Municipal Finance Management Bill: Chapters 10 & 15

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Finance Standing Committee

10 April 2003
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

11 April 2003

Chairperson: Ms B Hogan (ANC) [Finance Portfolio Committee]

Documents handed out
Draft Municipal Finance Management Bill - 31 March 2003
Proposed Amendments to Municipal Systems Act

The following issues were raised in Chapter 15: the list of offences for financial management in Clause 165 was consolidated, whether Clause 166 conflicts with any financial management provisions in the Companies Act and, if so, which law is supreme. The offences in Clause 167 were reworked, as well as who and how it would be decided whether disciplinary or criminal proceedings would be followed in Clauses 59 and 60. The word "ensure" will be replaced with "take all reasonable steps to ensure" throughout the Bill when dealing with the accounting officer, because "ensure" by itself sets too high a standard. Clause 62 was tailored down.

The following matters were raised in Clause 10: clarity on the enforcement of rights and obligations by the second municipality to the original contract in Clause 82, the repeal of old ordinances and regulations that trump provision of the Bill and thereby bedeviling its implementation. In Clause 84 clarity was sought on the meaning and scope of "in public", and in Clause 85 the Committee considered whether municipal councilors and designated observers should sit in on meetings of the tender committee.

The Chair acknowledged the amount of work Mr Dorfling, South African Local Government Association (SALGA) Councillor, has put into this Bill and thanked him for the effort. The Committee Researcher has to liaise with the Office of the Auditor General on the issues in the Bill that are still of concern before its meeting with this Committee on Tuesday 15 April. The three outstanding issues are:
- Chapter 15 dealing with Financial Mismanagement,
- Chapter 10 on Municipal Supply Chain Management.
- Municipal Entities, which has now been removed from the Bill and placed in the amendment to the Municipal Systems Act (see document).

Mr Ismail Momoniat (Deputy Director-General: Intergovernmental Relations: Treasury) stated that the Committee also has to look at the definitions clause, as well as Clauses 31, 39 and 40 relating to bulk service delivery.

Mr Momoniat noted that this chapter can be divided into two parts: disciplinary proceedings and criminal proceedings.

Part 1: Disciplinary proceedings
Clause 165: Financial misconduct by municipal officials
Mr Momoniat stated that Clause 165(1)(a) lists all the transgressions Members wanted to be included in this provision. This provision is too extensive and the phrase "willfully or negligently fails to comply with the Act in general" that is currently contained in the Public Finance Management Act (PFMA) should instead be used. Also, it is only when criminal proceedings are dealt with in Clause 167 that all those provisions listed in Clause 165(1)(a) are then included.

Adv Gerrit Grove, Legal Drafter: Treasury, stated that Clause 165(1)(a) implies that a person can only be subject to disciplinary proceedings for the offences listed in this clause. It therefore suggests that the person could even deliberately ignore the legislation and escape criminal liability.

The Chair agreed with Adv Grove and Mr Momoniat. Would Clauses 166(3) and 165(4) be retained?

Mr Momoniat agreed, and stated that Clauses 165(1)(b) and (c) will also be retained. The phrase "to the provincial and national government" has to be inserted after "to" in Clause 165(1)(c)(i), because those spheres of government have to be included as well. Clause 165 (4) would remain as is.

The Chair suggested that Clause 165(2) cannot remain, because it restricts the CEO to only Clauses 77 and 79.

Adv Grove agreed. Clause 165(2)(a) should be as broadly framed as the new proposed Clause 165(1)(a). Clauses 165(2)(b) -(d) would then remain as is.

The Chair proposed that Clause 165(1)(c) be included in Clause 165(2) as well.

Mr Dorfling agreed. He stated that most of the accounting and reporting functions would be done by the Chief Financial Officer in any event.

Adv Grove contended that this is covered under Clause 165(2)(b), because the reporting function is delegated to the CFO. The most serious penalty for failing to report properly is dismissal.

The Chair agreed. She noted that the Committee agreed that Clauses 165(3) and (4) would remain as is.

Clause 166: Financial misconduct by accounting officers and officials of municipal entities
Mr M Tarr (ANC) [Finance Portfolio Committee] asked whether any of the provisions dealing with municipal entities would conflict with the Companies Act.

Adv Grove replied that he doubts whether there is any conflict. Clause 166 is much more specific as it focuses exclusively on the accounting officer, not on the Board of Directors. The Board of Directors would be dealt with by the Companies Act. Should any conflict occur, the Bill would prevail.

Ms R Taljaard (DA) [Finance Portfolio Committee] stated that she is not sure if it is at all desirable for this Bill to override the Companies Act. Furthermore, should this be the case, she doubts whether the Bill deals as sufficiently with the accounting officer as the Companies Act does.

Mr Momoniat noted that Treasury has met with Mr Mervin King, as requested by this Committee, on the appropriateness of the Companies Act in dealing with municipal entities. It was found that the Companies Act does not in fact sufficiently cater for municipal entities. For this reason the application of the proposed Clause 166 goes beyond private companies alone.

The Chair stated that the Committee has already canvassed this issue. It is true. The report of the discussion between Mr Momoniat and Mr King on the corporate governance issues involving municipal entities is still awaited. She proposed that any further discussions on the financial misconduct of municipal entities be postponed until the Committee discusses municipal entities themselves, as well as the applicability of the Companies Act. Clause 166 therefore has to be revisited.

Part 2: Criminal proceedings
Clause 167: Offences
Adv Grove stated that here the Bill has to be specific and identify those provisions that are really serious. A breach or failure to comply with any of these serious provisions must be made a criminal offence. The provisions listed in Clause 167(1)(a) are those offences that the Committee has already identified:

Clause 59: General financial management functions
The Chair stated that these provisions are really the hallmarks of general financial management of an accounting officer. She asked Adv Grove to comment on whether these grounds are far too vague for a prosecution to be pinned on it.

Adv Grove responded that he thinks the grounds are rather explicit. The clauses state that the breach or failure to comply with these provisions must be either deliberate or grossly negligent, and it is not just any breach that would qualify here.

Mr Momoniat proposed that "section 59(2)" in Clause 167(1) should be replaced with "section 59(3)". The reason is that "section 59(2)" is only a policy matter, and the accounting officer cannot be held criminally liable if a policy matter has not been implemented.

Adv Grove agreed that only "section 59(1)" should be referred to.

Ms Taljaard stated that there are some aspects in Clause 59 that should trigger disciplinary proceedings "before we go into straight criminal conduct". There is currently no "grid" for categorising disciplinary and criminal offences. The legislation is not clear enough, and this will create uncertainty for the officials.

Dr Petra Bouwer, Director: Legal Services in the Department of Provincial and Local Government (DPLG), replied that it is not uncommon in labour practice to provide for the same act to be dealt with both via disciplinary procedures and criminal proceedings. In the public service, for example, the Public Service Bargaining Chamber prescribes that these are two parallel processes that have to run simultaneously.

Mr Dorfling stated that the practice in municipalities is that when the disciplinary procedure has determined that the accounting officer has been "grossly negligent", the matter would then be handed over to the South African Police Service (SAPS) for the criminal investigation.

Adv Grove stated that the "grossly negligent" test for criminal proceedings in Clause 167 is very strong, and is close to recklessness.

The Chair stated that her concern is that provisions cannot be too specific. This would allow persons who have committed a similar act that has not been specified to escape legal sanction. There should instead be a general provision requiring transparent systems of financial and risk management and internal controls.

Adv Grove stated that he is more or less comfortable with all these provisions, but he has reservations with Clause 59. Clause 59 should be more specific. He proposed that only Clauses 59(1)(b), (c) and (d) should be retained.

The Chair agreed, because "effective, efficient, economical and transparent" in Clause 59(1)(a) is not measurable.

Mr M Lekgoro (ANC) [Finance Portfolio Committee] asked what discretion the authorities have to choose to follow either disciplinary or criminal proceedings, if there is this parallel process.

Dr Bouwer replied that in labour practice it is actually desirable that the two processes run parallel to each other.

Mr Momoniat proposed that the parallel model be retained. The provisions in the Bill should only state that the accounting officer can only take disciplinary measures, and lay charges. This would allow others such as the Attorney General to lay criminal charges with SAPS, if the accounting officer does not.

Mr Lekgoro stated that the problem is that if management has the discretion to impose either disciplinary or criminal proceedings, there is the risk that it could choose different approaches for identical offences.

Mr Momoniat responded that this is a problem generally, and whether this provision is retained or not will not change the problem. Even the courts may no punish similar crimes in a similar way. Either way, the provision does put proper mechanisms in place. For example, if criminal sanctions are imposed, there will almost always be disciplinary measures as well. If disciplinary charges are laid there will sometimes be a discretion to also institute criminal charges. Even if criminal charges are not pursued, all these matters are disclosed in the annual report which has to be tabled to Parliament.

Dr Bouwer proposed that Clause 59(1)(e) be retained. The PFMA currently provides that an accounting officer can avoid liability by acting against the official who has committed the offence. Thus if an accounting officer does not "take effective and appropriate disciplinary steps" which may include opening a criminal case, s/he should be held liable.

The Chair agreed.

Adv Grove stated that Clause 59(1)(e) is too harsh on the accounting officer. It should include "who deliberately or negligently" after the word "who". As it currently stands the accounting officer would be liable for a very minor contravention by any official. The words "contravenes", "commits" and "makes or permits" in Clauses 59(e)(i)-(iii) would then have to change to the past tense.

The Chair agreed, and noted that Clause 59(1)(a) and (2) will be removed. Clause 59(3) will also be excluded due to vagueness.

Clause 60: Asset and liability management
Ms Taljaard asked for the reason informing the decision to immediately categorise certain acts in this clause as triggering criminal proceedings in the "parallel approach". There are certain acts in Clause 60 that could also be dealt with via disciplinary proceedings.

Mr Momoniat replied that Clause 60(2) is a huge problem in the public sector, as assets are really not being looked after. National Treasury feels so strongly about this that it is prepared to up the stakes and impose criminal liability for it.

The Chair asked whether municipalities already have a "generally recognised accounting practice" in place.

Mr Momoniat responded that municipalities do have a more accrual-type system in place. Perhaps Clause 60(2)(b) should be excluded. The important areas are Clauses 60(2)(a) and (c).

The Chair agreed, because Clause 60(2)(b) is covered in Clause 60(2)(b).

Ms Taljaard proposed that the same stringent requirements have to be placed on accounting officers in provincial and national structures. It is unfair that only local government officials are held to such high account.

Clause 61: Revenue management
Ms Taljaard proposed that the terms "proper" and "promptly" in Clause 61(2)(a) and (d), respectively, are too broad to constitute an offence.

Mr Dorfling agreed that this is a problem. Yet Clauses 61(2)(a) and (d) are the lifeblood of municipalities, and are vital for municipalities to get off the ground. This has to be ensured.

Dr P Rabie (DA) [Finance Portfolio Committee] stated that it was decided during the discussion on the untenable nature of the current municipal revenue collection systems that a provision like Clause 61(2)(a) would have to be introduced. There is no other option. The current situation has to be rectified.

Mr Momoniat proposed that "proper" be replaced with "effective"

The Chair agreed.

Adv Grove stated that the word "ensure" is used throughout the Bill. It places a very strong responsibility on the accounting officer. It should instead be qualified by inserting "take all reasonable steps to ensure" throughout the Bill.

The Chair noted that Members agreed. This strong Draconian demand placed on accounting officers to do things irrespective of circumstance has to be corrected. She noted that Members agreed that Clauses 61(2)(a) and (d) have to be included, as amended.

Clause 62: Expenditure management
The Chair stated that "proper" has to be removed from Clause 62(2)(a). It does not add much value.

Mr Momoniat proposed that "proper" be replaced with "effective".

The Chair agreed.

Mr Dorfling stated that the 30 day period in Clause 62(2)(e) is problematic. Local government is simply not receiving its money quickly enough from provincial and national government.

The Chair noted that Members agreed that Clause 62(2)(e) must be removed, because failure to pay in "30 days" cannot be a basis for criminal liability.

Mr Momoniat proposed that Clause 62(2)(f) must include "audit fees, medical aid, Unemployment Insurance Fund and other statutory commitments".

The Chair agreed.

Mr Dorfling stated that Clause 62(2)(g) is also problematic because it is too general a statement.

Mr Momoniat agreed that Clause 62(2)(g) be removed. Clause 62(2)(h) can also be deleted, because the Chapter 10 on Municipal Supply Chain Management does make this a criminal offence.

The Chair agreed that Clauses 62(2)(g) and (h) have to be deleted.

Mr Momoniat proposed that Clauses 61(2)(e), (f) and (h) be reinserted to be symmetrical with Clause 62(2).

Ms Taljaard replied that the inclusion of specific provisions in Clause 167(1) creates the impression that the offence would automatically be immediately catapulted into criminal proceedings without engaging the disciplinary procedure. This is a problem.

The Chair stated that this is precisely what the Bill is saying. Criminal sanctions have to imposed on those officials who have let municipalities go into rack and ruin for grossly negligent reasons, by not setting up effective revenue or expenditure control systems. They have to face the music.

Ms Taljaard maintained that the broadening of the provisions by Mr Momoniat's proposal of reinstating Clauses 61(2)(e), (f) and (h) is problematic. It would be desirable to have the minimalist approach in Clause 61 without this extension, coupled with the reasonable management test indicated earlier by Adv Grove. This formulation must then be replicated in Clause 62(2), by limiting Clause 62(2) to Clause 62(2)(a) alone. Clauses 62(2)(b)-(i) then have to be deleted, because they are all merely detailed expositions of the generic statement in Clause 62(2)(a).

The Chair noted that Members agreed that Clause 62(2)(a)-d) would be retained.

Mr Dorfling stated that it would be very difficult to provide the reports required in Clause 61(2)(h) on a weekly basis.

Mr Momoniat stated that Mr Dorfling is missing the point. Clause 61(2)(h) does not require reports to be submitted on a weekly basis. Instead, it only requires that all the revenue received by the municipality is reconciled on a weekly basis. All this seeks to ensure is that all the funds due to the municipality are actually in, and are registered in its bank account.

Mr Dorfling stated that this will only work if the National Traffic Information System (NATIS) provides for this reconciliation. The problem is that it does not.

The Chair stated that this concern would be resolved by the inclusion of "take all reasonable steps to ensure", as proposed earlier by Adv Grove. This would absolve the municipality when it cannot reach the stated requirements for reasons beyond its control.

Mr Dorfling proposed that Clause 61(2)(c) should also then be included, because it is the lifeblood of municipalities.

The Chair agreed. The specifics for criminal liability from Clause 63 onwards are not needed. Instead only the general provisions for criminal liability in Clauses 59-63 has to be retained.

Dr Bouwer proposed that the deciding factor between the criminal or disciplinary route is whether influence outside the organisation is desired. If the answer is yes, then it would probably be a criminal matter.

The Chair stated that this is a useful yardstick. She proposed that a smaller working group be setup to look at the issue of financial management and the criminal sanctions, to expedite proceedings. She noted that the Committee agreed.

Adv Grove explained that the first part of the chapter essentially deals with the procurement of goods and services by municipalities. The second part deals with the disposal of assets which are no longer required. Thirdly, the appointment of an external, private sector service provider via a bidding process prescribed by the Local Government: Municipal Systems Act of 2000 (Systems Act). The fourth is the farming out of an aspect of the service for non payments of accounts etc., to a private sector entity.

Ms Taljaard sough clarity on "aspect of the service" in the last portion of the chapter.

Dr Bouwer responded that the new definition of "municipal service" enacted during 2001 is "a service that a municipality, in terms of its powers and functions, provides or may provide to, or for the benefit of the local community". A distinction has to be drawn between the provision of a service to the local community or for the benefit of the local community, and where the service is actually provided for the administration of the municipality itself.

This would best be illustrated by the following example. The municipality puts out a tender for the construction of a sewerage farm, and a service provider is then contracted to actually run it for the benefit of the community. The first portion would be the procurement approach in the Chapter 10 of the Bill. The other would be the Chapter 8 process in the Systems Act.

Clause 82: Application of Chapter
Mr Momoniat stated the use of "contracts" in the procurement of goods and services in Clause 82(1)(a)(i) has to deleted. He proposed that "contracts for" be removed from Clause 82(1)(a) and placed at the beginning of Clause 82(1)(a)(ii).

Clause 82(2) allows a municipality to "piggy-back" on other contracts. The regulations will require this to be conducted in accordance with some prescribed framework. Also, Sub clause (c) has to be inserted to require the approval by the municipal council for the bypassing of the tender process by "piggy-backing".

Ms Taljaard asked how the municipality doing the "piggy-backing" would exercise its rights in terms of that arrangement, because the contract exists only between the service provider and the other municipality. This could possibly become a very complex and potentially uncertain arrangement.

Mr Momoniat responded that a few clauses have to be inserted to cater for this. The first is to ensure that the first municipal council agrees to the "piggy-backing" of the second. Secondly, a contract is probably needed between the two municipalities prescribing how the rights will be exercised. All these details should not be spelt out in this legislation, but should instead be left to prescription.

Dr Bouwer stated that he does not understand the problem being raised. The ordinary contract law principle of res inter alius acta provides that one cannot bind a person who is not party to your contract. However, it is possible to have a two-way contractual relationship. This happens very frequently. It would thus be possible to enter into another contractual relationship with any other party, and this would not give the third party any rights against one of the initial contractees. An exception to this rule would be if that contractee is actually party to the contract himself, another would be the case of a contract for the benefit of a third party. But where liabilities and rights are involved, the res inter alius acta principle applies. Thus ordinary legal principles already cater for this situation.

The Chair stated that the problem raised by Ms Taljaard is how exactly the municipality that is "piggy-backing" would manage its contract with the service provider.

Dr Bouwer replied that the only way to do this legally is for that municipality to be drawn into the original contract. Thus the original contract between the first municipality and the service provider would have to be amended.

Mr Matthew Glasser, Treasury Consultant, stated that in the United Stated, municipalities would collaboratively establish a procurement system, and each municipality would put out a request for tenders. The procurement documents would include the provision that "the successful offeror must hold him-/herself able and ready to enter into a contract with each and every municipality that wants to take up the offer". This would require a simple contract in response to the tender between each of the purchasers. It is thus not necessary to delve into the assignment of rights and responsibilities.

Mr Dorfling informed Members that the Australian jurisdiction has adopted a different approach. Its Organised Local Government (OLG) goes out on central tender, and the municipalities then buy into that central tender process. A small commission will then be granted to OLG. The problem with the South African system is that each and every municipality will have to go out on separate tender for the same product, instead of employing this much more efficient and cost-effective central tender process.

Ms Jackie Manche, DPLG Deputy Director-General: Institutional Reform and Support, stated that this example does not work in South Africa because South African OLG does not currently have those kinds of powers. Yet this does not prevent a group of municipalities from doing what has been described. Thus in a sense a group of municipalities can engage in this arrangement without using a middle person, in this case SALGA. The municipalities would however have to design a contract that adequately caters for their needs and interests.

Mr Dorfling respectfully disagreed. He stated that each municipality would have to go out on separate tender. They cannot "piggy-back" as has been described. This is reflected in the current regulations regarding the municipal tendering process.

The Chair stated that the issue of whether the old regulations and ordinances have precedence continues to be a problem, and it will bedevil the whole implementation of the Bill.

Dr Bouwer stated that these ordinances are kept in place by Section 10G of the Local Government Transition Act 209 of 1993 (LGTA). The Local Government Municipal Structures Amendment Act 33 of 2000 amends Section 93 of the Structures Act, and reads as follows:

Any regulation made under Section 12 of the LGTA and which relates to Section 10G of that Act, read with the necessary changes, apply to such a municipality.

This means that those ordinances can be removed by simply repealing Section 10G in the manner being proposed.

Mr Dorfling stated that SALGA has a huge problem with a piece of Gauteng provincial legislation called the Rationalisation of Local Government Affairs Act. Its provisions are not in line with the Bill, and must be sorted out. Furthermore, SALGA was not even consulted in the legislative process of that Act.

Mr Momoniat replied that the fact of the matter is that provinces have a concurrent and, in some cases, an exclusive power over many local government functions. If it relates to issues in Schedule 4 of the Constitution, then the Bill overrides provincial legislation. He is not sure whether the Bill can do much more than this, because this is a political issue that has to be taken up.

Adv Grove stated that if these provisions in the Bill deal with National Treasury norms and standards, it would fall outside the scope of provincial competence. If the ordinances referred to are also National Treasury norms and standards, then Parliament can also repeal those without amending the Constitution.

Dr Bouwer informed Members that DPLG has engaged in a process of "cleaning up its lawbooks". It has prepared draft repeal ordinances for all nine provinces, and these were presented to the officials last week. There will also be a political process to get the "buy-in" of the MEC's, so that they can pass it through their legislatures. The problem is that municipalities themselves are not creating their own financial management systems, but are instead relying on the old ordinances to do this.

The Chair asked Mr Dorfling to confer with Dr Bouwer on this issue, and to report back to the Committee. In fact, copies of this Gauteng legislation have to be made available.

Clause 83: Supply chain management policy and system
Mr Momoniat stated that "contracts" has to be replaced with "goods and services".

Adv Grove proposed that the words "and system" can be removed from both the heading and the body of the provision. In fact, the phrase "and system" should removed from the entire chapter.

The Chair noted that Members agreed.

Clause 84: Supply chain management policy and system to comply with prescribed framework
Mr Momoniat any reference to "municipal chain management" in the clause has to be replaced with "supply chain management". The word "of" has to be inserted after "barring" in Clause 84(1)(j).

Ms Taljaard asked for clarity on the scope of "in public" in Clause 84(1)(f).

Mr Momoniat stated that this aspect was included in response to the horrendous stories in the bidding process related by Mr Dorfling. In fact, any tampering with bids should even be criminalised.

Mr Dorfling agreed that this is the worst part where most of the irregularities take place. A contract tender register has to be put in place in the municipality to record this, and it has to be signed by each individual tenderor present at the opening of the tender document. The public has to be present when the tender document is opened.

Adv Grove stated that the intention is not to provide the framework in this clause. Instead it enables the framework to be prescribed in the regulations. This merely indicates the broad framework of the regulations.

Ms Taljaard asked what exactly would constitute "in public".

The Chair stated that this issue is not being resolved and she will have to rule on the matter. The word "transparent" be inserted before "procedures" in Clause 84(1)(f), and "in the presence of the tenderors or interested parties" must be added after "public". What exactly is meant by "in public" must then be spelt out in the regulations.

Ms Taljaard proposed that the invalidation in Clause 84(1)(l) must be secured prior to the contract.

Mr Momoni replied that the intention is to provide this degree of detail in the regulations.

The Chair agreed that the provision should remain as is, because invalidation could occur at any stage of the procurement process. All these circumstances cannot be spelt out in the legislation.

Clause 85: Approval of tenders not recommended
This clause deals with the situation in which the municipal council disagrees with the tender recommended by the tender committee. The clause provides for a "higher hoop" for the municipal council when it takes a different decision.

Mr Dorfling asked whether there is any possibility for at least one councillor to sit on the tender committee to give guidance to the tender committee, even as an observer. The fact is that the tender committee consists of persons outside the local government sphere, and they might need technical guidance.

Mr Momoniat replied that political representatives cannot sit on tender committees. There are enough stories to suggest all sorts of problems with this. The Bill does not stipulate that the tender committee has to consist solely of external people. The accounting officer is responsible for the composition of the committee, and it could consist wholly of internal employees.

Ms Taljaard stated that this clearly relates to Clause 88. She has concerns with not even allowing councilors to attend tender committee meetings as observers. They should be allowed to attend. If they attempt to unduly influence the tender committee, their conduct would automatically trigger all the offences in the Code of Conduct. Their conduct is thus regulated.

Mr Momoniat and the Chair agreed that there are dangers in allowing even observer status, because it does put pressure on members of the tender committee.

Mr Lekgoro stated that safeguards have to be built into this clause to ensure that the officials on the tender committee themselves are not corruptable.

The Chair noted that the Members agreed that the power to approve such tenders would be delegated to the mayoral or executive council by the accounting officer. This covers Mr Lekgoro's concern.

Ms Taljaard stated that she has a concern with "information asymmetry" here, because the tender committee would not necessarily share all the requisite information with the municipal council.

Mr K Moloto (ANC) [Finance Portfolio Committee] stated that the reporting requirements do make it an offence to withhold information from the decision-making authority.

Ms Manche stated that all the proper policies and procedures have to put in place, and the councilors have to be removed from this process so that there is no undue influence. Any people with a vested interest in the matter have to be removed. This is very important. These measures are aimed at maintaining the integrity of the system and the organisation. The further away the councilors are from this process, the better.

Mr Momoniat proposed that perhaps other observers, apart from councilors, could be allowed to attend the meetings. These persons would ensure that due process is followed during the meeting.

Mr Dorfling stated that these observers can be delegated by the municipal council, but cannot be officials. These observers could be businesspeople, NGO's and other capacitated persons.

Mr Momoniat replied that they have to be officials, because outside persons do not necessarily have the requisite expertise.

Ms Taljaard maintained that there has to be a declaration of interests by these officials in order to avoid any conflict. She is of the opinion that this declaration is crucial and has to be rigorous.

The Chair suggested that Ms Taljaard had been implying all along that she alone has a problem with the integrity of the process. She should acknowledge that there are other people in this Committee that recognise the problems with the tendering process.

Ms Taljaard replied that this perception was misconstrued.

Mr Moloto proposed that stock be placed in the system itself rather than the officials. These mechanisms will ensure that no undue influence is placed on officials.

The Chair agreed with Mr Moloto. The officials are also subject to a whole series of prescriptions that guide their conduct.

Mr Momoniat proposed that the accounting officer be required to report on all tender procurements on a quarterly basis. This reporting would also be included in the annual report.

Ms Taljaard stated that she is not convinced that the reporting requirements are strong enough. She wants to be assured that councilors receive the relevant information so that they are not in a disempowered position.

The Chair replied that the point has been made by the majority of the Committee that the power asymmetry is actually more dangerous than the information asymmetry at this stage. Mechanisms have been built in to include independent persons outside of council and officials who can sit in on meetings. This is as far as the legislation can go at this stage. This matter has been discussed in depth. The Chair added that she feels that Ms Taljaard keeps taking the Committee back to her own view of the matter.

Ms Taljaard stated that the point she has been trying to make is that there is an information sharing and the power issue. A far more nuanced approach is needed in the legislation.

Clauses 86-89
No concerns were raised with these clauses.

The Chair summarised the outstanding issues in this chapter:
- the Gauteng provincial legislation;
- the delegation of decision-making to the accounting authority;
- "transparent procedures" under Clause 84(f); and
- presence of councilors on tender committees.

The meeting was adjourned.


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