy, Economics and Finance at the Stellenbosch School of Public Leadership and Dr Mkhululi Ncube, Programme Manager of the Local Government Unit at the Financial and Fiscal Commission. The discussion was moderated by Prof Jaap de Visser, Director of the Dullah Omar Institute. What follows is an overview of Prof Ajam’s presentation to the webinar.
Since the declaration of the state of national disaster by the Minister of Cooperative Government on 18 March 2020, and the subsequent announcement of a Lockdown by the President on 26 March, municipalities have implemented various measures in response to the COVID-19 pandemic. This article analyses some of the measures taken by eThekwini Metropolitan Municipality (Metro) more than 90 days into the Lockdown. While disaster management is a shared national and provincial government competence, municipalities play a crucial role during disasters in terms of their constitutional functions (listed under Schedule 4B and 5B) and their assigned functions (s99 and 126), such as housing.
The public has long put pressure on the government to curb the resource wastage at the local level. In a bid to contain this problem, on 7 June 2019, the Minister of Finance, Tito Mboweni, with the concurrence of the Minister of Cooperative Governance and Traditional Affairs (COGTA), gazetted the Municipal Cost Containment Regulations (the Regulations). The objective of these Regulations is to ensure that the resources of municipalities and municipal entities are used effectively, efficiently and economically. It is also hoped that these cost containment measures will eliminate the wastage of public resources on non-service delivery mandates.
Suppose a new municipal manager comes across a procurement contract that was awarded irregularly more than three months ago. Can he or she approach a court to have that contract set aside?
Unsolicited Bids in the Disposal of Municipal Immovable Property.
Section 14 of the Municipal Finance Management Act (MFMA) read with the Municipal Supply Chain Management Regulations issued in terms of the of the MMFA regulates the disposal of capital assets owned by municipalities.
Municipality's Share of the National Pie: New Grants, More Money in the Fight Against Poverty.
The Division of Revenue Bill 2007, introduced by the Minister of Finance, Trevor Manual, sets out the allocations local government will receive for the 2007/2008 financial year. The Bill not only determines local government's equitable share of revenue raised by the national government, but it also contains a number of innovations. The most important are the new conditional grants- the Neighbourhood Development Partnership grant and the Water Services Bulk Infrastructure grant.
Who Wants to be President When You Can be Mayor: Career Patterns of Local Government Politicians: The Case of Metropolitan Mayors.
Local Government is emerging as a strong third sphere of government. Within local government, metropolitan cities are coming out as powerful institutions. Meanwhile, the discussion on the role of provincial government's is raging. This article looks at the impact of the emergence of local government on career patterns of politicians.
Tying Municipal Manager's Pay to Performance.
Municipal managers are well paid-too well, it has sometimes been argued. Many wonder why the head public servants of local government should earn more than mayors, or in some cases even the President. The remuneration of managers became a hot issue in the run-up to the recent local government elections. the Department of Provincial and Government recently gazetted new regulations on the performance and remuneration of municipal managers.
Managing Expectations While Commiting to Improved Service.
The writing of the Buffalo City Service Charter was an iterative process that involved a cross-section of officials in the municipality. During the sessions, the measurability of the promises and pledges on quality was hotly debated. Officials agreed that in the case of some services, like water and sanitation, there are national standards with which they have to comply.
From the Courts: Extending Municipal Managers Contracts
The Change of government in the City of Cape Town Metropolitan Council has also seen a change in the office of the municipal manager. Although the decision of the Cape High Court in Mgoqi v City of Cape Town dealt with a number of issues, at the core of the dispute was whether the the outgoing mayor could have extended the contract of the then municipal manager, Wallace Mgoqi.
Salaries Scale Upwards For Mayors, Managers and Councillors.
National government recently gazetted new and bigger remuneration packages for municipal councillors. The proposal sees a big jump in salaries for all office-bearers, especially part-time councillors. However, some dangers lurk in the changes for rural councils and voters in poorer communities.
From the Courts: Settling Municipal Debts: Preference in the case of Insolvency.
In March 2006, the Supreme Court of Appeal handed down a decision that sets an important precedent in respect of the preference given to municipal debts in cases of insolvency, in terms of section 118 of the Municipal Systems Act.
State of the Municipalities: More Money, More Skills
In his 2006 State of the Nation Address on 3 February , President Thabo Mbeki focused on the troubles and goals of local government. While he noted that three quarters of South Africans approve of the government's service delivery efforts, only 45% believe that local government is performing well. The President then set out his plan to rescue local government.
Making Headliines.
A probe into performance bonuses in kwaZulu-Natal
Section 62 Appeals: A tender process.
Many people aggrieved by decisions made by municipalities have latched on to the fact that they have a right to appeal in terms of section 62 of the Municipal Systems Act. Municipalities have recently experienced a significant increase in the number of appeals lodged in terms of section 62. This has led to municipalities having to grapple with the parameters and practical implications of section 62. This article highlights a few difficulties in this regard.
The PPP Procurement Process.
The Public-Private Partnership procurement process overlaps in many respect with the recently published Supply Chain Management Regulations. The overlap occurs where a proposed transaction is both a PPP and one of the matters to which the SCM regulations apply. Although the focus in this article is not on the SCM regulations, any attempt to discuss the PPP procurement process separately from the SC, regulations would be incomplete.
Service Delivery Agreements: Renegotiations and Amendments.
Contract renegotiations and amendments are a relatively common feature of long-term service delivery agreements and public-private partnerships. The legislature has recognised this in existing and newly promulgated legislation which clearly aims to limit risks associated with contract amendments.
The New Municipal PPP Regulations.
Regulations governing public/private partnerships in the local government sphere came into effect on 1 April 2005. Section 120 of the Municipal Finance Management Act also regulates PPP's and the new PPP regulations have the effect of elaborating or expanding on some of the concepts introduced in section 120.
Outsourcing Municipal Services and Skills Transfer.
The Local Government Project conducted a survey of a wide range of current South African service delivery contracts to see how their actual contract terms assist in achieving the outsourcing objectives and how they provide for the common dangers. The objective was to get a general idea of the these service delivery contracts entail. This article focuses on what they contain on the issue of skills transfer,.
Municipal Debts Are Rising.
In a recent report to Parliament, the Auditor-General, Shauket Fakie questioned the ability of South African municipalities to continue operating as a going concern. He commented that municipalities mounting levels of uncollected debt relative to their income was a cause for concern. The total municipal debt countrywide is more than R32 Billion and it is getting worse each year because of non-payment.
From the Courts: Councillors and Contracts With Their Municipality.
In the case of Mpakathi v Kgotso Development and Others SCA, Case No. 334/03, the Court had to consider whether a property attached by a municipality may be sold in execution to a close corporation if one of the members of that close corporation is a municipal councillor.
Supply Chain Management and Public-Private Partnership Provisions.
Chapter 11 of the Municipal Finance Management Act came into force on 1 July 2004. This chapter contains provisions that strictly regulate the acquiring of goods and services and the disposal of municipal assets. A sound knowledge and understanding of its provisions is therefore an essential requirement for all municipalities and municipal entities.
Supply Chain Management under the Municipal Finance Management Act
Municipalities and municipal entities will have to read carefully when acquiring goods or services or when disposing of goods when the Municipal Finance Management Act comes into operation.
A New Role For Provincial Treasuries
The Municipal Finance Management Act gives provincial treasuries an important role in supervising municipalities. Whereas the provincial Departments of Local Government were responsible in the past for most aspects of local government, including monitoring municipalities financial well-being, provincial treasuries will now perform important functions with regard to monitoring of, and intervening in municipalities.
The State of Municipal Budgets-Intergovernmental Fiscal Review for 2003.
The Minister of Finance released the 2003 intergovernmental Fiscal Review on 8 April. It provides a wealth of information on municipal budgets for the 2002/03 financial year.
Municipal Services-Public-Partnerships as External Delivery Mechanism.
The legislature provides two options to a municipality when choosing an external service delivery mechanism after completion of the assessment process prescribed in section 78 of the Municipal System Act.
Province not Liable for Municipal Debts.
MEC for Local Government, Mpumalanga v IMATU 2002 (1) SA 76 (SCA)
From the Courts: Guarding Against Disruption of Local Government
MEC for Local Government and Planning of the Western Cape v Paarl Poultry Enterprises CC Rosendal Poultry Farm 2002 (2) BCLR 133 (CC)
The Policy In The Numbers.
There is more to the 2011 Local Government Budgets and Expenditure Review than numbers. The review tells a story about the policy behind the numbers. It lays down the policy line, sends clear signals about policy shifts on the way, issues warnings, educates us, and sometimes brings out the big stick or applies the brakes.
The National Treasury 2011 Local Government Review.
It is the most rigorous analysis of local government published by government. The 2011 Local Government Budgets and Expenditure Review, released in September, is the National Treasury’s analysis of long-term trends in local government finances and performance. We will have a close look at the wealth of information in this report, in this and forthcoming issues of the Bulletin. We begin with a general introduction to the document, focusing on its purpose and importance as a barometer of local government.
Are We On Track For A Clean Audit in 2014?
On 16 July 2009 the Department of Cooperative Governance and Traditional Affairs (COGTA) launched an ambitious project dubbed ‘Operation Clean Audit 2014’. This operation is part of a bigger project called ‘Operation Clean Up’, which has three other components: Clean Cities and Towns, Debt Collection, and Public Mobilisation and Revenue Enhancement.
Bid Amendments: The Disqualification of Unresponsive Bids.
The court in this case confirmed that it was unfair for an organ of state to afford one bidder an opportunity to amend its bid after the close of tenders and before evaluation and not allow other bidders to do the same. This is particularly the case where an organ of state indicates in the bid documents that non-compliant bids will be disqualified.
New Preferential Procurement Regulations Released.
After much anticipation and a lengthy process of review, the new regulations under the Preferential Procurement Policy Framework Act of 2000 (Procurement Act ) have finally been released. The Preferential Procurement Regulations 2011 will only take effect on 7 December 2011, but clearly hold implications for the way in which municipalities procure goods and services. In this article, the most essential aspects of the regulations are highlighted.
The Tender Process and Blacklisted Suppliers.
The courts view the blacklisting of suppliers by the National Treasury in a very serious light and confirm that organs of state are allowed to cancel contracts concluded with suppliers who, when tendering for a contract, knowingly and wrongfully fail to disclose their inclusion on the National Treasury’s database as companies or persons prohibited from doing business with the public sector.
Limitations of Section 62 Appeal Procedure.
Section 62 of the Municipal Systems Act provides that any person ‘whose rights are affected by a decision taken by a political structure, political office bearer, councillor or staff memberof a municipality in terms of a power or duty delegated or sub-delegated by a delegating authority to the political structure, political office bearer, councillor or staff member, may appeal against that decision by giving written notice of the appeal and reasons to themunicipal manager within 21 days of the date of the notification of the decision.
From the Courts: The cart before the horse? An award of tender contracts before legal compliance?
Diggers Development (Pty) Ltd v City of Matlosana and Isago@N12 (Pty) Ltd (47201/09) [2010] ZAGPPHC 15.
The Budget Vote for Local Government.
On 22 April 2010, the Minister for CooperativeGovernance and Traditional Affairs, Sicelo Shiceka, presented Parliament with his department’s budget vote for the 2010/11 financial year. The significance of this particular budget vote is that it is the first for CoGTA since the launch of the Local Government Turnaround Strategy (LGTAS) in December 2009.
Different Hats Worn by the Municipal Manager in the Tender/Bid Process.
In a recent Supreme Court of Appeal decision, CC Groenewald v M5 Developments, the court held that the unsuccessful bidders had a right, under section 62 of the Municipal Systems Act, to appeal against the municipality’s decision to award a tender. The court cautioned, however, that even though an appeal under this provision was a ‘wide appeal’, involving a rehearing of the issues, it did not allow the appeal authority to revisit all tenders and to award the tender to a bidder who had not appealed or, as in this case, whose appeal was out of time.
The Role and Function of Bid Committees.
In recent months the courts have stressed the importance of the roles and functions of these committees. Contracts have been set aside because bid committees were not properly constituted, proper procedures were not followed at meetings or bids were evaluated based on specifications different from those initially advertised. With reference to the case law, it is particularly important for municipalities to comply with the following rules, as failing to do so leads to costly litigation.
From the Courts: The Municipal Manager Supervisory Role Over Bid Committees.
Bid committees can be described as the engine rooms that give effect to a municipalities’ supply chain management policy. The work of these committees is integral to ensuring that procurement processes not only comply with the regulatory framework governing supply chain management, but also result in fair, equitable, transparent and cost effective procurement of goods and services. The three bid committees that are responsible for driving procurement processes include the Bid Specification Committee (BSC), Bid Evaluation Committee (BEC) and Bid Adjudication Committee (BAC)
When Can Bidders With a Bad Track Record Be Rejected?
There are a number of legislative grounds upon which a municipal manager may reject a tender bid. One such ground is provided in the Municipal Supply Chain Management Regulations. Regulation 38(1) provides that a municipality’s supply chain management policy must provide measures for combating abuse of the supply chain management system. Furthermore, it must enable the municipal manager to reject the bid of a bidder who, during the past five years, has failed to perform satisfactorily on a previous contract with the municipality or municipal entity or any other organ of state. This applies only if written notice has been given to that bidder that its performance was unsatisfactory.
The Financial Health of Municipalities.
In the 2008 Local Government Budgets and Expenditure Review, the National Treasury analyses how municipalities have been funded since 2003/2004 and how they will be funded until 2009/2010. It does the same for the expenditure patterns of municipalities. This article highlights just a few important issues from a comprehensive review.
From the Courts: Who Excludes Bidders From Future Contracts?
The duty to create and maintain a sound supply chain management system is an essential component of the good governance of any municipality. While the Municipal Finance Management Act clearly outlines the type of relationship that should exist between the municipality and those bidding to supply services, it is difficult at times to determine how acts of bribery, for example should be dealt with and the appropriate procedures to be followed when these matters.
Legal Brief
Who is liable to pay the municipal accounts of defaulting tenants?
Financial Arrangements for the New Municipalities: Guidelines for the Transitional Phase
The establishment of new municipalities is on our doorstep and it is crucial that certain financial and other related issues be addressed as a matter of extreme of urgency.
From the Courts: Access to Tender Documents- Water Engineering and Construction (Pty) Ltd v Lekoa Vaal Metropolitan Council 1999 (9) BCLR 1052 (W)
Access to tender documents