Municipal Finance Management Bill: deliberations

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Finance Standing Committee

14 October 2002
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FINANCE PORTFOLIO COMMITTEE

FINANCE PORTFOLIO COMMITTEE
15 October 2002
MUNICIPAL FINANCE MANAGEMENT BILL: DELIBERATIONS

Chairperson
: Ms Hogan (ANC)

Relevant Documents:
Municipal Finance Management Bill: Draft of 13 September

SUMMARY
National Treasury provided the Committee with a redraft of Chapters 1-8 of the Municipal Finance Management Act and the Committee checked the amendments to the first four chapters.

MINUTES
Mr Momoniat, Mr Glasser and Mr Pillay represented the National Treasury.

Ms Hogan initiated a chapter-by-chapter analysis of the working draft from 13 September. She proposed leaving the definitions in Chapter 1 for a later stage, and that they focus only on the amendments.

Chapter 2:
Mr Dorfling (South African Local Government Association) wondered whether Clause 5(2) e(i) is not too prescriptive. Ms Taljaard (DP) echoed these sentiments.

The Chair believed that the words monitor and assess were not too prescriptive. She remarked upon Clause 6 that she felt it is a bit vague on the powers and role of MECs and local government ministers.

Chapter 3:
Mr Lekgoro (ANC) questioned the use of the word promptly. He wanted clarity on this.
Mr Pillay answered that this was meant to make sure that individuals or groups do not hold any money unduly. He added that daily might be a better word to use.
Ms Mabe (ANC) remarked that it is meant to stop officials from using money for their own interest.
Ms Hogan said that her understanding is that it meant that all money must be paid immediately.
Mr Lekgoro (ANC) added that promptly was too loose and that he would like to see a more defined time period.
The Chair agreed that this is a problem area that the Treasury must look at in its norms and standards.
Ms Taljaard drew attention to Clause 11(1)f. She questioned the words prescribed framework. Her understanding was that this clause was written to envisage every unforeseen problem and she wondered how that would be possible in a prescribed framework.
Ms Hogan could not see any problems with the wording used.
Mr Dorfling (SALGA) referred to Clause 8 and asked if it means that the city manager must authorise all transfers between accounts.
Mr Momoniat acknowledged that it is currently not clear enough that the municipal manager can delegate the duties to the chief financial officer only.
Mr Lekgoro asked about the concept of a primary bank account for the municipalities. He wanted to know the reasons for this.
Mr Momoniat answered that municipalities sometimes change banks for a variety of different reasons.
Ms Taljaard asked for clarity on the definition of basic services in Clause 13.
Mr Momoniat pointed out that this definition is consistent with the definition used in the Municipal Systems Act.

Chapter 4:
Mr Dorfling was of the opinion that a projection of cash flow, broken down per month would be impossible - as stipulated in Clause 17(c)
Mr Pillay told him that pilot studies on this issue are being done and that there are councils who are already doing this. He added that this was only a projection that is not necessarily going to be accurate.
Ms Hogan also emphasised that it is only a projection of cash flow.
Mr Dorfling argued that it would be very difficult to project more than 120 days before the start of the fiscal year.
Mr Hanekom (ANC) said that Mr Dorfling is referring to the difficulty of preparing a month-per-month breakdown. He did not see why it should be so difficult seeing that they are only projections.
The Chair emphasised that this is merely supplementary information for the budget.
Mr Dorfling added that he still has misgivings on the vote-for-vote breakdown.
Mr Pillay said that this practice would help with the credibility of budgets. He also mentioned that it could for instance be of use when overdraft issues are raised.
The Chairperson and Mr Dorfling wanted more clarity on Clause 21(2) as to what consult exactly means in this case and what the underlying principle is.
Mr Momoniat replied that this was not about the details of the budgets. These consultations are bilateral meetings and that they are not prescribing anything. The Treasury is trying to protect the municipalities by providing opportunities for consultation before the finalisation of the budget.
Ms Hogan wanted to know how Treasury is going to consult with 284 municipalities.

Mr Pillay said that the purpose of this clause is to "make a process" out of making a budget.
Ms Hogan stated that this intent is not clear in the wording.
Mr Momoniat said that they will look at the wording again.
Mr Powell (Department of Provincial & Local Government) asked the Treasury to be more specific about this as this is very important to his department.
Mr Dorfling questioned the way annual budgets would be publicised according to the Act. Section 22 states that printed copies will be available at all head and branch offices and libraries as well as on the municipality's website. He questioned the amount of paperwork this will include.
Mr Momoniat added that he would prefer to publish it just on the websites.
Mr Lekgoro felt strongly that this principle be upheld.
Mr Dorfling added that it would be more sensible to have a budget summary available in the library and municipal offices and the full version on the website.
Mr Momoniat concluded that libraries are a good idea because of easy public access and that he will look at these trivial changes.
Ms Taljaard questioned the use of the words must consider in Clause 23(1). She wondered whether this did not bind municipalities.
Ms Hogan replied that is not the case and that the meaning is clear.
Ms Taljaard asked about the legality of the term pending non-compliance in Clause 23D. She felt that the concept is absurd as a legal construct.
Mr Momoniat said that they would check up on it.
Ms Hogan wondered if Clause 23D(4) means that a budget cannot be challenged in court.
Mr Momoniat again said that they would check the wording.
Ms Taljaard asked for clarity on the words time provision other than section 16(1) in Clause 23D(2). She wanted to know what other time provisions there are.
Mr Momoniat answered that they would check up on it.
Mr Dorfling felt that Clause 23E 2(d) did not belong there. He wanted these decisions to be left to the discretion of the council.
Mr Momoniat said that it might be a good idea to allow for more flexibility.
Mr Lekgoro mentioned the possibility of a percentage ceiling for shifting between votes.
Mr Powell said that the council should have the power to change their budgets.
Ms Hogan felt that the councils owe the public to commit to their budgets. Many of the councils are spending very differently from their budgets.
Ms Taljaard agreed with Mr Lekgoro that a percentage ceiling is a good idea, but added that the exact percent is very important.
Mr Hanekom added that the ceiling could not be too high or too low. He also emphasised the difference between national and municipal budgets. Municipal budgets are more prone to volatile changes. Therefore flexibility is important for municipal councils.
Ms Taljaard asked about the prescribed formula in Clause 23F 2(b).
The Chairperson told her she thinks it is a prescribed percentage. She also enquired who authorises the unauthorised expenditure in Clause 23G.
Mr Momoniat told her that it is the council and not the mayor.
The Chair felt that there was some kind of investigative process missing in this clause.
Dr Woods (IFP) was of the opinion that they should look at research done on this subject. He mentioned that Naas du Plessis has done quite a lot of work on this subject.
The Chair agreed that this would be a good idea.

Meeting adjourned.

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