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Louise Muller
President
IMFO
South Africa
Legislation and
Regulatory
Requirements
of Municipal
and Utility
Entities
Presentation outline
Guiding Legislation in South Africa
National Government Principles
Oversight Responsibilities
Role of the Regulator and Regulatory
Responsibilities
Establishing a Municipal Entity in South Africa
Essential Facets of Good Governance
Guiding Legislation
Supreme Legislation - The Constitution
Companies Act
National Government Legislation - PFMA
Suite of Local Government Legislation – MStrucA;
MSA, MFMA, MPRA, MFPFA, etc
Sector Legislation – Water, Electricity, etc
King III – Good governance principles
GOAL: Sound & sustainable management of
available resources
National Government Principles
Enabling legislation – Legislature grants authority
to take certain actions. For example, enabling acts
often establish government agencies to carry out specific
government policies
Integrated development planning (IDP) –
Municipal strategic planning
strong emphasis on community participation,
planning to be development orientated and
in the spirit of co-operative government
Corporate performance management system
National Government Principles (2)
“Batho Pele” (“People First”) -“We belong, we
care, we serve” - defines service delivery ethos
with principles of: Consultation
Known service standards
Redress where these are not met
Equal access
Courtesy
Information
Openness and transparency
Value for money
Oversight Responsibilities
Department of Cooperative Government &
Traditional Affairs have overarching
responsibility of strengthening cooperative
governance
Water Affairs, Mineral Resources, Energy,
Transport and Human Settlements have a direct
role in monitoring sector-specific outcomes &
service delivery
Regulatory Roles – NERSA, Water Boards, etc.
Oversight Responsibilities (2)
Section 139 of Constitution provides for provincial
government intervention in local government when
needed to:
Maintain national security
Maintain economic unity
Maintain essential national standards
Prevent a municipality from taking unreasonable action
that could be prejudicial to the interests of the other
province or municipality
Maintain minimum standards required for rendering
services
Oversight Responsibilities (3)
Often there are:
sector-specific regulators,
general regulators (such as competition
authorities), and
special agencies or
ministries
charged with specific tasks that all share common
duties.
Role of the Regulator
Regulator mandate established in Constitution
Responsibilities clarified in national legislation- e.g
Welcome to the National Energy Regulator of South Africa
The National Energy Regulator (NERSA) is a regulatory authority
established as a juristic person in terms of Section 3 of the National
Energy Regulator Act, 2004 (Act No. 40 of 2004). NERSA’s mandate is
to regulate the Electricity, Piped-Gas and Petroleum Pipeline industries
in terms of the Electricity Regulation Act, 2006 (Act No. 4 of 2006), Gas
Act, 2001 (Act No. 48 of 2001) and Petroleum Pipelines Act, 2003 (Act
No. 60 of 2003). The structure of the Energy Regulator consists of nine
members, five of whom are part-time and four are full-time, including the
CEO. The Energy Regulator is supported by a secretariat under the
direction of the CEO. http://www.nersa.org.za/
Regulatory Responsibilities
Total freedom sometimes leads to unfair business
practices, cartelization and so on – especially
where there is a single supplier/ monopoly.
A balance has to be struck – referee between
players.
A Regulator is set up by the government to ensure
that the ordinary citizen gets desired services at a
reasonable cost.
Regulatory Responsibilities (2)
Regulators, guided by the policy of the government,
must obtain the views of all the stakeholders;
work within the framework of the law,
should not be hampered by government interference and
should not be manipulated by powerful private enterprises.
The Regulator would then establish:
Reasonable return on investment and
Roll-out needs or continuous development of the
infrastructure to meet future needs when
The pricing policy and service standards are set.
Regulatory Responsibilities (3)
May conclude that, when diligently and correctly
carried out, the Role of the Regulator is essential to
ensure:
Supply reliability
Continuous investments
Reasonable pricing
Proper market behaviour
Maintenance of service standards, etc
Establishing a Municipal Entity in
South Africa
When considering the establishment of, or participation in, a municipal entity, a municipality must first assess:
Direct and indirect costs and benefits associated if the service is provided through an internal mechanism taking into consideration the expected effect on environment, human health, well-being and safety;
Municipal organisational administrative and human capacity and potential future capacity to furnish skills, expertise and resources;
Impact on development, job creation and employment patterns and views of organised labour.
Establishing a Municipal Entity in
South Africa (2)
If the Council decides that an external mechanism then:
Notify the community of intentions;
Assess all the options before – just also considering the capacity of prospective service providers to furnish the skills, expertise and resources; and
Conduct a feasibility study including:
Clear identification of the service to be rendered;
Timeframe envisaged for the provision of the service(s);
Outputs to be achieved;
Establishing a Municipal Entity in
South Africa (3)
Assessment on how this will provide Value for money;
Address the needs of the poor;
Be affordable for the municipality and the residents;
Transfer appropriate technical, operational and financial risk.
Projected impact on municipal staff, assets and liabilities
Projected impact on the municipal Integrated Development Plan (IDP);
Projected impact on budget including revenue impact, expenditure, borrowing, debt and tariffs.
Council then determines if an external mechanism should be further considered.
Establishing a Municipal Entity in
South Africa (4)
When considering the establishment of, or participation in, a municipal entity, a municipality must first:
determine precisely the function or service that such entity would perform on behalf of the municipality; and
make an assessment of the impact of the shifting of that function or service to the entity on the municipality's staff, assets and liabilities, including an assessment of:
the number of staff of the municipality to be transferred to the entity;
the number of staff of the municipality that would become redundant because of the shifting of that function or service;
Establishing a Municipal Entity in
South Africa (5)
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 the shifting of that function or service;
any liabilities of the municipality to be ceded to the entity; and
any debt of the municipality attributed to that function or service which the municipality would retain.
» Section 78 of Municipal Systems Act, Act 32 of 2000 AND
» Section 84 of Municipal Finance Management Act, Act 56 of 2003
Establishing a Municipal Entity in
South Africa (6)
External delivery mechanism can be:
A municipal entity
A private company
A service utility (within municipal jurisdiction)
A multi-jurisdictional service utility
Another municipality
An organ of state
A community based organisation of non-governmental organisation
Any other legally competent institution, entity or person
Good Governance
Generally and globally accepted attributes,
ingredients and characteristics of good governance
include:
1) transparency
2) accountability
3) responsibility (obligation to give explanation,
responsiveness, interaction between press and offices)
4) legitimacy
5) independent judiciary
6) rule of law
7) effective management of public and private
sectors,
8) participation,
9) administrative integrity,
10)vibrant civil society
11)respect for individual liberty and freedom (respect
for human rights)
12)decentralization and local governance.
Good Governance (2)
7) effective management of public and private
sectors
8) Participation
9) administrative integrity
9) vibrant civil society
10)respect for individual liberty and freedom (respect
for human rights)
11)decentralization and local governance.
Good Governance (3)
The seven Nolan Principles of good governance:
1. Selflessness: professional decisions should benefit the
public, not themselves,
2. Objectivity: not favor one public or private group over
another,
3. Integrity: not beholden to improper influence,
4. Honesty: not just telling the truth, disclose relationships
with the potential for a conflict of interests
5. Accountability: for own actions and actions of staff
6. Openness: Transparent reporting
7. Leadership: practice the above principles and enforce
them amongst their staff
Good Governance
Whatever principles used, whether:
King III,
Nolan Principles
Other Governance Principles
The Bottom line is -
Good governance is highly associated with political and
bureaucratic accountability to public needs, transparency
in finance, auditing and decision making, a fair and
reliable judicial system, freedom of information and
expression, with civil expression, effective and efficient
public sector management and cooperation with civil
society organizations (UNDP, 1995:22; Dahal, 1996:6)