1. The Bill provides in terms of Section 76 that a municipality may establish a municipal business enterprise. According to the definition of a "municipal business enterprise", an essential element of such an enterprise is that it is financed fully or substantially from sources OTHER THAN a municipal revenue fund or by way of a rate on property, or a tax, levy or duty or surcharge on service fees that may be imposed by a municipality.

The question then arises as to whether it is competent for a municipality in establishing such an enterprise, to furnish the enterprise with seed capital and more particularly bridging finance in the first, second and third years of operation. Such enterprise may well in the initial stages of its existence be dependent on financial assistance from the local authority. The Institute is aware that it is the intention of at least one local authority at present engaged in preliminary work for the establishment of such enterprises to finance them initially. It is therefore submitted that the definition should be amended to permit initial financial assistance through municipal funding.

2. The definition of "service utility" provides for such an entity to be controlled through "applicable by-laws" and for the municipal service it renders to be regulated by "by-laws". The reason for the use of "by-laws" for such control is not clear and seems to depart from the standard use of by-laws almost verging on an "abuse" of by-laws. More over, the infringement of a by-law constitutes an offence and upon conviction incurs a penalty inter alia in the form of a fine. Is it intended to fine the entity should it infringe the by-law, and if so, what effect would the fine have, quite apart from the time involved in prosecuting the entity?

It is also not clear whether the standard by-law procedure is to be involved, and if so, what kind of objections may be anticipated when the by-laws are advertised for objection. It is submitted that it would be more appropriate and less problematic to provide for the control and regulation of such entity by regulations rather than by means of by-laws.

The Constitution provides that a municipality has executive authority in respect of:

1. The local government affairs listed in parts B of Schedules 4 and 5 of the Constitution and;
2. any other matter assigned to it by national and provincial legislation.

The relevant parts of the Schedules refer to local government matters in category terms such air pollution, child care facilities, etc.

It is submitted that the intention of the Constitution here is to provide a general framework of parameters within which a municipality may exercise powers. Specific legislative empowerment or establishment within the functional areas specified in the constitution is still required as is borne out by Section 151(3) of the Constitution which states that a municipality has the right to govern the local government affairs of the community, subject to national and provincial legislation. This and other references to legislation (national or provincial) affecting inter alia the powers of local government) indicate that specific enabling legislation to flesh out the general areas of local government powers stipulated in Part B of Schedules 4 and 5 is required.

Chapter 7 deals with local public administration and human resources (Sections 47 to 66 of the Bill)

1. Section 5.3 requires disclosure of the salary and benefits of the Municipal Manager and managers directly accountable to the MM.

It is submitted that this provision is unconstitutional in that it infringes the constitutional right of the relevant officials to privacy and should be scrapped.

2. Part 3 of Chapter 7 deals with a delegation system a municipality needs to have in place. Sections 54(1), (2) and (3) of the Bill are already incorporated in the Municipal Structures Act, 1988, (see Section 32 of the Municipal Structures Act, 1998) with one critical difference between the Act and the Bill with regard to delegations. The Bill provides that appropriate powers may also be delegated to councillors. This could prove to be very problematic for the following reasons:

• An individual councillor exercising a delegated authority will do so from his or her own particular perspective and would not have had the benefit of and the checks and balances provided by wide-ranging views coming from different political and practical perspectives which for instance the executive mayor when exercising a delegated power will receive from committees of the Council which have considered the relevant matter and reported to the executive mayor thereon.
• It is likely that like officials exercising delegated powers the councillor to whom the power is entrusted will not only make the required administrative decision but will also be involved in actioning such decision, which could result in unwarranted interference with the administration of the local authority and blur the distinction between the role of councillors as policy and decision-makers and the role of officials of administering the execution of such policies / decisions.

1. Part 4 Staff members – (Staff Remuneration)

The Institute of Local Government Management is of the view that a similar system to the one currently being used to pay allowances of councillors, should be applied to the remuneration of employees. Currently councils decide for themselves how to remunerate their employees which leads to confusion and inconsistency in terms of employees’ remuneration. Employees in a particular position in Council A may receive much more or much less than their counterparts in Council B even though if a grading system were to be applied to the two Councils, the grading would be the same. It is suggested that the Bill provide for a remuneration system for employees to obviate such anomalies. This is not to say that the remuneration of employees must in monetary terms be the same as, or correspond to, the allowances of councillors in any way. The point is merely that the Bill should put a uniform system for determining and regulating such remuneration in place.

1. Section 74: The word "Sectoral" which appears in the term "national sectoral legislation in Section 72(c) is vague and requires clarification or definition.

2. Section 74(1)(c) provides that the procedure set out in part 4 of Chapter 8 must be followed before a service delivery agreement is entered into with any person other than institutions specified in Section 74. It would appear that the intention of this paragraph is that business entities other than service utilities, municipal business enterprises, other municipalities and organs of state wishing to enter into a service delivery agreement with local authorities must follow the competitive bidding procedure set out in Chapter 8. This procedure is set out in part 3 of Chapter 8 and not in part 4 and therefore the reference to part 4 should be substituted by a reference to part 3.

3. Section 75(2)(f) stipulates that a service delivery agreement may provide for the relevant local authority to take over the municipal service, including the assets, when such agreement expires or is terminated. It is submitted that in instances where it is appropriate for the Council to take over assets of the service provider it may well also be appropriate to take over staff of the service provider at the same time and therefore the words "and certain or all staff of the service provider" should be inserted after the word "assets".

4. It must also be noted that Section 76(2) again refers to a municipality establishing a service utility in terms of a by-law and again the advisability of using by-laws for such a purpose must be questioned.

Section 94 stipulates that a municipality may credit a payment by a person against any municipal account of that person. There is no problem with this provision if a globular amount is paid without any directive that the payment should be credited to a particular account.

In its present form however, the section appears to give the municipality an unfettered discretion to credit the payment to any account/s in which would include crediting the payment to a particular account when the person making the payment has specifically indicated that such payment be credited to another account.

Crediting payment to one account in cases where the municipality’s customer has specified that such payment should be credited to another account is both inequitable and untenable for inter alia the following reasons:

1. It does not take due cognizance of the fact that charges / taxes are levied in terms of different statutes.
2. It subverts a fundamental principle in the law relating to debtor and creditor namely that a person making a payment in the absence of an agreement to the contrary, may nominate that such payment should be utilized for a particular debt and not for another debt owing or allegedly owing to the same creditor. The creditor concerned then has recourse to the law for collection of the unpaid debt.
3. It can lead to patently unfair results. This can be illustrated by way of an example. A debtor has a genuine dispute with the municipality about his water account and alleges that he has and is being overcharged. He tries unsuccessfully to resolve such dispute over a period of months while paying the, in his view, inflated amount. He eventually informs the municipality that he is only going to pay the amount which he believes he lawfully owes for water. He thereafter makes payment to the municipality and directs in writing that the payment is to be utilized towards the full payment of all his accounts except the water account, to which only the amount the consumer believes is owed to the municipality is to be credited. The municipality on the basis of the current wording of Section 94, notwithstanding the specific directives of the consumer, credits full payment to the disputed water account and only part payment to the consumer’s electricity account. The municipality then proceeds to cut the electricity supply to the consumer on the ground that his payments are in arrears.
4. It can be used as a coercion mechanism to enforce resolution of disputes in the Council’s favour through means other than the legitimate legal mechanisms already existing for such dispute resolution. In the above example most consumers for practical reasons cannot allow their electricity supply to remain cut for any significant length of time. They are therefore faced with Hobson’s choice in this matter. They either have to go to the great expense of instituting an urgent court application against the municipality for an order that the municipality allocate the payment in accordance with their directives or they would have to pay the full amount plus reconnection fees to reinstate their electricity supply. This practice on the part of the municipality can be repeated by the Council if the consumer does not continue to pay the full amount required by the Council in respect of all municipal accounts including the water account (even though there may be a genuine overcharging which the Council refuses to address or resolve).
5. Scenarios such as the one sketched in the example could lead to successful legal challenge and are bound to spoil and bedevil the partnership between local authorities and communities which the Bill seeks to foster. It is therefore submitted that it is imperative that Section 94(b) be amended to provide that a payment may be credited to any account of the relevant person unless the person making the payment gives specific directives as to the allocation of the payment in which case the payment must be allocated according to such directive.

1. Section 101(1) of the Bill provides that a municipality may submit to arbitration any matter other than a matter involving a decision on its status, powers or duties or the validity of its act or by-laws. As the word "acts" cannot mean Acts as in the case of a law passed by Parliament it in all probability means "actions". Broadly speaking the actions of municipalities through its functionaries can be divided into two categories:

1. Actions done in the course of exercising a legitimate power of the municipality but which are nevertheless, unlawful actions. Every delict committed by Council functionaries while engaged in lawful Council activities would for example fall into this category.
2. Actions which are outside and beyond the legal powers of the municipality.

It surely cannot be the intention of the drafters of the Bill that an arbitrator may not decide whether an action constitutes a delict for which the municipality may be liable to another party for payment of damages and it is therefore likely that the second type of invalid actions ie. actions beyond the powers of the municipality is intended. It is submitted that there should be a clearer indication of what category of act or actions is being referred to in this section. If indeed the understanding that this section is intended to prohibit a decision on whether or not a particular act (action) done by a municipality is beyond its powers is correct, then it is submitted that the difficulty created by the current wording would be obviated by amending this subsection along the following lines: "A municipality ……. may submit to arbitration any matter other than a matter involving a decision on its status, powers or duties, the validity of its by-laws or whether any of its acts are within its powers."

Certain sections that may prove to be problematic if retained in their present form or at all, need to be highlighted:

1. Section 51(1) makes the Municipal Manager responsible and accountable for a number of things listed under the said section. If one read this proposed section with section 56 of the Municipal Structures Act, 1998, it would seem that there is an overlapping or duplication of powers between the Municipal Manager ("the MM") (as envisaged in the Bill) and the Executive Mayor ("the EM") (as set out in the Act). The above might be illustrated by the following examples:

• the MM is responsible and accountable for the formation and development of an economical, effective, efficient, accountable and performance driven administration and the EM must review the performance of the Municipality in order to improve its economy, efficiency and effectiveness;
• the MM is responsible and accountable for the management of the municipality’s administration and the EM must monitor the management of the municipality’s administration in accordance with the directions of the Municipal Council;
• the MM is responsible and accountable for the implementation of the Municipality’s Integrated Development Plan and the monitoring of progress with the implementation of the plan and the EM must make recommendations to Council on strategies, programmes and services through the above integrated development plan to address priority needs and to identify and develop criteria in terms of which the progress in the implementation of the above can be evaluated;
• the MM is responsible and accountable for the management of the provision of services to communities, resident and ratepayers in a sustainable manner and the EM must oversee the provision of services to communities in the municipality in a sustainable manner;
• the MM is responsible and accountable for carrying out the decisions of the structures and functionaries of the Municipality and the EM must ensure that regard is given to the public issues and report on the effect of consultation on the decisions of the Council;
• the MM is responsible and accountable for the administration and implementation of the Municipality’s by-laws and other legislation and the EM must review the performance of the municipality in order to improve the implementation of the Municipality’s by-laws.

The legislature’s intention will have to be determined. Is there indeed duplication and overlapping of powers and duties or will the EM act as a kind of watchdog over the MM? It is critical that it be clearly identified.

R.G. BOSMAN

for ILGM