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)

Thank you

Dankie

Enkosi

Any Questions?