Municipal Systems Bill: Chapters 8 & 9

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Cooperative Governance and Traditional Affairs

29 June 2000
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

29 June 2000

Documents handed out:
White Paper on Municipal Service Partnerships
Why A Policy on Tariffs? (Appendix 1)
Comparative analysis: Municipal Systems Bill; MSP White Paper and the National Framework Agreement (Appendix 2)
Introduction and Background - Chapter 8 Municipal Systems Bill (Appendix 3)

Chapter 8 of the Bill seeks to ensure efficient, just and equitable service delivery by municipalities. The Chapter provides for a tariff policy by municipalities. Provision is made for municipalities to enter into partnerships with other service providers for delivery of services. Provision is also made for different types of service delivery mechanisms. The Department proposed a structure within the municipality and a "municipal entity" to be the mechanisms available to a municipality. Within the municipal entity the municipality might have a choice of either a service utility or a municipal business enterprise.

The Committee asked the Department to return at a latter stage and clarify the distinction between the various legal entities mentioned in the Bill. The Committee was especially interested in the "internal trading entity" which the Department now proposes to exclude from the Bill.

Debate focused on the decision-making process and establishment of criteria by which service providers would be chosen. The ANC submitted that municipalities must first determine whether it is within their own capacity to provide a service before discussions on out-sourcing are held. The department, DP and IFP felt this was inherently covered in the Bill. However the Chair requested that it be clearly stipulated that the public sector must be the preferred service provider.

The committee also agreed that councillors or staff members of a municipality who share in any profits or receive benefits from a service provider would be subject to criminal punishment.

Chapter 9 aims to enable municipalities to improve their revenue management, divide the responsibilities of credit control between the administration and the council, and provide for a sound customer care management system. The committee did not look at this chapter in depth. The committee is expected to resume deliberations in August.

Chapter 8: Municipal Services
The Chairperson emphasised the importance of this chapter in the Municipal Systems Bill as it impacts on the restructuring of service delivery in local government.

In its overview of this chapter, the Department said the reason for initiating the Municipal Service Partnership (MSP) process was government's limitations in delivering services. Consequently government is inviting other service providers to be involved in delivering services. In March 1998 the MSP Task Team was set up to facilitate the MSP process. The first draft of the Municipal Service Partnership policy paper appeared in August 1998 and was used as a basis for discussion with the public, government departments, private sector, unions and non-government organisations. The final document was produced in November 1998. Because of political sensitivity surrounding the matter, the Department tried to deal with the matter at a technical level through NEDLAC. However a deadlock was reached and the matter had to be dealt with at a political level. A task team was assigned with drafting a framework agreement that was signed in December 1998. A sectoral forum was set up to look at any matters that stakeholders (government, labour, local government) disagreed on.

People had raised concerns that an insufficient legal and policy framework existed for the use of MSP arrangements in delivering services. In considering the rationale for Chapter 8 in the Bill it is essential to point out why there is a need to include other service providers. The fact that municipalities are starved of infrastructure necessitates supporting whatever resources there are with private capital. There is a need to find innovative ways of delivering services given the backlogs in infrastructure as articulated in the White Paper of Local Government. Chapter 8 also seeks to put in place a regulated mechanism where parties other than municipalities are involved to minimise abuse that could happen. The Chapter also seeks to contribute to the developmental outcomes of local government.

The White Paper is intended to speed up inclusion of other service providers but seeks to do so in a responsible way. The country is sitting with high levels of unemployment. These partner service providers have to take into account such societal problems in helping with delivery.

General duty
The Bill places a general duty on the municipality to provide basic municipal services that are equitable and financially and environmentally sustainable. The Constitution provides that municipalities have to ensure service delivery. However municipalities have the option of choosing who delivers the services in terms of Clause 72 of the Bill and the White Paper on MSPs.

Part 1: Service Tariffs
The Department said a number of municipalities have no policy on tariffs and how they run their affairs. Existing policies and agreements on tariffs are in terms of the Constitution, the Local Government Transition Act, provincial ordinances, the Municipal Infrastructure Investment Framework, the equitable share, the White Paper on Local Government, NEDLAC's Memorandum of Understanding, SALGA's Framework Agreement.

A common factor in these various documents or policy is the need for sustainable delivery of services. A tariff policy makes provision for municipalities to adopt and implement tariffs in line with sectoral legislation and allows for cross-subsidisation. A tariff policy adopted by a municipality must also apply to any service provider with which it works in partnership. A tariff policy creates transparency, consistency and predictability and serves as a planning and management instrument. The policy should reflect reasonable costs and fairness to all groups. Tariffs have to be informed by principles of efficiency, sustainability and equity. The policy should be able to differentiate between categories of consumers. In addition tariff policy should give effect to by-laws and regulations by the Minister.

Part 2: Provision of Services
This seeks to make provision for a range of service delivery mechanisms available to a municipality. It lays out procedure to be followed in deciding on appropriate mechanisms for delivering services. Reference is made to what the municipality should do if it provides services itself or allows for service delivery agreements to be concluded between municipalities and other service providers. Section 76 makes provision for creation of appropriate legal structures for partnerships to operate successfully.

Part 3: Service Agreements Involving Competitive Bidding
Having big companies from other countries as partners in service delivery has posed the question: what is the country doing to improve its own capacity? Part 3 enunciates the selection process and the factors that need to be considered in selecting a service provider. The negotiation process, once the preferred bidder has been accepted, is articulated and the transparency requirements regarding the service delivery agreement is outlined.

Part 4: Municipal Service Districts
The Department said Clause 79 Establishment of internal municipal service districts might create problems in terms of unfair discrimination and that its deletion is being considered. Part 4 of the Bill makes provision for the establishment of multi-jurisdictional municipal service districts amongst two or more municipalties. This seeks to give legal certainty for the ability of municipalities to deliver which has not been the case up to now. The contents of such agreements are outlined. A governing body that ensures that the interests of the communities are taken care of will be set up. The minimum rules for their powers and duties are outlined. Circumstances under which a governing body would be terminated are spelt out.

The Department gave a comparative analysis of the Municipal Systems Bill, the MSP White Paper and the Framework Agreement (See Appendix 2).

The Department referred the Chairperson to Typical MSP Arrangements in the White Paper on MSPs for an explanation of the different kinds of MSP arrangements.

In answer to what informs a municipality in deciding whether to take the private or public route in delivering services, the Department replied that Section 70 of the Bill provides for mechanisms for provision of services. The needs of a municipality inform it on whether to deliver services itself or bring in another service provider as a partner. The Department proposes some amendments to this section to make it consistent with the Public Finance Management Act by removing the distinction between the different types of entities an organ of state may operate. It is felt that there is no longer a need for the distinction in the Bill as there will be none in terms of financial management. The Department's view is that if such a distinction is drawn it would only be cause for confusion among municipalities. It proposes collapsing sub-clauses (a) and (b) in Section 70. Under section 70(c) in sub-clauses (iii) service utilities and (iv) municipal business enterprises, the proposal is that reference be made only to a "municipal entity".

A municipality at this stage is not able to set up a statutory body with a separate entity and this has resulted in municipalities resorting to inappropriate statutes providing for trusts and companies. For instance section 21 companies would have limitations for municipalities because once they transfer assets to such companies the municipalities lose control. On the other hand a service utility would be more suited to municipalities as it can be easier to control.

The Chairperson expressed uneasiness that merely because the Department of Finance is doing away with the distinction it necessarily follows that these entities are not good for local government. He said even if the Department thinks of changing to service utility and municipal entity, the Committee still needs to know the difference between the different types of entities.

The Department said the reason for the distinction in the Public Finance Management Act was because different financial management criteria applied for different kinds of entities. With the Department of Finance taking the stance that the same criteria would apply to all entities, there is no need for the distinction.

The Committee was not satisfied with the Department's explanation of an "internal trading entity" and instructed the Department to research what it entails and bring out a written explanation. The Chairperson added that this is the sort of thing that unions would like to find in the formulation of Section 70 and it is essential that the Committee be informed. He also urged the Department to make a comparative analysis of the provisions of both the Public Finance Management Act and Municipal Finance Management Bill, especially regarding the legal entities mentioned in both pieces of legislation.

The Chairperson said if the Department anticipates fundamental changes to the Bill it would have to go back to stakeholders such as NEDLAC, SALGA, Business SA, trade unions and NGOs for consultation. The Department might even invite members of the Committee to observe in such discussions.

In answer to a query on the difference between "service utility" and "municipal business enterprise" and what it meant to collapse sub-clauses (a) and (b) in Section 70, the Department replied that both sub-clause (a) and (b) referred to internal structures of a municipality. Sub-clause (c) lists separate entities outside a municipality. A "service utility" would be a juristic person established by a municipal by-law which has its own staff, assets, bank account but cannot be owned jointly and is not necessarily run according to business principles. A "municipal business enterprise" refers to a company which a municipality establishes in terms of the Companies Act under the control of one or more municipalities. This would be financed fully or substantially from funds other than those coming from municipality. Thus it would be a business in the proper sense of the word and have shareholders and the Companies Act would regulate its operation.

Clause by clause analysis of Chapter 8: Municipal Services
Clause 67 - General duty
Clause 67 (1)
Ms Botha (DP) agreed that all households should have access to basic services. She noted however that poor households should be dealt with more specifically in Clause 67 (1) as no reference was made to them whatsoever.
The Chairperson said that this was not a major issue and that they would look at this.

Ms Borman (DP) asked what the minimum level of basic services as noted in this clause was. She said that if they did not quantify the minimum level then who would determine what the minimum level of basic services was.

The Department replied that there is no government policy on this yet. There are numerous policy documents which give indications of the minimum level of basic services but there is no set basic level of service.

Mr Smith (IFP) asked if there could be one minimum level of basic services or if the position was not rather that there should be different minimum levels based on the particular circumstances. To what extent does one link minimum level to what a community feels is the appropriate level for them?

The Chairperson commented that it was important to separate ''minimum'' from ''basic''. Minimum level of basic services was contained in the Constitution and the Committee simply agreed to retain the constitutional wording. They included it in the Bill without quantifying it. Many stakeholders indicated in their submissions that the phrase should be defined but the Department disagreed.

The Chairperson continued by explaining what access to services meant. He said that it does not mean that the government has an obligation to provide the service. The Constitutional Court has held that access to socio-economic rights means that the government only has an obligation to ''progressively achieve''. By the same token the municipality must progressively achieve. This means that if the municipality has no capacity then there is no duty to provide the service.

The Committee agreed that they must:
1) be consistent with the Constitution, and
2) they must reflect the National Framework Agreement.
The Chairperson added that this was only a draft and that they were not taking any final decisions.

Clause 67(2)
The Department noted that although this seemed to imply that this applied only to a municipality, it is intended to apply to anyone providing a service.

Clause 67(2)(a) says that the municipal services must be equitable to all communities, residents and ratepayers. Clause 67(2)(c) says that municipal services must be financially sustainable.

Mr Smith asked what was meant by ''equitable'' and ''financially sustainable''.

The Department replied that to provide services to communities in an equitable way, they have an indigent policy in terms of which those who cannot pay will be subsidised by those who are well-off. This clause should be read together with Credit Control and Debt Collection (Chapter 9 of the Bill).
The Department said that they support the principle of moving toward a sustainable local government. The municipality functions with expenditures and they need sufficient revenue to cover the expenditures and they need to be financially sustainable.

The Chairperson added that the issue was that there had to be provision of services in a financially sustainable manner.

Mr Bhabha (ANC) said that ''financially sustainable'' is a process not an event. It is something that the municipality must strive for. Therefore the drafting in the Bill should express it as an objective by saying ''to strive to become financially sustainable'' instead of simply saying ''financially sustainable''.

Mr Smith disagreed with Mr Bhabha that it should be phrased as an objective as there is no option but for the municipality to balance its budget every year.

Ms Borman agreed with Mr Smith that "financially sustainable" is an operating principle and not an objective. She said that if one is not financially sustainable when one starts then one will simply build onto one's debts.

The Chairperson noted that the options before the committee was to express ''financially sustainable'' in the Bill as either:
1. an objective principle. Example ''achievement of financial sustainability'', or
2. an operating principle. ''Financial sustainability''

Various members differed on this point but the Chairperson said that it is an issue of policy and they will leave it for now. He asked members to mull this over and the Committee would come back to it. He noted that they were not looking for conclusions at this stage.

Part 1: Service tariffs
Clause 68 - Tariff policy
Clause 68(1)
Mr Smith asked if this subsection was stating that the tariff must be set by the council or that the council will determine who must set the tariff.

The Department said that Mr Smith was distinguishing between the structure of tariff and the actual rate setting.

The Chairperson said that later in the Chapter the answer was clear that it was not possible for the service provider to decide on the tariffs.

Mr Smith referred to an argument that had been made in the submissions as regards the problem of private investors entering into agreements with municipalities. What would the positionof a service provider who entered into a 30 year contract with the municipality if the Council was deciding the tariffs.

Mr Bhabha said that he had found that submission to be quite alarming. Service providers are presently entering into such agreements with the municipality and making investments on the basis of the policy that the municipality has. The municipality must have control over the tariffs.

The Department said that they could perhaps add ''with the consultation of the service provider''.

The Chairperson said that it has never been suggested that a Council forego setting the tariffs to a service provider. He thought that it was constitutionally required for the municipality to set tariffs and it was unconstitutional for tariffs to be devolved to the service provider.

The Department said that the applicable section of the Constitution was 160(2). Here the Constitution was silent on the issue of tariffs. Therefore it was not unconstitutional. The Department had to take a policy decision and they had decided not to devolve the tariffs to the service provider. They want to rest this function with the Council.

Clause 68(2)
In clarifying the difference was between a user and a consumer in 68(2)(a), the Department said that a user uses a public service, example a library. It is not possible to measure what he is using. In the case of a consumer you can measure what the person is using.

In 68(2)(b), the Chairperson highlighted the Gender Commission's concern that the individual as used in the clause did not relate to an individual person but to the individual household. Therefore where ten people were living in a two-roomed house in poorer communities, they were assessed as an individual unit. Where two people were living in a two-roomed house in a wealthier community they also made up an individual unit. He was concerned that the assessment was unfair as the policy is higher charges for higher rates of consumption. This had to be done without penalising the poor

The Department said that the Council can decide to subsidise using the income from wealthier areas. This can be done as it is a decision of the municipality.

An ANC member said that there were court cases going against what the Department was saying.

The Department said that the Committee must look at subsections (a) -(i) as a package rather than individually. There must be subsidisation of some sort.

Clause 68 (3)
In answer to Mr Smith, the Department said debtors were mentioned here as it makes the link between the credit control section and the indigent policy.

Mr Smith said that he did not see the link. The Chairperson said that they would leave this for now and return to it another time.

Clause 69 - By-laws to give effect to policy
Clause 69(1)
Mr Smith asked why the municipal council ''must'' adopt by-laws to give effect to the tariff policy. He preferred to use the word ''may''. He asked if it was not unconstitutional to say ''must'' because Section 156(2) of the Constitution says that ''A municipality may make and administer by-laws for the effective administration of the matters which it has the right to administer''.

The Department disagreed that it was unconstitutional. They felt that it was within the general legislative power of Parliament.

The Chairperson commented that he was sick of Bills being passed only to have certain sections challenged in the Constitutional Court. He asked the Department to check on this for the sake of certainty. Th Committee's decision would be to retain ''must'' unless it was unconstitutional.

Part 2: Provision of services
Clause 70: Mechanisms for provision of services
The Chair queried the ordering of the clauses in Part 2. He felt that Clause 70 should be preceded by the other clauses. He reasoned that the process of deciding and establishing criteria for mechanisms to provide municipal services should be dealt with prior to any mention of the actual mechanisms that would be providing the service. The Department responded that it had been their intention to first identify the mechanisms so that it could be better understood what the ensuing clauses referred to. The committee favored placing Clause 70 after Clause 73.

Clause 71: When municipalities must decide on mechanisms to provide municipal services
Mr Smith felt it was problematic in 71 (f) that a "significant body of residents" could oblige a municipality to review the mechanism that was chosen to provide a particular municipal service. Mr Bhabha (ANC) proposed that (f) refer instead only to "the community", thus creating the implication that the community as a whole would have to believe that the existing mechanism needed to be reviewed. The Chair added that the courts would also have the power to determine if requests were relevant.

Clause 72: Criteria for deciding on mechanisms to provide municipal services
Mr Bhabha argued that when a municipality has to decide on a service delivery mechanism, the Bill should state that the municipality must first look within its own capacity to determine whether or not they are capable of providing the service. The Department responded that that notion was inherently applied. The DP and the IFP agreed with the Department , stating that Mr Bhabha's concern was further covered by 72(a) which forces municipalities to assess all service delivery options.

Mr Bhabha thought it was necessary that the Bill clearly indicate that municipalities must first determine that they were incapable of providing a service before it was out-sourced. The Chair agreed, saying that the public sector needed to be the preferred service provider. He made reference to public submissions that had suggested preference be given to the public sector, in line with the National Framework Agreement. The Bill is currently neutral in identifying a preference.

Mr Africa of the Department stated that the matter was a policy issue, and not relevant to the clause. His opinion was that the clause did not address who the service provider should be, but rather the steps taken in deciding which mechanism would provide the municipal service.

The Chair felt it necessary that the clause specifically stipulate the municipality as the preferred service provider. He asked the Department to draft such a clause, taking the National Framework Agreement into account.

Mr Bhabha questioned whether the "direct and indirect costs and benefits" mentioned in 72(a)(i) properly captured the idea of best value for money. Mr Smith suggested that reference to best value be included. The Chair agreed.

Clause 73: Provision of services by municipality itself
Mr Smith asked why this clause had been included since it seemed self-evident. Mr Bhabha replied it makes assurance when a municipality takes the decision to provide a service that all the necessary steps will be taken to guarantee proper provision. The Chair asked the department to reword the clause more clearly.

Clause 74: Provision of services by way of service delivery agreements
The Chair noted that the Municipal Infrastructure Investment Unit (MIIU) believed 74(1)(b) to be contradictory to Section 217(1) of the Constitution. Section 217(1) states that the awarding of contracts by a sphere or institution of government must be done in a fair, equitable, transparent, competitive and cost-effective manner. MIIU argued that for a municipality to provide a service by way of a negotiated service delivery agreement would not guarantee the most competitive selection process. The Department will look into the matter.

It was decided in order to make it clear that individuals were part of "any person other than an institution" in 74(1)(c), that it be rewritten as "any person, juristic or natural,".

Clause 75: Responsibilities of municipalities when providing services through service delivery agreements
Concern was raised that the principles outlined in 75(2)(a) were a narrowing of those outlined in the Procurement Act. 75(2) addresses the responsibilities that a municipality may assign to a service provider under a service delivery agreement. Although the intention was deemed correct, it was thought that specific reference must be made to the Act. The Department was asked to take the matter under consideration.

Ms Botha (DP) queried how it could be stated, in 75(2)(v), that a service delivery agreement could authorize a municipality to assign responsibility to a service provider to manage its accounting, investing, and reporting of finances subject to the Municipal Finance Management Act (MFMA). She argued that private sector service providers would adhere to their own laws and principles.

Ms Manche replied that this section was applicable to the private sector since the municipality is ultimately responsible for providing services without disruption. This ensures the entity is accountable to the municipality for providing adequate service delivery. Ms Botha (DP) rebutted that one cannot expect municipalities to administer and manage the finances of a private entity when most cannot manage their own finances.

There was confusion over 75(2)(b). Members put forth that it was unconstitutional that a municipality could assign a service provider responsibility for reviewing and adjusting tariffs. After some debate, it was determined that (b) had to be read separate from (a). 75(2)(b) states that a service delivery agreement may authorize a municipality to review and adjust tariffs. The section was correct as stated.

Mr Bhabha proposed a clause be inserted following 75(4) that councillors or staff members who share in any profits or receive any benefits from a service provider would face criminal punishment. The Chair asked that it be incorporated into the existing section.

Mr Bhabha further proposed that a similar clause be added that councillors or staff members must fully disclose if their relatives have financial or other interests in the service provider. The committee accepted both proposals.

Clause 77: Competitive bidding, and Clause 78, Negotiation and agreement with prospective service provider
These clauses were agreed to as stated.

Clause 79: Establishment of internal municipal service districts
Mr Smith stated the process by which internal municipal service districts were established was problematic. He argued that if, after the boundaries of the district had been determined, a municipality was allowed to impose surcharges in order to finance the service, it would create greater disparities between the rich and the poor.

SALGA responded that the Bill needed to include "safeguards" that would protect both the rich and disadvantaged areas. The Chair agreed that the entire clause needed to be restructured. He decided to allot a period of 14 days in which members could make concrete proposals to amend the entire section. He added that the appropriate organizations would also be contacted for comment.

The remainder of the Chapter will be dealt with in the sub-committee due to its technical nature.

Chapter 9: Credit Control and Debt Collection
The department briefed the committee on this Chapter. The aim of the chapter is to respond to the need for a national policy and establishment of national guidelines on credit control and debt collection. It intends to provide enabling legislation for this purpose.

The current realities facing the implementation of this chapter were addressed. They included a significant number of municipalities that were faced with financial difficulties, inefficient collection mechanisms, and a lack of credit control policy or experience in implementing such policies. These problems were expected to be exacerbated by the existing lack of clarity in the definition of roles and responsibilities between the administration and the councils, a lack of customer-care management, and a culture in many municipalities of non-payment.

The chapter attempts to enable municipalities to improve their revenue management, divide the responsibilities of credit control between the administration and the council, and provide for a sound customer care management system.

SALGA asked if the collection of revenue from the municipalities should be the responsibility of the national sphere of government. It was thought that this would allow for indigent debtors to be subsidized through social security grants, and relieve the municipalities of the burden. Ms Manche replied that the Constitution made it very clear that the collection of revenue was given to municipalities, and that any attempt to centralize such a process would go against the spirit of the Constitution.

The Chair admitted this Chapter was very complex, and the committee needed to be better informed before discussions progressed. The meeting was adjourned.

Appendix 1:






Appendix 2:
Comparative analysis

The Municipal Systems Bill

The MSP White Paper

The Framework Agreement

General Duties 67 (I)

Section 153 (a) of the Constitution

To add " contribute to the furtherance of societal goals of social and gender equity and justice in municipal service delivery"

Municipal services provided must
( a-e)

Pg 9 the overview : ".. the MSP policy also endorses universal access to basic services etc.

To add " contribute to the furtherance of societal goals of social and gender equity and justice in municipal service delivery"

To add " in the MSP policy more explicitly under Section 2 of the policy document

Included in the preamble: "… municipalities are responsible for ensuring delivery of basic services to all South Africans."

Tariff Policy 68 (1)

Not explicitly included in the MSP policy part of the indigent policy - will be included under 3.1.3 on tariffs

Included as part of the principles ( Page 8) and as part of regulatory measures ( Pg 15)

By laws 69 (1)

Included on Page 3.1.3 of the MSP policy- (that legislation will clarify)

Require tariff policy to be set by national government and MSP policy ( Pg 15)

Mechanisms for provision of services 70 -
Options to delete (b)
To include employee option

All captured in the policy

Provides guidelines on motivation of public and private service - most of the issues can be taken on board in the contract

Choosing a mechanism to provide municipal services 71

Captured on Pg 14 - needs further elaboration in terms of a-g in the Systems Bill

Captured on Pg 7 - principles of service delivery

Criteria for deciding on mechanisms to provide municipal services 72

Pg 22 it also includes feasibility studies ( excluded in the Bill)

"Pg 15 ( cost effective)

Provision of the services by the municipality 73

Pg 14 MSP policy deals with " no preferance" Pg 11 one of the means for service delivery

Reference made to
Pg 7 " preferred " method of service delivery

Provision of services by way of service delivery agreements 74

Pg 11 Typical MSP arrangements
( definition of types of agreements)

General provision in the preamble

Responsibilities of municipalities when providing services through service agreements 75

Still to be included in the MSP policy paper

Not included

The Municipal Systems Bill

The White Paper on MSPs

The Framework Agreement

Service utilities and municipal business enterprises 76
To be amended in terms of the Municipal Finance Management Bill

Still to be included

Not included

Competitive bidding 77

Pg 23 ( talks about formal competitive tendering)

Refers to a transparent process
(General provision)

Negotiation and agreement with prospective service provider 78

Pg 27 ( included)

Not inlcuded

Establishment of internal municipal district

To delete 79

Not included

Not included

Establishment of multi jurisdictional municipal service districts 80

Not included ( reference to be made to the electricity sector)

Not included

Contents of agreements establishing multi- jurisdiction municipal service districts 81

Currently not included will be included in the final draft

Not included

Legal status of governing bodies 82

To be included in the MSP policy

Not included

Powers and duties of governing bodies 83

To be included in the MSP policy

Not included


Control of governing bodies 84

To be included in the MSP policy

Not included

Termination of multi-jurisdictional municipal service districts 85

To be included in the MSP policy

Not included

Regulations and guidelines 86

To be included in the MSP policy

Not included


Appendix 3:
Introduction and Background

The MSP policy process:
Rationale for the MSP policy paper
· March 1998 - MSP Task Team set up
· August 1998 - MSP first draft
· August- September 1998: consultations
· November 1998 - MSP final draft
· Overview of the contents of the MSP policy

The notice at NEDLAC:
JUNE 1998 - Task team set up ( political and technical)
· Creation of the Sectoral Forum

Realities on the ground:
concerns about MSPs
· setting up of the MIIU - March 1999
· signing of agreements ( Dolphin Coast and Nelspruit)
· estimated backlogs in infrastructure delivery
· the Municipal Finance Management Act
· the ongoing EDI restructuring in anticipation of REDs
· the ongoing revision of the Water Services Act
· DWAF: regulations
· Johannnesburg restructuring ( an example)

Rationale for Chapter 8 in the Municipal Systems Bill
To be conscious of the role of local government in service delivery and its contribution to the overall contribution to the societal goals of a just and equitable system of service delivery.
· To find innovative ways of service delivery given the infrastructure backlogs.
· To put in place a regulated mechanism where other parties either than the municipality are involved
· To contribute to the developmental outcomes of local government

The Provisions in the Bill
General duties
These are generic and must be observed by municipalities and other service providers.
· Reference is made about the notion of service provider and service authority.

Part 1: Service Tariffs
Tariff policy - makes provision for municipalities to adopt and implement tariff policy in line with sectoral legislation.
· Makes provision for cross- subsidization.
· Makes provision for a lifeline tariff.
· Provides for the adoption of tariff by-laws.

Part 2: Provision of services
Makes provision for a range of service delivery mechanisms.
· Makes provision for the procedure to be followed on deciding on the appropriate mechanisms.
· Makes provision for criteria to decide on the appropriate mechanism.
· Makes reference to what the municipality needs to do if it provides the service itself.
· Makes provision for service delivery agreements/contracts.
· Makes provision for the creation of appropriate legal structures ( 76).

Part 3: Service delivery agreements - competitive bidding
Articulates the bidding process with reference to the different kinds to bidding processes depending on the value of the project ( See page 23-25 of the white paper).
· Articulates the negotiation process once the preferred bidder has been accepted.
· Outlines the need to access the information on the agreement.

Part 4: Municipal service districts
Section 79 ??
· makes provision for the establishment of the multi-jurisdictional municipal service districts.
· deals with contents of the agreement establishing the multi-jurisdictional municipal districts.
· creates a governing body and minimum rules for its powers and duties, control .
· spells out the circumstances under which a governing body would be terminated.


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