municipal systems act section 78 assessments implementing the division of powers and functions for...

MUNICIPAL SYSTEMS ACTMUNICIPAL SYSTEMS ACT

SECTION 78 ASSESSMENTSSECTION 78 ASSESSMENTS

Implementing the Division of Powers and Implementing the Division of Powers and

Functions for Water ServicesFunctions for Water Services

LEGISLATIVE OVERVIEWLEGISLATIVE OVERVIEWNovember 2003November 2003

Legislative Overview: Version 1 November 2003

Purpose of the PresentationPurpose of the Presentation

S78 assessments in the context of powers and functions Introduction to S78 assessments S78 triggers Different types of service delivery mechanisms The S78 process step by step Criteria and decisions Important considerations Community participation Implementation (procurement & service delivery agreements)

To facilitate a common understanding of the section 78 process through the following topics:

S78 ASSESSMENTS IN THE S78 ASSESSMENTS IN THE CONTEXT OF POWERS AND CONTEXT OF POWERS AND

FUNCTIONSFUNCTIONS


Powers and Functions...Powers and Functions...

The division of powers and functions for water services became effective on 1 July 2003

Implementing powers and functions is linked to municipal establishment, budgets, IDP review, capacity building and so on

S78 assessments are a critical milestone in measuring the success of the implementation of powers and functions


Powers & Functions: The Trigger Powers & Functions: The Trigger for S78 Assessmentsfor S78 Assessments

S77(a)(iii) of MSA states that a municipality must review & decide on appropriate mechanism/s in the municipality, or part thereof, when the municipality is restructured or re-organised in terms of the Structures Act

The division of powers and functions constitutes a restructuring or re-organisation in terms of the Structures Act and therefore triggers the need for S78 assessments


Where services are provided through an internal mechanism by the “former WSA”, the “new WSA” must review and decide on appropriate mechanisms in municipality or part thereof

Where services are provided through an external mechanism by “former WSA”, the “new WSA” will be the successor in title to the Service Delivery Agreement (SDA)

A S78 assessment therefore does not have to be undertaken in areas covered by an external service delivery mechanism, but the division of powers and functions remains a legislative trigger



Where a service is provided through an internal mechanism, the municipality must review & decide on appropriate mechanism/s in the whole or part of the municipal area

The S78 assessment can therefore be undertaken for the “former WSA” area only



Powers & Functions: The Powers & Functions: The Scope of S78 AssessmentsScope of S78 Assessments

The scope and area covered by the S78 is in the discretion of the municipality

Some considerations … Political implications Scale of expenditure

Importance of service Potential for community & labour conflict

Geography & demographics

Urgency (time, levels of services, legislative non-compliance)


National Gov. recommends that S78 as a result of p&f be done for whole area (irrespective of internal or external mechanism in place) to ensure consideration of: Benefits of scale Efficiency Integration

Where a service is provided through an external mechanism, any amendments to the contract informed by S78 must be done in accordance with the provisions of the contract

Powers & Functions: The Powers & Functions: The Scope of S78 AssessmentsScope of S78 Assessments

INTRODUCTION TO S78 INTRODUCTION TO S78 ASSESSMENTS ASSESSMENTS


What is a Section 78 Assessment?What is a Section 78 Assessment?

A section 78 assessment is a process A section 78 assessment is a process required by the Municipal Systems Act to required by the Municipal Systems Act to assess assess potential service delivery potential service delivery mechanismsmechanisms for the provision of a for the provision of a municipal servicemunicipal service

Section 78 assessments are required Section 78 assessments are required under certain legislated circumstances under certain legislated circumstances (which are called “triggers”)(which are called “triggers”)


The Importance of S78 The Importance of S78 AssessmentsAssessmentsFOR MUNICIPALITIES - May have long term service delivery implications

Has financial implications

Decisions may be challenged

FOR NATIONAL & PROVINCIAL GOV. – Appropriate, sustainable service delivery mechanisms

Continued service delivery

Improvement in service delivery


Urgency for Completing S78’sUrgency for Completing S78’s

Administrative units & other arrangements are interim

Interim arrangements pose difficulties in respect of – Effective management Political imperatives Certainty both in respect of staff and future

service delivery mechanism Stability in the “new and former WSAs”


National Government Timeline National Government Timeline for Completion of S78 for Completion of S78 AssessmentsAssessments

Jan ‘03Jan ‘03

Announcement Announcement of P&F for WSof P&F for WS

Effective date Effective date of P&F for WS of P&F for WS & MEC & MEC adjustmentsadjustments

Implementation Implementation of P&F for WS of P&F for WS and MEC and MEC adjustments adjustments completecomplete

1 July ‘031 July ‘03 1 July ‘041 July ‘04Dec ‘03Dec ‘03

Announcement Announcement of adjustments of adjustments of P&F byof P&F by MECsMECs

THE ‘TRIGGERS’THE ‘TRIGGERS’


Powers & Functions ‘Triggered’ Powers & Functions ‘Triggered’ the Need to Undertake S78 the Need to Undertake S78 AssessmentsAssessments

A number of triggers are provided for in the A number of triggers are provided for in the ActAct

There are different triggers where services There are different triggers where services are provided through internal and external are provided through internal and external mechanismsmechanisms

The division of powers and functions is a The division of powers and functions is a trigger trigger

It is however necessary to take note of other ‘triggers’..


When Must a S78 Process Be When Must a S78 Process Be Applied? The ‘Triggers’Applied? The ‘Triggers’

A review is required by an intervention in terms of A review is required by an intervention in terms of the Constitutionthe Constitution

A new municipal service is to be provided A new municipal service is to be provided Requested by the local community through Requested by the local community through

mechanisms, process and procedures established mechanisms, process and procedures established in terms of the MS Actin terms of the MS Act

A review of its IDP requires a review of the A review of its IDP requires a review of the delivery mechanismdelivery mechanism

A municipality must review and decide on appropriate A municipality must review and decide on appropriate mechanism/s to provide a municipal service in the mechanism/s to provide a municipal service in the municipality or a part of the municipality when –municipality or a part of the municipality when –


What are the ‘Triggers’ when a What are the ‘Triggers’ when a Service is Provided through an Service is Provided through an InternalInternal Mechanism? Mechanism?

An existing municipal service is to be An existing municipal service is to be significantly upgraded, extended or significantly upgraded, extended or improvedimproved

A performance evaluation in terms of the A performance evaluation in terms of the MS Act requires a reviewMS Act requires a review

The municipality is restructured or The municipality is restructured or reorganised in terms of the Municipal reorganised in terms of the Municipal Structures ActStructures Act


What Are the ‘Triggers’ When a What Are the ‘Triggers’ When a Service Is Provided Through an Service Is Provided Through an ExternalExternal Mechanism? Mechanism?

A performance evaluation in terms of the MS Act requires a review

The Service Delivery Agreement (SDA) is anticipated to expire or be terminated within the next 12 months

An existing municipal service is to be significantly upgraded, extended or improved and this is not addressed in the SDA

THE DIFFERENT TYPES OF THE DIFFERENT TYPES OF SERVICE DELIVERY SERVICE DELIVERY

MECHANISMSMECHANISMS


What are the Different Types of What are the Different Types of Mechanisms?Mechanisms?

Internal mechanisms External mechanisms

Internal mechanisms

WSA

External mechanisms

Inside the municipality

Entities outside the municipality


What are What are InternalInternal Mechanisms? Mechanisms?

Department or Administrative Unit within the municipality's administration

Business Unit

Internal Municipal Service District

Internal mechanismsWSA


What is a What is a DepartmentDepartment or or Administrative UnitAdministrative Unit??

The Act does not define ‘department’

There is no clear legal or academic definition

Traditionally, a ‘department’ is an institutional arrangement where the responsibility for the delivery of a particular service is carried by more than one unit


What is a What is a DepartmentDepartment or or Administrative UnitAdministrative Unit??

This is currently the most common mechanism used by municipalities to provide municipal services

One department/ administrative unit usually takes responsibility for technical aspects while others take responsibility for aspects such as financial, legal, social and human resources...


What is a What is a Business UnitBusiness Unit??

A business unit - operates within municipality’s

administration, under council’s control and in accordance with operational &

performance criteria of council There is no clear legal or academic definition

The Act does not define a ‘business unit’


What is a What is a Business UnitBusiness Unit??

Can be defined as a ring-fenced unit within the municipality, operating in a defined framework and fully accountable for all aspects of service delivery

Is similar to a department/ administrative unit as it’s an integral part of the municipality and does not have a separate legal personality

Is responsible for all aspects of a service and is ring-fenced in respect of income and expenditure


What Is an What Is an Internal Municipal Internal Municipal Service DistrictService District??

Established, regulated and managed in terms of a municipal policy framework that must reflect –

A balance of development needs & priorities of the designated area against whole area

The extent to which LED will be promoted in the whole municipal area

The extent to which it will enhance social, economic and spatial integration

It may not entrench or contribute to further disparities in service provision


Established in a part of the municipality to facilitate the provision of a municipal service

Must establish separate accounting and record-keeping systems

May establish committee to act as a consultative and advisory forum



The municipality must – Consult communities on boundaries,

the nature of services, method of financing and mechanism for delivery

Obtain the consent of the majority that will have to contribute



What Are What Are ExternalExternal Mechanisms? Mechanisms?

Municipal Entity Municipal Entity Another municipalityAnother municipality Organ of state (including a traditional authority) Organ of state (including a traditional authority)

CBOCBO NGONGO Any other institution or entity legally competent to Any other institution or entity legally competent to

operate a business activityoperate a business activity

External mechanisms

Competitive tenderingCompetitive tendering

Service D

elivery Ag

reemen

ts m

ust b

e entered

into


What Are What Are Municipal EntitiesMunicipal Entities??

Private Company

Service Utility

Multi- Jurisdictional Service Utility (MJSU)

The Act no longer allows the following as municipal entities:

Section 21 companies, trusts, etc.


Establishment of Establishment of Municipal Municipal EntitiesEntities: General Information: General Information

When considering establishing or participating in a municipal entity, a municipality must first -

determine precisely the service that such entity would perform on behalf of the municipality, and

make an assessment of the impact of shifting that service to the entity on the municipality’s staff, assets and liabilities, including an assessment of… —


Establishment of Establishment of Municipal Municipal EntitiesEntities: General Information : General Information (cont.)(cont.)

the number of municipal staff to be transferred to the entity

the number of municipal staff that would become redundant as a result of shifting the function or service

the cost to the municipality of any staff retrenchments or the retention of redundant staff

any assets of the municipality to be transferred to the entity

any assets of the municipality that would become obsolete because of shifting the service

any liabilities of the municipality to be ceded to the entity

any debt of the municipality attributed to that service which the municipality would retain


A municipality may establish or participate in a municipal entity only if, prior to the council meeting to approve this, it has —

made a public information statement setting out the municipality’s plans for the municipal entity, together with the assessment which the municipality must conduct,

invited the local community and other interested persons to submit comments or representations in respect of the proposed entity..

Establishment of Establishment of Municipal Municipal EntitiesEntities: General Information: General Information


solicited the views and recommendations of the National Treasury, DPLG and the MEC for LG in the Province, and

taken into account— the impact assessment any comments or representations on the matter received

from the local community, organised labour and other interested persons

any written views and recommendations on the matter received from the NT, DPLG and the MEC

Establishment of Establishment of Municipal Municipal EntitiesEntities: General Information : General Information (cont.)(cont.)


The functioning of municipal entities are regulated in terms of the MFMA in respect of -

Financial governance

Financial accountability

Reports and reportable matters

Functioning of Functioning of EntitiesEntities: : Municipal Finance Management Municipal Finance Management Act (MFMA)Act (MFMA)


The functioning of municipal entities are regulated in terms of the MSA in respect of -

Duties of municipalities

Municipal representatives may be councilors or officials

Governance

Councilors, officials, members of National Assembly & representatives in NCOP may not be Directors

Functioning of Functioning of EntitiesEntities: : Municipal Systems ActMunicipal Systems Act (MSA)


What Are What Are Private CompaniesPrivate Companies??

Pty (Ltd) Companies are referred to in section 19 and 20 of the Companies Act No 61 of 1973

Established and subject to the Companies Act

Juristic persons (separate legal entities) Johannesburg Water (Pty) Ltd is an example

of a similar entity Must enter a Service Delivery Agreement

(SDA)


Who may hold interests in Who may hold interests in private companiesprivate companies??

A municipality may:

establish or participate in establishing, or acquire or hold an interest in a private company

either acquire or hold full ownership, or acquire or hold a lesser interest – minority shareholding is possible

acquire or hold a lesser interest only if all the other interests are held by another municipality or municipalities or national or provincial organ/s of state


Who may hold interests in Who may hold interests in private companiesprivate companies? (cont.)? (cont.)

A municipality may acquire or hold an interest in a private company in which an investor (other than another municipality or a national or provincial organ of state) has an interest, but only if:

the municipality, or another municipality (or both municipalities) have effective control in the private company -- private shareholding is possible

“Effective control” means the power a shareholder has to appoint or remove at least the majority of the Board of Directors, or to control at least the majority of the voting rights, at a general meeting.


Are there conditions precedent Are there conditions precedent for establishing for establishing private private companiescompanies??

In the case of one municipality:

A municipality may establish a private company or acquire an interest in such a company only - for the purpose of utilising the company as a

mechanism to assist it in the performance of any of its functions or powers

if the municipality can demonstrate that- there is a need to perform that function or power in

accordance with business practices in order to achieve its strategic objectives more effectively

the company would benefit the local community


Are there conditions precedent Are there conditions precedent for establishing for establishing private private companiescompanies??

If two or more municipalities intend to establish a private company or to acquire interests in it, each of those municipalities must also -

consider and reach agreement on proposals for shared control of the company, and

consider cash flow projections of the company's proposed operations for at least three financial years


Rules that apply to Rules that apply to private private companiescompanies

A private company which is a municipal entity -

must restrict its activities to the purpose for which it is used by its ‘parent’ municipality

has no competence to perform any activity which falls outside the functions and powers of its establishing municipality


What Are What Are Service UtilitiesService Utilities??

Service utilities are:

established by a bylaw

juristic persons (separate legal entities)

under the sole control of the establishing municipality


Are there conditions precedent Are there conditions precedent for establishing for establishing service utilitiesservice utilities??

A municipality may establish a service utility only -

as a mechanism to assist the municipality in the performance of its functions or powers, and

if the municipality can demonstrate that -

the function or power could be performed more efficiently by a separate structure in order to achieve the strategic objectives of the municipality

the service utility would benefit the local community


What Rules Apply to What Rules Apply to Service Service UtilitiesUtilities??

No by-law may confer any functions or powers falling outside the competence of the parent municipality on a service utility

A service utility - must restrict its activities to the purpose for

which it was established has no competence to perform any activity

which falls outside its functions or powers in terms of the by-law


What are What are Multi Jurisdictional Multi Jurisdictional Service UtilitiesService Utilities (MJSUs)? (MJSUs)?

Established by a written agreement between two or more municipalities

Minister may request establishment in consultation with Minister of DWAF

The Act states what must be provided for in agreement Agreement is similar to a SDA Controlled by a governing body which is a juristic

person (independent legal entity) Accountable to municipalities


What rules apply to What rules apply to MJSUsMJSUs??

The MJSU: must restrict its activities to the purpose for

which it was established has no competence to perform any activity

which falls outside its functions in terms of the agreement


Rules that apply to Rules that apply to Other Other MunicipalitiesMunicipalities

Where a municipality decides to enter into a SDA with another municipality, the other municipality must conduct a Feasibility Study (FS)

The FS must be taken into account before the SDA is entered into


Rules that apply to Rules that apply to Other Other MunicipalitiesMunicipalities Feasibility Study must include an assessment of:

the impact on its budget, assets, liabilities and staff expenditure, for each financial year that it intends to serve as an external service provider

whether it will be necessary to increase the number of staff to enable it to be an external service provider, and whether it will be necessary to transfer or second any staff

Its ability to absorb any commitments, liabilities or employees involved, if and when the appointment as external service provider ends


What rules apply to What rules apply to Organs of Organs of StateState??

Example: Water boards

Any organ of state is subject to the PFMA and must inform National Treasury in writing and obtain approval from Minister of DWAF


What rules apply to What rules apply to CBOsCBOs, , NGOsNGOs and the and the Private SectorPrivate Sector??

Competitive procurement

The Municipal Finance Management Act regulates Public Private Partnerships


Public Private PartnershipsPublic Private Partnerships (PPPs)(PPPs)

The term ‘PPP’ is not defined in the Act

National Treasury regulations define PPPs in the context of national and provincial govt.

NT regulations provide a useful definition in the municipal context


Public Private PartnershipsPublic Private Partnerships

In NT Treasury regulations, national & provincial PPPs are defined as commercial transactions between an institution and a private party, in terms of which –

the private party either performs an institutional function on behalf of the institution for a specified or indefinite period, or acquires the use of state property for its own commercial purposes for a specified or indefinite period…;


Public Private PartnershipsPublic Private Partnerships (cont.)(cont.)

In the NT Treasury regulations, the private party receives a benefit for performing the function or by utilising state property, either by way of:

compensation from a revenue fund; charges or fees collected by the private party

from users or customers of a service provided to them; or

a combination of such compensation and such charges or fees



Municipalities may enter into PPP agreements, but only if they can demonstrate that the agreement will -

provide value for money to the municipality;

be affordable for the municipality; and

transfer appropriate technical, operational and financial risk to the private party


A PPP agreement must comply with any prescribed regulatory framework for PPPs

If the PPP involves the provision of a municipal service, it must comply with Chapter 8 of the MSA

Before a PPP is concluded, the municipality must conduct a Feasibility Study…



The Feasibility Study (FS) must –

explain the strategic and operational benefits of the PPP for the municipality in terms of its strategic objectives;

take into account all relevant information; describe in specific terms -

the nature of the private party’s role in the PPP the extent to which this role can be performed

by a private party…



describe in specific terms how the proposed agreement will –

provide value for money to the municipality

be affordable for the municipality

transfer appropriate technical, operational and financial risk to the private party

impact on the municipality’s revenue flows and its current and future budgets

The FS must also motivate for the capacity of the municipality to effectively monitor, manage and enforce the agreement



Before submitting the FS report and other relevant documents to Council for an in principle decision, the municipality must – make public the particulars of the proposed PPP

including the FS report, invite the local community and other interested

persons to submit comments or representations in respect of the proposed PPP, and

solicit the views and recommendations of National Treasury, DPLG and DWAF if the PPP involves the provision of water


THE S78 PROCESS THE S78 PROCESS ‘STEP BY STEP’‘STEP BY STEP’


STEP 7: DECIDE

STEP 5A: ASSESS EXTERNAL SERVICE

DELIVERY MECHANISMS

B: CONDUCT FEASIBILITY STUDY

STEP 4: IMPLEMENT APPROPRIATE INTERNAL

SERVICE DELIVERY MECHANISMS

• Allocate sufficient human, financial and other resources necessary for proper provisioning of the service

STEP 2: ASSESS INTERNAL SERVICE DELIVERY MECHANISMS

STEP 3:DECIDE on appropriate internal

service delivery mechanismto explore external service

delivery mechanisms

STEP 6GIVE NOTICE TO THE LOCAL

COMMUNITY

on internal mechanism

on external mechanisms

STEP 1: STATUS QUO ASSESSMENT

CRITERIA AND DECISIONS CRITERIA AND DECISIONS IN EACH STEPIN EACH STEP


Step 1: Status Quo AssessmentStep 1: Status Quo Assessment

The purpose of the status quo assessment is to identify water services challenges in the area and to have basis to evaluate the various mechanisms against these challenges

This approach is called a gap analysis It is important that all WSAs apply their minds

and evaluate service delivery mechanisms in their areas against existing challenges


Step 2: Assess Internal Step 2: Assess Internal MechanismsMechanisms

The municipality must assess the following in respect of providing the municipal service through an internal mechanism – Direct & indirect costs and benefits including

expected effect on environment, human health, well-being & safety

Existing & future capacity to furnish skills, expertise and resources

Criteria that applyCriteria that apply


Internal Assessment Criteria Internal Assessment Criteria (cont.)(cont.)

Extent to which the re-organisation of its Extent to which the re-organisation of its administrationadministration and the development of the and the development of the human resource capacity could be utilisedhuman resource capacity could be utilised

Likely impact on development, job creation, Likely impact on development, job creation, and employment patterns in the municipalityand employment patterns in the municipality

Views of organised labour Views of organised labour

May take developing trends into accountMay take developing trends into account


Step 3: Step 3: Decide on appropriate internal Decide on appropriate internal mechanism or, before taking a mechanism or, before taking a decision, explore the decision, explore the possibility of external possibility of external mechanismsmechanisms

Internal mechanism

OR

Assess external

mechanisms

WSA


Step 4: Implement Internal Step 4: Implement Internal MechanismMechanism

When implementing an internal mechanism, the municipality must make the necessary:

human,

financial and

other resources available, and

transform the provision of services

..in accordance with the Municipal Systems Act


Step 5a: Assess External Step 5a: Assess External MechanismsMechanisms

When municipality has decided to explore external mechanisms, it must give notice to the local community of its intention

The municipality must assess the different service delivery options, taking into account – The direct & indirect costs and benefits incl.

expected effect on environment, human health, well-being & safety

The provider's existing & future capacity to furnish skills, expertise and resources

Criteria that apply


External Criteria (continued)External Criteria (continued)

Views of local communities

Views of organised labour

Likely impact on development, job creation, and employment patterns in the municipality


Step 5b: Conduct a Feasibility Step 5b: Conduct a Feasibility StudyStudy FS must be taken into account and must

include: a clear identification of the municipal service

for which the municipality intends to consider an external mechanism,

an indication of the number of years for which the provision of the municipal service through an external mechanism might be considered,

the projected outputs the provision of the municipal service through an external mechanism might be expected to produce,


Feasibility Study to include..Feasibility Study to include..

an assessment of the extent to which the provision of the municipal service through an external mechanism will - provide value for money

address the needs of the poor

be affordable for the municipality and residents

transfer appropriate technical, operational and financial risk

the projected impact on the municipality's staff, assets and liabilities,


Feasibility Study to include..Feasibility Study to include..

the projected impact on the municipality's Integrated Development Plan (IDP),

the projected impact on the municipality's budgets for the period for which an external mechanism might be used, including impacts on revenue, expenditure, borrowing, debt and tariffs, and

any other matter that may be prescribed.


Step 6: Give Notice to the Step 6: Give Notice to the Local CommunityLocal Community

The community:

must be informed when the municipality considers external mechanisms

must be consulted and informed of the contents of a service delivery agreement before the agreement is signed (see both MSA & MFMA)

must be consulted and informed on the establishment of municipal entities and PPPs

The community’s views on external service delivery mechanisms must be assessed


Step 7: Make the DecisionStep 7: Make the Decision

Decide on and implement appropriate internal mechanism or external mechanisms

Council resolution:Delivery mechanism

Council resolution:Delivery mechanism

IMPORTANT IMPORTANT CONSIDERATIONSCONSIDERATIONS


Considerations when Considerations when conducting S78 Assessmentsconducting S78 Assessments

Is the service a municipal service?

Do you have a budget allocated to undertake the assessment/s?

What should the scope and extent of the assessment/s be?

What regional efficiencies & benefits of scale should be considered in the municipal area and in respect of neighboring municipalities?

What are the requirements of sector legislation?

What other processes are impacting on the assessments?

Community participation


What is a Municipal Service?What is a Municipal Service?

Municipal Systems Act definition:

“a service that a municipality, in terms of its powers and functions, provides to or for the benefit of the community, irrespective of whether…”

the service is provided or will be provided through an internal or external service delivery mechanism, or

fees, charges or tariffs are levied in respect of the service or not


What is a Municipal Service?What is a Municipal Service?

The powers & functions of municipalities are listed in the Constitution and the Municipal Structures Act

Not all the matters listed in the Constitution and Municipal Structures Act are municipal services


Funding Section 78 AssessmentsFunding Section 78 Assessments

Budget allocations for section 78 assessments must be informed by the scope and extent of assessment/s

National government funding is available


DWAF: Provides direct support and oversight to

municipalities on identified strategic focus areas

Strategic focus areas are municipalities – receiving transfer of DWAF schemes

with institutional complexities

with regional schemes are affected by P&F

Funding Section 78 AssessmentsFunding Section 78 Assessments


DPLG FUNDING:DPLG FUNDING: MSIG to DMs to strengthen institutional

capacity within DMs and LMs Key focus areas of funds:

Establishment and governance IDP Performance Management System Establishment & Operation of PMMS Centres Implementation of P & F

Use of flexible portion is at the discretion of municipalities - may be used for S78

Flexible PortionFlexible Portion


The scope and area covered by the S78 is in the discretion of the municipality

Some considerations …

Political implications Scale of expenditure

Importance of service Potential for community & labour conflict

Geography & demographics

Urgency (time, levels of services, legislative non-compliance)

Factors that Influence the Scope Factors that Influence the Scope of S78 Assessmentsof S78 Assessments


Regional Efficiencies and Regional Efficiencies and Benefits of ScaleBenefits of Scale

How can regional efficiencies be achieved?

How can benefits of scale be maximised?

What are the potential benefits of partnering with a neighboring municipality?


Section 11: In ensuring access to water services, a WSA must take into account, among other factors:

alternative ways of providing access to water services

the need for regional efficiency

the need to achieve benefit of scale

the need for low costs

the requirements of equity

the availability of resources from neighboring WSAs

Considerations in terms of the Considerations in terms of the Water Services ActWater Services Act


Water Services Act and ContractsWater Services Act and Contracts

Section 19:

A WSA may only enter into a contract with a private sector water services provider after it has considered all known public sector water services providers which are willing and able to perform the relevant functions.

SECTOR POLICY: The Strategic Framework for Water Services


Transfer of National Water Transfer of National Water Services Works and S78 Services Works and S78 AssessmentsAssessments

S78 assessments run parallel with National Gov. programme for transfer of nationally owned water services works to municipalities

S78 assessments to be completed by ‘04

Transfer agreements to be signed by ‘05

S78 & Transfers require decisions on appropriate service delivery mechanism/s



Section 78 assessments should include areas served by National government water services works in section 78 assessments to avoid duplication of processes and appropriate decision-making in respect of whole area



Example: significant extension of area

Does it make sense to do S78 for P&F now and S78 for transfers later?

Appropriate service delivery in WHOLE municipal area is important Area where DWAF owns &

operates WS works

Area to which Municipality currently provides services

Municipal area of jurisdiction

DECISION MAKINGDECISION MAKING


Decision makingDecision making

Final decision is an administrative action Administrative action is regulated by the

Promotion of Administrative Justice Act 3 of 2000

Anyone that feels that their rights have been adversely affected may take decisions on review

A number of grounds may give rise to review Important to undertake S78 assessments and

decisions in a manner that will not give rise to a review

COMMUNITY PARTICIPATIONCOMMUNITY PARTICIPATION


Community ParticipationCommunity Participation

The Municipal Systems Act emphasises and creates legislative obligations for municipalities

The Act obliges municipalities to develop a culture of municipal governance that complements formal representative government with a system of participatory governance

Municipalities must therefore encourage and create conditions for local communities to participate in the affairs of the municipality, including in strategic decisions relating to the provision of municipal services


Who is the Local Community?Who is the Local Community?

The Act defines the “local community” as that body of persons comprising -

the residents or ratepayers of the municipality

any civic organisations, NGOs, private sector or labour organisations involved in local affairs

Others residing outside the municipal area who make use of services or facilities provided by the municipality

and specifically includes the poor and other disadvantaged groups


Community Participation & S78Community Participation & S78

Remember that the community:

must be informed when the municipality considers external mechanisms

must be consulted and informed of the contents of a service delivery agreement before the agreement is signed (see both MSA & MFMA)

must be consulted and informed on the establishment of municipal entities and PPPs

The community’s views on external service delivery mechanisms must be assessed


What mechanisms for What mechanisms for community participation?community participation?

Local communities must participate in the affairs of the municipality through -

political structures (such as ward committees) the mechanisms, processes and procedures for

participation in municipal governance established in terms of the MSA

other appropriate mechanisms, processes and procedures established by the municipality

councillors


A municipality must establish mechanisms and procedures to enable the local community to participate in its affairs, and provide for -

receiving, processing and considering petitions and complaints

notification and public comment procedures public meetings and hearings by the municipal

council, political structures and office bearers consultative sessions with locally recognised

community organisations and, where appropriate, traditional authorities

report-back to the local community

Mechanisms for community Mechanisms for community participationparticipation


What mechanisms for community What mechanisms for community participation?participation?

When establishing participation mechanisms, the municipality must take into account the special needs of people who cannot read or write, people with disabilities, women and other disadvantaged groups


What information must be What information must be communicated?communicated?

Municipalities must:

communicate any information concerning available participation mechanisms to encourage and facilitate community participation

when communicating information, take language preferences and usage, and the special needs of people who cannot read or write, into account


How does communication take How does communication take place?place?

When the municipality needs to notify the community through the media in terms of this Act or any other applicable legislation, it must be done - in the local newspaper or newspapers in the area

in a newspaper or newspapers circulating in its area and determined by the council as a newspaper of record; or

by means of radio broadcasts covering the municipality’s area


How does communication take How does communication take place?place? Any notification must be in the official languages

determined by council with regard to language preferences and usage in the area

A copy of each notice published in the Provincial Gazette, media or legislation must be displayed at the municipal offices

When the local community is invited to submit written comments or representations, it must be stated in the invitation that assistance will be provided to transcribe comments or representations


How does communication take How does communication take place?place?

All documents that must be made public in terms of the MSA, the MFMA or other legislation, must be conveyed to the local community -

by display at the municipality's head and satellite offices and libraries

by display on the municipality's official website

by notifying the local community where detailed particulars can be obtained

If appropriate, any notification must invite the local community to submit written comments or representations

IMPLEMENTING S78 IMPLEMENTING S78 DECISIONS DECISIONS


Implementing S78 DecisionsImplementing S78 Decisions

When implementing an internal mechanism: Must make the necessary human, financial and

other resources available, and transform the provision of services in accordance with the Municipal Systems Act

When implementing an external mechanism:

Consider municipal responsibilities

Consider procurement

Service delivery agreements


External Mechanism: Municipal External Mechanism: Municipal ResponsibilitiesResponsibilities

The municipality:

remains responsible for ensuring that the service is provided to the local community

must regulate the provision of the service

must monitor and assess the implementation of SDA (including the performance of the service provider/s)



The municipality must also:

perform its functions and exercise its powers in terms of the IDP & performance management if the municipal service falls within IDP development priorities

Control the setting and adjustment of tariffs within the tariff policy determined by the municipal council



The municipality must exercise its authority to ensure uninterrupted service delivery

The SDA must ensure continuity of the service if the service provider is unable to continue performing its functions

The municipality must, where applicable, take over the municipal service, including all assets, when the service delivery agreement expires or is terminated

PROCUREMENT, PROCUREMENT, NEGOTIATION AND NEGOTIATION AND

CONCLUDING SERVICE CONCLUDING SERVICE DELIVERY AGREEMENTSDELIVERY AGREEMENTS


Type of ProcurementType of Procurement

Where a municipal entity, another municipality, or an organ of state is selected:

No competitive procurement is required

The municipality may negotiate and enter into a SDA

The SDA must include matters provided for in S81 of MSA and regulations made under S19 of Water Services Act



Before entering into an agreement: Municipal entity: may be established after

assessment and consultation requirements are met

Another municipality: a feasibility study must be conducted

Organ of state: inform National Treasury and obtain DWAF approval

The community must be consulted and informed on the contents and implications of agreements



Where any other entity (private sector, NGO or CBO) is selected: MFMA PPP requirements to be met (feasibility study

and consultation requirements) prior to procurement

Competitive procurement required prior to negotiation of SDA

MSA S83 applies

MFMA supply chain management provisions apply


Competitive Procurement: S83 Competitive Procurement: S83 of the MSAof the MSA

Selection processes must – comply with MFMA supply chain management allow all prospective service providers to have equal

and simultaneous access to information relevant to the bidding process

minimise the possibility of fraud and corruption make the municipality accountable to the local

community on progress with selecting service provider and the reasons for any decisions

take into account the need to promote the empowerment of small and emerging enterprises



A municipality may determine a preference for categories of service providers to advance the interest of persons disadvantaged by unfair discrimination in accordance with the Preferential Procurement Policy Framework Act

Such preference may not compromise or limit the quality, coverage, cost and developmental impact of the services



The selection process must be fair, equitable, transparent, cost-effective and competitive, and as provided for in other applicable national legislation

In selecting a service provider, the criteria listed in section 78 as well as any preference for categories of service providers, must be applied


MFMA: Supply Chain ManagementMFMA: Supply Chain Management

Applies to the selection of external mechanisms (other than another organ of state) for the provision of municipal services

Must be read with sections of the Act on the disposal of capital assets

Municipality and each municipal entity must have and implement a supply chain management policy which gives effect to the provisions of the Act


The supply chain management policy of a municipality or municipal entity must be fair, equitable, transparent, competitive and cost effective, comply with a prescribed regulatory framework and provide for specified matters

Councillors may not be members of tender committees

MFMA: Supply Chain ManagementMFMA: Supply Chain Management


After selecting a prospective service provider, the municipality must negotiate the final SDA on the basis of the bidding documents, any addenda, amendments or variations provided to all the bidders

The community to be consulted and informed on contents of the agreement

Must enter into such an agreement on terms and conditions specified in the bidding documents, as modified or supplemented in the negotiations (modifications may not compromise the integrity of the bidding process)

Negotiating the SDA with the Negotiating the SDA with the Preferred Bidder/sPreferred Bidder/s


The SDA must include matters provided for in S81 of MSA and regulations made under S19 of Water Services Act

If municipality and selected service provider fail to reach agreement within a reasonable time, the municipality may negotiate with the next-ranked service provider

Negotiating the SDA with Negotiating the SDA with Preferred Bidder/sPreferred Bidder/s


On concluding the SDA, the municipality must: make copies of the agreement available at its

offices for public inspection

give notice in the media of:

particulars of service that will be provided under the agreement

the name of the selected service provider; and

the place and the period for which copies of the SDA are available for public inspection

Negotiating the SDA with Negotiating the SDA with Preferred Bidder/sPreferred Bidder/s


Contracts having future Contracts having future budgetary implications (more budgetary implications (more than 2 years)than 2 years)

A municipality may enter into a contract which will impose financial obligations on the municipality beyond a budget year

If this is the case, it may only do so if, prior to the meeting of the council at which the contract is to be approved, it has…


made the draft contract and information statement summarising the municipality’s obligations public

invited the local community and other interested persons to submit comments or representations in respect of the proposed contract

solicited the views and recommendations of the National Treasury, DPLG and DWAF if the contract involves the provision of water

Contracts having future Contracts having future budgetary implications (cont.)budgetary implications (cont.)


and taken into account— the municipality’s projected financial obligations in terms

of the proposed contract for each financial year covered by the contract;

the impact of those financial obligations on the municipality’s future municipal tariffs and revenue;

any comments or representations on the proposed contract received from the local community and other interested persons; and

any written views and recommendations on the proposed contract by the NT, DPLG and DWAF



and has adopted a resolution in which —

it determines that the municipality will secure a significant capital investment or will derive a significant financial economic or financial benefit from the contract;

it approves the entire contract exactly as it is to be executed; and

it authorises the municipal manager to sign the contract on behalf of the municipality



The process does not apply to -

contracts for long-term debt regulated elsewhere in MFMB

employment contracts

contracts for categories of goods as may be prescribed

Contracts having future Contracts having future budgetary implicationsbudgetary implications


The process also does not apply to - Contracts in terms of which the financial obligation

on the municipality is below - a prescribed value; or

a prescribed percentage

of the municipality’s approved budget for the year in which the contract is concluded

Contracts having future Contracts having future budgetary implicationsbudgetary implications

Thank You

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