LGL Study Guide PDF

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University of South Africa
Muckleneuk, Pretoria
LGL3702/1/2020–2025
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2 CONTENTS
GENERAL OVERVIEW ix
LEARNING UNIT 1: Introduction to local government law 2
LEARNING UNIT 2: The impact of the Constitution on local government 18
LEARNING UNIT 3: The operational forms of municipalities (including the

establishment of municipalities) 37
LEARNING UNIT 4: The governance structure of a municipality 57
LEARNING UNIT 5: Municipal public administration 88
LEARNING UNIT 6: Powers and functions 105
LEARNING UNIT 7: Municipal service delivery 127
LEARNING UNIT 8: Municipal finance and fiscal management 156
LEARNING UNIT 9: Municipal revenue 230
LEARNING UNIT 10: Municipal public administration, public participation and

development planning 251
LGL3702/1/2020 –2025 (iii)

(iv)
1 GENERAL OVERVIEW
The purpose of this study guide is to guide you through the general principles of local
government law in South Africa. Local government law centres on the governance
structure, powers and duties of municipalities. The overall purpose of municipalities
is to deliver services to communities across South Africa. Local government law is
founded on general and specific sections in the Constitution of the Republic of South
Africa, 1996 and a number of Local Government Statutes.
PURPOSE OF MODULE
The focus of this module is to equip you with in-depth legal, theoretical and practi-
cal knowledge of the current structure, management, administration and functions
of municipalities. In addition, you will be qualified to critically analyse and evaluate
the legality of fact-based scenarios that concern the everyday workings of our local
government system. You will have the expertise and skills to apply your knowledge of
local government law to the operation of a given municipality and to assess whether
the municipality as legal entity is functioning in line with the Constitution and the
statutes that aim to give effect to the Constitution.
It is essential for you to study this guide in conjunction with relevant case law, ex-
tracts from textbooks, journal articles and legislation in order to complete this module
successfully. During the course of the year, you will also receive tutorial letters that
form part of your prescribed study material. Upon completion of this module you will
acquire the following skills/learning outcomes.
LEARNING OUTCOMES
Successful completion of your assignments and a range of tasks set in your study
material – combined with acceptable results in your examinations – will show that
you have achieved the following outcomes:
Outcome 1
Explain the nature, status, values and objectives of pre-1994 and post-1994 local
government in light of both the transition that this area of law has undergone in the
new constitutional dispensation and the constitutional principles that now pertain to
municipalities.
Assessment criteria
• The pre-1994 local government system is compared to the current municipal system.
• The constitutional and legislative objectives that pertain to post-1994 local
government law is explained with reference to underlying constitutional principles
and values.
LGL3702/1 (v)
GENERAL OVERVIEW
Outcome 2
Analyse the establishment (and demarcation) of new municipalities with special
emphasis on the different categories and types of newly established municipalities.
Assessment criteria
• The composition and election of municipalities are analysed in order to aid

understanding of local government administration.
• The various categories and types of municipalities are described and compared.
Outcome 3
Examine the current governance structure of municipalities, including municipal
administration and public administration.
Assessment criteria
• Municipal administration is described and critically evaluated with specific reference

to the role of municipal councils.
• Municipal development planning, capacity building and performance management
are identified and examined in the context of public administration.
Outcome 4
Critically analyse the division of powers and functions of municipalities with special
emphasis on municipal service delivery and households’ constitutional rights to basic
services.
Assessment criteria
• Original and assigned municipal powers are distinguished and analysed.

• Municipal service delivery is explained and analysed in light of the relevant
constitutional and legislative provisions.
• Legitimacy of delegation is critically evaluated with reference to the possibility of
external service delivery.
• Different entities in service delivery are assessed based on compatibility
and competencies.
Outcome 5
Examine the financial management of municipalities with reference to the relevant
role-players.
Assessment criteria
• Municipal budgeting is described in light of the relevant constitutional and legislative

provisions.
• The self-reliance of municipalities regarding financial management is examined.
• Authorised and unauthorised expenditure are described and compared.
Outcome 6
Explain the various concepts that form part of the financial operations of municipalities.
(vi)
General overview
Assessment criteria
• Asset and liability management is explained as part of the overall municipal finance
management.
• Equitable share, transfers, surcharges, taxes and property rates are described
as components of direct municipal revenue.
• Procurement is defined and contextualised in the local government context.
• Provincial and national monitoring is explained as a tool for ensuring proper local
government operations.
STUDY MATERIAL
By way of introduction to each learning unit you will find references to the relevant
prescribed extracts from textbooks, journal articles and case law/judicial decisions.
Please note:
The prescribed extracts from textbooks, journal articles and case law/judicial deci-
sions form part of your study material and should be studied in conjunction with
the content of this study guide.
PRESCRIBED STUDY MATERIAL

What follows below is a list of references to the said prescribed material in this study
guide:
Please note:
All the prescribed material (including the prescribed court cases) is available on
the Unisa website (myUnisa) under the heading “e-Reserves” as part of your study
package. However, note that the court decisions are also available on the website:
http://www.saflii.org
1. Books
Bekink B Principles of South African Local Government Law (Durban: LexisNexis
2006) (in this guide referred to as Bekink)
The following pages are prescribed:
Pages 3–14; 48–52; 75–78; 117–120; 121–122; 122–124; 159–167; 312–319; 471–472;
482–484; 488–490;
Please note further:

It must be emphasised that the full publication is NOT prescribed but only the extracts
as indicated above. It is therefore unnecessary to purchase the book.
2. Journal articles
Madzivhandila TS & Asha AA “Integrated development planning process and service
delivery challenges for South Africa’s local municipalities” (2012) 47 Journal of
Public Administration 369–378
Mle TR & Maclean S “Ethics, integrity and good governance: The case of South Af-
rica’s local sphere of government” (2011) 46 Journal of Public Administration
1364–1383
LGL3702/1 (vii)
GENERAL OVERVIEW
Nealer E & Raga K “Nature and extent of local governance in South Africa” (2007)
42 Journal of Public Administration 171–182
Steytler N & Fessha YT “Defining local government powers and functions” (2007)
124 SALJ 320–337
Phago KG & Malan LP “Public Private Partnerships (PPPs) and their role in extending
access to local governance” (2004) 39 Journal of Public Administration 481–491
Mubangizi BC “Improving public service delivery in the new South Africa: Some
reflections” (2005) 40 Journal of Public Administration 633–648
Nkuna NW & Nemutanzhela TL “Locating the role of service delivery within powers
and functions of local government in South Africa” (2012) 47 Journal of Public
Administration 355–368
3. Case law
Please note:
Some of the cases (the references to them are set out in chronological order below)
are indicated as “read only”, but “read only” does NOT mean ignore them completely!
(See below.) Cases, which you have to study, will be distinctly indicated as such – some
of them require you to study the case in full whilst in others the relevant paragraphs
to be studied will be clearly demarcated.
In re: Certification of the Constitution of the Republic of South Africa, 1996 1996 (10)
BCLR 1253 (CC)
Certification of the Amended Text of the Constitution of the Republic of South Africa,
1996 1997 (1) BCLR 1 (CC)
Fedsure Life Assurance Ltd and Others v Greater Johannesburg Transitional Metro-
politan Council and Others 1998 (12) BCLR 1458; 1999 (1) SA 374 (CC)
Pretoria City Council v Walker 1998 (2) SA 363 (CC)
Garden Cities Incorporated Association not for gain v Northpine Islamic Society 1999
(2) SA 257 (C)
Fedsure Life Assurance v Greater JHB TMC 1998 (2) SA 115 (SCA)
City of Cape Town v Ad Out-post (Pty) Ltd 2000 (2) SA 733 (C)
Government of the RSA v Grootboom 2001 (1) SA 46 (CC)
Cape Metropolitan Council v Metro Inspection Services CC 2001 (3) SA 1013 (SCA)
Port Elizabeth Municipality v Peoples Dialogue on Land and Shelter 2001 (4) SA 759 (E)
North Central Local Council and South Central Local Council v Roundabout Outdoor
(Pty) Ltd 2002 (2) SA 625 (D)
City of Cape Town and Other v Robertson and Other 2005 (2) SA 323 (CC)
Matatiele Municipality and Others v President of the Republic of South Africa and
Others 2006 (5) SA 47 (CC)
Doctors for Life International v Speaker of the National Assembly and Others 2006
(6) SA 416 (CC)
Others 2007 (1) BCLR 47 (CC)
CDA Boerdery (Edms) Bpk and Others v The Nelson Mandela Municipality and Oth-
ers 2007 (4) SA 276 (SCA)
Merafong Demarcation Forum and Others v President of the Republic of South Africa
and Others 2008 (5) SA 171 (CC)
Residents of Joe Slovo, Western Cape v Thubelisha Homes and Others 2010 (3)
SA 454 (CC)
Mazibuko and Others v City of Johannesburg and Others 2010 (4) SA 1 (CC)
City of Johannesburg Metropolitan Municipality v Gauteng Development Tribunal
2010 (9) BCLR859 (CC)
(viii)
General overview
City of Johannesburg Metropolitan Municipality v Blue Moonlight Properties 39 (Pty)

Ltd and Another 2012 (2) SA 104 (CC)
Schubart Park Residents’ Association and Others v City of Tshwane Metropolitan
Municipality and Another [2012] ZACC 26; 2013 (1) BCLR 68 (CC)
Capricorn District Municipality and Another v South African National Civic Organisa-
tion [2014] ZASCA 39; 2014 (4) SA 335 (SCA)
City of Johannesburg Metropolitan Municipality v Chairman of the Valuation Appeal
Board for the City of Johannesburg and Another [2014] ZASCA 5; 2014 (4)
SA 10 (SCA)
Meadow Glen Home Owners Association and Others v City of Tshwane Metropolitan
Municipality and Another Capricorn District Municipality and Another v South
African National Civic Organisation [2014] ZASCA 209; 2015 (2) SA 413 (SCA);
City Power (Pty) Ltd v Grinpal Energy Management Services (Pty) Ltd and Others
[2015] ZACC 10; 2015 (6) BCLR 660 (CC)
Nelson Mandela Bay Municipality v Amber Mountain Investments (Pty) Ltd [2017]
ZASCA 36; 2017 (4) SA 272 (SCA)
4. Legislation
Throughout this module, you will see a number of references to the Constitution of
the Republic of South Africa, 1996. It is vital that you study these relevant sections
of the Constitution carefully since the Constitution is the supreme law of the country.
It is essential that you obtain a copy of the Constitution. The Constitution’s text is
available on the internet at www.saflii.org
In addition to the relevant sections of the Constitution you will also see numerous
references to the applicable sections in the local government laws. These laws in-
clude the following: The
• Local Government: Municipal Demarcation Act 27 of 1998;

• Local Government: Municipal Structures Act 117 of 1998;
• Local Government: Municipal Systems Act 32 of 2000;
• Local Government: Municipal Electoral Act 27 of 2000;
• Local Government: Municipal Finance Management Act 56 of 2003; and the
• Local Government: Municipal Property Rates Act 6 of 2004.
5. Policy papers
White Paper on Local Government, March 1998 published in Government Notice
423 of 1998. It is also available on the website of the Department of Co-operative
Government and Traditional Affairs (CoGTA) (earlier known as the Department of
Provincial and Local Government (DPLG))
It is essential that you study this study material carefully when and where this guide
refers you to it. It is therefore important to remember that although you will use this
study guide as your primary guide when studying Local Government Law (LGL3702)
the above-mentioned material is part of your learning material.
Please note:
We encourage you to visit the web page of the Department of Co-operative Govern-
ment and Traditional Affairs (CoGTA) regularly to keep abreast of developments in
the sphere of local governance and the field of local government law in South Africa.
The website address is www.cogta.gov.za
LGL3702/1 (ix)
GENERAL OVERVIEW
RECOMMENDED STUDY MATERIAL

We also consulted the listed publications below in our research and mention these
publications to complete the bibliography. However, take particular note of the refer-
ence to the Steytler and De Visser publication since this is the definitive textbook on
local government in South Africa.
Steytler NC and De Visser J Local Government Law of South Africa (Durban: But-
terworths 2007)
Mathenjwa M Supervision of Local Government (Cape Town: Juta 2017)
Van Wyk J Local Government (LAWSA 2007)
METHOD OF STUDY
This study guide is the primary source of your learning material but you MUST STUDY
it in conjunction with all the relevant prescribed study material set out under the heading
“Prescribed study material” above and demarcated at the beginning of each learning
unit. “Study” means that you have to learn the material for final examination (or to
use the elegant phrase “summative assessment”) purposes. As regards the verb “to
study” we must emphasise that we do not advocate parrot-type learning but stress
the need for a proper understanding of the relevant statutory provisions. However,
there are (unfortunately!) some principles/concepts that you will have to internalise/
study. In other words, you have to make them your own by getting to the point that you
are able to explain in your own words what the particular principle/concept means.
The guide will also clearly indicate which statutory provisions you should merely read
or carefully read. You will not be examined on the sections that you are required only
to read or carefully read. It is important to read these sections carefully in order for
you to understand other sections and, of course, for you to be able to appreciate the
overall picture regarding this field of law.
The purpose of this study guide is to explain difficult concepts and principles pertain-
ing to amongst others, key features of local governments’ powers and functions. In
essence, this study guide therefore constitutes the primary source of your learning
material. However, in the study guide you will also see references to case law, extracts
from textbooks and journal articles. These sources also form part of your prescribed
study material. To repeat, YOU MUST STUDY ALL the sources, paragraphs and
references to the prescribed materials, case law, journal articles and the like. We
also repeat that the sections that merely require CAREFUL READING or READING
will be clearly pointed out to you. However, you are actually required to read these
sections or paragraphs in order to understand fully other more important sections.
During the course of the year, you will receive tutorial letters and it is very likely that
we will prescribe additional material in these tutorial letters. The additional material
might include case law, legislative amendments, journal articles or even relevant
book extracts. The additional material will therefore also form part of your prescribed
material and you can expect to be examined on them.
At the end of each learning unit, you will see a number of self-assessment questions.
The purpose of these questions is for you to self-assess whether you understand the
content of the learning unit and whether you can in fact apply it. We encourage you
to answer these questions carefully upon completion of each learning unit.
(x)
General overview
Please note:
The self-evaluation questions are examples of the kind/type of questions you can
expect as essay-type ones on examination/assessment day. (See below for some
guidelines on how to approach essay-type questions.)
It will also be beneficial for you to keep a “learning journal” (see below) in which
you can make notes and complete the self-assessment questions. Essentially, you
should engage with this study guide and all the other materials in order to understand
fully the content of this field of law. Merely reading the guide will not be sufficient for
examination purposes.
For this very reason (to prevent you from “skimming” through this guide one or two
days before the examination/assessment or even worse, on the evening before the
examination) you will encounter “activities” throughout a particular study guide as
well. They headings will be as follows: “Activity: To think about and write down in
your “learning journal”. These activities will be numbered from 1.1 up to whatever
number of activities you will find in a particular learning unit. (In the final learning
unit – learning unit 10 – the numbering will be 10.1 and onwards.) These activities
inserted into a particular learning unit are designed virtually to compel you to engage
with the study material.
Please note:
In cases where the answer to an activity is NOT that obvious, we will provide you with
some “feedback”. However, the feedback will in no way take the format of “model
answers”, but will only act as guidelines on what you should consider in your attempt
to answer the activity question. Moreover, should the “activity” be quite straightforward
such as requiring you merely to provide a summary of the preceding discussion no
feedback will be forthcoming and you will see the following “message” only: “This
is a self-evaluation activity. Use the information given earlier in this learning unit to
guide you through the answer to the activity”.

You will encounter the message “This is a self-evaluation activity. Use the informa-
tion given earlier in this learning unit to guide you through the answer to the activity”
(with some variation here and there) till you are literally and figuratively sick of these
two sentences. However, your physical and mental health notwithstanding these two
sentences as feedback are obvious since the majority of activities are based on the
paragraphs preceding the particular activity.
A BRIEF NOTE ON KEEPING A “LEARNING JOURNAL”

It is a good idea to get a notebook in which to make notes and complete the various
activities you will find in the study guide. Should you feel more comfortable using
a computer, feel free to do so to prepare your notes or answers to the activities in the
study guide. The point is that you need to engage with this guide in order to manage
its contents. To repeat: Paging through the guide a day or two before the examina-
tion will not help you to master the basic principles of this module. Nor will merely
reading and rereading it.
This process of making notes and completing the activities (answering the questions)
has become known as keeping a “learning journal”. Moreover, a learning journal is
also a way of recording your thoughts, impressions, concerns, questions and re-
flections systematically. It provides an informal yet focused opportunity to express
LGL3702/1 (xi)
GENERAL OVERVIEW
whatever comes to mind as you read course materials, participate in discussions,

read articles and engage in conversations with friends and colleagues.
ASSESSMENT/EXAMINATION
There are two forms of assessment applicable to this module, namely “formative
assessment” and “summative assessment”.
The self-assessment questions at the end of each learning unit and one may even
regard the activities/questions to be addressed in your “learning journal” to fall under
formative assessment since they provide you with an opportunity to self-assess
your knowledge and skills and the progress you have made throughout the semester.
These formative assessments will not form part of your final mark and we will there-
fore not mark these “assignments” – whether they are the self-assessment questions
at the end of a learning unit or the activities inserted into a particular learning unit.
The second form of assessment is referred to as “summative assessment”. The

two compulsory assignments and the final examination fall into this category. The
two compulsory assignments count for 20% of your final mark (10% each), while the
final exam will count for 80% of your final mark. The final exam will be written at the
end of the semester.
In the final exam you can expect the following types of questions:
• Short, straightforward questions in terms of which you are required to briefly

define certain concepts
• Longer questions that require you merely to list a number of points/factors
• Theoretical questions that require a systematic discussion of certain aspects
• Problem-type questions that require the identification of a certain legal issue; a
discussion surrounding the applicable legal aspects; and a concise conclusion
that includes a resolution
• Critical assessment of a problem statement entailing certain viewpoints that require:
identification of the legal problem/debate; explaining and critically assessing the
different viewpoints; providing a concise conclusion that highlights the strengths
and weaknesses in each viewpoint; giving your own opinion
HOW TO ANSWER PROBLEM/APPLICATION-TYPE QUESTIONS

Problem-type questions (including “critical assessment of a problem statement” type
of questions) are designed to test whether you can apply your theoretical knowledge
(that is the legal principles and/or concepts that you have studied) to a practical set
of facts. In order to answer this kind of question, you should note the following:
Step 1: Read through the question, which sometimes contains a list of facts and
extract the most relevant ones. Try to identify key words and phrases in the
question – they will help you tremendously.
Step 2: After you have summarised the most important facts, identify the core issue/s
that has/have to be analysed.
Step 3: After you have identified the key issue/s for discussion, identify area/s of the
law that is/are applicable, and that are most specific to the case/problem.
Step 4: State what the law says. This could involve setting out the general princi-
ples of law applicable to the area of law under discussion.
(xii)
General overview
It could also involve stating any exceptions to the general principles of law, court
cases, academic opinions, or any other relevant material.
Step 5: Finally, you should apply the law to the problem (the set of facts) and draw
your own conclusions. In this part of the analysis/examination process, you
could, in your evaluation of the legal position, make comparisons, identify
similarities and make distinctions.
Good luck with your studies in local government law!
Your lecturers for LGL3702
LGL3702/1 (xiii)
1 LEARNING UNIT 1
1 Introduction to local government law
OUTLINE
In this learning unit we introduce you to the definition of local government law to
enable you to understand how and where this area of law fits into the South African
government in general. Local government is contextualised as the local sphere of
government and derives its powers and force from the Constitution. Local government
in the pre-1994 era was very different from the current system. Since the advent of
the new constitutional dispensation it has undergone extensive transformation. Cur-
rently, local government law is, to a large extent, regulated by the Constitution (both
generally and more specifically) as well as by the legislation enacted to give effect
to the Constitution. This unit introduces you to the constitutional provisions and the
most important statutes. There are a number of constitutional principles that pertain
to local government and you should take careful note of these principles since they
“trigger” (underlie) all local government actions.
On completion of this learning unit you should be able to:
• define local government in the new constitutional dispensation

• identify the statutes that regulate local government law
• describe local government law during the pre-1994 era in relation to its specific
features
• distinguish between the current post-1994 and previous apartheid municipal
regimes
• explain the implementation of the constitutional text with regard to the White Paper
on Local Government and applicable legislation
• explain the principle of developmental local government in terms of the White
Paper on Local Government
• explain the constitutional principles that pertain to local government
STUDY MATERIAL
Prescribed study material
Books
Bekink, chapter 1, sections 1.3.–1.4 (pages 3–14)
Cases
The relevant paragraphs of the prescribed cases are given below. It is therefore NOT
necessary to study the whole case, rather just the facts and the relevant paragraphs
as indicated, except where it is indicated that you should study the whole case.
ers 2007 (4) SA 276 (SCA) para 33
Fedsure Life Assurance Ltd and Others v Greater Johannesburg Transitional Met-
ropolitan Council and Others 1998 (12) BCLR 1458 (CC) paras 2, 121 & 122
LGL3702/1 1
RECOMMENDED READING
In re: Certification of the Constitution of the Republic of South Africa, 1996 1996 (10)
BCLR 1253 (CC)
Certification of the Amended Text of the Constitution of the Republic of South Africa,
1996 1997 (1) BCLR 1 (CC)
1.1 DEFINING AND CONTEXTUALISING LOCAL GOVERNMENT

Local government is the field of law that covers municipal actions, including the leg-
islative and executive functions of municipalities. This area of law operates in a legal
framework in which various legal requirements imposed by the three governmental
spheres – national, provincial and local – must be fulfilled.
The Constitution has been infused into all facets of local government law and cur-
rently sets the backdrop against which all municipalities must conduct their everyday
operations. In addition, the provisions of the Constitution formed the foundation upon
which the new local government was introduced. These foundational values are
discussed later in this unit.
The legislative framework, in terms of which South African local government func-
tions, consists of a number of new statutes. These statutes regulate all municipal
actions and it is important to take note at this stage that they deal comprehensively
with almost all aspects of local government law. These laws are analysed and the
most important provisions are dealt with in later units. The statutes are the following:
• Local Government: Municipal Demarcation Act 27 of 1998

• Local Government: Municipal Structures Act 117 of 1998
• Local Government: Municipal Systems Act 32 of 2000
• Local Government: Municipal Electoral Act 27 of 2000
• Local Government: Municipal Finance Management Act 56 of 2003
• Local Government: Municipal Property Rates Act 6 of 2004
To better your understanding of the current local government system, it is imperative

that we first look at the apartheid regime, which was in place prior to 1994.
1.2 PRE-1994 LOCAL GOVERNMENT
1.2.1 Background
During the apartheid era, local governments were “subordinate creatures of statute”
(this basically meant that their powers were strictly limited to empowering legislation)
and they consisted of disorganised institutions. Municipalities were racially segregated
and provided services in an unequal manner.
ACTIVITY 1.1
To think about and write down in your “learning journal”
• Can you think of an example of how local government excluded certain persons, based
on race, from having access to certain basic services?
2
LEARNING UNIT 1: Introduction to local government law
1 FEEDBACK
• Obvious examples are the uneven distribution of water in separate areas of a particular
city or town and the uneven provision of adequate housing during the years of apartheid.
Can you think of any other examples? Write them down.
ACTIVITY 1.2
• How did the 1996 Constitution remedy this unequal distribution of services?
2 FEEDBACK
• For an answer to this question, turn your attention to the Constitution and more
particularly the Bill of Rights as found in Chapter 2 of the Constitution. Look at section
26 in particular and write down what the provisions of section 26 are.
1.2.2 Features of pre-1994 local government

Municipalities were described as “creatures of statute” since their powers were
expressly stipulated in legislation. These powers derived directly from national and
provincial government, which effectively meant that the higher spheres of government
ruled and overpowered municipal government. Even though the municipalities could
enact bylaws, these bylaws were reviewable by the courts and could be declared
invalid. Government functioned in terms of a hierarchical structure and local govern-
ment was the lowest tier of government – its functions and decisions were therefore
subordinate to higher government spheres, namely provincial and national government.
Study the following paragraph very carefully:
ers 2007 (4) SA 276 (SCA) paragraph 33:
Under the pre-constitutional dispensation, municipalities owed their existence to and

derived their powers from provincial ordinances. These ordinances were passed by
provincial legislatures, which themselves had limited law-making authority, conferred
on them and circumscribed by Parliamentary legislation. Parliament’s law-making
power was untrammelled, and it could determine how much legislative power provinces
exercised. The provinces in turn could largely determine the powers and capacities
of local authorities. Municipalities were therefore at the bottom of a hierarchy of law-
making power: constitutionally unrecognised and unprotected, they were, by their very
nature, “subordinate members of the government vested with prescribed, controlled
governmental powers”.
The provinces established four types of local authorities, namely city councils for
large urban areas; town councils; village councils; and health committees. In addi-
tion to these authorities, there were also local authorities for coloured, Indian and
black communities in urban areas. The outcome was that there were numerous local
authorities in relatively small areas. Each authority was responsible for its specific
tasks and the group of persons it had to provide services for. This arrangement led
to a fragmented local government. Because of the political goal of racial segregation,
LGL3702/1 3
the municipalities’ operations at the time could have been described as disjointed
and fragmented.
Consequently, the quality and extent of services provided to different households were
unequal since the provision of services was racially influenced. “White” areas had
successful business districts; valuable rateable properties and good infrastructure,
while “black” areas were undeveloped, poor and often denied municipal services.
Study the following paragraphs very carefully:
Fedsure Life Assurance Ltd and Others v Greater Johannesburg Transitional Metropoli-
tan Council and Others 1998 (12) BCLR 1458 (CC) paragraphs 2; 121 and 122:
It may be helpful at the outset to sketch the political and legal context within which the
present dispute has arisen. The transformation of South Africa from a society rooted
in discrimination and disparity to a constitutional democracy founded upon freedom,
dignity and equality posed, and continues to pose, particularly profound challenges
at local government level. It is here that acute imbalances in personal wealth, physi-
cal infrastructure and the provision of services were and are often most patent. The
greater Johannesburg region is no exception. The thirteen local government bodies
which formerly exercised powers and duties within this, South Africa’s largest and
most developed urban area, were of two sorts. Those in historically “white” areas
were characterised by developed infrastructure, thriving business districts and valu-
able rateable property. Those in so-called “black”, “coloured” and “Indian” areas, by
contrast, were plagued by underdevelopment, poor services and vastly inferior rates
bases. (para 2)
As the joint judgment points out, the impact of the apartheid system is particularly
evident in the area of local government. Nowhere is the contrast in existential reality
starker than in the residential areas of the cities, towns and villages of South Africa. In
this case we are concerned with the vast conurbation that developed in the economic
heartland of the country. More specifically, we are concerned with the consequences,
primarily socioeconomic but ultimately political, of the vastly inferior living conditions
imposed on the majority of residents, merely because of their skin colour. (para 121)
The apartheid city, although fragmented along racial lines, integrated an urban eco-
nomic logic that systematically favoured white urban areas at the cost of black urban
and peri-urban areas. The results are tragic and absurd: sprawling black townships
with hardly a tree in sight, flanked by vanguards of informal settlements and guarded
by towering floodlights out of stone’s throw reach. Even if only a short distance away,
nestled amid trees and water and birds and tarred roads and paved sidewalks and
street-lit suburbs and parks, and running water, and convenient electrical amenities
we find white suburbia. How did it happen? Quite simply: “in reality the economic
relationship between the white and black (African, coloured and Indian) halves of
the city was similar to a colonial relationship of exploitation and unequal exchange.”
(para 122)
ACTIVITY 1.3
• How did the absence of municipal services affect the living conditions of the previously
disadvantaged groups? Did this have an impact on the dignity of individuals?
4
3 FEEDBACK
• Study the extract from the Fedsure decision carefully. You will find an indication of the
impact of absent municipal services in the judge’s summary of living conditions under
apartheid in the quote from para 122 quoted above. The point is that you need to explain
what he wrote in your own words. You can even elaborate on it should you find yourself
still in such a position and explain what it is like. The answer to the second part of the
question is obvious and self-evident: living under conditions of dirt and grime – the
result of the absence of proper municipal services – will have, as a matter of course,
a negative impact on the dignity of individuals. If you are of the opinion that there is
no link, you need to substantiate your opinion.
ACTIVITY 1.4
• Is there a link between the newly guaranteed socioeconomic rights of all persons under
the Constitution and the lack of municipal services under the previous apartheid regime?
4 FEEDBACK
• There is an obvious link in the sense that the newly granted socioeconomic rights of
all persons (see section 26–29) are guaranteed to act as a “brake” on any lack of the
provision of municipal services. These provisions spell out a duty on the part of any
municipality to provide such services.
The most important transitional mechanism was the Local Government Transition
Act 209 of 1993, which established a transformation to non-racial and democratic
structures in local government. The Act was an interim solution, whilst in terms of the
interim Constitution, the certification judgments, handed down by the Constitutional
Court, had to verify the new constitutional text.
The Constitution is the foundation for the establishment of the new local government
framework – the certification judgments only verified the constitutional text. The
drafting of the Constitution involved many South Africans and required numerous
consultations, negotiations and compromises. It is one of the most progressive in
the world and enjoys high acclaim internationally.
1.3 THE CERTIFICATION JUDGMENTS AND THE CONSTITUTION
1.3.1 The First and Second Certification judgments

• In re: Certification of the Constitution of the Republic of South Africa, 1996 1996
(10) BCLR 1253 (CC)
Carefully read paragraphs 299, 301, 302, 304, 305, 364, 367, 369, 374, 375 and 380.
• Certification of the Amended Text of the Constitution of the Republic of South

Africa, 1996 1997 (1) BCLR 1 (CC)
Carefully read paragraphs 79, 80, 82, 85, 87, 171, 172 and 175
Importantly, the Constitutional Assembly did not alter the relationship between the
provinces and local government – it confirmed the diminution of provincial powers.
LGL3702/1 5
The Constitutional Court also confirmed the principle of one sovereign state structured
at national, provincial and local levels (in the Constitution referred to as “spheres
of government” – see section 40(1) of the Constitution) with each of these levels or
spheres being allocated appropriate and adequate powers to function effectively. In
addition, adequate provision should be made for fiscal and financial allocations to the
provincial and local spheres of government from revenue collected nationally. Each
level of government has a constitutional right to an equitable share of revenue col-
lected nationally to enable provinces and local government to provide basic services
and to execute the functions entrusted to them.
1.3.2 Local government in terms of the Constitution

Study the following sections – which constitute the basic constitutional innovations
for local government – from the Constitution:
1.3.2.1 Section 40 (“Government of the Republic”)

(1) In the Republic, government is constituted as national, provincial and local spheres of
government, which are distinctive, interdependent and interrelated.
(2) All spheres of government must observe and adhere to the principles in this Chapter
and must conduct their activities within the parameters that the Chapter provides.
The inclusion of this section introduces a move away from the previous hierarchical
system in terms of which local government was completely dominated by the provincial
and national spheres of government.
1.3.2.2 Section 151 (“Status of municipalities”)

(1) The local sphere of government consists of municipalities, which must be established
for the whole of the territory of the Republic.
(2) The executive and legislative authority of a municipality is vested in its Municipal Council.
(3) A municipality has the right to govern, on its own initiative, the local government af-
fairs of its community, subject to national and provincial legislation, as provided for in
the Constitution.
(4) The national or a provincial government may not compromise or impede a municipal-
ity’s ability or right to exercise its powers or perform its functions.
The inclusion of this section confirms the autonomy of municipalities. It also ensures
that democratic local government is extended to the entire country. This means that
all urban and rural areas are subject to municipal governance.
ACTIVITY 1.5
• Do you think that local government is better suited to governing municipal aff airs on
its own initiative than with oversight by higher levels of government?
5 FEEDBACK
• An answer to this question requires of you to think in terms of what has been written
about local government – local government being described as “democracy at the
grassroots level”. Against this background one may argue that “local government is
better suited to governing municipal aff airs on its own initiative” since local government
is nearest to the people it governs. However, there is still the wording of section 40 to
consider. So, although one can argue in favour of a local government governing on its
6
“own initiative” it does not mean that a local government is fully “autonomous” (in the
sense of being fully independent and free from any oversight by the other spheres of
government).
ACTIVITY 1.6
• To what extent should the provincial sphere interfere with the autonomy of local
government? Or, perhaps, in what circumstances should “higher levels” of government
interfere?
6 FEEDBACK
• An answer to this question links to the previous one. However, should there be any
evidence of maladministration in a particular local government then obviously “higher
levels” of government must be permitted to “interfere” in the affairs of local government.
Thus, one may argue that in light of the wording of section 151 interference is the
exception and not the rule. But to argue this way is to forget the wording of the
Constitution. Hence you need to compare sections 40 and 151 with each other and
reach a conclusion. Take careful note of the wording of section 40 in particular and
its reference to the words “interdependent” and “interrelated”. Are these words an
indication of full “autonomy” of local government? What are your thoughts on this
matter? Is a form of “checks and balances” not a better explanation of what is at issue
in the relationship between the various spheres of government? Think along the lines of
the present problems of local government with reference to amongst others corruption
and the lack of or lapse in service delivery. Against this background it is obvious that
there are indeed instances when local government will be subjected to “interference”
by the other two spheres of government.
1.3.2.3 Section 156 (“Powers and functions of municipalities”)

(1) A municipality has executive authority in respect of, and has the right to administer
(a) the local government matters listed in Part B of Schedule 4 and Part B of Schedule
5; and
(b) any other matter assigned to it by national or provincial legislation.
(2) A municipality may make and administer by-laws for the effective administration of the
matters which it has the right to administer.
(3) Subject to section 151(4), a by-law that conflicts with national or provincial legislation
is invalid. If there is a conflict between a by-law and national or provincial legislation
that is inoperative because of a conflict referred to in section 149, the by-law must be
regarded as valid for as long as that legislation is inoperative.
(4) The national government and provincial governments must assign to a municipality, by
agreement and subject to any conditions, the administration of a matter listed in Part A
of Schedule 4 or Part A of Schedule 5 which necessarily relates to local government, if
(a) that matter would most effectively be administered locally; and

(b) the municipality has the capacity to administer it.
(5) A municipality has the right to exercise any power concerning a matter reasonably
necessary for, or incidental to, the effective performance of its functions.
In terms of this provision, municipalities have the right to administer matters that fall
within their competencies. It is important to note that provinces still have a monitoring
LGL3702/1 7
role in terms of section 155(6) of the Constitution and that they also have the power
to intervene in terms of section 139 of the Constitution.
Please note:
Pay careful attention to the following sections:
Section 155(6)
Each provincial government must establish municipalities in its province in a manner consist-
ent with the legislation enacted in terms of subsections (2) and (3) and, by legislative or other
measures, must
(a) provide for the monitoring and support of local government in the province; and
(b) promote the development of local government capacity to enable municipalities to
perform their functions and manage their own affairs.
Section 139(1) (“Provincial intervention in local government”)

When a municipality cannot or does not fulfil an executive obligation in terms of the Constitu-
tion or legislation, the relevant provincial executive may intervene by taking any appropriate
steps to ensure fulfilment of that obligation.
ACTIVITY 1.7
• How can provincial government promote the capacity of local government?
7 FEEDBACK
• Study the wording of section 155(6) very carefully again. To promote the capacity of
local government a provincial government can, for example assist in the in-service
training of local government personnel. It can provide for workshops to be attended
by local government personnel. Can you think of other examples? The point of this
exercise/activity is to make you think about solutions to the problem.
ACTIVITY 1.8
• In a case where local government fails to give effect to its functions, what type of steps
should the provincial executive take to ensure fulfi lment of those functions?
8 FEEDBACK
• The steps a provincial government is permitted to take are set out in section 39(1)
(a)–(c) and includes the dissolution of the Municipal Council and the appointment of
an administrator (section 39(1)(c)). See section 39(4) as well.
1.3.2.4 Section 152 (“Objects of local government”)

(1) The objects of local government are
(a) to provide democratic and accountable government for local communities;

(b) to ensure the provision of services to communities in a sustainable manner;
(c) to promote social and economic development;
(d) to promote a safe and healthy environment; and
8
(e) to encourage the involvement of communities and community organisations in the

matters of local government.
(2) A municipality must strive, within its financial and administrative capacity, to achieve
the objects set out in subsection (1).
This provision shows that local government was given the responsibility to ensure
broader social and economic development in their communities. This is one of the
new objectives of government.
1.3.2.5 Section 67 (“Participation by local government representatives” [in the

activities of the National Council of Provinces – sections 60 –72]
Not more than ten part-time representatives designated by organised local government
in terms of section 163, to represent the different categories of municipalities, may
participate when necessary in the proceedings of the National Council of Provinces,
but may not vote.
Through the institution of organised local government, local government was given a
seat in the National Council of Provinces. This inclusion also confirms local government
as a distinctive sphere of government, embedded in the system of intergovernmental
relations and cooperative government.
1.4 IMPLEMENTATION OF THE CONSTITUTIONAL TEXT: THE

WHITE PAPER AND LEGISLATION
1.4.1 The White Paper

Once the Constitutional Court approved the constitutional text, the process of imple-
menting the constitutional provisions commenced. The Ministry of Provincial Affairs
and Constitutional Development started to develop a policy that would give effect
to the constitutional provisions that pertain to local government. In 1997, the Green
Paper on Local Government was released for public comment, which led to the
introduction of the White Paper on Local Government. The White Paper sought to
transform the extant/existing local government system by means of a new municipal
framework and programme.
The foundation of the White Paper was the principle of developmental local govern-
ment, as stated in section B 1 (p 17) of the White Paper:
… local government committed to working with citizens and groups within

the community to find suitable ways to meet their social, economic and mate-
rial needs and improve the quality of their lives.
1.4.1.1 Four key characteristics of developmental local government

The White Paper also identified four key characteristics of developmental local gov-
ernment (section B 1 of the White Paper (1.1–1.4) (20-22)):
• Municipal powers and functions should be exercised to maximally impact on social

development by meeting basic needs through the delivery of services
• Development can only be effected through the integrated and coordinated effort
of all role-players – both public and private. (“One of the most important methods
LGL3702/1 9
to achieve this [developmental objective] is integrated development planning”
according to Steytler and De Visser (section 3.4.1).)
• Municipal councils must promote the involvement of citizens and community groups
in the layout/design and delivery of municipal programmes.
• The developmental municipality should play a “strategic policy-making and visionary
role and seek to mobilise a range of resources to meet basic needs and achieve
developmental goals” (p 22).
1.4.1.2 Developmental local government outcomes

The White Paper also listed the following developmental local government outcomes:
• the provision of household infrastructure and services

• the creation of liveable, integrated cities, towns and rural areas
• local economic development
• community empowerment and redistribution
In order to achieve these outcomes and give effect to developmental local govern-
ment, the White Paper proposed the following changes to local government:
• a strong unified metropolitan government (pages 58–60)

• a system of district government for all non-metropolitan areas (pages 69–72)
• strong political leadership: an executive mayor and executive committee (receiving
delegated authority from the council)
The White Paper, described by some as a “mini-Constitution” for local government,

clearly indicated the new policy considerations for forthcoming legislation.
It is important to note that policy decisions always set the foundation for legislation
and that the legislation should implement the policies. Policies are therefore reflected
in statutes.
1.4.2 Legislation
The most important laws are listed and described below. It is imperative to take note
of these laws since a number of provisions from the statutes are discussed at length in
later learning units. You should be able to explain the functions of each of these laws.
The Local Government Transition Act 209 of 1993 provided the “machinery” for the
transition from a racially-based system of local government to a non-racial system.
The Act also established democratic structures, although it did not establish the final
framework for the new local government system. It introduced interim municipal struc-
tures which lacked sustainable service delivery, financial capability and economic
sustainability. This Act remained in effect until 30 April 2000.
The Municipal Demarcation Act 27 of 1998 (or the Local Government: Municipal
Demarcation Act) introduced the process for demarcating (outlining and establishing)
municipal boundaries.
The Municipal Structures Act 117 of 1998 (or the Local Government: Municipal
Structures Act) describes the criteria for the demarcation of the three categories
of municipalities: metropolitan, district and local municipalities. It also describes
the division of powers and functions between the categories and further deals with
the composition, membership and function of municipal councils.
10
The Local Government: Municipal Electoral Act 27 of 2000 was enacted to regulate
the election in 2000 and was followed by the Local Government: Municipal Systems
Act 32 of 2000.
The Local Government: Municipal Finance Management Act 56 of 2003 and the Lo-
cal Government: Municipal Property Rates Act 6 of 2004 were adopted in 2003 and
2004, respectively.
Apart from the above-mentioned laws that aim to regulate local government, old pro-
vincial ordinances continue to apply, specifically to matters such as land use planning.
ACTIVITY 1.9
• In a case where new legislation (adopted post-1994) and old provincial ordinances
clash, what legislation/regulation do you think would be upheld?
9 FEEDBACK
• It is a rule from the interpretation of statutes that “later” legislation has precedence over
older legislation. This is even more relevant in a situation when there is a transition from
one legal system to another – in this instance a transition from the Westminster system
characterised by the superiority of parliament to one characterised by the superiority
of the Constitution. In this situation it is obvious that in the event of a conflict/clash the
“later” legislation will prevail.
ACTIVITY 1.10
• What would happen to the older piece of legislation/regulation in such an instance?
10 FEEDBACK
• This is a “tricky” question and there is neither a quick answer nor any one convincing
argument to it. So, for our purposes one may submit (using section 149 of the Constitution
as a “guideline”) that the older legislation becomes “inoperative”. However, this is a
hugely theoretical question which requires an in-depth examination of section 149
and section 156(3) and (4), respectively. Rest assured that you would definitely not be
confronted with such a question in any examination since the question deals with a
matter from the domain of the separation of powers.
1.5 CONSTITUTIONAL PRINCIPLES THAT PERTAIN TO LOCAL

GOVERNMENT
The following basic principles have been constitutionally developed to ensure that
the state gives effect to its responsibilities, while also protecting individuals against
abusive state actions. Throughout this module you should keep these principles in
mind since they have a direct impact on the functions and operations of municipali-
ties – therefore please study these principles and make sure that you can explain
each of them. These principles include the following:
LGL3702/1 11
1.5.1 Constitutional supremacy and constitutional entrenchment
It is essential to keep in mind that the Constitution is the supreme law of South Af-
rica. This means that any law or conduct that is inconsistent with the Constitution is
automatically invalid. In the context of this module, take note that all constitutional
requirements relevant to government authority (remember local government forms
part of “government” in general) must be fulfilled. The Constitution can also not easily
be amended – this is referred to as constitutional entrenchment.
1.5.2 Justiciability
This principle refers to the power of the judiciary to enforce the provisions of the
Constitution. In the absence of this principle, the Constitution would be ineffectual
and not have significant meaning. Section 172 of the Constitution makes it clear
that a court must declare law or conduct invalid if it is found to be inconsistent with
the Constitution. The powers of the judiciary are not limited to invalidating laws or
conduct that is inconsistent with the Constitution: they also infuse areas of law with
the Constitution. In other words, when the courts interpret legislation or develop
the common law (and customary law) they must also promote the spirit, purport and
objects of the Bill of Rights.
1.5.3 Constitutionalism and a constitutional state

The term “constitutionalism” is worth memorising/internalising:
“Constitutionalism” refers to a state that is founded on the law. The law

determines government’s powers and government derives its powers
from the law.
The definition of “constitutional state” adds on this definition:
The law is supreme and the law binds the state.
1.5.4 The rule of law principle

Government must act in accordance with the rules and does not have the power to
limit a person’s basic rights through arbitrary and excessive use of its powers. Only
the courts can limit a person’s basic rights. Any conduct that is not authorised by the
law will be invalid.
This is also referred to as the legality principle – all actions of government must be
lawfully authorised.
Please note:
• There must always be a rational connection between a) the law and b) the
achievement of a legitimate government purpose.
• State action may not infringe an individual’s basic rights except if the infringement
is authorised by the law.
1.5.5 Principle of democracy

South Africa is a modern democratic state. In general, democracy means that govern-
ment can only function legitimately if it has the consent of the majority of its citizens.
12
However, majority decision-making by itself does not mean that the majority has
unlimited powers since the majority may not impair certain principles. The majority
must still function within the law, which constitutes predetermined rights.
Constitutional democracy means that government, as elected by the majority, cannot

enact laws without control.
1.5.6 The Bill of Rights and other founding principles

The Bill of Rights contains the foundational constitutional values that underlie our
new constitutional dispensation. The Bill of Rights protects fundamental human rights,
including the right to be treated equally and the right to human dignity. In addition,
the Bill of Rights incorporates certain core values into our democratic government
(and local government law forms part of “government”), namely accountability, re-
sponsiveness and openness.
In S v Makwanyane and Another 1995 (3) SA 391 (CC) the Constitutional Court
confirmed (and thus “incorporated indirectly” – Bekink p 7) the value or principle of
the traditional African concept of “Ubuntu” in our constitutional dispensation. Bekink
explains “Ubuntu” as “synonymous with the values of humaneness, social justice,
fairness, rehabilitation and the abolition of victimisation, crime and cruel inhuman
treatment” (p 7).
1.5.7 The principles of separation of powers

This principle is also known as the trias politica doctrine – it requires government
powers to be separated into three categories: legislative, executive and judicial. These
different powers are exercised by different organs of state. The main reason for the
existence of this principle is to ensure that government power is spread to different
bodies, thus avoiding the concentration of powers in one decision-making body.
• Parliament is responsible for the promulgation and enactment of legislation.

• The president, nine premiers and municipal councils are responsible for executive
decisions.
• The courts are the judicial authority.
Importantly, the division of powers is not rigid and overlaps to ensure proper checks
and balances.
1.5.8 Devolution and the principle of cooperative government

The Constitution mandates spheres of government to cooperate and it ensures ef-
fective intergovernmental relations. In order to understand these concepts it is useful
to compare the new system to the previous, pre-1994 governmental structure. In
terms of the previous structure, the local government level was subordinate/inferior
to the provincial and national government levels. There was no coordination between
government levels and the local government sphere merely had to abide by the in-
structions of provincial and national government.
Under the new constitutional dispensation, the three spheres of government are
obliged to assist and support one another. Sometimes this means that some powers
can be delegated to another sphere of government.
LGL3702/1 13
1.6 NEW LOCAL GOVERNMENT LAW PRINCIPLES
In addition to the newly introduced Constitution and the principles that underlie it,
local government was transformed and restructured in order to be in line with the
Constitution. A number of principles form part of local government law and these fea-
tures were created in order to realign local government with the Constitution. These
principles are briefly listed below. Study the following principles:
1.6.1 Non-racial democratic government

People of all races must have equal rights and opportunities and all persons must
have the right to vote for their political representatives.
1.6.2 Local government within a system of cooperative government

Local government forms part of the general government system.
1.6.3 New boundaries for municipalities

The whole of South Africa must be divided into municipal jurisdictions. Municipal
boundaries have a direct impact on the effectiveness of municipal institutions.
1.6.4 Constitutional supremacy

The Constitution is the supreme law and the constitutional provisions bind local
government. The municipalities (local government) are closely linked to the people
of South Africa and they must therefore ensure first-hand that effect is given to the
values of the Constitution.
1.6.5 New functions of municipal governments

The modern internal procedures and functioning of local government are complex
since the municipal administration must operate efficiently under political leadership.
1.6.6 Municipal service delivery: striving for sustainability

The municipalities must strive to deliver municipal services in a sustainable manner.
This is a key objective since all South African citizens are dependent on these ser-
vices, although some households’ basic needs must be provided by local government.
Service delivery must be affordable, accessible and simple in its aims.
1.6.7 Municipal financial/fiscal management

The accurate and effective financial management of municipalities is essential for
local government functions.
1.6.8 Municipal development planning and public participation

Aspects of local planning have been decentralised to municipal government. Gov-
ernment accountability and public participation in municipal decision-making are
constitutional principles that must be given effect to.
14
1.6.9 New municipal autonomy

Local governments are interdependent, autonomous spheres of government.
1.6.10 Objects/objectives of local government

• To provide for democratic and accountable local government
• To ensure sustainable provision of services
• To promote social and economic development
• To promote a safe and healthy environment
• To encourage public involvement in municipal affairs
1.7 PRINCIPLES AS ENVISIONED IN THE INTERIM CONSTITUTION

The following principles were set out in the interim Constitution.
• Each level of government shall have appropriate and adequate legislative and
executive powers and functions that will enable each level to function efficiently.
The allocation of powers between the different levels of government shall be made
on a basis that is conducive to financial viability at each level of government and
to effective public participation.
• The framework for local government powers, functions and structures shall be set
out in the Constitution. The comprehensive powers, functions and other features
of local government shall be set out in parliamentary statutes or in the provincial
legislation or both.
• Each level of government shall have a constitutional right to an equitable share of
revenue collected nationally to ensure that provinces and local governments are
able to provide basic services and carry out executive functions allocated to them.
• Formal legislative procedures shall be adhered to by legislative organs at all levels
of government.
ACTIVITY 1.11
As a point of refl ection – do you think these principles mentioned above pertaining to the
interim Constitution are currently echoed in the Final Constitution and legislation?
11 FEEDBACK
The answer to this activity is as the phrase states “a point refl ection”. Please return to what
we wrote about under heading 1.6 and compare it to what was written under heading 1.7.
Is the answer not to be found in a “refinement” of the principles spelt out under 1.7 when
you compare them with the principles set out under 1.6? The point is you need to write
down what your opinion is.
CONCLUSION
For you to fully understand how local government operates and, more specifically,
how the law regulates the local sphere of government, you should first understand the
context of local government, taking into consideration its relevance and fundamental
tasks. Local government is an essential sphere of government and the pre-1994 dis-
LGL3702/1 15
cussion shows how local government can desist from providing services to the public
– this has a detrimental effect on citizens. This unit also shows how the introduction
of the Constitution radically changed the previous local government regime – opting
for the enhancement of human rights. The White Paper on Local Government and
the enabling legislation play a critical role in this transition. You should study the un-
derlying principles pertaining to local government since these principles should, in
essence, underlie all the different aspects of local government law, which are dealt
with in the following units. This unit should also help you understand the current state
of local government, as discussed in the next unit.
SELF-ASSESSMENT QUESTIONS
ACTIVITY 1
Explain the features of pre-1994 local government with reference to the unique character of
the current local government. Write a few paragraphs on how you understand local govern-
ment in both eras and try to list a number of advantages under each regime.
ACTIVITY 2
List the most important constitutional principles that pertain to local government and try to
formulate a reason for each principle.
ACTIVITY 3
Explain how the White Paper on Local Government played a definitive role in transforming
South African local government.
ACTIVITY 4
List the most important statutes that regulate local government. Write one short sentence
on each Act. This will help you understand how the statutes regulate the operation of local
government.
16
2 LEARNING UNIT 2
2 The impact of the Constitution on local
government
OUTLINE
In this learning unit, we explain the constitutional provisions that regulate local gov-
ernment directly and we refer to other constitutional provisions that have an indirect
impact on local government. These other constitutional provisions concern provincial
and national spheres of government as well. Moreover, local government has a direct
constitutional obligation to give effect to all citizens’ fundamental human rights and
fulfilling this duty is anything but an easy task. The Bill of Rights entrenched in the
Constitution establishes fundamental human rights for individuals, and local govern-
ment is responsible for ensuring that these rights are realised. The cases cited help
to show to extent to which municipalities should aim to fulfil basic human rights,
although they also highlight the difficulties inherent in this task. In this unit, we also
discover the nature of local government as an independent organ of state, which is
both democratic and, to some extent, autonomous. It is imperative that you be aware
of the new role and character of local government, which has taken on a distinct form
and status. Developmental local government underlies the new obligations and vision
of all municipalities and it is imperative that you take note of this concept from the
outset. In this unit, we finally examine the current state of local government against
this described backdrop. It is important that you appreciate some of the difficulties
municipalities have to deal with because of the newly envisioned responsibilities of
local government.
On completion of this learning unit, you should be able to:
• identify and explain the constitutional provisions that pertain both directly and
indirectly to local government
• explain the obligations of municipalities in relation to individuals’ fundamental
human rights
• explain, on a practical level and with reference to case law, the extent of
municipalities’ duties in relation to the basic needs of households
• give a detailed description of the new nature of local government, with reference
to the Municipal Systems Act
• give a thorough explanation of the characteristics and new status of municipalities
• define developmental local government
• appreciate some of the difficulties that municipalities currently face
LEARNING MATERIAL
Bekink, chapter 6 (section 6.7.1.4 (pp 48–52); chapter 7 (section 7.7.2.4 [pp 75–78])
Madzivhandila TS & Asha AA “Integrated development planning process and service
delivery challenges for South Africa’s local municipalities” (2012) 47 Journal of
Public Administration 369–378, pages 372–373
Please note:
LGL3702/1 17
The relevant paragraphs of each prescribed case are given below. It is therefore
NOT necessary to study the whole case. You only need to study the facts and the
relevant provisions as indicated, except where it is indicated that you should study
the whole case.

Garden Cities Incorporated Association not for gain v Northpine Islamic Society 1999
(2) SA 257 (C)
North Central Local Council and South Central Local Council v Roundabout Outdoor
(Pty) Ltd 2002 (2) SA 625 (D)
Port Elizabeth Municipality v Peoples Dialogue on Land and Shelter 2001 (4) SA 759 (E)
Cape Metropolitan Council v Metro Inspection Services CC 2001 (3) SA 1013 (SCA)
Fedsure Life Assurance Ltd and Others v Greater Johannesburg Transitional Met-
ropolitan Council and Others 1998 (12) BLCR 1458 (CC) paragraphs 38, 126
Fedsure Life Assurance v Greater JHB TMC 1998 (2) SA 115 (SCA)
Residents of Joe Slovo, Western Cape v Thubelisha Homes and Others 2010 (3) SA
454 (CC) paras 75, 348
City of Johannesburg Metropolitan Municipality v Blue Moonlight Properties 39 (Pty)
Ltd and Another 2012 (2) SA 104 (CC) paras 6–29; 42–46; 96 and 97
Mazibuko and Others v City of Johannesburg and Others 2010 (4) SA 1 (CC) paras
1–10; 110, 111, 130 in particular (but in light of the importance of this case, we
urge you to read the whole case carefully)
Schubart Park Residents’ Association and Others v City of Tshwane Metropolitan
Municipality and Another 2013 (1) BCLR (CC) (the whole case)
2.1 CONSTITUTIONAL PRINCIPLES PERTAINING DIRECTLY TO

LOCAL GOVERNMENT
2.1.1 The preamble to the Constitution

Local government institutions form part of the overall government structure. A number
of the goals and objectives listed in the preamble to the Constitution also pertain to
local government and we have paraphrased them below. Municipalities can use these
objectives to resolve issues or disputes. Besides, these goals and objectives as set
out in the preamble have to be read in conjunction with the specific constitutional
objectives and duties of local government as set out in sections 152 and 153 of the
Constitution in Chapter 7 entitled “local government”.
The preamble to the Constitution expresses the desire of the people of South Africa to:
• recognise the injustices of the past and honours those who have suffered for
justice and freedom in the land
• honour those who have worked to build and develop the country
• heal the divisions of the past and establish a society based on democratic values,
social justice and fundamental human rights
• lay the foundation for a democratic and open society in which the government
is based on the will of the people and citizens are equally protected by the law
• improve the quality of life for all people and free the potential of each person
• build a democratic and united South Africa able to take its rightful place as a
sovereign state in the family of nations
18
LEARNING UNIT 2: The impact of the Constitution on local government
2.1.2 The founding constitutional provision – section 1 of the Constitution

This provision (which is deeply entrenched within the Constitution). Under section 74
headed “bills amending the Constitution” section 1 may only be amended should it
be passed by the National Assembly “with a supporting vote of at least 75 per cent
of its members” and by the Council of Provinces “with a supporting vote of at least
six provinces” – section 74(1). Note that section 74(1) carries the same requirements
for its amendment.) It enumerates the fundamental values on which the constitutional
order is founded:
The Republic of South Africa is one, sovereign, democratic state founded on the
following values:
(a) Human dignity, the achievement of equality and the advancement of human
rights and freedoms.
(b) Non-racialism and non-sexism.
(c) Supremacy of the Constitution and the rule of law.
(d) Universal adult suffrage, a national common voters’ roll, regular elections and
a multi-party system of democratic government, to ensure accountability, re-
sponsiveness and openness.
Local government, and all other spheres of government, must make an effort to
achieve and maintain these values.
2.1.3 The supremacy clause – section 2 of the Constitution

This Constitution is the supreme law of the Republic; law or conduct inconsistent with
it is invalid, and the obligations imposed by it must be fulfilled.
In the area of local government law, the supremacy clause is important for the fol-
lowing reasons:
• The constitutional obligations and requirements regarding local government are the
most important laws of the state and it is very difficult to amend these provisions
(see section 74 of the Constitution for details concerning the amendment of the
Constitution).
• Any conduct (legislative or executive) by local government must be in line with
the Constitution. The making of a by-law or the approval of a new policy must
be compliant with the whole Constitution. If this is not the case, the by-law or
policy will be invalid.
• Local government must give effect to all its constitutional obligations. The
Constitution therefore mandates (places a positive obligation on) municipalities
and these obligations have to be fulfilled. In terms of section 7 of the Constitution,
local government must fulfil, promote, respect and ensure the rights in the Bill of
Rights.
2.1.4 The Bill of Rights and its impact on local government

(Study Bekink section 6.7.1.4 – “The importance of the Bill of Rights [pp 48–52])
The Bill of Rights has a significant impact on government in general, including local
government. Make sure you study the general aspects, application and limitation of
the Bill of Rights. In order to understand how the Bill of Rights influences local gov-
ernment, study the following case law that dealt with substantive rights contained in
the Bill of Rights.
LGL3702/1 19
• The equality clause (section 9 of the Constitution)
• Freedom of religion (section 15(1) of the Constitution)
Garden Cities Incorporated Association not for gain v Northpine Islamic Society
1999 (2) SA 257 (C)
• Freedom of expression (section 16 of the Constitution)
North Central Local Council and South-Central Local Council v Roundabout
Outdoor (Pty) Ltd 2002 (2) SA 625 (D)
• Property-related provisions in the Bill of Rights: Property rights (section 25); housing
rights (section 26) and the right to food and water (section 27)
Port Elizabeth Municipality v Peoples Dialogue on Land and Shelter 2001 (4) SA
759 (E).
Residents of Joe Slovo, Western Cape v Thubelisha Homes and Others 2010 (3)
SA 454 (CC) paras 75, 348
City of Johannesburg Metropolitan Municipality v Blue Moonlight Properties 39
(Pty) Ltd and Another 2012 (2) SA 104 (CC)
(carefully read the facts (paras 1–10) and study paras 110, 166)
• The right of access to information and just administrative action (sections 32 and
33 of the Constitution)
Cape Metropolitan Council v Metro Inspection Services CC 2001 (3) SA 1013
(SCA) Fedsure Life Assurance v Greater JHB TMC 1998 (2) SA 115 (SCA)
(carefully read the facts (paras 1–10) and study para 130)
ACTIVITY 2.1
• Does local government have a positive duty to provide access to the basic needs of
households?
12 FEEDBACK
• This is obviously a self-evaluation activity. Use the information given earlier in this
learning unit to guide you through the answer to the activity. However, in this instance
you are required to go one step further and study the court decisions relating to the
property-related provisions in the Bill of Rights: Property rights (section 25); housing
rights (section 26) and the right to food and water (section 27). Only after having
undertaken this “exercise” of studying the particular cases (the suggested way of
studying these cases is to summarise the facts as well as the way the court argued),
will you be able to address the question. You should also page down this guide and take
note of the wording of these rights quoted in relation to the obligations of municipalities
as “developmental local government”. This is thus an essay-type question requiring
you to follow the procedure set out in the “general overview” on how to approach such
questions.
20
ACTIVITY 2.2
• Do you think that municipalities have the capacity to provide access to all the basic
needs of households? If not, why not? Write down your reasons.
13 FEEDBACK
• For an answer to this activity, you need to take note and study the discussion below
regarding “constraints” hampering local governments. Do consider too the wording added
to each of these rights (except for section 29 dealing with children) carry a “limitation”
to the right worded along these lines: “The state must take reasonable legislative and
other measures, within its available resources, to achieve the progressive realisation of
each of these rights”. Note though that concerning the right to land, the wording reads
as follows: “The state must take reasonable legislative and other measures, within its
available resources, to foster conditions which enable citizens to gain access to land
on an equitable basis”.
2.1.5 Chapter 7 of the Constitution entitled “local government”

This Chapter contains the primary provisions for local government. Sections 151–164
are included in this Chapter. It deals with a number of aspects. For purposes of this
learning unit, you should study the following sections:
151. Status of municipalities.

the Constitution.
152. Objects of local government.

153. Developmental duties of municipalities.
A municipality must
(a) structure and manage its administration and budgeting and planning processes to give
priority to the basic needs of the community, and to promote the social and economic
development of the community; and
(b) participate in national and provincial development programmes.
154. Municipalities in co-operative government.

(1) The national government and provincial governments, by legislative and other meas-
ures, must support and strengthen the capacity of municipalities to manage their own
affairs, to exercise their powers and to perform their functions.
LGL3702/1 21
(2) Draft national or provincial legislation that affects the status, institutions, powers or
functions of local government must be published for public comment before it is in-
troduced in Parliament or a provincial legislature, in a manner that allows organised
local government, municipalities and other interested persons an opportunity to make
representations with regard to the draft legislation.
ACTIVITY 2.3
• How do the above-mentioned sections correspond to households’ rights of access to

basic services?
14 FEEDBACK
• This is a self-evaluating activity. Note though that to answer the question properly
you need to study carefully the provisions of the above-mentioned sections and then
“select” those sections’ subsections, which (in your opinion) correspond closest to
households’ rights of access to basic services.
ACTIVITY 2.4
• Write a few short paragraphs explaining how households’ rights to basic services
correspond to local government’s constitutional duties as outlined in the above
constitutional sections (sections 151–154).
15 FEEDBACK
• This activity constitutes an expansion on the previous one and is therefore yet again
a self-evaluating activity. However, do follow the guidelines provided above.
2.1.6 Constitutional requirements other than Chapter 7

The Chapter 7 requirements are directed at local government alone, whilst the follow-
ing constitutional requirements are relevant to all spheres of government, including
local government (take careful note of these provisions):
• Chapter 3: Co-operative government

• Section 43 headed “Legislative authority of the Republic” (read with sections 67
[“Participation by local government representatives”] and 163 [“Organised local
government”]): Legislative authority vests with either Parliament (in the national
sphere), provincial legislatures (in the provincial sphere) or municipal councils (in
the local sphere)
• Section 126 headed “Assignment of functions”: Powers or functions that have to be
exercised in terms of an Act of Parliament can be assigned to a municipal council
• Section 195(1) (and Chapter 10 in general): Government administration (including
local government) must comply with the general requirements governing public
administration – public administration acting as the administrative branch of the state
• Chapter 12 (“Traditional leaders”): Traditional leaders must be included in local
authorities since they have important roles to play regarding the effective functioning
of municipalities
22
• Chapter 13 (“Finance”): Financial principles and requirements that pertain to local

government
2.2 THE NATURE OF LOCAL GOVERNMENT

2.2.1 Defining local government
In CDA Boerdery (Edms) Bpk and Others v The Nelson Mandela Metropolitan Mu-
nicipality and Others 2007 (4) SA 276 (SCA) in paragraph 37, Cameron JA found
that the Constitution conferred “a radically enhanced status on municipalities” which
is completely different from the pre-1994 era.
In Pedro v Greater George Transitional Council [2001] 1 All SA 334 (C), the court
confirmed that a municipality is an organ of state and that municipalities must there-
fore respect principles of public administration.
The legal nature of a municipality could be defined as follows: An organ of state within
the local sphere of government, which exercises legislative and executive authority.
This authority concerns a specific demarcated area as established by the Local

Government: Municipal Demarcation Act 27 of 1998. One should also note that a
municipality consists of three entities, namely the political structure, the administra-
tion and the community (section 2(b) of the Systems Act). Section 2(d) also makes
it clear that the municipality is a separate legal entity and therefore liable for its ac-
tions. A municipality could be defined as a universitas. Municipalities have a number
of common-law duties, for example:
• A municipality must exercise its authority in accordance with administrative law,

its actions should be reasonable and in line with the audi alteram partem rule (“to
hear the other side” rule).
• The law of contract and delict will apply to municipalities, similar to any other legal
institution.
• Where the municipality’s actions contravene certain laws (for example town
planning legislation), the municipality will be held liable and criminally sanctioned.
• Can an individual sue local government for not giving effect to his/her constitutional
rights? For instance, his/her right to have access to adequate housing (section
26 of the Constitution.)
2.2.2 Local government as democratic

Section 152(1)(a) of the Constitution provides that local government should aim to
provide “democratic and accountable government for local communities”.
Section 4(2)(a) of the Systems Act (the Local Government: Municipal Systems Act
32 of 2000) also includes this objective since it states that a municipal council should
use municipal resources “in the best interests of the local community”.
Section 4(2)(b) of the Systems Act provides that this obligation will be given effect
to if the functions of local government are provided “without favour or prejudice” and
through “democratic and accountable government”.
The Systems Act describes a municipality as a composite organ of state, which consists
of three elements. The three elements are listed in section 2(b) of the Systems Act:
• the municipal council as the elected political structure
LGL3702/1 23
• the municipal administration
• “the community of the municipality”
This “community” (as defined in section 1 of the Act) refers to four different groups:
(a) the residents of the municipality who are ordinarily resident in the municipality
(b) the ratepayers of the municipality
(c) civil society formations who are involved in local affairs within the municipality
(d) non-residents (visitors who make use of municipal services)
Importantly, section 1 of the Systems Act emphasises that community includes “more
specifically, the poor and other disadvantaged sections” of the mentioned persons.
The community is part of the functioning of the municipality, although section 2(d) of
the Act makes it clear that the municipality has a separate legal personality, which
excludes liabilities of citizens.
Importantly, the political relationship between the political structures of the municipality
and the community would necessarily imply “community” in the narrow sense – that
is the residents who can vote and hold political actors in the municipality accountable
for their actions and for the way in which they govern the municipality. The residents
ARE the central part of the local community and all residents have locus standi (legal
standing) to enforce legally local government obligations.
There is also a relationship of co-governance between the political structures of

the municipality and the community. Members of the community are entitled to be
consulted – although it depends on the specific issue at hand.
One might ask:
How do members of the community relate to the administration and political

structures of local government?
The answer is straightforward and specifically regulated in the Systems Act. The
relevant sections are paraphrased below:
Section 5(1)(a): Members of the community have the right to submit suggestions
and complaints through the legally provided mechanisms.
Section 5(1)(b): Members have the right to receive prompt responses to their submis-
sions to the municipality.
Section 5(1)(c): Members have the right to know about decisions that affect their
property rights and reasonable expectations.
Section 5(1)(d): Members have the right to know about decisions that affect the mu-
nicipality’s state of affairs including its finances.
Section 5(1)(e)(i): Members have the right to demand that council proceedings be
open to the public.
Section 5(1)(e)(ii): Members have the right to demand that council proceedings
take place “impartially and without prejudice” and are “untainted by personal
self-interest”.
Section 5(1)(f): Members have the right to use and enjoy public facilities.
Section 5(1)(g) read with section 5(2)(b): Members have the right of access to mu-
nicipal services (if they pay for such services).
On the other hand, members of the community have a number of responsibilities.
These are also listed in the Systems Act and paraphrased below:
Section 5(2)(a): They should engage with the municipality in an orderly manner.
Section 5(2)(b): Members must pay promptly in respect of taxes, fees, rates, levies
and duties that the municipality imposes.
Section 5(2)(c): Members must respect each other’s municipal rights.
24
Section 5(2)(d): Members must allow municipal officers reasonable access to their
properties for the performance of municipal duties.
Section 5(2)(e): Members must abide by the by-laws.
ACTIVITY 2.5
• Explain in a note the following: a) the ways in which community members can take
part in local government; b) the responsibilities of the community with regard to local
government aff airs.
16 FEEDBACK
• This is a self-evaluation activity. Use the information given earlier in this learning unit
to guide you through the answer to the activity. Hint: You need merely to summarise
(using your own words) the question posed above, “How do members of the community
relate to the administration and political structures of local government?”
ACTIVITY 2.6
• To what extent, do you think, should members of the community participate in the
aff airs of local government? Are there areas of law that require MORE community
participation than others do?
17 FEEDBACK
to guide you through the answer to the activity. Hint: In this regard, think along the lines
of the provision of basic services such as housing and development.
2.2.3 Local government as autonomous

The 1996 Constitution confirms local government’s autonomy. Section 4(1)(a) of the
Systems Act confirms the nature of local government as autonomous. It states that
municipal council has the right “to govern on its own initiative the local government
affairs of the local community.” In terms of section 4(1)(b) of the Systems Act, the
council can exercise the municipality’s executive and legislative authorities “without
improper interference”. However, this does not mean that the national and provincial
government may not supervise the functioning of local government; in fact, these
spheres of government are often obliged to supervise local government actions.
It is important to understand that municipal councils exercise original legislative au-

thority and their powers are not merely delegated to them from either provincial or
national government. In essence, this means that the municipal council can make
its own laws.
Study the following passages from Fedsure Life Assurance Ltd and Others v Greater
Johannesburg Transitional Metropolitan Council and Others 1998 (12) BLCR 1458
(CC) paragraphs 38, 126:
LGL3702/1 25
… for the first time in our history, provision was made for autonomous local
government with its own constitutionally guaranteed and independent exist-
ence, powers and functions. (para 38)
The constitutional status of a local government is thus materially different to what it

was when Parliament was supreme, when not only the powers but also the very exist-
ence of local government depended entirely on superior legislatures. The institution of
elected local government could then have been terminated at any time and its func-
tions entrusted to administrators appointed by the central or provincial governments.
This is no longer the position. Local governments have a place in the constitutional
order, have to be established by the competent authority, and are entitled to certain
powers, including the power to make by-laws and impose rates. (para 126)
Study the following passage from CDA Boerdery (Edms) Bpk and Others v The Nelson
Mandela Metropolitan Municipality and Others 2007 (4) SA 276 (SCA) paragraph 38:
The Constitution has moved away from a hierarchical division of government

power in favour of a new vision, in which local government is interdependent,
and (subject to permissible constitutional constraints) inviolable and has latitude
to define and express its unique character. (para 38)
In addition, it is also very important to note that municipalities are financially inde-
pendent. Municipalities have access to their own resources, including service fees,
surcharges and property rates, which amount to nearly 80 per cent of the municipal-
ity’s budget.
The autonomy granted to municipalities must be used purposively. Section 11(3)(1)

of the Systems Act specifies that local government must provide services in a sus-
tainable manner, promote social and economic development and ensure a safe and
healthy environment for all citizens. In addition, section 1 and section 11(3)(b) of the
Systems Act specify that municipalities must “develop” in the sense that communi-
ties must be uplifted, members of the community’s quality of life should be improved
and special attention should be awarded to poor and disadvantaged members. Local
government therefore has a key role to play in transforming South Africa, especially
with regard to the nation’s commitment to redistribution.
Please note:
Throughout this discussion (and discussion in subsequent learning units), you need
to remember the important “limitation” to the autonomy of local government as found
in section 40(1) of the Constitution. Therefore, always bear in mind that even though
local government is defined as autonomous (distinctive of other spheres of govern-
ment), municipalities are also interrelated and interdependent with provincial and
national governments in terms of the said subsection. (See below.)
• Carefully read the following paragraphs from Schubart Park Residents’ Association
and Others v City of Tshwane Metropolitan Municipality and Another 2013 (1)
BCLR 68 (CC):
Schubart Park is a residential complex close to the city centre of Pretoria in the City
of Tshwane Metropolitan Municipality. It consists of four high-rise blocks, A, B, C
and D. The complex was erected in the 1970s as part of a state-subsidised rental
scheme for the benefit of civil servants. In July 1999, the first respondent (City) took
over Schubart Park. Initially, the City continued to rent out units in the complex to civil
servants. However, over time, increased urbanisation and the resultant decay took
their toll. By the time the events that led to the litigation in this matter occurred, the
26
condition of the buildings had markedly deteriorated, and many persons not known
to the City were occupying the buildings. Approximately 10 days before 21 Septem-
ber 2011, the water and electricity supply to Schubart Park was stopped. Some 700
families were living at Schubart Park in blocks A, B and C at that time. Block D was
unoccupied. (para 1)
On 21 September 2011, a number of residents started a protest about living condi-

tions at the complex. The protest involved the burning of tyres, the lighting of fires
and the throwing of stones and objects from the buildings at vehicles and the police.
Two localised fires broke out in block C. The police cordoned off the streets around
Schubart Park, removed the residents of block C from the building and denied access
to all other residents returning to Schubart Park after work on that day. Residents in
blocks A and B were not removed that day. The City Metropolitan Police and fire bri-
gade officers assisted police. The fires were extinguished later in the evening and by
the next day, the police operation relating to the protest was effectively over. (para 3)
ACTIVITY 2.7
The municipality owned the buildings and the municipality therefore had a duty to
maintain the buildings. It is clear that the municipality did not maintain the buildings
since they had started to decay.
• Write a short paragraph explaining whether there is a link between the decay of
the buildings and the protest initiated by the residents.
18 FEEDBACK
• This is a self-evaluation activity. However, it requires you fi rst to read and re-read the
paragraphs above and then to summarise the facts. Having done that, you must go
back and use the information given earlier in this learning unit to guide you through the
answer to the activity. Hint: Once again, return to that part of the study guide where
we discuss “responsibilities” of members of the community.
ACTIVITY 2.8
• Is there a link between the residents being “kicked out” of their homes and the municipality
failing to provide finances for the maintenance of the buildings?
19 FEEDBACK
• This is a self-evaluation activity. Use the information given earlier in this learning unit to
guide you to the answer. Hint: What is required of you is to compare the developmental
duties of municipalities with that of the provisions made for members of the community
and then to reach a conclusion.
ACTIVITY 2.9
• In light of these circumstances, do you think local government should remain autonomous
in all instances? When should “higher” spheres of government intervene?
LGL3702/1 27
20 FEEDBACK
to guide you to the answer. Hint: Have a look at the provisions of section 154 quoted
above (as well as the provisions of section 40(1) of the Constitution).
ACTIVITY 2.10
• To what extent can the court interfere and order local government to adhere to its
duties? How does separation of powers fit into your answer?
21 FEEDBACK
• Take another look at section 2 of the Constitution quoted and discussed above. As
regards the separation of powers part of the question, page back to where this doctrine
is discussed and then answer the question.
2.3 THE ROLE, CHARACTER, STATUS AND OBJECTIVES OF

LOCAL GOVERNMENT
2.3.1 The new role of local government

• Local government functions closest to the citizens of South Africa and the services
it provides affect the lives of all the people in its jurisdiction.
• Local government counterbalances a concentration of power and authority in
other governmental spheres.
• Local government must provide sustainable services.
• Local government ensures that the community is involved in the decision-making
process concerning matters that affect them.
Section 40 of the Constitution headed “Government of the Republic” states the

following:
(1) In the Republic, government is constituted as national, provincial and local

spheres of government, which are distinctive, interdependent and interrelated.
(2) All spheres of government must observe and adhere to the principles in this
Chapter and must conduct their activities within the parameters that the Chapter
provides.
2.3.2 Characteristics of local government

A local authority is a separate juristic entity and it functions in a specific area (juris-
diction). Each local authority has been formed by the members of the community
in which it operates. Thus, this authority must make its decisions in the interests of
the community.
The local authority represents a place where members of the community can actively
participate in governmental affairs. This is referred to as “grass-roots” democracy.
28
Above all, local government is empowered with its own executive and legislative
power in terms of which it can make decisions and politically take part in governing
South Africa – these powers should not be overlooked.
2.3.3 The status of municipalities

Local government is a sphere of government, not a level.
Section 151 of the Constitution (“Status of municipalities”) provides as follows:
the Constitution.
The following conclusions can be drawn from section 151 (Please study these
pointers.):
• Local government consists of municipalities.

• Municipalities must be established for the whole of South Africa – no area in South
Africa can be excluded from municipal governance.
• The municipal council is vested with all the authority.
• Local government is largely autonomous, but provincial and national government
must oversee some of its actions.
With regard to the last point, local government has administrative autonomy and
the other spheres of government cannot intervene in relation to these functions.
However, the legislative autonomy of local government can and will be impaired by
provincial and national government if local government’s municipal by-laws conflict
with provincial or national laws. Such by-laws will be invalid in terms of section 156(2)
of the Constitution.
2.3.4 Local government objectives

Section 152 of the Constitution states the following:

Section 152 sets the foundation for local government’s obligations. The objectives
listed above are clear and it is therefore not necessary to explain them in detail, al-
though you should keep them in mind when studying this module since they underlie
all actions of local government. In addition, you should understand that, in order to
give effect to these objectives, various programmes have to be put in place and the
implementation of these programmes can become challenging.
LGL3702/1 29
ACTIVITY 2.11
• Make a note of the disadvantages that this newly created third sphere of government
can experience. Also, study the constitutional explanation of the three spheres of
government and summarise this constitutional explanation.
22 FEEDBACK
to guide you to answer the activity. Hint: See below for the “disadvantages” (read
“constraints”) this tier can experience.
2.4 DEVELOPMENTAL LOCAL GOVERNMENT

This principle refers to local government that works with members of the community
in order to meet the basic needs of all South Africans. Municipalities must structure
and manage their administration, budgeting and planning to give priority to the basic
needs of members of each municipal community. Municipalities must undertake
developmental-orientated planning to ensure that it gives effect to the constitutional
mandate of developmental duties, which effectively aims to fulfil individuals’ funda-
mental human rights.
ACTIVITY 2.12
• Page back to the Schubart Park case and ask yourself, “Did the Tshwane Municipality
undertake developmental planning to ensure that it could give effect to the residents’
basic housing needs”?
23 FEEDBACK
to guide you to answer the activity.
One should note that the Constitution entitles households to certain rights that are
directly linked to certain municipal services, including access to housing, health
care, education, food, water and social security.
Sections 26–29 of the Constitution provide as follows:

26. Housing
(1) Everyone has the right to have access to adequate housing.

(2) The state must take reasonable legislative and other measures, within its available
resources, to achieve the progressive realisation of this right.
(3) No one may be evicted from their home, or have their home demolished, without an
order of court made after considering all the relevant circumstances. No legislation
may permit arbitrary evictions.
27. Health care, food, water and social security

(1) Everyone has the right to have access to
30
(a) health care services, including reproductive health care;

(b) sufficient food and water; and
(c) social security, including, if they are unable to support themselves and their de-
pendants, appropriate social assistance.
(2) The state must take reasonable legislative and other measures, within its available
resources, to achieve the progressive realisation of each of these rights.
(3) No one may be refused emergency medical treatment.
28. Children
(1) Every child has the right
(a) to a name and a nationality from birth;
(b) to family care or parental care, or to appropriate alternative care when removed
from the family environment;
(c) to basic nutrition, shelter, basic health care services and social services;
(d) to be protected from maltreatment, neglect, abuse or degradation;
(e) to be protected from exploitative labour practices;
(f) not to be required or permitted to perform work or provide services that
(i) are inappropriate for a person of that child’s age; or
(ii) place at risk the child’s wellbeing, education, physical or mental health or
spiritual, moral or social development;
(g) not to be detained except as a measure of last resort, in which case, in addition to
the rights a child enjoys under sections 12 and 35, the child may be detained only
for the shortest appropriate period of time, and has the right to be
(i) kept separately from detained persons over the age of 18 years; and
(ii) treated in a manner, and kept in conditions, that take account of the child’s age;
(h) to have a legal practitioner assigned to the child by the state, and at state expense,
in civil proceedings affecting the child, if substantial injustice would otherwise
result; and
(i) not to be used directly in armed conflict, and to be protected in times of armed
conflict.
(2) A child’s best interests are of paramount importance in every matter concerning the child.
(3) In this section “child” means a person under the age of 18 years.
29. Education.
(1) Everyone has the right
(a) to a basic education, including adult basic education; and
(b) to further education, which the state, through reasonable measures, must make
progressively available and accessible.
(2) Everyone has the right to receive education in the official language or languages of
their choice in public educational institutions where that education is reasonably prac-
ticable. In order to ensure the effective access to, and implementation of, this right, the
state must consider all reasonable educational alternatives, including single medium
institutions, taking into account
(a) equity;
(b) practicability; and
(c) the need to redress the results of past racially discriminatory laws and practices.
(3) Everyone has the right to establish and maintain, at their own expense, independ-
ent educational institutions that
(a) do not discriminate on the basis of race;
(b) are registered with the state; and
(c) maintain standards that are not inferior to standards at comparable public educa-
tional institutions.
(4) Subsection (3) does not preclude state subsidies for independent educational institutions.
LGL3702/1 31
Government, and specifically local government, should take all “reasonable measures”
in order to give effect to these rights. Local government must use its resources to
fulfil this constitutional commitment. The reality is that numerous South Africans live
in poverty without basic services and it is the local government’s duty to rectify this
predicament through its developmental obligations. These obligations were mentioned
in the previous learning unit.
Please note:
Provision has been made for “mechanisms” for local government to achieve develop-
mental goals. The White Paper (see the reference to the White Paper in the previous
learning unit) introduced the three approaches detailed below:
(Study Bekink section 7.7 – “Mechanisms for local governments to achieve develop-
mental goals” [pp 75–78].)
(a) Integrated development planning, budgeting and performance

monitoring
Make sure you understand the process of Integrated Development Planning (IDP) in
terms of which municipalities must put together local development plans. You should
be able to list the necessary steps that government must take to give effect to its
plans. These are steps such as: (1) an assessment of the current reality (relating to
the social, economic and environmental reality); and (2) a determination of community
needs through close consultation.
You should be able to list and thoroughly explain the advantages of a proper IDP.
IDP’s are not fixed long-term plans incapable of being amended. Rather, they are
subject to review and change. Each municipality should manage and develop its own
IDP on a regular basis.
ACTIVITY 2.13
Study Madzivhandila TS & Asha AA “Integrated development planning process and

service delivery challenges for South Africa’s local municipalities” (2012) 47 Journal
of Public Administration 369–378, pages 372–373 in conjunction with learning unit
7 (dealing with service delivery).
24 FEEDBACK
• You should be able to explain IDP in detail in this activity. However, for the second part
of the question you need to “hold back” until you have studied learning unit 7 and only
then link (as the writers did) IDP to the basic principles regarding municipal service
delivery. This activity is an example of you being able to link various units of this study
guide to each other.
(b) Municipal performance management

Performance management ensures that local objectives and duties are implemented,
monitored and – if need be – corrected. Each municipality must set its own standards
32
of performance and these are referred to as Key Performance Indicators (KPIs). KPIs
vary from one municipality to the next and each municipality should aim to give effect
to the constitutional objectives, whilst also relying on its KPIs to assess the success
of its plans. The community should be actively involved in establishing the KPIs for
each municipality.
You should be able to give a thorough explanation of the nature and function of KPIs
as set out in the prescribed pages from Bekink.
(c) Municipal co-operation with the community and private

partners
You should be able to list and explain the four levels of public participation in municipal
affairs (Section B 3.3 Working together with local citizens and partners of the White
Paper on Local Government):
• as voters
• as participants in the policy process
• as consumers and end-service-users
• as local partners in resource mobilisation
2.5 THE CURRENT STATE OF LOCAL GOVERNMENT
2.5.1 External constraints

As explained in the previous learning unit (and elaborated upon in this learning unit),
the Constitution created the legal framework for local government. However, in the
paragraphs that follow, we identify a number of external factors that, despite the legal
framework being in place, have a negative impact on the current municipal system.
• Financial constraints
As a consequence of the new local government structure – and specifically the en-
hanced responsibilities of local government – the number of people for whom each
municipal authority must provide services has increased significantly. These increases
in the numbers of households requiring services, along with the generally expanded
jurisdictions of each municipality, have not been counterbalanced by the increases
in tax revenue that would be necessary to enable local government (in the form of
municipalities) to fulfil their new-found, Constitution-driven accountabilities. This has
resulted in a number of municipalities facing financial crises, although service back-
logs, disintegrated infrastructure and a general lack of borrowing capacity have also
contributed to the financial distress of municipalities. The current decline in national
economic growth (the country finds itself at present in a “technical” recession with
virtually no growth), combined with residents’ expectations of service delivery, places
even more pressure on the dire financial situation of local government.
• Administrative challenges
The incorporation of local government as a significant sphere of government – and
one that is largely autonomous in its decisions – has resulted in substantial admin-
istrative changes. Despite this constitutional imperative, local government still faces
a number of administrative difficulties. These include hierarchical structures, a lack
of coordination between different departments, inexperienced and untrained staff
LGL3702/1 33
and a general shortage of women in senior positions. These difficulties have to be
addressed through new capacities, approaches and attitudes. Importantly, the rela-
tionships between municipal councils and local communities – as well as between
municipal councils and the various operational divisions (including the administra-
tions, management and workforce) in each municipality – will have to be improved.
• Legislative complication
A number of new laws were introduced in order to give effect to the Constitution in
the area of local government and these laws were listed in the previous learning unit.
Nevertheless, many old-order laws (laws that applied during the pre-1994 period)
remain in force and continue to operate alongside the newly enacted local government
laws. Unsurprisingly, the old-order laws were enacted to give effect to the apartheid
government’s policies and ideals. This predicament has created some uncertainty
for municipal councils. The old-order laws were often applied and interpreted differ-
ently depending on the jurisdiction concerned. This resulted in different norms and
standards being applied throughout the Republic.
ACTIVITY 2.14
• Explain in one short paragraph the negative external constraints on local government.
25 FEEDBACK
• This is obviously a self-evaluating activity and warrants no further comment.
ACTIVITY 2.15
• Can you think of any solutions to these negative aspects that are hindering local
government in performing its functions?
26 FEEDBACK
• This is obviously a self-evaluating activity. It requires you to be imaginative and come
forward with solutions.
QUESTION 1
Mention the fundamental human rights, as stated in the Bill of Rights, and write a short piece
on the constitutional obligation of local government to give effect to those rights. Refer to case
law and pay specific attention to the facts of the cases. Do you think the task handed to the
municipalities is an easy one? Substantiate your answer.
34
QUESTION 2
Give a full explanation of the new nature of local government. To what extent is local govern-
ment autonomous? Do the other spheres of government have any role to play in the daily
functions and operations of local government? Substantiate your answers.
QUESTION 3
Describe the status, character and objectives of local government. It is vital that you refer to
the relevant constitutional provisions and sections in the Systems Act. You must memorise
the relevant sections of the Act.
QUESTION 4
Explain the concept of developmental local government with reference to fundamental human
rights. Write a two-page piece on the link between the realisation of socioeconomic rights in
South Africa and the duties of local government. Refer to case law in your answer. You should
also refer to the previous apartheid regime in terms of which local government denied some
persons access to basic services.
QUESTION 5
Explain the constraints and difficulties municipalities currently face and write a paragraph
substantiating why municipalities are burdened with these problems.
Your answer should refer to the pre-1994 apartheid regime and the nature of local govern-
ment during that era.
LGL3702/1 35
3 LEARNING UNIT 3
3 The operational forms of municipalities
(including the establishment of
municipalities)
OVERVIEW
In this learning unit, we examine how municipalities are established. In order for you
to understand this, we first have to determine how the Municipal Demarcation Board
(MDB) demarcates municipal boundaries. The MDB has specific functions and powers
in relation to the establishment of municipal boundaries across South Africa. It must
establish municipalities in line with the criteria set for the demarcation of municipalities
and it must comply with the required procedures. In this unit, you will discover how
establishment notices function and how municipalities are converted. (Conversion
is the process by which one municipality ceases to exist and another takes its place.
You should take special note of the legislative provisions that regulate the conver-
sion of municipalities.) We also explain the institutional models of local government
and, by the end of this unit, you should have a sound understanding of the different
categories, systems and types of municipalities. In this regard, you should be able to
explain fully the three municipal categories (A–C), the five municipal systems and the
different combinations of systems that would constitute different types of municipali-
ties. It is imperative that you study these aspects in conjunction with the applicable
statutory provisions since local government law is essentially regulatory law.
• explain how municipalities are established

• describe the functions and powers of the MDB in relation to the demarcation of
municipal boundaries
• explain how and when municipalities are converted
• give a thorough explanation of the different categories of municipalities
• give a detailed description of the different municipal systems
• explain how the municipal systems are combined to constitute different municipal
types
• fully describe the new institutional models with reference to the relevant statutory
provisions
LEARNING MATERIAL
Bekink section 10.3.1.2 (p 117–120); sections 10.3.1.3 and 10.3.1.4 (p 121–122)
Others 2006 (5) SA 47 (CC) paras 1–31; 40–42; 48–51
Others 2007 (1) BCLR 47 (CC) paras 36–39; 45
and Others 2008 (5) SA 171 (CC) paras 1; 16; 19–27
Executive Council, Western Cape v Minister of Provincial Affairs and Executive Coun-
cil KwaZulu-Natal v President of the RSA and Others 2000 (1) SA 661 (CC)
36
LEARNING UNIT 3: The operational forms of municipalities (including the establishment of municipalities)
3.1 DEMARCATION OF MUNICIPALITIES
3.1.1 Introduction
In terms of section 151(1) of the Constitution, local government consists of a number
of municipalities and municipalities must be established for the whole territory of
South Africa. In addition, section 155(6) of the Constitution mandates each province
to establish municipalities within its own borders. Sections 155(6) and 157(4) of the
Constitution states that national legislation must determine the criteria and procedures
to be followed in order for an independent authority to determine municipal boundaries
and to demarcate the wards within municipalities. It is important that you take note
of the importance of local government boundaries and that you understand the re-
determination of municipal boundaries during the transitional period. These aspects
are explained in the textbook and you should read the relevant sections there carefully.
Municipal boundaries determine the specific area for which a municipal council is
responsible. They also determine the extent of the services that must be provided
and the size of the voting population.
The process of establishing municipalities is regulated in terms of the Local Govern-

ment: Municipal Demarcation Act 27 of 1998 and the Local Government: Municipal
Structures Act 117 of 1998. The Demarcation Act also makes provision for the es-
tablishment of a Municipal Demarcation Board (MDB).
Carefully study Matatiele Municipality and Others v President of the Republic of

South Africa and Others 2006 (5) SA 47 (CC) paras 1–31; 40–42; 48–51; Matatiele
Municipality and Others v President of the Republic of South Africa and Others 2007
(1) BCLR 47 (CC) paras 36–39; 45; and Merafong Demarcation Forum and Others
v President of the Republic of South Africa and Others 2008 (5) SA 171 (CC) paras
1; 16; 19–27. You should be able to answer short questions regarding these cases.
3.1.2 Municipal Demarcation Board (MDB)

Section 2 of the Demarcation Act confirms that the MDB is a juristic person and that
it operates independently. The main function of the MDB is to determine municipal
boundaries in terms of applicable legislation and to provide advisory services as
stated in the legislation: section 4 of the Demarcation Act. The advisory role of the
MDB pertains to the division of powers between different municipalities, for example,
local and district municipalities. The powers of the Board are limited to its functions
(section 5(1) of the Act). The MDB consists of no fewer than seven members, but it
cannot have more than 10 members. The members must be South African citizens
and the composition of the Board must be representative of South Africa (section
6(1)–(3) of the Act). Section 7(2) of the Demarcation Act excludes a number of
persons from becoming members, including persons under curatorship. Amongst
the members of the Board, the President also appoints a chairperson and a deputy
chairperson (section 8(7) and 10 of the Act). It is vital that you fully understand the
operating procedures of the MDB.
Even though the main function of the MDB is to determine and re-determine municipal
boundaries, the Board’s functions must still be compliant with the relevant legislation
(section 21(2) of the Demarcation Act). The Board must publish any determination
in the Provincial Gazette and any person may object to such a determination within
30 days by writing to the Board (section 21(4) of the Act). In terms of section 21(5)
(a)–(c), the Board must consider all objections and respond in the Provincial Ga-
zette by either amending, withdrawing or confirming its determination. The Board
LGL3702/1 37
can determine municipal boundaries at the request of the Minister or the MEC of a
province; the municipality itself; or on its own initiative in terms of section 22 of the
Demarcation Act. Importantly, section 23(2)(a) of the Act provides that the Board
must send the newly-determined municipal boundary to the Electoral Commission
(EC) and the determination will only be effective after the date of the next municipal
vote if the new municipal boundary will affect the representation of voters in that
specific council. If the proposed change in the municipal boundary does not affect
the representation of voters, the determination will take effect on the date as stated
in the Provincial Gazette.
3.1.3 Criteria for demarcation

There are a number of requirements listed in section 24(a)–(d) of the Act (“Demar-
cation objectives”) that the Board must fulfil when determining (or re-determining) a
municipal boundary, namely:
• The municipality must be enabled to give effect to the constitutional commitments

as set out in section 152 of the Constitution.
• The municipality must be able to govern the relevant area in an effective manner.
• The municipality must be able to provide for integrated development.
• The municipality must have a tax base “as inclusive as possible of all users of
municipal services in that municipal area” (in other words the tax base has to cover
the municipal services in the applicable area). (Why do you think this requirement
must be fulfilled?) In other words, the municipal area should therefore be big enough
for the municipality to acquire sufficient revenue (usually in the form of property
rates and taxes) in order to fulfil its obligations (as explained in the previous unit
and elaborated upon in learning unit 9 dealing with “municipal finance”).
ACTIVITY 3.1
• What do you think would happen if the area were too small and the municipality were
to struggle to acquire enough revenue in order to carry out its functions?
27 FEEDBACK
to guide you through the answer to the activity. Hint: Read the last bullet point just
above and think along the lines of how it will be possible for a municipality to fulfi l its
obligations with virtually no revenue base.
ACTIVITY 3.2
• Do other spheres of government have a role to play in such an instance?
28 FEEDBACK
to guide you through the answer to the activity. Hint: Think back and reconsider the
38
provisions of section 40(1) of the Constitution. However, we will return to this subject
later in this study guide.
Section 25 of the Demarcation Act headed “Factors to be taken into account”, lists
the factors that a municipality must consider when demarcating a specific area. You
should study these factors and be able to list at least ten (10) of them:
In order to attain the objectives set out in section 24, the Board must, when determining a
municipal boundary, consider
(a) the interdependence of people, communities and economics as indicated by
(i) existing and expected patterns of human settlement and migration;

(ii) employment;
(iii) commuting and dominant transport movements;
(iv) spending;
(v) the use of amenities, recreational facilities and infrastructure; and
(vi) commercial and individual linkages;
(b) the need for cohesive, integrated and unfragmented areas, including metropolitan areas;
(c) the financial viability and administrative capacity of the municipality to perform municipal
functions efficiently and effectively;
(d) the need to share and redistribute financial and administrative resources;
(e) provincial and municipal boundaries;
(f) areas of traditional rural communities;
(g) existing and proposed functional boundaries, including magisterial districts, voting
districts, health, transport, police and census enumerator boundaries;
(h) existing and expected land use, social, economic and transport planning;
(i) the need for co-ordinated municipal, provincial and national programmes and services,
including the needs for the administration of justice and health care;
(j) topographical, environmental and physical characteristics of the area;
(k) the administrative consequences of its boundary determination on
(i) municipal creditworthiness;

(ii) existing municipalities, their council members and staff; and
(iii) any other relevant matter; and
(l) the need to rationalise the total number of municipalities within different categories and
of different types to achieve the objectives of effective and sustainable service delivery,
financial viability and macroeconomic stability.
It follows that the demarcation process is a complex and involved task and that, in
most instances, specialised advice and thorough studies should be conducted be-
forehand. Bekink writes the following about these factors (at p 152):
The Demarcation Act does not specify how the Board should go about ensur-
ing that all of the factors have indeed been complied with. This is perhaps
an unfortunate lacuna in the Act, which could enhance the chances of legal
challenges to actions of the Board. Such challenges could be minimised if the
Board took every possible precaution to ensure that all relevant criteria were
taken into account before a decision was finalised.
3.1.4 The demarcation procedure

Prior to the determination of a municipal boundary, the Board is required to publish
a notice in a relevant local newspaper. The notice must clearly state the intention
of the Board and invite written comments from the public. Written representations/
views from the public must be submitted within a specified period, which period may
not be shorter than 21 days (s 26(1)(a) and (b)). A copy of the notice must also be
LGL3702/1 39
sent to the MEC in the province; to all municipalities that are affected by the objec-
tive; to the magistrate of the area (if the magisterial district is affected) and to the
provincial house of traditional leaders. In terms of section 26(3) of the Demarcation
Act, all these parties are invited to submit written responses. Once the Board has
considered all the recommendations by the mentioned parties it can hold a public
meeting and investigate certain matters in a more thorough manner. As already
mentioned, once the Board has decided on the boundary and considered all the
recommendations, the details of the demarcation must be sent to the Independent
Electoral Commission (IEC), which must determine whether the new demarcation
affects the representation of voters in the affected council. If so, the demarcation will
take effect from the date of the next election. If the new demarcation does not affect
the representation of voters in the councils, the boundary determination takes effect
on the date stated in the Provincial Gazette. It is important to note that the Minister
of Finance must be informed in advance of any such new determination in order to
align intergovernmental financing.
In a footnote (fn 70 at p 154), Bekink writes that the broad principles/objectives of the
demarcation process “are to ensure integration of all areas that belong together, to
ensure all municipalities are financially viable and capable of performing their func-
tions and to ensure effective local democracy and local government”.
3.2 ESTABLISHMENT OF MUNICIPALITIES
3.2.1 The “establishment notice”

The establishment of a municipality takes place by the publication of a notice in the
Provincial Gazette. Section 12 of the Structures Act headed “MECs to establish
municipalities” prescribes certain requirements in order for such an establishment
to be effective. The municipality will be formally established at the first election of
the council of the given municipality and the so-called “section 12 notice” must be
published by the MEC for Local Government. Some of the concepts in this provision
will be explained later in this learning unit. Section 12(3) provides that the notice must
contain at least the following:
(a) the category of municipality that is established;

(b) the type of municipality that is established;
(c) the boundaries of the municipal area;
(d) the name of the municipality;
(dA) in the case of a metropolitan or local municipality, the number of wards in the
municipality;
(e) the number of councillors;
(eA) in the case of a district municipality, the number of councillors, to represent
both parties proportionally and to represent each local municipality directly;
(f) which councillors of the municipality (if any) may be designated as full-time;
(g) any provisions of this Act from which the municipality has been exempted; and
(h) any other relevant detail.
The establishment notice is the founding document for all municipalities. It binds all
relevant parties and can usually not be easily amended. In order to commence with the
establishment of a municipality, the MEC for Local Government must notify organised
local government in the province and other affected municipalities of the intended
establishment. Once these parties have been notified and consulted, section 12(1)
of the Structures Act provides that the notice must be published for public comment.
40
3.2.2 The conversion of municipalities

Once a new municipality is established in a specific area it supersedes the existing
municipality that falls within that area and the new/superseding municipality becomes
the successor to the previous municipality.
Section 14(1) of the Structures Act provides as follows:

(a) A municipality established in terms of section 12 in a particular area, supersedes the
existing municipality or municipalities to the extent that the existing municipality or
municipalities fall within that area.
(b) The superseding municipality becomes the successor in law of the existing municipality
subject to paragraph (c).
(c) Where a district municipality and one or more local municipalities within the area of the
district municipality supersede the existing municipality or municipalities in that area,
the district and local municipalities in that area become the successors in law of the
existing municipality or municipalities depending on the specific assets, liabilities, rights
and obligations allocated to the district and local municipalities respectively in terms of
the relevant section 12 notice or notices.
In terms of section 14(2) of the Structures Act, the section 12 notice must ensure
disestablishment of the previous municipality.
Section 14(2) of the Act provides as follows:

(2) The section 12 notice must
(a) provide for the disestablishment of the existing municipality or, if only part of the
existing municipality’s area is affected, the disestablishment of the existing mu-
nicipality in the affected area; and
(b) regulate the legal, practical and other consequences of the total or partial dises-
tablishment of the existing municipality, including
(i) the vacation of office by councillors of the existing municipality;
(ii) the transfer of staff from the existing municipality to the superseding munici-
pality, or, if there is more than one superseding municipality, to any of the
superseding municipalities;
(iii) the transfer of assets, liabilities, rights and obligations, and administrative
and other records, from the existing municipality to the superseding munici-
pality, or, if there is more than one superseding municipality, to any of the
superseding municipalities, taking into account the interests of creditors of
the existing municipality; and
(iv) the continued application of any by-laws and resolutions of the existing mu-
nicipality to or in that area, and the extent of such application.
Importantly, section 14(1) regulates the principle of succession, while section 14(2)
regulates domestic transition. In City of Cape Town v Robertson 2005 (3) BCLR 199
(CC) in paragraph 48, the Court held that succession in terms of section 14(1) was
sufficient to constitute a new municipality, the successor of the previous municipality.
This succession included the laws that governed the old municipality.
ACTIVITY 3.3
• Why is it important that the new municipality should in essence “inherit” the laws of
the previous municipality?
29 FEEDBACK:
• A “proper” answer to this question requires you to summarise in your own words the
provisions of section 14(1). Summing up the wording of section 14(1) you would not
be way off the mark should you state that in essence such “inheritance” provides for
LGL3702/1 41
continuity in the governance of any new municipality. Can you think of any other reasons
(apart from providing continuity)? Write them down.
ACTIVITY 3.4
• Why is the action of reviewing the previous municipality’s by-laws and regulations
important?
30 FEEDBACK
• It is important to bear in mind that the new municipality must review the previous
municipality’s by-laws and regulations. The eff ect of such review is that the previous
municipality’s regulations and by-laws will either be transferred to the superseding
municipality or be rescinded. The advantage and/or importance of such a method is that
the new municipality can critically consider the previous laws and regulations in order
to ensure that the measures, legislation and executive decisions are in line with the
Constitution (see section 15 of the Structures Act headed “Review and rationalisation
of existing municipal by-laws”). In other words, such action (to review the previous
municipality’s by-laws and regulations) ensures that all municipal laws (the old-order
laws) are consistent with the new constitutional dispensation.
ACTIVITY 3.5
• What will happen to the previous (old dispensation) laws? Will they be repealed or
amended?
31 FEEDBACK
• See the “feedback” answer above. What does the word “rescind” mean? Look it up in
a dictionary if you do not know. It will provide you with the correct answer.
ACTIVITY 3.6
• Do you think that it will be suffi cient for the new municipality merely to amend the
existing unconstitutional laws?
32 FEEDBACK
• See once again the feedback above. In other words, use the preceding comments to
guide you when you tackle this activity.
The transfer of staff under the section 12 notice is regulated in terms of section 14(3)
of the Structures Act. It states as follows:
(a) The transfer of a staff member in terms of a section 12 notice must be
42
(i) on conditions of service not less favourable than those under which that staff
member served in the existing municipality; and
(ii) in accordance with the Labour Relations Act, 1995 (Act No. 66 of 1995).
(b) A section 12 notice transferring staff of an existing municipality to a superseding mu-

nicipality may determine that
(i) the staff transferred from the existing municipality to the superseding municipality
form an administrative unit that functions as such until the superseding municipal-
ity has established a staff structure and has appointed staff to positions on that
staff structure; and
(ii) such administrative unit functions under the control of the municipal manager or
acting municipal manager of the superseding municipality.
It is therefore clear that staff members will hold their positions and simply be trans-
ferred to the new municipality.
Section 14(4) of the Structures Act makes provision for the transfer of assets in ac-
cordance with the section 12 notice. Where an asset is transferred from the existing
municipality to the new municipality, the register of deeds has to be amended in
order to reflect such a transfer. This implies that the asset must be registered in the
name of the new municipality. Section 14(5) provides that the MEC in a province must
first consult with the existing municipality before he/she may publish a notice in the
Provincial Gazette that would enforce measures to facilitate the transitional process.
It follows that establishment notices are important founding documents for all munici-
palities with the exception of District Management Areas. Section 12 notices can be
amended to reflect new measures necessary to regulate that specific municipality
and, in such instances, a formal process must be followed. Section 16(1)–(3) of the
Structures Act (“Amendment of section 12 notices”) stipulates the requirements for
such an amendment:
(1) The MEC for local government in a province, by notice in the Provincial Gazette, may
amend a section 12 notice
(a) to change the municipality from its existing type to another type;
(b) to alter the name of the municipality;
(c) subject to section 20, to alter the number of councillors, but only with effect from
the next election of the municipal council;
(d) to specify which councillors of the municipality (if any) may be designated as full-
time in terms of section 18(4);
(e) to specify any provisions of this Act from which the municipality has been exempted
in terms of section 91;
(f) to give effect to any change in boundaries; or
(g) to further regulate the matters mentioned in section 14 after consulting all affected
municipalities.
(2) Any amendment of a section 12 notice must be consistent with the provisions of this Act.
(3) The MEC for local government must
(a) at the commencement of the process to amend a section 12 notice, give written
notice of the proposed amendment to organised local government in the province
and any existing municipalities that may be affected by the amendment;
(b) before publishing the amendment notice consult
(i) organised local government in the province; and

(ii) the existing municipalities affected by the amendment; and
(c) after such consultation, publish particulars of the proposed notice for public comment.
It is important to remember that when the Demarcation Board re-determines munici-

pal boundaries and this re-determination affects existing/established municipalities,
the provisions in the Structures Act (specifically sections 12 and 14) apply. It follows
LGL3702/1 43
that the MEC for the province must consult with the existing municipality and amend
or repeal the existing section 12 notice in line with the re-determination. If the MEC
were of the opinion that a municipality is likely to fail in performing all its functions, the
municipality would be allowed to perform only some of its functions not specifically
stipulated in its establishment notice. In such a case, the MEC will merely inform the
municipality that it has assigned some of the municipality’s powers to another cat-
egory of municipality but the assignment is only temporary and reassignment must
take place once the situation has been restored. (See section 87 of the Structures
Act headed “Temporary allocation of functions and powers” for more details.)
3.3 INSTITUTIONAL MODELS IN LOCAL GOVERNMENT
3.3.1 Introduction
One should bear in mind that South Africa is diverse and that government must
cater for the basic needs of all citizens (and even non-citizens who are legally in the
country). In addition, the diversity of communities makes it difficult for local govern-
ment to satisfy the needs of individual households. However, local government must
always strive to cater for the socioeconomic needs of all South Africans. As part
of the new constitutional dispensation and the role it defines for local government,
specific attention must be given to areas outside the metropolitan areas. Currently,
local government is founded on two requirements, namely:
• To create a flexible and effective two-tier system for local government “across
the whole country” (on p 111 of Bekink). In essence, this means that a local tier
of government must govern every person.
These tiers of local government are known as Metropolitan Councils and Local
Councils. The regional tier of local government is referred to as District Councils.
(You should be able to explain both the local tier and the regional tier.)
• To clearly define the roles of local government, provincial government and national
government.
3.3.2 Functioning of local government

It has already been mentioned that local government consists of three bodies, namely
the municipal council (elected by the residents), the municipal administration (consist-
ing of various officials) and the community. In essence, municipal functions consist
of the following (we will expand on these points in later chapters):
• the sustainable provisions of basic services to all citizens, which requires

infrastructure, finances and proper administration
• the promotion of social and economic development
• the provision of democratic and accountable local government – local government
must take proper decisions and will be held accountable if this is not done
It is therefore essential that local government must be organised, structured and

institutionalised in order to give effect to its functions and constitutional objectives.
The new institutional models of local government (and as mandated by the Con-
stitution and Municipal Structures Act) must allow flexibility and be in line with the
Constitution. Section 151(2) of the Constitution mandates and allows municipalities
(specifically Municipal Councils) to enact laws and to make executive decisions. This
means that local government must develop plans in their relevant areas and ensure
the proper implementation and execution of such plans. This often also means that
44
municipal councils must delegate some of their tasks. However, local government
must still ensure that its functions are performed properly and it is noted that not all
local government tasks can be delegated.
Please note:
What follows is a discussion of the different municipal categories, systems and types
provided for in both the Constitution and relevant legislation. It is a “dense” part of
this learning unit and you need to ensure that you are able to distinguish between
these three building blocks to establish (and to describe) a municipality – categories,
systems and types.
3.3.3 Categories of municipalities
3.3.3.1 Introduction
Section 55 of the Constitution identifies three categories of municipalities, while
the national legislature must establish the different types of municipalities. It is very
important that you should be able to distinguish between the different categories and
types of municipalities. Section 55 of the Constitution provides as follows (these are
the different categories of municipalities):
155. Establishment of municipalities.

(1) The following are the three categories of municipality:
(a) Category A: A municipality that has exclusive municipal executive and legislative
authority in its area.
(b) Category B: A municipality that shares municipal executive and legislative authority
in its area with a category C municipality within whose area it falls.
(c) Category C: A municipality that has municipal executive and legislative authority
in an area that includes more than one municipality.
(2) National legislation must define the different types of municipality that may be estab-
lished within each category.
(3) National legislation must
(a) establish the criteria for determining when an area should have a single category A
municipality or when it should have municipalities of both category B and category C;
(b) establish criteria and procedures for the determination of municipal boundaries by
an independent authority; and
(c) subject to section 229, make provision for an appropriate division of powers and
functions between municipalities when an area has municipalities of both category
B and category C. A division of powers and functions between a category B mu-
nicipality and a category C municipality may differ from the division of powers and
functions between another category B municipality and that category C municipality.
(4) The legislation referred to in subsection (3) must take into account the need to provide
municipal services in an equitable and sustainable manner.
(5) Provincial legislation must determine the different types of municipality to be estab-
lished in the province.
(6) Each provincial government must establish municipalities in its province in a manner
consistent with the legislation enacted in terms of subsections (2) and (3) and, by
legislative or other measures, must
(a) provide for the monitoring and support of local government in the province; and
(b) promote the development of local government capacity to enable municipalities
to perform their functions and manage their own affairs.
(7) The national government, subject to section 44, and the provincial governments have
the legislative and executive authority to see to the effective performance by municipali-
ties of their functions in respect of matters listed in Schedules 4 and 5, by regulating
the exercise by municipalities of their executive authority referred to in section 156(1).
LGL3702/1 45
Study the following:
• A category A municipality has exclusive municipal executive and legislative

authority.
• A category A municipality is the only municipal council in that area and therefore
stands alone.
• A category A municipality is also known as a Metropolitan Municipality/Council.
• In a metropolitan area, there will only be a Metropolitan Council.
• Category B municipalities share municipal executive and legislative authority
with a category C municipality since the municipalities fall within the same area.
• A category B municipality is also known as a Local Municipality/Council.
• Category C municipalities have authority in areas with more than one municipality.
• A category C municipality is also known as a District Municipality/Council.
• Category A and B municipalities are generally referred to as primary local
governments, while category C municipalities are referred to as secondary
municipalities.
One should also bear in mind that municipal councils often differ and the Structures
Act has an important role to play regarding the establishment of municipalities in
line with the requirements pertaining to categories and types of municipalities. The
Structures Act confirms the categories as determined by the Constitution, although it
also provides detail concerning the question of whether a specific area should have
either a category A municipality or a combination of a category B and C municipality.
3.3.3.2 Category A municipality

In terms of section 2 of the Structures Act the following areas must have a category
A municipality. (You should study the explanation of such an area.):
If that area can reasonably be regarded as
(a) a conurbation {Note: Synonyms for this word are “built-up area”, “urban sprawl” or
“metropolis”.}
(i) areas of high population density;

(ii) an intense movement of people, goods, and services;
(iii) extensive development; and
(iv) multiple business districts and industrial areas;
(b) a centre of economic activity with a complex and diverse economy;

(c) a single area for which integrated development planning is desirable; and
(d) having strong interdependent social and economic linkages between its constituent units.
It is suggested that all four features (i)–(iv) must be confirmed present before a
municipality can be determined as a category A municipality. However, once these
features have been identified and confirmed, the municipality must be established
as a category A (metropolitan) municipality.
ACTIVITY 3.7
• Why do you think all four features must be present before a municipality can be said
to be a “category A municipality”?
46
33 FEEDBACK
guide you through the answer to the activity. Hint: Think along the lines of the definition
given above of a metropolis.
ACTIVITY 3.8
• Can you think of such a municipality?
34 FEEDBACK
to guide you through the answer to the activity. Hint: Consider where you live – does
your city answer to the definition given above?
ACTIVITY 3.9
• Do you live in a category A municipality? If so, explain why you are of such an opinion.
35 FEEDBACK
• Once again this is a self-evaluation activity. Use the information given earlier in this
learning unit to guide you through the answer to the activity. Hint: Return to the hint
provided in the previous activity.
Please note and this is very important:
Study section 10.3.1.2 of Bekink (p 117–120) to enable you to address the questions
below:
You should be able to:
(a) Fully explain metropolitan municipalities and give three substantiated reasons for the
importance of these municipal councils.
(b) You should also be able to explain the creation and establishment of metropolitan
governments in South Africa. Take special notice of the transition from the previous
apartheid government, the challenges for the post-1994 government in creating category
A municipalities and the transformation of the administration of municipalities.
(c) Make sure you understand the important role of private actors in service delivery and
the supervisory role that government must sometimes undertake.
ACTIVITY 3.10
• This activity is an obvious one. What is more though is that it is a “three-in-one” answer
that is required of you.
LGL3702/1 47
36 FEEDBACK
• This is once again a self-evaluating exercise requiring you to summarise what Bekink
wrote and in so doing answer the questions concentrating on the essence of what he
wrote. In other words, link what he wrote to the particular question(s) with the assistance
of your summary.
3.3.3.3 Category B and C municipalities

Study Bekink sections 10.3.1.3 and 10.3.1.4 (pp 121–122)
Section 3 of the Structures Act headed makes it clear that if an area does not comply
with the section 2 requirements (for establishing a category A municipality), the area
must have both a category B and C municipality. Therefore, except for metropolitan
municipalities, the new South African local government system is a two-tier system
consisting of local councils and district councils. The relevant legislation, namely the
Demarcation Act and Structures Act, envision strong district governments outside
metropolitan areas with enough powers to give effect to constitutional principles and
rules. District municipalities should therefore accommodate local councils to fulfil their
objectives. District councils and local councils have different responsibilities and you
must ensure that you can distinguish between their functions. You should also be
able to define District Management Areas. These areas are declared if certain parts
of district areas are not established by local councils. The district council would be
responsible for all municipal services and functions in these areas.
Please note:
It follows that, in some instances, it might be difficult to determine who would be
responsible for determining the different categories. In Executive Council, Western
Cape v Minister of Provincial Affairs and Executive Council KwaZulu-Natal v President
of the RSA and Others 2000 (1) SA 661 (CC) the Court had to consider the validity
of sections of the Structures Act.
Please note:
Study this decision in conjunction with section 10.3.2 (122–124) of Bekink.
Having studied this decision and Bekink’s discussion you should be able to explain
the Court’s decisions and give reasons for them.
As a result of the Court’s decisions in this case, section 5 of the Structures Act was
repealed and section 4 was amended. Sections 4(1) and 4(2) of the Local Govern-
ment: Municipal Structures Amendment Act 58 of 1999 states that the Demarcation
Board must determine whether a certain area must have a single category A munici-
pality or municipalities of both category B and C. The Board must also determine the
boundaries of the areas in terms of the Act.
It is important that you take note of the definition and description of a district manage-
ment area in terms of section 6 of the Structures Act. Section 6 provides as follows:
6. Parts of category C areas in which category B municipalities are not viable.

(1) If part of an area that in terms of section 3 must have municipalities of both category C
and category B, is declared in terms of subsection (2) as a district management area,
that part does not have a category B municipality.
(2) The Demarcation Board, after consulting the Minister and the MEC for local govern-
ment in the province concerned, may, by notice in the Government Gazette, declare
48
a part of an area that must have municipalities of both category C and category B as
a district management area, if the establishment of a category B municipality in that
part of the area will not be conducive to fulfilment of the objectives set out in section
24 of the Demarcation Act.
(3) (a) The Demarcation Board, after consulting the Minister and the MEC for local gov-
ernment in the province concerned, may by notice in the Government Gazette
withdraw the declaration of an area as a district management area.
(b) When such declaration is withdrawn, the MEC for local government in the province
concerned must, in accordance with any boundary determinations or redetermina-
tions of the Demarcation Board and with effect from the date of the next election
of municipal councils
(i) establish a local municipality for that area in terms of section 12; or
(ii) include that area into another local municipality in terms of section 17.
3.3.4 Different systems of municipalities
3.3.4.1 Introduction: Systems and types

In terms of the Structures Act, different types of municipalities can be created in
each municipal category. Section 155(2) of the Constitution mandates the legislature
to define the types of municipalities. Each municipal type consists of five different
systems. Therefore, one should first consider the different systems of munici-
pal government because a combination of the systems constitutes the type
of municipal government. Section 7 of the Structures Act explains the different
systems as follows (you should note that the types are explained in sections 8–10
of the Structures Act):
7. General. The different types of municipality that may be established within each cat-
egory of municipality are defined in accordance with the following systems of municipal
government or combinations of those systems, as set out in sections 8, 9 and 10:
(a) Collective executive system, which allows for the exercise of executive authority
through an executive committee in which the executive leadership of the municipal-
ity is collectively vested.
(b) Mayoral executive system, which allows for the exercise of executive authority
through an executive mayor in whom the executive leadership of the municipality is
vested and who is assisted by a mayoral committee.
(c) Plenary executive system, which limits the exercise of executive authority to the
municipal council itself.
(d) Sub-council participatory system, which allows delegated powers to be exercised
by sub-councils established for parts of the municipality.
(e) Ward participatory system, which allows for matters of local concern to wards to be
dealt with by committees established for wards.
Note that it is not compulsory that the different systems be combined to form a specific
type of municipal government. Individual systems can also be used to form a type
of municipal government.
Study the following:
• Every municipal council has executive and legislative powers and functions.
• The municipal council’s powers have important implications for that municipality’s
specific system and type.
• Note, from section 7 of the Structures Act, that there are two broad systems,
namely the executive system (consisting of the collective, mayoral and plenary
executive systems) and the participatory system (consisting of the sub-council
and ward participatory systems).
• The executive system describes the way in which the municipality exercises its
executive powers; the municipal council will exercise its executive powers by
means of this structure.
LGL3702/1 49
• Every municipal government must be based on one of the three executive systems
since it must exercise executive powers.
• The participatory systems aim to ensure accountable democratic government
and public participation.
• The participatory systems cannot function on their own and must therefore
be combined with one of the executive systems. However, the executive systems
can stand on their own or be combined with either one or both of the participatory
systems.
You should make sure that you can explain these different systems, otherwise you
will not understand the types of municipalities.
3.3.4.2 The collective, mayoral and plenary executive systems

In the collective system, the municipal council will elect an executive committee
amongst the members of the council and delegate responsibilities to that committee,
which will then be able to take decisions regarding executive matters. The smaller
executive structure allows the municipal council to delegate daily tasks and functions
to the committee and this lifts the council’s burden of having to meet regularly. This
system is therefore ideal where the municipal council is large and, consequently, has
numerous decisions to make daily. Delegation of the tasks to the committee means
that the decision-making process is enhanced. Importantly, the committee must make
decisions together, as a collective whole; members are not allowed to take decisions
themselves. This structure ensures unbiased decision-making and group participation.
The mayoral executive system is different from the collective system since the
executive authority of this system rests with the executive mayor (section 7(b) of the
Structures Act). The mayor is usually assisted by a mayoral committee. The mayor,
as member of the municipal council, is elected by the municipal council. Once the
mayor has been approved by the MEC of the province the council will usually elect
a deputy executive mayor. You should note how the collective and mayoral systems
differ and be able to explain the differences fully. You should also be able to explain
the advantages of a mayoral executive system.
The plenary system is regarded as the simpler model. In this system the executive
powers rest with the municipal council and all decisions must be taken by the whole
council. It follows that the municipal council cannot delegate its executive tasks to
any committee or individual. “Plenary” means “full” and therefore indicates that the
executive decisions must be taken by the full municipal council. However, similar to
the mayoral system, the municipal council must elect a chairperson of the council.
The chairperson is also known as the mayor. Plenary systems usually work best in
smaller municipal areas.
3.3.4.3 The ward and sub-council participatory systems

The ward system allows for the establishment of ward committees in a specific
municipal area. The committees make provision for community participation and all
their powers and functions are delegated to them by the local councils. The aims of
the committees are as follows:
• to give advice on the facilitation of community participation

• to make provision for a system of communication by means of certain channels
that the public can use in order to correspond with local government
• to act as the point of access for the community to local government
50
• to ensure the accountability of municipal councillors

• to strive to improve communication between local residents and government. This
makes it possible for local government to act on behalf of the community and to
address their basic needs.
Each ward committee consists of a councillor and a maximum of ten people drawn
from that specific ward.
The sub-council participatory system is usually introduced in large metropolitan areas.

This system helps to enhance democratic participation and ensure a decentralised
form of local governance. Metropolitan municipalities usually struggle to sustain
effective service delivery, which necessitates a decentralised structure of service
delivery. Sub-councils are established in various parts of the metropolitan area and
the Metro council delegates services and functions to them, the extent of their duties
depending largely on the individual Metro council. Importantly, the Metro council must
conduct thorough research before deciding on the implementation of sub-councils
since these councils can easily become ineffective and financially burdensome. The
number of sub-councils in each instance will depend on the metropolitan municipality
and to what extent it wishes to decentralise powers and functions.
3.3.5 Different types of municipalities

3.3.5.1 Introduction
Municipalities can also be categorised into different types. A combination of municipal
systems constitutes the specific type of municipality. To recap:
• There are five systems of municipalities: three executive systems (collective,

mayoral and plenary) and two participatory systems (ward and sub-council).
• The executive systems describe the way in which a municipality would conduct its
executive powers, while the participatory system is usually implemented to ensure
public participation (more often than not in large municipalities).
• The five systems form the “building blocks” for municipal types.
• All municipalities must have one executive system, or one executive system combined
with one or more of the participatory systems.
• Executive systems cannot be combined with one another.
• If a municipality has decided on the executive system without the inclusion of
participatory systems, the municipal type will be the same as the executive system.
• Participatory systems cannot function on their own.
ACTIVITY 3.11
• Write a short paragraph in which you explain the different municipal systems.
37 FEEDBACK
• Once again this is a self-evaluation activity. However, note that in order to come to
grips with these systems the fi rst step is to remember how many systems there are.
Then you need to distinguish between them by mentioning them to be followed an
explanation of what each of them entails.
LGL3702/1 51
ACTIVITY 3.12
• How many municipal systems are there? What are they?
38 FEEDBACK
• This is obviously a self-evaluation activity. Follow the “instructions” above to get to
this answer.
ACTIVITY 3.13
• How many executive systems are there?
39 FEEDBACK
• This is a giveaway question/activity. Return to the paragraphs above and merely write
down the number of executive systems – nothing more.
ACTIVITY 3.14
• Can a municipality have only one participatory system (and therefore operate without
an executive system)?
40 FEEDBACK
• This is a rather “tricky” question/activity that requires you to read and re-read the
“introduction” above very carefully.
ACTIVITY 3.15
• Why should each municipality have an executive system?
41 FEEDBACK
• This is once again a self-evaluation activity. Hint: Think along the lines of what an
executive’s functions are.
DO NOT proceed if you cannot define and explain the different municipal
systems!
Sections 8–10 of the Structures Act identify different types of municipalities in each
municipal category. (Section 8 deals with “Types of category A municipalities”; section
52
9 deals with “Types of category B municipalities”, and section 10 deals with “Types
of category C municipalities”.)
3.3.5.2 Types of category A municipalities (section 8 of the Structures Act)

Section 8. Types of category A municipalities. The following types of category A munici-
palities exist:
(a) a municipality with a collective executive system;
(b) a municipality with a collective executive system combined with a sub-council partici-
patory system;
(c) a municipality with a collective executive system combined with a ward participatory
system;
(d) a municipality with a collective executive system combined with both a sub-council and
a ward participatory system;
(e) a municipality with a mayoral executive system;
(f) a municipality with a mayoral executive system combined with a sub-council participa-
tory system;
(g) a municipality with a mayoral executive system combined with a ward participatory
system; and
(h) a municipality with a mayoral executive system combined with both a sub-council and
a ward participatory system.
You should study the following: The plenary system cannot stand alone and it can-
not be combined with either one or both of the participatory systems in a category
A (Metropolitan) municipality. Metropolitan areas are too large for plenary executive
systems. Category A municipalities can therefore have either the collective or the
mayoral system alone, or be combined with either one or both of the participatory
systems. Sub-councils are usually implemented in metropolitan municipalities and it
is possible to implement both ward and sub-council systems in a metropolitan munici-
pality. In such a case the municipality should consider how the ward and sub-council
systems should co-operate and interact.
ACTIVITY 3.16
• Can a category A municipality have two participatory systems? A “yes” or “no” will not
be suffi cient. Explain your answer.
42 FEEDBACK
• This is once again a self-evaluation activity although it is also a rather “cunning” one.
You need to read and re-read the above paragraph very carefully to proceed to (a) write
down either “yes” or “no” and (b) to explain why you have reached your conclusion.
3.3.5.3 Types of category B (local) municipalities (section 9 of the Structures Act)

9. Types of category B municipalities. The following types of category B municipalities
exist:
(b) a municipality with a collective executive system combined with a ward participatory
system;
(c) a municipality with a mayoral executive system;
(d) a municipality with a mayoral executive system combined with a ward participatory
system;
(e) a municipality with a plenary executive system; and
(f) a municipality with a plenary executive system combined with a ward participatory system.
LGL3702/1 53
You should note that a category B municipality must have one of the three executive
systems. It can have only the executive system or a combination of an executive
system with a ward participatory system. The sub-council participatory system is
therefore not an option for category B municipalities.
ACTIVITY 3.17
• Can a category B municipality have one ward participatory system and one sub-council
participatory system? Explain your answer.
43 FEEDBACK
to guide you through the answer to the activity.
3.3.5.4 Types of category C (district) municipalities (section 10 of the Structures

Act)
10. Types of category C municipalities. The following types of category C municipalities
exist:

(b) a municipality with a mayoral executive system; and
(c) a municipality with a plenary executive system.
District municipalities may not, therefore, combine their executive system with one of
the participatory systems because (a) district municipalities do not have wards and
because (b) local representation is already provided for through councillors. Impor-
tantly, these municipalities must ensure community participation since these areas
usually cover large areas of land in typically rural areas.
You should also note how the municipal types apply to individual municipalities.
QUESTION 1
Explain the role and function of the Municipal Demarcation Board (MDB). You should make
special reference to the importance of this Board and its role in the constitutional dispensation.
QUESTION 2
What are the requirements and factors that the MDB must take into account when demarcat-
ing municipal boundaries?
QUESTION 3
What must the section 12 establishment notice contain? Explain.
54
QUESTION 4
Give full explanations of the ways in which existing municipalities are disestablished and how
new municipalities succeed the previous municipalities. Refer to the relevant statutory provi-
sions and case law in your answer.
QUESTION 5
Give an extensive analysis of the three municipal categories. In your answer, you should dis-
tinguish between the different categories in order to give a full explanation of why a specific
municipal category should be in a certain area.
QUESTION 6
Describe the five municipal systems and make a clear distinction between executive and
participatory municipal systems.
QUESTION 7
Give a thorough analysis of the different types of municipalities.
QUESTION 8
Draw a chart using rows and columns to differentiate between the different municipal catego-
ries, systems and types.
LGL3702/1 55
4 LEARNING UNIT 4
4 The governance structure of a municipality
OVERVIEW
Now that you know the different types of municipalities (dealt with in the previous
learning unit), you are ready for this learning unit, which deals with the governance
structure of a municipality. A municipal governance structure consists of various
institutions. The municipal council is the key institution in every municipality and you
should take special note of its internal procedures, the powers and functions of the
councillors who make up the council, the code of conduct that applies to all council-
lors, and the composition of municipal councils. The election procedures for all types
of councils are comprehensively regulated in terms of the Structures Act and you
should make sure you understand them. The municipal executive, executive com-
mittee, executive mayor, council committees and sub-councils are all institutions
important to the structure of a municipality and we briefly discuss them at the end
of this learning unit.
• explain thoroughly the workings and functions of municipal councils with reference
to their internal procedures, their composition and their members
• give a full description of the election procedures of metropolitan, local and district
municipal councils, with reference to the Structures Act
• explain fully the place and duties of the municipal executive, executive committee,
executive mayor, council committees and sub-councils
LEARNING MATERIAL
Bekink section 12.3 (p 159–167)
Mle TR & Maclean S “Ethics, integrity and good governance: The case of South Af-
rica’s local sphere of government” (2011) 46 Journal of Public Administration
1364–1383, pages 1367–1370; 1375–1382
Mpakathi v Kgotso Development CC and Others [2006] 3 All SA 518 (SCA) paras 10–13
4.1 INTRODUCTION
In terms of the Local Government: Municipal Systems Act 32 of 2000, each munici-
pality consists of a political structure, administration and the community. The political
structure of a municipality, which will be explored in this learning unit, consists of the
municipal council, the executive structures (the executive committee and mayor),
the committees and the metropolitan sub-councils.
ACTIVITY 4.1
• What does the political structure of a municipality consist of?
56
LEARNING UNIT 4: The governance structure of a municipality
44 FEEDBACK
• This is a self-evaluation activity. Use the information given above in this learning unit
to guide you through the answer to the activity. This activity aims to encourage you to
read attentively and carefully what has been written.
ACTIVITY 4.2
• What does a municipality consist of?
45 FEEDBACK
• This is a self-evaluation activity. Use the information given above.
4.2 THE MUNICIPAL COUNCIL
4.2.1 Introduction
Section 18(1) of the Municipal Structures Act provides that every municipality must
have a municipal council. In terms of section 151(2) of the Constitution, a municipality’s
legislative and executive powers are vested within the municipal council. Importantly,
there is no separation of powers between legislative and executive powers at local
government level – a situation vastly different to that in other spheres of govern-
ment. The members of the municipal council are also the members of the executive
structures and both the executive and legislative powers regarding local government
matters rest with the municipal council and, therefore, its members. Consequently, all
decisions pertaining to local government are made by the municipal council, although
some functions are delegated to outside parties and associations.
ACTIVITY 4.3
• Explain the concept of separation of powers in a short paragraph. (At this stage of your
studies you should know this by heart!)
46 FEEDBACK
• This is a self-evaluation activity. If you are unable to write a short paragraph, page
through this guide till you find the discussion and study it once again very carefully
and attentively.
ACTIVITY 4.4
• Why do you think this principle does not apply in the local government sphere?
LGL3702/1 57
47 FEEDBACK
• This is obviously a self-evaluation activity. Hint: You need to return to earlier learning
units for the answer to this question. The point is to provide a substantiated opinion
linked to the provisions of the Constitution, relevant legislation (if any) and the content
of the separation of powers doctrine.
ACTIVITY 4.5
• Is this perhaps in need of rectifi cation? Give reasons for your answer.
48 FEEDBACK
• This is once again a self-evaluation activity. Use the information given earlier in this
study guide (note not unit) to guide you through the answer to the activity. See too what
has been written on the feedback to activity 4.4 above. Hint: Consider the position of
the so-called “municipal courts”.
Section 160 of the Constitution provides the framework for the internal procedures
of municipal councils.
Section 160 of the Constitution states as follows (study this section carefully):
160. Internal procedures.

(1) A Municipal Council
(a) makes decisions concerning the exercise of all the powers and the performance
of all the functions of the municipality;
(b) must elect its chairperson;
(c) may elect an executive committee and other committees, subject to national
legislation; and
(d) may employ personnel that are necessary for the effective performance of its
functions.
(2) The following functions may not be delegated by a Municipal Council:
(a) The passing of by-laws;

(b) the approval of budgets;
(c) the imposition of rates and other taxes, levies and duties; and
(d) the raising of loans.
(3) (a) A majority of the members of a Municipal Council must be present before a vote
may be taken on any matter.
(b) All questions concerning matters mentioned in subsection (2) are determined by
a decision taken by a Municipal Council with a supporting vote of a majority of its
members.
(c) All other questions before a Municipal Council are decided by a majority of the
votes cast.
(4) No by-law may be passed by a Municipal Council unless –
(a) all the members of the Council have been given reasonable notice; and
(b) the proposed by-law has been published for public comment.
(5) National legislation may provide criteria for determining –
(a) the size of a Municipal Council;
58
(b) whether Municipal Councils may elect an executive committee or any other com-
mittee; or
(c) the size of the executive committee or any other committee of a Municipal Council.
(6) A Municipal Council may make by-laws which prescribe rules and orders for –
(a) its internal arrangements;

(b) its business and proceedings; and
(c) the establishment, composition, procedures, powers and functions of its committees.
(7) A Municipal Council must conduct its business in an open manner, and may close its
sittings, or those of its committees, only when it is reasonable to do so having regard
to the nature of the business being transacted.
(8) Members of a Municipal Council are entitled to participate in its proceedings and those
of its committees in a manner that
(a) allows parties and interests reflected within the Council to be fairly represented;
(b) is consistent with democracy; and
(c) may be regulated by national legislation.
You should note that the municipal council is the highest decision-making body in
any municipality since all the decision-making powers rest with it.
Please note:
You should be able to (a) list the functions that a municipal council may not delegate.
You should also (b) be able to list the requirements for passing a by-law. (c) The
municipal council may regulate some of its internal procedures by passing by-laws
– make sure you can explain the different aspects that the municipal council can
regulate in this manner.
Section 19 of the Structures Act regulates the objectives of municipal councils:
19. Municipal objectives.

(1) A municipal council must strive within its capacity to achieve the objectives set out in
section 152 of the Constitution.
(2) A municipal council must annually review
(a) the needs of the community;

(b) its priorities to meet those needs;
(c) its processes for involving the community;
(d) its organisational and delivery mechanisms for meeting the needs of the com-
munity; and
(e) its overall performance in achieving the objectives referred to in subsection (1).
(3) A municipal council must develop mechanisms to consult the community and community
organisations in performing its functions and exercising its powers.
ACTIVITY 4.6
• Write a short paragraph explaining the importance of these objectives.
49 FEEDBACK
• This is a self-evaluation activity. Use the information given earlier in this learning unit,
as well as the information provided earlier in this guide to guide you through the answer
to the activity. Hint: Return to the wording of section 152 and study the objectives as
regards local government set out there and link them to the provisions set out above
to reach your substantiated opinion as to the importance of these objectives.
LGL3702/1 59
ACTIVITY 4.7
• How do these objectives correspond with households’ constitutional rights pertaining

to basic services?
50 FEEDBACK
• This is a self-evaluation activity. Use the information given earlier in this study guide
(note the reference to guide and not to the unit) to assist you in dealing with this activity.
Finally, one should also recognise the role of traditional leaders in local government
law. Section 81 (see Part 6 of the Act entitled “Participation of traditional leaders”),
read with Schedule 6 (“Identification of traditional leaders for purposes of section
81”), of the Structures Act regulates the participation of traditional leaders in local
government law. (Study section 81 and Schedule 6 carefully to be able to write a brief
note on the participation of traditional leaders in local government law.)
81. Participation in municipal councils.

(1) Traditional authorities that traditionally observe a system of customary law in the area
of a municipality may participate through their leaders, identified in terms of subsection
(2), in the proceedings of the council of that municipality, and those traditional leaders
must be allowed to attend and participate in any meeting of the council.
(2) (a) The MEC for local government in a province, in accordance with Schedule 6 and
by notice in the Provincial Gazette, must identify the traditional leaders who in
terms of subsection (1) may participate in the proceedings of a municipal council.
(b) The number of traditional leaders that may participate in the proceedings of a
municipal council may not exceed 20 per cent of the total number of councillors
in that council, but if the council has fewer than 10 councillors, only one traditional
leader may so participate.
(c) If the number of traditional leaders identified in a municipality’s area of jurisdiction,
exceeds 20 per cent of the total number of councillors the MEC for local govern-
ment in the province may determine a system for the rotation of those traditional
leaders.
(3) Before a municipal council takes a decision on any matter directly affecting the area of
a traditional authority, the council must give the leader of that authority the opportunity
to express a view on that matter.
(4) The MEC for local government in a province, after consulting the provincial House of
Traditional Leaders, may by notice in the Provincial Gazette
(a) regulate the participation of traditional leaders in the proceedings of a municipal

council; and
(b) prescribe a role for traditional leaders in the affairs of a municipality.
(5) (a) When participating in the proceedings of a municipal council a traditional leader is
subject to the appropriate provisions of the Code of Conduct set out in Schedule
1 of the Local Government: Municipal Systems Act, 2000.
(b) (i) A traditional leader who participates in the proceedings of a municipal coun-
cil is entitled to the payment of out of pocket expenses in respect of such
participation.
(ii) A municipal council must determine the criteria for, and calculation of, the out
of pocket expenses referred to in subparagraph (i).
(iii) Out of pocket expenses referred to in subparagraph (i) must be paid from the
budget of the municipality in question.
Schedule 6
IDENTIFICATION OF TRADITIONAL LEADERS FOR PURPOSES OF SECTION 81
1. Manner of identification.
60
(1) If it comes to the notice of the MEC for local government in a province that one or more
traditional authorities traditionally observe a system of customary law in the area of a
municipality, the MEC
(a) must inform the provincial House of Traditional Leaders of the maximum number
of traditional leaders that may be identified in terms of section 81 to participate in
the proceedings of the council of that municipality;
(b) must request that House of Traditional Leaders to recommend which leaders of
that traditional authority or of those traditional authorities can be identified for the
purposes of section 81;
(c) on receipt of the recommendation, or if no recommendation is received within 30
days after the request in terms of paragraph (b) has been made, may identify the
leaders of that authority or authorities; and
(d) if any leaders have been identified in terms of paragraph (c), must submit the names
of those leaders to the municipal manager of that council.
(2) In a province in which no provincial House of Traditional Leaders has been established,
the MEC must consult the traditional authority concerned before identifying any leader
for the purposes of section 81.
2. Guidelines for identification. The traditional leader to be identified must

(a) hold the supreme office of authority among all the leaders of the traditional author-
ity referred to in item 1; and
(b) be ordinarily resident within the area of the municipality concerned.
4.2.2 Councillors
Section 26(1)(a) headed “Term of office of councillors “of the Structures Act provides
that councillors are elected for a period ending when the next council is elected.
Councillors appointed as representatives to district councils (indirectly elected coun-
cillors) are appointed for a period ending when the next council is elected. Section
20(1)(b) of the Structures Act provides that the maximum number of councillors for
local and district councils is 90, while section 20(1)(c) limits the number of councillors
in a metropolitan area to 270. Based on the number of voters in a municipal area, a
formula must be determined by the Minister of Local Government (section 20(1)(a)
of the Structures Act) to establish how many councillors should be elected for each
municipal council. The category of the municipality will also influence the necessary
formula. Section 20(3)(a) of the Structures Act states that the MEC for Local Govern-
ment may deviate from the Minister’s formula if there is, for instance, a lack of com-
munication within the municipality. Section 20(3)(b) regulates the position where the
MEC wishes to increase or decrease the number of councillors. It states as follows:
(3) The MEC for local government in a province may deviate from the number of council-
lors determined for a municipality in terms of subsection (1) by
(a) increasing the number of councillors if extreme distances, a lack of effective com-
munication in the municipality or other exceptional circumstances render it neces-
sary; or
(b) decreasing the number of councillors if it is necessary to achieve the most effec-
tive size for
(i) active participation by all councillors at council meetings;

(ii) good and timely executive and legislative decisions;
(iii) responsiveness and accountability of councillors, taking into account the
possible use of modern communication techniques and facilities; or
(iv) the optimum use of municipal funds for councillor allowances and adminis-
trative support facilities.
LGL3702/1 61
4.2.3 The code of conduct
All municipal councillors are bound by the code of conduct as included in the Systems
Act. The code of conduct concerns the integrity of councillors and their accountability
towards the community. Councillors must represent the community; ensure that there
are structured mechanisms in place that will give effect to the municipality’s obligation
towards being an accountable local government; and they must aim to meet the basic
needs of the community by delivering sustainable services. In addition, the council
must report back to the community regarding its performance. Councillors must do
the following (these duties are listed in Schedule 1 of the Systems Act):
• perform their duties in good faith, in the interest of the municipality

• attend meetings of either the council or other committees of which they are members
• declare their financial interests, including shares in a company, membership
of a close corporation, interest in a trust, directorships, partnerships, any other
employment, interest in property, pension and subsidies
• declare gifts received above R1000 in value – such declaration must describe the
gift, indicate the source of the gift and give the value of the gift
• councillors must declare any direct/indirect personal/financial interest that they
may have in a matter before the council (if the interest is not trivial, the councillor
must withdraw from the matter).
ACTIVITY 4.8
• Why is the duty indicated under the last bullet included in this list?
51 FEEDBACK
to guide you through the answer to the activity. Hint: Consider a possibility of conflict
of interest. Can you think of any other reasons for this inclusion? Write them down.
ACTIVITY 4.9
• Can the above be defined as positive duties?
52 FEEDBACK
guide you through the answer to the activity. Hint: Introduce your answer by providing
an indication of what is meant when we refer to “positive duties”.
ACTIVITY 4.10
• What do you think should be the penalty in the case where a councillor does not fulfi l
these duties? Can an individual hold a councillor liable for his/her failure to perform
these duties?
62
53 FEEDBACK
• This is yet another self-evaluation activity. Use the information given earlier in this
learning unit to guide you through the answer to the activity. Hint: Page back to where
we set out these duties. Link these duties to the objectives set out in section 152 of
the Constitution. Having done that, ponder the question about what the penalty must
be under these circumstances. A vacation of his/her offi ce perhaps? What is your
considered opinion on this matter? Use the information given earlier in this learning
unit to guide you through the answer to the activity.
Councillors may not do the following (these prohibitions are listed in Schedule 1 of
the Systems Act):
• perform outside work without the consent of the council

• use their position as councillor for private gain (either for themselves or another
person) See Mpakathi v Kgotso Development CC and Others [2006] 3 All SA 518
(SCA) paras 10–13
• receive gifts, rewards or favours for voting in a particular manner, persuading
the municipal council to exercise their powers in a certain manner, making a
representation to the council or committees or disclosing privileged information
• interfere with the administration of the municipality
ACTIVITY 4.11
• Would you define these duties as positive or negative? Give a reason for your answer.
54 FEEDBACK
• This is obviously once again a self-evaluation activity. Use the information given
earlier in this learning unit to guide you through the answer to the activity. Remember
once again to introduce your answer with an explanation of the meaning of the term
“negative duty or duties”.
The municipal council or the MEC has the authority to impose sanctions for any breach
of the code of conduct. A councillor in breach is subject to punishment by one of the
following means (these sanctions are included in Schedule 1 of the Systems Act):
• issuing of a formal warning

• issuing of a reprimand to the councillor
• fining the councillor
• suspending the councillor for a certain period (at the request of the MEC)
• removing the councillor from office (at the request of the MEC)
Study the following: Mle TR & Maclean S “Ethics, integrity and good governance:
The case of South Africa’s local sphere of government” (2011) 46 Journal of Public
Administration 1364–1383, pages 1367–1370; 1375–1382.
4.2.4 The composition and election of municipal councils

Study Bekink section 12.3 (p 159–167)
LGL3702/1 63
The transitional process was completed in December 2000 with the second round
of local government elections.
The transitional process was characterised by the first “truly democratic” local govern-
ment elections (held during 1995 and 1996) (p 158 Bekink). Since they were transi-
tional in nature their main characteristic was the combination of two distinct electoral
systems into one: the “first-past-the-post” electoral system (specifically directed at
municipal wards) together with a system of proportionality (combined by a list system).
Note that both systems ran parallel with one another in urban areas, with both ward
candidates and proportional representative candidates contesting seats in the elec-
tion. Ward councillors made up 60% of seats in all local councils, while proportional
representative councillors accounted for the other 40%. In transitional local councils
that were too small to have wards, citizens voted only for political parties. This was
also the position in the so-called Transitional Representative Councils (TRep Cs and
Transitional Rural Councils (TRur Cs). District councillors were appointed by and
from among the councillors of transitional local councils, Transitional Representative
Councils and Transitional Rural Councils. Bekink explains further that in certain rural
areas where a primary tier of local government was impossible (so-called “remaining
areas”) voters had to vote for councillors based on proportional representation, “who
then served directly on the relevant district council” (p 159).
Section 157 of the Constitution determines the following regarding the composition
and election of local government (study section 157 carefully):
157. Composition and election of Municipal Councils.
(1) A Municipal Council consists of
(a) members elected in accordance with subsections (2) and (3); or
(b) if provided for by national legislation
(i) members appointed by other Municipal Councils to represent those other
Councils; or
(ii) both members elected in accordance with paragraph (a) and members ap-
pointed in accordance with subparagraph (i) of this paragraph.
(2) The election of members to a Municipal Council as anticipated in subsection (1)(a) must
be in accordance with national legislation, which must prescribe a system
(a) of proportional representation based on that municipality’s segment of the na-
tional common voters roll, and which provides for the election of members from
lists of party candidates drawn up in a party’s order of preference; or
(b) of proportional representation as described in paragraph (a) combined with a
system of ward representation based on that municipality’s segment of the na-
tional common voters roll.
(3) An electoral system in terms of subsection (2) must result, in general, in proportional
representation.
(4) (a) If the electoral system includes ward representation, the delimitation of wards
must be done by an independent authority appointed in terms of, and operating
according to, procedures and criteria prescribed by national legislation.
(5) A person may vote in a municipality only if that person is registered on that municipal-
ity’s segment of the national common voters roll.
(6) The national legislation referred to in subsection (1)(b) must establish a system that allows
for parties and interests reflected within the Municipal Council making the appointment,
to be fairly represented in the Municipal Council to which the appointment is made.
Please note:
It is important to bear in mind that Schedule 6B, which regulated the loss (or reten-
tion) of membership of municipal councils after a change of party membership was
repealed by section 5 of the Constitution Fifteenth Amendment Act of 2008.
64
Section 19 of the Constitution provides as follows:

19. Political rights.
(1) Every citizen is free to make political choices, which includes the right
(a) to form a political party;
(b) to participate in the activities of, or recruit members for, a political party; and
(c) to campaign for a political party or cause.
(2) Every citizen has the right to free, fair and regular elections for any legislative body
established in terms of the Constitution.
(3) Every adult citizen has the right
(a) to vote in elections for any legislative body established in terms of the Constitution,
and to do so in secret; and
(b) to stand for public office and, if elected, to hold office.
Section 19(3) of the Constitution provides that every adult citizen has the right to vote
in elections for any legislative body that is established in terms of the Constitution,
which includes municipal elections. However, the right to franchise is not an absolute
right and can therefore be limited in line with the general limitation clause, namely
section 36 of the Constitution.
ACTIVITY 4.12
• Do you think this limitation is justifi ed?
55 FEEDBACK
• Why should it not be justifi ed is the obvious point of departure. Always bear in mind
that no right is absolute and needs to be weighed up against another’s right(s). This is
where the notion of the limitation of rights comes into the picture – see section 36 of
the Constitution (“limitation of rights”).
4.2.5 The election of municipal councils

Please bear in mind that the Constitution (section 155 headed “Establishment of
municipalities”) provides for three distinct categories of municipality (categories A
(Metropolitan), B (Local), and C (District) municipalities). It therefore follows logically
that under the final structure of local government as provided for in the Municipal
Structures Act these three categories of municipalities are elected differently from
one another.
In terms of sections 20 (“Determination of number of councillors”) and 22(1) (“Elec-

tion of metropolitan and local councils”) of the Structures Act, a metropolitan or local
municipality’s council is elected by voters who are registered on that municipality’s
segment of the national common voters roll. This provision ensures proportional
representation in that municipality and its wards. The number of ward councillors
must be equal to 50 per cent of the number of councillors for the entire metropolitan
or local municipality.
The council of a district municipality is elected by voters registered on that municipal-

ity’s segment of the national common voters roll, which again ensures proportional
representation: section 23 of the Structures Act. However, councillors of district mu-
LGL3702/1 65
nicipalities can also be appointed by councils of the respective local municipalities
in order to represent the local municipalities. The councillors of a district municipal-
ity with a district management area are elected by voters registered on that district
municipality’s segment of the national voters roll in that area.
The Electoral Court determines local government election issues.
Please note:
Take note that the Identification Act 68 of 1997 is relevant since it provides that iden-
tity documents are relevant for the registration of voters (municipal voters included).

Schedule 1 of the Local Government: Municipal Structures Act is reproduced below
and provides detail regarding the electoral system for metro and local councils. Read
this information carefully. You should be able to answer short questions arising from
Schedule 1 but NOT questions involving any dealing with for example, how to calculate
the quota of votes to a district council.
ELECTORAL SYSTEM FOR METRO AND LOCAL COUNCILS

Part 1: General
2. Delimitation of wards. The Demarcation Board after consultation with the Electoral
Commission, for purposes of an election, must delimit all metropolitan municipalities and all
local municipalities that must have wards, into wards.
3. Number of wards. The number of wards in a metropolitan or local municipality must be
equal to the number of ward councillors determined for the municipality in terms of section 22
(2).
4. Delimitation criteria. The Demarcation Board after consulting the Electoral Commis-
sion must delimit a municipality into wards, each having approximately the same number of
voters, taking into account the following criteria:
(a) The number of registered voters in each ward may not vary by more than fifteen per cent
from the norm, where the norm is determined by dividing the total number of registered
voters on the municipality’s segment of the national common voters roll by the number
of wards in the municipality.
(b) The need to avoid as far as possible the fragmentation of communities.
(c) The object of a ward committee as set out in section 72(3) which is to enhance partici-
patory democracy in local government.
(d) The availability and location of a suitable place or places for voting and counting if ap-
propriate, taking into consideration
(i) communication and accessibility;
(ii) density of population;
(iii) topography and physical characteristics; and
(iv) the number of voters that are entitled to vote within the required time frame.
(e) The safety and security of voters and election material.

(f) Identifiable ward boundaries.
5. Publication of delimitation.
(1) The Demarcation Board must publish its delimitation of wards for a municipality in the
Provincial Gazette.
(2) Any person aggrieved by a delimitation may within 14 days of publication submit objec-
tions in writing to the Demarcation Board, and the Board must
(a) consider those objections; and
(b) confirm, vary or withdraw its determination.
6. Electoral system for metro and local councils with wards. A metro council, and a
local council having wards, must be elected as follows:
66
(a) A number of councillors equal to the number of wards in the municipality must be di-
rectly elected in accordance with Part 2 of this Schedule to represent the wards in the
Council; and
(b) the rest of the councillors must be elected from party lists in accordance with Part 3 of
this Schedule to represent parties proportionally in the council.
7. Electoral system for local councils without wards. If a local council has no wards,
all the councillors must be elected from party lists in accordance with Part 3 of this Schedule
to represent parties proportionally in the council.
Part 2: Ward elections
8. Number of votes.
(1) In an election of a councillor for a ward each voter has one vote only, and a voter may
vote for one candidate only.
(2) In each ward the candidate who receives the most votes is the elected councillor for
that ward. In the event of two or more candidates receiving an equal number of votes,
the result will be determined by lot.
8A. Uncontested ward elections. If only one candidate is duly nominated in a ward, an
election is not held in that ward and the uncontested ward candidate is deemed to have been
elected
(a) in the case of an election called in terms of section 24(2), with effect from the date set
for the election; or
(b) in the case of a by-election, with effect from the date stated in the timetable for the by-
election as the final date on which nominations for the by-election may be submitted.
Part 3: Proportional representation elections

9. Number of votes.
(1) In an election for a metro council, or for a local council that has wards, each voter has
two votes, and may vote for
(a) not more than one ward candidate; and
(b) not more than one party.
(2) In an election for a local council that has no wards, each voter has one vote only, and
may vote for one party only.
10. Submission of lists of candidates.

(1) A list of candidates may be submitted only by a party.
11. Party lists.

(1) The number of candidates on a list submitted by a party may not exceed double the
number of seats in the metro or local council to be filled from party lists.
(2) The candidates’ names must appear on the list in the order of the party’s prefer-
ence, commencing with the first in order of preference and ending with the last.
(3) Every party must seek to ensure that fifty per cent of the candidates on the party list
are women and that women and men candidates are evenly distributed through the list.
12. Quota.
(1) The quota of votes for a seat in the metro or local council must be determined in ac-
cordance with the following formula (fractions to be disregarded):
A
+1
B–C
Where
A represents the total number of valid votes cast for all parties, consisting of those cast
on the party vote and those cast for ward candidates representing parties;
B represents the number of seats in the metro or local council; and
C represents the number of independent ward councillors elected in the election.
LGL3702/1 67
(2) If a ward candidate representing a party is elected unopposed, a vote cast by a voter
registered in that ward for the party of which that candidate is a representative must
for the purpose of factor A be counted as two votes.
13. Allocating seats.
(1) (a) The total number of valid votes cast for each party on the party vote and for the
ward candidates representing the party must be divided by the quota of votes for a
seat. The result is the total number of seats to which each party is entitled before
any adjustment in terms of subitem (3).
(b) If a ward candidate representing a party is elected unopposed, a vote cast by a voter
for the purpose of paragraph (a) be counted as two votes.
(2) (a) If the calculation in subitem (1) yields a surplus not absorbed by the seats awarded
to a party, that surplus must compete with similar surpluses accruing to any other
party or parties, and any undistributed seat or seats must be awarded to the party or
parties concerned in sequence of the highest surplus.
(b) If the surplus for two or more parties is equal, the seat must be awarded to the
party that obtained the highest number of valid votes.
(3) (a) In an election for a metro council or for a local council that has wards, the Electoral
Commission must deduct from the total number of seats to which each party is
entitled in terms of subitem (1) and (2), the number of ward candidates representing
that party who were declared elected.
(b) The result is the number of seats, which the party is entitled to fill from its list of
party candidates.
(4) If no party is awarded a seat in terms of subitem (1), the votes for each party, read with
subitem (1)(b), must be treated in accordance with subitem (2) as if they are surpluses.
(5) The Electoral Commission must determine which party candidates are elected by
selecting from the party’s list, in accordance with the party’s order of preference on
the list, the number of candidates that is equal to the number of seats to which the
party is entitled, beginning with the first candidate on the list and ending with the low-
est ranking candidate.
14. Uncontested elections.
(1) If only one party submitted a list, an election according to proportional representation
must not be held for the metro or local council.
(2) The number of seats to which the party is entitled is the total number of seats on the
council to be filled by proportional representation.
(3) The chief electoral officer must determine which party candidates are elected by se-
lecting from the party’s list, according to the party’s order of preference on the list, the
number of candidates that is equal to the number of seats to which the party is entitled.
15. Procedure if no party applications.
(1) If no party submitted a list, a by-election must be held within 90 days of nomination
day and the MEC for local government must, after consultation with the Commission,
determine the date of the election.
(2) Section 25 applies to a by-election in terms of this item, to the extent that that section
can be applied.
16. Excessive seats.

(1) If, through the election of ward candidates, a party listed on the part of the ballot paper
for parties has obtained a number of seats that is equal to, or greater than the total
number of seats in the council to which it is entitled under item 13, that party must not
be allocated any seats from its list of party candidates.
(2) The seats of ward candidates are not affected.
68
17. Insufficient party lists.

(1) If a party list contains fewer candidates than the party is entitled to, the Electoral Com-
mission must in writing immediately notify the party of the exact shortfall and request
the party to deliver a list supplemented by the name or names of one or more eligible
candidates.
(2) Immediately upon receipt of the list referred to in subitem (1), the Electoral Commission
must allocate the number of representatives, in the order of preference on the list, to
which the party is entitled.
(3) (a) Subject to paragraph (b)
(i) if the party concerned has ceased to exist, the seat or seats must remain
unfilled;
(ii) if the party concerned does not deliver a supplemented list, the seat or seats
remain unfilled until it delivers a list; or
(iii) if the party concerned delivers a supplemented list containing fewer names
than the number of seats to be filled from that list, the seat or seats remain
unfilled to the extent of the shortfall until it delivers a further list.
(b) Where seats are unfilled in terms of paragraph (a), and the vacancies render a
quorum for the municipal council impossible, the party concerned forfeits the unfilled
seats, and the seats must be filled within 14 days in accordance with subitems (4)
to (10).
(4) If a party forfeits seats, a new quota of votes for a seat must be determined in accord-
ance with the following formula (fractions to be disregarded):
A–B
C – (D + E) + 1
Where
A represents the total number of valid votes cast for all parties, consisting of those cast
on the party vote and those cast for ward candidates representing parties;
B represents the total number of valid votes cast for the party that has forfeited seats,
both on the party vote and for ward candidates representing the party;
C represents the number of seats in the council;
D represents the number of seats awarded to the forfeiting party; and
E represents the number of independent ward councillors elected in the election.
(5) (a) The total number of valid votes cast for each party, both on the party vote and for
ward candidates representing the party, excluding the party that has forfeited seats,
must be divided by the quota of votes for a seat. The result is the total number of
seats to which each party is entitled.
(b) the calculation in paragraph (a) yields a surplus not absorbed by the seats awarded
party or parties, and any undistributed seat or seats must be awarded to the party
or parties concerned in sequence of the highest surplus.
(c) If the surplus for two or more parties is equal, the seat must be awarded to the
party that received the highest number of valid votes.
(6) If a ward candidate representing a party is elected unopposed, a vote cast by a voter
for the purpose of factors A and B and subitem (5) be counted as two votes.
(7) In an election for a council that has wards, the Electoral Commission must deduct
from the total number of seats to which each party is entitled in terms of subitem (5),
the number of ward candidates representing the party who were declared elected.
(8) If no party is awarded a seat in terms of subitem (5)(a) the votes for each party must
be treated in accordance with subitem (5)(b) as if they are surpluses.
(9) The Electoral Commission must determine in the manner provided in item 13 (5) which
party candidates are elected.
(10) If a party is entitled to an additional number of seats in terms of subitem (5) and its list
of candidates does not contain a sufficient number of candidates, the party concerned
forfeits, subject to subitem (1), the unfilled seats and the process provided in this item
must be repeated until all seats have been filled or until all listed candidates have been
allocated to a vacant seat.
LGL3702/1 69
18. Filling of vacancies.
(1) (a) If a councillor elected from a party list ceases to hold office, the chief electoral of-
ficer must, subject to item 20, declare in writing the person whose name is at the
top of the applicable party list to be elected in the vacancy.
(b) Whenever a councillor referred to in paragraph (a) ceases to hold office, the mu-
nicipal manager concerned must, within seven days after the councillor has ceased
to hold office, inform the chief electoral officer accordingly.
(2) Where a party list has become exhausted, item 17, adjusted as may contextually be
necessary, applies to the supplementation of the list, and if the party fails to supplement
its list, or if the party has ceased to exist, the vacancy must remain unfilled.
Part 4: Filling and amending party list.

19. Causes of vacancies on lists. A person who is a candidate on a party list ceases to
be a candidate and a vacancy arises in the list when the party withdraws the person’s name
by written notice to the chief electoral officer, or when that person
(a) assumes office as a councillor;
(b) resigns from the list by written notice to the chief electoral officer;
(c) becomes ineligible to be a candidate;
(d) is disqualified or removed from the list in terms of any legislation;
(e) ceases to be a member of the party for which that person was listed as a party candidate;
(f) or ceases to be ordinarily resident in the municipality to which the list relates.
20. Filling vacancies and changing the order.

(1) A party may supplement, change or increase its list at any time, provided that if a coun-
cillor elected according to a party list, ceases to hold office, the party concerned may
supplement, change or increase its list by not later than 21 days after the councillor
has ceased to hold office. The vacancy must be filled as soon as the party in question
has supplemented, changed or increased its list, but not later than 14 days after expiry
of the 21-day period.
(2) If a party supplements, changes or increases its list in terms of subitem (1) it must
provide the chief electoral officer with an amended list.
Please note:
Schedule 2 of the Local Government Municipal Structures Act is reproduced below
and details the electoral system for district councils. Read this information carefully.
You should be able to answer short questions from Schedule 2 but once again note
that the questions will be straightforward and not dealing with the calculation of quotas
or similar questions.
ELECTORAL SYSTEM FOR DISTRICT COUNCILS

Part 1: Proportional elections
2. Electoral system for party representatives.
The councillors of a district council that in terms of section 23 must be elected in accordance
with this Part, must be elected as follows:
(a) a number of councillors determined for the municipality in terms of section 23 (3) must
be elected from party lists to proportionally represent parties in the council; and
(b) a number of councillors allocated in terms of section 23(2)(b) to any district management
areas in the municipality must be elected from party lists to proportionally represent
parties in those areas.
3. Number of votes.
In an election for a district council
(a) each voter registered in the area of a local municipality within the district municipality
has one vote, and may vote for one party only; and
(b) each voter registered in a district management area within the district municipality has
two votes, and may vote for
70
(i) not more than one party that submitted a list for the district council; and
(ii) not more than one party that submitted a list for the district management area.
4. Submission of lists of candidates.

(1) A list of candidates may be submitted only by a party.
5. Party lists.
(1) The number of candidates on a party list submitted by a party may not exceed double
the number of seats in the district council allocated, as the case may be, for the elec-
tion of councillors
(a) referred to in section 23(1)(a); or
(b) to represent a district management area in the district council.
(2) The candidates’ names must appear on the list in the order of the party’s prefer-
ence, commencing with the first in order of preference and ending with the last.
(3) Every party must seek to ensure that fifty per cent of the candidates on the party list
are women and that women and men candidates are evenly distributed through the list.
6. Quota.
The quota of votes for a seat in a district council or for a seat in a district council as a repre-
sentative of a district management area must be determined in accordance with the following
formula (fractions to be disregarded):
A
+1
B
Where
A represents the total number of valid votes cast for all parties; and B represents, as the case
may be, either
(a) the number of seats in the district council allocated in terms of section 23(1)(a); or
(b) the number of seats allocated to a district management area in the district council.
(1) The total number of valid votes cast for each party must be divided by the quota of
votes for a seat. The result is the total number of seats to which each party is entitled.
(2) (a) If the calculation in subitem (1) yields a surplus not absorbed by the seats awarded
(b) If the surplus for two or more parties is equal, the seat must be awarded to the
party that obtained the highest number of valid votes.
(3) If no party is awarded a seat in terms of subitem (1), the votes for each party must be
treated in accordance with subitem (2) as if they are surpluses.
lecting from the party’s list, in accordance with the party’s order of preference on the
list, the number of candidates that is equal to the number of seats to which the party
is entitled, beginning with the first candidate on the list and ending with the lowest
ranking candidate.
8. Uncontested elections.
(1) If only one party submitted a list, an election must not be held for the district council
or in the district management area concerned.
(2) The number of seats to which the party is entitled is the total number of seats on the
council to be filled by the election concerned.
lecting from the party’s list, according to the party’s order of preference on the list, the
number of candidates that is equal to the number of seats to which the party is entitled.
9. Procedure if no party applications.

(1) If no party submitted a list, a by-election must be held within 90 days of nomination
day and the MEC for local government must, after consultation with the Commission,
determine the date of the election.
LGL3702/1 71
(2) Section 25 applies to a by-election in terms of this item, to the extent that that section
can be applied.
10. Insufficient party lists.

(1) If a party list contains fewer candidates than the party is entitled to, the chief electoral
officer must in writing immediately notify the party of the exact shortfall and request
the party to deliver a list supplemented by the name or names of one or more eligible
candidates.
(2) Immediately upon receipt of the list referred to in subitem (1), the chief electoral officer
must allocate the number of representatives, in the order of preference on the list, to
which the party is entitled.
(3) (a) Subject to paragraph (b)
(i) if the party concerned has ceased to exist, the seat or seats must remain
unfilled;
(ii) if the party concerned does not deliver a supplemented list, the seat or seats
remain unfilled until it delivers a list; or
(iii) if the party concerned delivers a supplemented list containing fewer names
than the number of seats to be filled from that list, the seat or seats remain
unfilled to the extent of the shortfall until it delivers a further list.
(b) Where seats are unfilled in terms of paragraph (a), and the vacancies render a
quorum for the municipal council impossible, the party concerned forfeits the unfilled
seats, and the seats must be filled within 14 days in accordance with subitems (4)
to (8).
(4) If a party forfeits seats, a new quota of votes for a seat must be determined in accord-
ance with the following formula (fractions to be disregarded):
A–B
C–D +1
Where
A represents the total number of valid votes cast for all parties;
B represents the total number of valid votes cast for the party that has forfeited seats;
C represents the number of seats in the council to be filled in the election; and
D represents the number of seats awarded to the forfeiting party.
(5) (a) The total number of valid votes cast for each party, excluding the party that has
forfeited seats, must be divided by the quota of votes for a seat. The result is the
total number of seats to which each party is entitled.
If the calculation in paragraph (a) yields a surplus not absorbed by the seats awarded
If the surplus for two or more parties is equal, the seat must be awarded to the
party that received the highest number of valid votes.
(6) If no party is awarded a seat in terms of subitem (5)(a) the votes for each party must
be treated in accordance with subitem (5)(b) as if they are surpluses.
(7) The chief electoral officer must determine in the manner provided in item 8(3) which
party candidates are elected.
(8) If a party is entitled to an additional number of seats in terms of subitem (5) and its list
of candidates does not contain a sufficient number of candidates, the party concerned,
subject to subitem (1), forfeits the unfilled seats and the process provided in this item
must be repeated until all seats have been filled or until all listed candidates have been
allocated to a vacant seat.

(1) (a) If a councillor elected from a party list ceases to hold office, the chief electoral
officer must, subject to item 13, declare in writing the person whose name is on
the top of the applicable party list to be elected in the vacancy.
(b) Whenever a councillor referred to in paragraph (a) ceases to hold office, the mu-
nicipal manager concerned must, within seven days after the councillor has ceased
to hold office, inform the chief electoral officer thereof.
72
(2) Where a party list has become exhausted, item 10, adjusted as may contextually be
necessary, applies to the supplementation of the list, and if the party fails to supplement
its list, or if the party has ceased to exist, the vacancy must remain unfilled.
12. Causes of vacancies on lists.

A person who is a candidate on a party list ceases to be a candidate and a vacancy
arises in the list when the party withdraws the person’s name by written notice to the
chief electoral officer or when that person
(a) assumes office as a councillor;
(b) resigns from the list by written notice to the chief electoral officer;
(c) becomes ineligible to be a candidate;
(d) is disqualified or removed from the list in terms of any legislation;
(e) ceases to be a member of the party for which that person was listed as a party can-
didate; or
(f) ceases to be ordinarily resident in the municipality to which the list relates.
13. Filling vacancies and changing the order.

(1) A party may supplement, change or increase its list at any time, provided that if a coun-
cillor elected according to a party list, ceases to hold office, the party concerned may
supplement, change or increase its list by not later than 21 days after the councillor
has ceased to hold office. The vacancy must be filled as soon as the party in question
has supplemented, changed or increased its list, but not later than 14 days after expiry
of the 21-day period.
(2) If a party supplements, changes or increases its list in terms of subitem (1) it must
provide the chief electoral officer with an amended list.
Part 2: Allocation and election of representatives of local councils and district

management areas to district councils
14. Manner of election.
The section 23(2) members of a district council must be
(a) appointed by the councils of the local municipalities in the area of the district council
from among their members; and
(b) if there is a district management area in the district municipality, elected in accordance
with Part 1 of this Schedule to represent that area on the district council.
15. Award of seats on district councils.

(1) The quota of registered voters that a local council or a district management area must
have in order to be entitled to a seat on a district council must be determined in ac-
cordance with the following formula (fractions to be disregarded)
A
+1
B
Where
A represents the total number of voters registered on the district council’s segment of
the national common voters roll; and
B represents the number of seats on the district council determined in terms of section
23(2)(a) for representatives of the local councils and district management areas but
disregarding any increase in terms of section 20(5).
(2) Each local municipality and each district management area in the area of a district mu-
nicipality is entitled to a number of seats on the district council determined by dividing
the total number of voters registered on the segment of the national common voters’
roll for that local municipality or district management area by the quota of votes for a
seat on the district council determined in accordance with subitem (1).
(3) If the calculation in subitem (2) gives a figure that is a fraction of figure 1, the council
or district management area, must be awarded one seat and must not participate in
any further calculation or award.
(4) If the calculation in subitem (2) yields a surplus, that surplus must compete with similar
surpluses of any other council or district management area, and any seat or seats not
LGL3702/1 73
awarded in terms of subitems (2) and (3) must be awarded in sequence of the highest
surplus.
16. Electing local councils’ representatives to district councils.

(1) The chief electoral officer must manage the election of representatives of a local council
to the district council.
(2) If a local council has been awarded one seat
(a) any councillor may nominate a candidate;
(b) each councillor has one vote; and
(c) the candidate who receives the most votes is elected.
(3) If the council has been awarded more than one seat, the council must elect that num-
ber of members according to proportional representation as set out in items 17 to 22.
17. Candidates lists.

(1) Every party or independent ward councillor may submit a candidates’ list containing the
names of councillors, accompanied by a written acceptance by each listed candidate.
(2) A party or independent ward councillor may not submit more than one list; and
(3) The candidates’ names must appear on the list in order of preference, starting with the
first in order of preference and ending with the last.
(4) The name of a councillor may appear on one list only.
(5) Every party or independent ward councillor must seek to ensure that fifty per cent of
the candidates on the candidates list are women and that women and men candidates
are evenly distributed through the list.
18. Number of votes.

Each councillor casts one vote for one list only.
19. Determining the quota.

In a local council, the quota of votes for a seat to the district council must be determined in
accordance with the following formula (fractions to be disregarded)
A
+1
B
Where
A represents the number of members of the local council; and
B represents the number of seats that the local council has been awarded on the district
council in accordance with item 15.

(1) The number of votes cast in favour of each list must be divided by the quota of votes
for a seat and the result is the number of seats allocated to that list.
(2) (a) If the calculation in subitem (1) gives a surplus, that surplus must compete with
other similar surpluses of any other lists, and any seat or seats not allocated under
subitem (1) must be awarded in sequence of the highest surplus.
(b) If the surplus on one list is equal to the surplus on any other list, the seat or seats
must be awarded in sequence of the highest number of votes cast for those lists.
21. Selecting names from the list.

The chief electoral officer, in accordance with the order of preference on a list, must select the
number of candidates from the list that is equal to the number of seats allocated to that list.
22. Insufficient lists.

In the case of a list containing fewer names than the number of seats allocated to that list, the
corresponding provisions of item 10 must be applied to the extent that that item can be applied.
74

If a councillor elected from a candidates’ list ceases to hold office or the list has become
exhausted, the corresponding provisions of item 11 must be applied to the extent that that
item can be applied.
24. Electing members representing a district management area.

The councillors representing a district management area must be elected in accordance with
the proportional electoral system set out in Part 1 of this Schedule.
4.2.6 Election procedures

The Constitution sets the basic framework for all municipal elections but is then
expanded upon mainly by the Local Government: Municipal Structures Act. Bekink
describes the Constitution and the Local Government: Municipal Structures Act as
establishing “the new basis for all local government elections” (p 188). However,
Bekink also reminds us that there are other legislative requirements that have an im-
pact on local government elections (either directly or indirectly) but more particularly
electoral procedures.
The Local Government: Municipal Electoral Act 27 of 2000 applies to and regulates
all municipal elections. The Electoral Act 73 of 1998 applies to municipal elections
to the extent stated in the Municipal Electoral Act. The Electoral Act makes provision
for the registration of voters and the voters roll and regulates issues relevant to the
election of municipal councils.
Even though the Municipal Electoral Act regulates only local government elections,
it must be read with the Constitution, the Electoral Commission Act 51 of 1996, the
Electoral Act and the Local Government: Municipal Structures Act. Chapters 2–7 of
the Municipal Electoral Act regulate the following:
• the voter’s roll applicable to municipal elections

• preparations for elections, including election timetables, parties, ward candidates,
voting stations and election officers
• voting procedures
• the counting of votes
• the prohibition of certain conduct, offences and penalties
ACTIVITY 4.13
• How many Acts of Parliament regulate municipal elections? Name them.
56 FEEDBACK
• This is once again a self-evaluation activity. Use the information given above.
ACTIVITY 4.14
• Which Act do you think is the most important one when considering municipal elections?
Can this Act be in contravention of the Constitution?
LGL3702/1 75
57 FEEDBACK
• This is obviously once again a self-evaluation activity. Use the information given earlier
in this learning unit to guide you through the answer to the activity.
4.3 THE MUNICIPAL EXECUTIVE

The Constitution envisages legislation to regulate the powers and functions of the
municipal council. Such legislation would seek to impose a degree of separation of
powers between the municipal legislature and executive. Section 160(1)(c) of the
Constitution provides that municipalities must elect an executive committee. The
typology instituted in terms of section 155(2) determines the relationship between
the municipal executive and the council. Importantly, in Executive Council of the
Western Cape v Minister for Provincial Affairs and Constitutional Development 1999
(12) BCLR 1360 (CC) para 101, the Constitutional Court held that the Constitution
places considerable constraints on the internal powers of municipalities. In terms of
this judgment, municipalities’ powers to regulate internal arrangements are limited to
internal proceedings, which exclude decisions made by the executive committees.
ACTIVITY 4.15
• Does this decision (mentioned above) bring about some form of “separation of powers”?
58 FEEDBACK
• This is once again a self-evaluation activity. Use the information given earlier in this
learning unit to guide you through the answer to the activity. Hint: Think again along the
lines of another feature of the separation of powers – checks and balances to counteract
the concentration of powers in one branch of government. Always remember though
that branches of government refer to the executive, the legislature and the judiciary and
is therefore not the context in which you need to consider the question. Concentrate
on the reality of the “status” of local government.
4.4 THE EXECUTIVE COMMITTEE

In terms of section 160(1)(c) of the Constitution, the municipal council may elect an
executive committee, provided that the election adheres to the relevant legislation.
Sections 33(a) and (c) of the Structures Act provide that a municipality may establish
an executive committee if the municipality is of a certain type and has more than nine
councillors. Municipalities of the collective executive type with less than ten council-
lors may therefore not elect an executive committee or an executive mayor. Section
160(8) of the Constitution provides that the members of the council are entitled to
participate in the proceedings of the executive committee, although the manner in
which the members participate may be regulated by legislation. The municipal coun-
cil may make by-laws to prescribe the establishment, composition, procedures and
functions of executive committees (s 160(6)(c) of the Constitution).
ACTIVITY 4.16
76
• Explain the conditions under which an executive committee can (may) be established.
(List the requirements with reference to the pertinent legislation – including the
Constitution.)
59 FEEDBACK
• This is obviously a self-evaluation activity. Use the information given above to guide
you through the answer to the activity.
In terms of section 44(1)(a) (“Functions and powers of executive committees”) of the

Structures Act, the executive committee is the “principal committee” in the sense
that it receives reports from other committees. Either the executive committee can
dispose of these matters by delegating them or it can make recommendations on the
reports that would be forwarded to the municipal council.
The powers and functions of executive committees are regulated in terms of sec-
tion 44 of the Structures Act (you should be able to explain the functions of execu-
tive committees):
44. Functions and powers of executive committees.

(1) An executive committee is
(a) the principal committee of the council of a municipality of a type that is entitled to
establish an executive committee; and
(b) the committee of a municipal council, which receives reports from the other com-
mittees of the council and which must forward these reports together with its
recommendations to the council when it cannot dispose of the matter in terms of
its delegated powers.
(2) The executive committee must

(a) identify the needs of the municipality;
(b) review and evaluate those needs in order of priority;
(c) recommend to the municipal council strategies, programmes and services to ad-
dress priority needs through the integrated development plan and estimates of
revenue and expenditure, taking into account any applicable national and provincial
development plans; and
(d) recommend or determine the best methods, including partnership and other ap-
proaches, to deliver those strategies, programmes and services to the maximum
benefit of the community.
(3) The executive committee in performing its duties must

(a) identify and develop criteria in terms of which progress in the implementation of
the strategies, programmes and services referred to in subsection (2)(c) can be
evaluated, including key performance indicators, which are specific to the munici-
pality and common to local government in general;
(b) evaluate progress against the key performance indicators;
(c) review the performance of the municipality in order to improve
(i) the economy, efficiency and effectiveness of the municipality;
(ii) the efficiency of credit control and revenue and debt collection services; and
(iii) the implementation of the municipality’s by-laws;
(d) monitor the management of the municipality’s administration in accordance with

the policy directions of the municipal council;
(e) oversee the provision of services to communities in the municipality in a sustain-
able manner;
(f) perform such duties and exercise such powers as the council may delegate to it
in terms of section 32;
(g) annually report on the involvement of communities and community organisations
in the affairs of the municipality; and
LGL3702/1 77
(h) ensure that regard is given to public views and report on the effect of consultation
on the decisions of the council.
(4) An executive committee must report to the municipal council on all decisions taken
by the committee.
Please note:
In general, the meetings of an executive committee are open to the public. However,
the committee may close any or some of its meetings if it is reasonable to do so
in light of the nature of the meeting. If one of the following topics is discussed by
the committee, section 20(2)(f) of the Systems Act (read with section 160(1)(c) of the
Constitution) provides that the committee may not exclude members of the public
from its discussion:
• a by-law
• the budget
• an amendment to the Independent Development Plan (IDP), the performance
management system or the service delivery agreement.
ACTIVITY 4.17
• When do you think the executive committee should be able to close its meetings to the
public? Can you think of some topical issues from which the public should be excluded?
60 FEEDBACK
• See the provisions of section 20(1)(a), which provide for closed meetings including
“… [when] it is reasonable to do so having regard to the nature of the business being
transacted; and (b) a by-law or a resolution of the council specifying the circumstances
in which the council or such committee may close a meeting and which complies with
paragraph (a)”. Against the background of these provisions, can you think of topical
issues from which the public should be excluded?
Once the executive committee has been chosen, the council must elect one member
of the executive committee as the mayor of the municipality. Section 48 of the Struc-
tures Act regulates the election of both mayors and deputy mayors (study sections
48 and 49 carefully):
48. Election of mayors.

(1) The municipal council must elect a member of its executive committee as the mayor
and, if the MEC for local government in the province so approves, another member of
the executive committee as the deputy mayor, of the municipality.
(2) The election of a mayor and deputy mayor takes place when the executive committee
is elected or when it is necessary to fill a vacancy.
(3) The procedure set out in Schedule 3 applies to the election of a mayor and deputy mayor.
(4) A mayor and deputy mayor is elected for the duration of that person’s term as a member
of the executive committee, but vacates office during a term if that person
(a) resigns as mayor or deputy mayor;
(b) is removed from office as a member of the executive committee in terms of sec-
tion 53; or
(c) ceases to be a member of the executive committee.
(5) (a) No person may hold office as mayor or both mayor and executive mayor for more
than two consecutive terms in the same council.
78
(b) No person may hold office as deputy mayor or both deputy mayor and deputy
executive mayor for more than two consecutive terms in the same council.
(c) If a person is elected
(i) to fill a vacancy in the office of mayor or deputy mayor, the period between
that election and the next election of a mayor or deputy mayor is not regarded
as a term; or
(ii) as mayor or deputy mayor where the type of the municipality has been
changed from any of those mentioned in sections 8(e), (f), (g) or (h), 9(c),
(d), (e) or (f) or 10(b) or (c) to any of those mentioned in sections 8(a), (b),
(c) or (d), 9(a) or
(b) or 10(a) during the term of the municipal council concerned, the period between
that election and the next election of a mayor or deputy mayor is not regarded as
a term.
(6) A mayor whose two consecutive terms have expired as provided for in subsection (5)
(a), may not immediately after the expiry be elected as deputy mayor.
Section 49 of the Structures Act stipulates the functions and powers of mayors:
49. Functions and powers of mayors.

(1) The mayor of a municipality
(a) presides at meetings of the executive committee; and
(b) performs the duties, including any ceremonial functions, and exercises the pow-
ers delegated to the mayor by the municipal council or the executive committee.
(2) The deputy mayor exercises the powers and performs the duties of the mayor if the
mayor is absent or not available or if the office of the mayor is vacant. The mayor may
delegate duties to the deputy mayor.
(3) If the mayor is absent or not available and the municipality does not have a deputy
mayor, or the deputy mayor is also absent or not available
(a) the member of the executive committee designated thereto in writing by the mayor
acts as mayor; or
(b) a councillor elected by the members of the executive committee from amongst
themselves acts as mayor if the mayor has not designated a member thereto or if
the designated member is absent or not available.
4.5 THE EXECUTIVE MAYOR

The municipal council of municipalities with the executive mayor type (page back to
the previous learning unit and make sure you understand this type of municipality)
must elect an executive mayor in terms of section 54 (“Only municipalities of certain
types may elect executive mayors”). Section 55 of the Act provides that the council
can also elect a deputy executive mayor from amongst the council members. Section
55 provides as follows:
55. Election of executive mayors.

(1) If a municipal council chooses to have an executive mayor it must elect an executive
mayor and, if the MEC for local government in the province so approves, also an execu-
tive deputy mayor, from among its members at a meeting that must be held
(a) within 14 days after the council’s election;
(b) if it is a district council, within 14 days after the last of the local councils has ap-
pointed its representatives to the district council; or
(c) within 14 days after the date with effect from which the type of the municipality
has been changed from any of those mentioned in section 8(a), (b), (c) or (d), 9(a),
(b), (e) or (f) or 10(a) or (c) to any of those mentioned in section 8(e), (f), (g) or (h),
9(c) or (d) or 10(b).
(2) A vacancy in the office of executive mayor or executive deputy mayor must be filled
when necessary.
LGL3702/1 79
(3) The procedure set out in Schedule 3 applies to the election of an executive mayor and
executive deputy mayor.
The powers and duties of the executive mayor are in essence identical to the func-
tions of the executive committee (see section 44 of the Structures Act, as already
mentioned), although the mayor can also perform a ceremonial role. Section 56 of
the Structures Act regulates the powers and functions of the executive mayor (you
should be able to give a thorough explanation of the executive mayor’s functions).
56. Functions and powers of executive mayors.

(1) An executive mayor is entitled to receive reports from committees of the municipal
council and to forward these reports together with a recommendation to the council
when the matter cannot be disposed of by the executive mayor in terms of the execu-
tive mayor’s delegated powers.
(2) The executive mayor must
(a) identify the needs of the municipality;
(b) review and evaluate those needs in order of priority;
(c) recommend to the municipal council strategies, programmes and services to ad-
dress priority needs through the integrated development plan, and the estimates of
revenue and expenditure, taking into account any applicable national and provincial
development plans; and
(d) recommend or determine the best way, including partnership and other approaches,
to deliver those strategies, programmes and services to the maximum benefit of
the community.
(3) The executive mayor in performing the duties of office must

(a) identify and develop criteria in terms of which progress in the implementation of
the strategies, programmes and services referred to in subsection (2)(c) can be
evaluated, including key performance indicators, which are specific to the munici-
pality and common to local government in general;
(b) evaluate progress against the key performance indicators;
(c) review the performance of the municipality in order to improve
(i) the economy, efficiency and effectiveness of the municipality;
(ii) the efficiency of credit control and revenue and debt collection services; and
(iii) the implementation of the municipality’s by-laws;
(d) monitor the management of the municipality’s administration in accordance with

the directions of the municipal council;
(e) oversee the provision of services to communities in the municipality in a sustain-
able manner;
(f) perform such duties and exercise such powers as the council may delegate to
the executive mayor in terms of section 59 of the Local Government: Municipal
Systems Act, 2000 (Act No. 32 of 2000);
(g) annually report on the involvement of communities and community organisations
in the affairs of the municipality; and
(h) ensure that regard is given to public views and report on the effect of consultation
on the decisions of the council.
(4) An executive mayor must perform a ceremonial role as the municipal council may
determine.
(5) An executive mayor must report to the municipal council on all decisions taken by the
executive mayor.
(6) The deputy executive mayor of a municipality exercises the powers and performs the
duties of the executive mayor if the executive mayor is absent or not available or if the
office of the executive mayor is vacant.
(7) If the executive mayor is absent or not available and the municipality does not have a
deputy executive mayor, or the deputy executive mayor is also absent or not available,
the council must designate a councillor to act as executive mayor.
80
If a municipality has more than nine council members, the executive mayor must
appoint a mayoral committee from among the councillors: section 60(1)(a) of the
Structures Act. Section 60 of the Act provides as follows:
60. Mayoral committees.

(1) If a municipal council has more than nine members, its executive mayor
(a) must appoint a mayoral committee from among the councillors to assist the ex-
ecutive mayor;
(b) may delegate specific responsibilities to each member of the committee;
(c) may delegate any of the executive mayor’s powers to the respective members; and
(d) may dismiss a member of the mayoral committee.
(2) The mayoral committee must consist of the deputy executive mayor (if any) and as
many councillors as may be necessary for effective and efficient government, provided
that no more than 20 per cent of the councillors or 10 councillors, whichever is the
least, are appointed.
(3) Those of the executive mayor’s powers and functions as may be designated by the
municipal council must be exercised and performed by the executive mayor together
with the other members of the mayoral committee.
(4) The members of a mayoral committee remain in office subject to subsection (5) and
section 26, for the term of the executive mayor who appointed them.
(5) If the executive mayor vacates office, the mayoral committee appointed by that execu-
tive mayor dissolves.
Importantly, section 160(8) of the Constitution provides that members of a municipal

council be entitled to participate in the proceedings of its committees. In Democratic
Alliance v Masondo 2003 (2) BCLR 128 (CC), the Constitutional Court held that the
mayoral committee is not a “committee of council” for purposes of section 160(8) of the
Constitution. The executive mayor appoints the mayoral committee and it terminates
once the mayor no longer holds office. The members of the mayoral committee are
not accountable to the municipal council but rather to the mayor.
ACTIVITY 4.18
• What is the function of a mayoral committee?
61 FEEDBACK
ACTIVITY 4.19
• How does this correspond to the functions of the municipal council in general?
62 FEEDBACK
• This is again a self-evaluation activity. Use the information given in this learning unit
to guide you through the answer to the activity. Hint: Once again, this activity requires
you to return to that part of the guide where we discuss the functions of the municipal
council, then return to the functions of the mayor and thereafter compare their respective
functions to reach your answer. Consider compiling a chart with the functions in one
LGL3702/1 81
column and the functions of the mayor in another column to assist you in your efforts
to see how the two institutions’ functions correspond.
4.6 COUNCIL COMMITTEES

In terms of sections 79 and 80 of the Structures Act, council committees can be
established to assist the council and the municipal executive. (Page back and make
sure you know what the municipal council and the municipal executive are.)
Section 33 of the Structures Act lists a number of factors that have to be taken into
account in order to determine whether a council committee is in fact necessary. Sec-
tion 33 states as follows:
33. Criteria for establishment of committees.

A municipality may establish a committee provided for in this Act if
(a) the municipality is of a type that is empowered in terms of this Act to establish a com-
mittee of the desired kind;
(b) the establishment of the committee is necessary, taking into account
(i) the extent of the functions and powers of the municipality;
(ii) the need for the delegation of those functions and powers in order to ensure ef-
ficiency and effectiveness in their performance; and
(iii) the financial and administrative resources of the municipality available to support
the proposed committee; and
(c) in the case of the establishment of an executive committee, the municipality has more
than nine councillors.
The municipal council may establish a committee in terms of section 79 of the Structures Act.
It states as follows:
79. Establishment.
(1) A municipal council may
(a) establish one or more committees necessary for the effective and efficient perfor-
mance of any of its functions or the exercise of any of its powers;
(b) appoint the members of such a committee from among its members; and
(c) dissolve a committee at any time.
(2) The municipal council

(a) must determine the functions of a committee;
(b) may delegate duties and powers to it in terms of section 32;
(c) must appoint the chairperson;
(d) may authorise a committee to co-opt advisory members who are not members of
the council within the limits determined by the council;
(e) may remove a member of a committee at any time; and
(f) may determine a committee’s procedure.
ACTIVITY 4.20
• Consider the establishment of a council committee and make a distinction between

what such a committee can and should do.
63 FEEDBACK
you through the answer to the activity. Hint: In your distinction, you need to distinguish
82
between a committee’s discretionary (can) and their compulsory/peremptory (must/

should) functions.
ACTIVITY 4.21
• What is the purpose of council committees?
64 FEEDBACK
• This is once again a self-evaluation activity. Use the information given above to guide
Examples of committees that are usually established in terms of section 79 are ap-
peal committees and disciplinary committees. The functions of these committees
usually flow from the terms of reference drawn up specifically for them. The council
will delegate powers to the committee and may appoint its chairperson.
Section 80 of the Structures Act regulates the establishment of committees that assist
either the executive mayor or executive committees. Section 80 provides as follows:
80. Committees to assist executive committee or executive mayor.

(1) If a municipal council has an executive committee or executive mayor, it may appoint
in terms of section 79, committees of councillors to assist the executive committee or
executive mayor.
(2) Such committees may not in number exceed the number of members of the execu-
tive committee or mayoral committee.
(3) The executive committee or executive mayor
(a) appoints a chairperson for each committee from the executive committee or
mayoral committee;
(b) may delegate any powers and duties of the executive committee or executive
mayor to the committee;
(c) is not divested of the responsibility concerning the exercise of the power or the
performance of the duty; and
(d) may vary or revoke any decision taken by a committee, subject to any vested rights.
(4) Such a committee must report to the executive committee or executive mayor in ac-
cordance with the directions of the executive committee or executive mayor.
So-called section 80 committees therefore report either to the executive mayor or

to the executive committee, not the municipal council. The two types of committees
serve different purposes and they report to different institutions. You should be able
to distinguish between the two. However, section 80 committees are subject to the
same requirements as section 79 committees and the rules that apply to section
79 committees apply to section 80 committees.
Please note:
Certain types of metropolitan and local municipalities may have ward committees
– if a metropolitan or local municipality decides to establish a ward committee, sec-
tions 73–78 of the Structures Act will apply. Ward committees are generally aimed
at promoting participatory democracy in local government: section 72(3) of the Act.
Ward committees must be established for each ward in the municipality.
LGL3702/1 83
4.7 METROPOLITAN SUB-COUNCILS
Metropolitan municipalities of the sub-council participatory type may establish sub-
councils in terms of section 61 of the Structures Act. A sub-council is a committee
(consisting of councillors) that delegates powers over a certain area that must cover
adjoining wards. Sub-councils therefore exercise powers that have been delegated
to them and they exercise these powers in certain municipal areas.
Please note:
The municipality must first adopt a by-law that determines the number of sub-councils
and give each of them a distinct name. The by-laws must also contain an “equitable
financial framework” in terms of which the sub-councils must function: section 62(1)
(d) of the Structures Act. The sub-council may also appoint committees from among
its members to help perform its tasks: section 71 of the Structures Act.
ACTIVITY 4.22
• Briefly explain the requirements for the establishment of a sub-council.
65 FEEDBACK
ACTIVITY 4.23
• Can a sub-council appoint committees?
66 FEEDBACK
ACTIVITY 4.24
• What type (page back to the previous learning unit) of municipality can establish a
sub-council?
67 FEEDBACK
• This is obviously a self-evaluation activity. Just follow the instruction above – to page
back to the previous learning unit.
Section 62 of the Structures Act regulates the establishment of sub-councils as follows:
84
62. Establishment of metropolitan sub-councils.

(1) If a metropolitan municipality decides to establish metropolitan sub-councils, it must
do so by passing, after a process of public consultation, a by-law which
(a) determines the number of sub-councils to be established;
(b) determines for each sub-council an area within the municipality consisting of a
cluster of adjoining wards;
(c) establishes in each area a sub-council under a distinct name;
(d) provides an equitable financial framework in terms of which the sub-councils must
function; and
(e) regulates any other relevant matters.
(2) When clustering wards to determine a metropolitan sub-council area, the municipal
council must
(a) apply the criteria set out in sections 24 and 25 of the Demarcation Act in so far as
they can be applied; and
(b) consult the Demarcation Board.
Section 63 of the Structures Act regulates the composition of sub-councils as follows:
63. Composition.
(1) Each metropolitan sub-council consists of
(a) the councillors representing the wards included in the sub-council area; and
(b) an additional number of councillors allocated in terms of Part 1 of Schedule 4.
(2) The councillors referred to in subsection (1)(b) must

(a) consist of councillors elected to the metro council from party lists in accordance
with Part 3 of Schedule 1; and
(b) be appointed to the metropolitan sub-council
(i) in accordance with Part 1 of Schedule 4.
Please note:
No councillor may serve on more than one sub-council.
Powers and duties must be delegated from the metropolitan council to the sub-councils.
Section 64 of the Structures Act regulates the powers and duties of sub-councils.
In terms of this section, the sub-council can make recommendations to the metro-
politan council on what duties should be delegated to it. The sub-council determines
its own internal procedures, although these decisions are still subject to approval by
the metropolitan council.
QUESTION 1
Explain the different institutions that make up a municipality.
QUESTION 2
Give a thorough explanation of the internal procedures of the municipal council.
QUESTION 3
Fully describe the duties and functions of municipal councils.
LGL3702/1 85
QUESTION 4
Give a short description of the councillors’ code of conduct.
QUESTION 5
Provide an in-depth explanation of the election procedures for metropolitan and local councils.
QUESTION 6
Provide an in-depth explanation of the election procedures for district councils.
QUESTION 7
Describe the duties of the executive committee.
QUESTION 8
Give a full explanation of the functions of the executive mayor.
QUESTION 9
Give the criteria for the establishment of council committees and explain the functions of
these committees. Differentiate between section 79 and section 80 committees in your answer.
QUESTION 10
When can a metropolitan sub-council be established? Also, explain its composition.
86
5 LEARNING UNIT 5
5 Municipal public administration
1 OVERVIEW
This learning unit considers the concept of public administration as applied in local
government. The Constitution and sections of the Promotion of Administrative Jus-
tice Act 3 of 2000 (PAJA) regulate municipal public administration. The concepts of
public participation and accountability form a fundamental part of the broad under-
standing of public administration in the local government sphere. They are central
to the general aim of the Constitution in respect of establishing an open, fair and
accountable government. Municipal performance management forms a crucial part
of accountable local government and consists of regular reports that form part of a
general performance management system. Municipal capacity building forms part of
the new autonomous status accorded to municipalities. All municipal staff members
should aim to enhance their capacities on a regular basis and municipalities should
foster conditions that would make such capacity building possible.
• define public administration with reference to its political dimension

• conceptualise municipal public administration
• explain the constitutional requirements regarding municipal public administration
• thoroughly explain the concepts of municipal accountability and public participation
LEARNING MATERIAL
Bekink sections 19.1–19.2 (pp 471–472); 19.4.6 (pp 482–484); 19.5.2 (pp 488–490).
City Power (Pty) Ltd v Grinpal Energy Management Services (Pty) Ltd and Others
2015 (6) BCLR 660 (CC); [2015] ZACC 8 (CC) para 30
5.1 INTRODUCTION
An uncomplicated definition of municipal administration could be “the organisation
or management of the public affairs of the specific organisation” (in this case, the
municipality). “Public administration” refers to the relationship that exists between
administrative organs and the executive arm of government (more particularly the
political segment of government).
• the administration is concerned with the practical implementation of political

decisions
• politicians make the political decisions (they are concerned with the uses of power)
Public administration includes resource allocation, planning, organisation, staffing

matters and policy decision-making. While its political dimension is subject to change,
its administrative dimension remains consistent.
Municipal public administration can therefore be conceptualised as follows:
• it functions in a political field
LGL3702/1 87
• it operates in a democratic context, which is characterised by an open and
accountable government
• it is decentralised and able to finance its own affairs
• it is in direct contact with the citizens
Please note:
Against the background of “municipal public administration”, you should also take note
of the basic aspects of municipal public relations. Take note too that municipal public
relations are constantly affected by decisions made by political or staff representa-
tives and that all decisions made by staff and by representatives are weighed and
analysed by the public (the local residents in the specific municipality). The effective-
ness and adequacy of public relations is largely dependent upon the performance of
all the functionaries involved in public administration. Public relations officers must
be able to determine what the public opinion is and it should aim to accommodate
(our emphasis) such opinions.
ACTIVITY 5.1
• Write a short paragraph explaining the difference between “administration in a political

structure/sphere” and “political decision-making in a political structure/sphere”.
68 FEEDBACK
• Once again this is a self-evaluation activity. Return to the preceding paragraphs to
tackle this activity.
ACTIVITY 5.2
• Define municipal public administration.
69 FEEDBACK
• Yet another self-evaluation activity. Return to the preceding paragraphs to tackle this
activity. Note though that you only need to “define” (explain) what public administration
entails.
ACTIVITY 5.3
• Will this definition be dependent on the ruling political party? Give a short reason for
your answer.
88
LEARNING UNIT 5: Municipal public administration
70 FEEDBACK
• Once again this is a self-evaluation activity. Hint: Think along the lines of the political
reality as regards the city/town or rural area in which you find yourself living and/or
working.
5.2 CONSTITUTIONAL REQUIREMENT CONCERNING MUNICIPAL

PUBLIC ADMINISTRATION
The Constitution includes basic values and principles that govern public administration.
These values and principles are important for public services throughout government
and hold supreme legal status.
Section 195 of the Constitution contains the values and principles relevant to public
administration (you should be able to give a concise explanation regarding section 195):
195. Basic values and principles governing public administration.

(1) Public administration must be governed by the democratic values and principles en-
shrined in the Constitution, including the following principles:
(a) A high standard of professional ethics must be promoted and maintained.
(b) Efficient, economic and effective use of resources must be promoted.
(c) Public administration must be development-oriented.
(d) Services must be provided impartially, fairly, equitably and without bias.
(e) People’s needs must be responded to, and the public must be encouraged to
participate in policy-making.
(f) Public administration must be accountable.
(g) Transparency must be fostered by providing the public with timely, accessible and
accurate information.
(h) Good human resource management and career development practices must be
cultivated, to maximise human potential.
(i) Public administration must be broadly representative of the South African people,
with employment and personnel management practices based on ability, objectiv-
ity, fairness, and the need to redress the imbalances of the past to achieve broad
representation.
These values and principles must be adhered to by all relevant stakeholders. You
should also note that these principles apply to all spheres of government, all organs
of state and all municipalities.
You should also take note of section 196 of the Constitution, which defines and sets
out the functions of the Public Service Commission.
196. Public Service Commission.

(1) There is a single Public Service Commission for the Republic.
(2) The Commission is independent and must be impartial, and must exercise its powers
and perform its functions without fear, favour or prejudice in the interest of the mainte-
nance of effective and efficient public administration and a high standard of professional
ethics in the public service. The Commission must be regulated by national legislation.
(3) Other organs of state, through legislative and other measures, must assist and protect
the Commission to ensure the independence, impartiality, dignity and effectiveness
of the Commission. No person or organ of state may interfere with the functioning of
the Commission.
(4) The powers and functions of the Commission are
(a) to promote the values and principles set out in section 195, throughout the public
service;
(b) to investigate, monitor and evaluate the organisation and administration, and the
personnel practices, of the public service;
LGL3702/1 89
(c) to propose measures to ensure effective and efficient performance within the
public service;
(d) to give directions aimed at ensuring that personnel procedures relating to recruit-
ment, transfers, promotions and dismissals comply with the values and principles
set out in section 195;
(e) to report in respect of its activities and the performance of its functions, including
any finding it may make and directions and advice it may give, and to provide an
evaluation of the extent to which the values and principles set out in section 195
are complied with; and
(f) either of its own accord or on receipt of any complaint
(i) to investigate and evaluate the application of personnel and public administra-
tion practices, and to report to the relevant executive authority and legislature;
(ii) to investigate grievances of employees in the public service concerning of-
ficial acts or omissions, and recommend appropriate remedies;
(iii) to monitor and investigate adherence to applicable procedures in the public
service; and
(iv) to advise national and provincial organs of state regarding personnel practices
in the public service, including those relating to the recruitment, appoint-
ment, transfer, discharge and other aspects of the careers of employees in
the public service; and
(g) to exercise or perform the additional powers or functions prescribed by an Act of

Parliament.
(5) The Commission is accountable to the National Assembly.

(6) The Commission must report at least once a year in terms of subsection (4)(e)
(a) to the National Assembly; and

(b) in respect of its activities in a province, to the legislature of that province.
It is therefore clear that the Constitution imposes certain values and principles with
regard to public administration upon local government as well.
ACTIVITY 5.4
• Which of the abovementioned principles do you think are the most important when
considering the underlying values of the Constitution as explained in the fi rst learning
unit?
71 FEEDBACK
• Yet another self-evaluation activity. However, for a successful completion of this activity
you have to return to both the relevant preceding paragraphs in this learning unit as
well as the pertinent ones in the fi rst learning unit.
ACTIVITY 5.5
• How should these principles assist South African citizens in being politically active
participants?
72 FEEDBACK
• To complete this activity you need to put your “thinking cap” on by carefully studying
both the values spelt out in the Constitution and the provisions of the relevant legislation
90
dealing with local government. Hint: Consider amongst others the duties of citizens
mentioned earlier in the guide. Will it be possible to argue that these “duties” are
factors to consider as well? Consider too the way these values and principles place
the citizen centre-stage. Should this not be a way too of “demanding” from citizens to
be politically active? Provide your own considered opinion.
The post-1994 legislative framework relating to local government also makes pro-
vision for aspects relevant to public administration. Section 51(a)–(m) of the Local
Government: Municipal Systems Act 32 of 2000 provides that all municipalities must
organise their administrative affairs in order to comply with a number of administra-
tive and financial requirements. These requirements are listed in section 51 of the
Systems Act as reflected below:
51. Organisation of administration. A municipality must within its administrative and fi -

nancial capacity establish and organise its administration in a manner that would enable the
municipality to
(a) be responsive to the needs of the local community;
(b) facilitate a culture of public service and accountability amongst its staff;
(c) be performance orientated and focused on the objects of local government set out in
section 152 of the Constitution and its developmental duties as required by section 153
of the Constitution;
(d) ensure that its political structures, political office bearers and managers and other staff
members align their roles and responsibilities with the priorities and objectives set out
in the municipality’s integrated development plan;
(e) establish clear relationships, and facilitate co-operation, co-ordination and communi-
cation, between
(i) its political structures and political office bearers and its administration;
(ii) its political structures, political office bearers and administration and the lo-
cal community;
(f) organise its political structures, political office bearers and administration in a flexible
way in order to respond to changing priorities and circumstances;
(g) perform its functions
(i) through operationally effective and appropriate administrative units and mecha-
nisms, including departments and other functional or business units; and
(ii) when necessary, on a decentralised basis;
(h) assign clear responsibilities for the management and co-ordination of these administra-
tive units and mechanisms;
(i) hold the municipal manager accountable for the overall performance of the administration;
(j) maximise efficiency of communication and decision-making within the administration;
(k) delegate responsibility to the most effective level within the administration;
(l) involve staff in management decisions as far as is practicable; and
(m) provide an equitable, fair, open and non-discriminatory working environment.
Please note:
Make sure that you understand these requirements (see above) – you must be able
to list them.

Note too that these requirements must be in line with labour legislation (section 52 of
the Systems Act). See in this regard City Power (Pty) Ltd v Grinpal Energy Manage-
ment Services (Pty) Ltd and Others 2015 (6) BCLR 660 (CC); [2015] ZACC 8 (CC).
The Constitutional Court held as follows with reference to the provisions of section
210 of the Labour Relations Act (LRA) 66 of 1995 par 30:
The LRA states that it should prevail –
LGL3702/1 91
“[i]f any conflict, relating to the matters dealt with in this Act, arises between
this Act and the provisions of any other law save the Constitution or any other
Act expressly amending this Act, the provisions of this Act will prevail.”
What it means in this context is that the provisions of the LRA prevail over the Mu-
nicipal Systems Act in employment matters.
ACTIVITY 5.6
• Should a person argue that the Systems Act prevails/trumps the Labour Relations Act
what would your answer be? Explain briefly with reference to the relevant provisions
of both Acts.
73 FEEDBACK
5.3 MUNICIPAL ACCOUNTABILITY AND PUBLIC/COMMUNITY

PARTICIPATION
5.3.1 Participation, communication and partnerships
Under the new constitutional dispensation, one of the aims of local government is to
provide mechanisms for residents to participate in decisions (mostly taken by gov-
ernment) that affect their lives. In order to give effect to this aim, residents should
have access to decision-making structures. There are a number of challenges that
affect this ideal, namely a lack of resources and education. To facilitate active public
participation, local government must constantly aim to improve channels of commu-
nication and form better partnerships between municipalities and local stakeholders.
Take note of the following channels of communication:
• Voting: citizens can voice their opinions through voting

• Paying for municipal services: citizens have direct contact with the municipality
when they act as consumers and pay for the services provided
• Operating as part of an organised interest group: such groups include political
parties, NGOs and community-based organisations
• Specialised structures: for instance, a ward committee or traditional leaders. If
the channels of communication are operating efficiently, conditions for creating
partnerships are usually favourable. Partnerships include the relationships between
the police and the municipality or between local businesses and the municipality.
Through such partnerships, the local municipality can play a vital role in combating
crime or in helping to alleviate poverty in local communities.
ACTIVITY 5.7
• Can you think of another reason why the community should be involved in local
government decision-making?
92
74 FEEDBACK
tackle this activity. Hint: Remember that local government is the sphere of government
that is the closest to the citizens.
ACTIVITY 5.8
• What would happen if the community were to be excluded from municipal decision-
making? Would the municipality be able to give eff ect to the needs of households?
75 FEEDBACK
tackle this activity. The point is that you need to provide a considered opinion with the
assistance of the relevant constitutional provisions as well as those pertinent to local
government. Your answer should not be an opinion based on political convictions.
ACTIVITY 5.9
• Can people really hold government accountable in cases where they lack certain basic
services if they do not make use of these channels of communication?
76 FEEDBACK
• Yet again this is a self-evaluation activity. Return to the preceding paragraphs to tackle
this activity. See too the comments under the feedback to activity 5.8.
5.3.2 Legislative provisions regarding public/community participation

In terms of Chapter 4 of the Municipal Systems Act, municipalities are under an
obligation to develop a culture in terms of which they must facilitate representative
government as well as a system of participatory government. Local government must
therefore create mechanisms for local communities to participate in the affairs of their
municipalities. Section 16(1)(a)(1) of the Systems Act provides that participation must
include the following:
16. Development of culture of community participation.

(1) A municipality must develop a culture of municipal governance that complements for-
mal representative government with a system of participatory governance, and must
for this purpose
(a) encourage, and create conditions for, the local community to participate in the
affairs of the municipality, including in
(i) the preparation, implementation and review of its integrated development
plan in terms of Chapter 5;
(ii) the establishment, implementation and review of its performance manage-
ment system in terms of Chapter 6;
LGL3702/1 93
(iii) the monitoring and review of its performance, including the outcomes and
impact of such performance;
(iv) the preparation of its budget; and
(v) strategic decisions relating to the provision of municipal services in terms
of Chapter 8.
Municipal resources must also be made available in order to achieve the participa-
tory objectives (section 16(1)(b)–(c) of the Systems Act). Section 17(2) provides that
all municipalities must design and implement the required mechanisms that would
enable local communities and residents to participate in the affairs of local govern-
ment. Section 17 provides as follows:
17. Mechanisms, processes and procedures for community participation.

(1) Participation by the local community in the affairs of the municipality must take place
through
(a) political structures for participation in terms of the Municipal Structures Act;
(b) the mechanisms, processes and procedures for participation in municipal govern-
ance established in terms of this Act;
(c) other appropriate mechanisms, processes and procedures established by the
municipality;
(d) councillors; and
(e) generally applying the provisions for participation as provided for in this Act.
(2) A municipality must establish appropriate mechanisms, processes and procedures to

enable the local community to participate in the affairs of the municipality, and must
for this purpose provide for
(a) the receipt, processing and consideration of petitions and complaints lodged by
members of the local community;
(b) notification and public comment procedures, when appropriate;
(c) public meetings and hearings by the municipal council and other political structures
and political office bearers of the municipality, when appropriate;
(d) consultative sessions with locally recognised community organisations and, where
appropriate, traditional authorities; and
(e) report back to the local community.
(3) When establishing mechanisms, processes and procedures in terms of subsection (2)
the municipality must take into account the special needs of
(a) people who cannot read or write;
(b) people with disabilities;
(c) women; and
(d) other disadvantaged groups.
Section 19(a)–(b) of the Systems Act provides that the public must be informed of
municipal council meetings and that the public must be given access to such meet-
ings. The municipal manager is required to provide details regarding the meetings,
including the time, place and venue. The municipal council may close meetings to the
public only if it has reasonable grounds for doing so (section 160(7) of the Constitu-
tion). However, the public and media may be denied access to meetings under the
following circumstances: (section 20(1) of the Systems Act):
20. Admission of public to meetings.

(1) Meetings of a municipal council and those of its committees are open to the public,
including the media, and the council or such committee may not exclude the public,
including the media, from a meeting, except when
(a) it is reasonable to do so having regard to the nature of the business being trans-
acted; and
(b) a by-law or a resolution of the council specifying the circumstances in which the
council or such committee may close a meeting and which complies with paragraph
(a), authorises the council or such committee to close the meeting to the public.
94
In terms of section 20(2) of the Systems Act, the public or media may not be denied
access to municipal meetings if the meetings concern the following:
(2) A municipal council, or a committee of the council, may not exclude the public, including
the media, when considering or voting on any of the following matters:
(a) A draft by-law tabled in the council;

(b) a budget tabled in the council;
(c) the municipality’s draft integrated development plan, or any amendment of the
plan, tabled in the council;
(d) the municipality’s draft performance management system, or any amendment of
the system, tabled in the council;
(e) the decision to enter into a service delivery agreement referred to in section 76(b); or
(f) any other matter prescribed by regulation.
Section 20(3) of the Systems Act provides that, subject to there being reasonable
grounds and the nature of the business, an executive committee and mayoral com-
mittee may close any or all meetings to the public and media.
(3) An executive committee mentioned in section 42 of the Municipal Structures Act and
a mayoral committee mentioned in section 60 of that Act may, subject to subsection
(1) (a), close any or all of its meetings to the public, including the media.
The municipality can also notify the public through the media. The municipality can
make use of the local newspaper or radio broadcasts (section 21(1)(a)–(c) of the
Systems Act) to notify the public. Section 21A of the Systems Act also provides that
all documents that must be made public by a municipality in terms of legislation must
be displayed at the municipality’s head office, satellite offices, libraries and on the
municipality’s website.
ACTIVITY 5.10
• Write a short paragraph explaining when local government can exclude the public
from certain meetings.
77 FEEDBACK
tackle this activity. Also page back to the previous learning units.
ACTIVITY 5.11
• When do you think would it be justifi able for the government to exclude the public from
its meetings?
78 FEEDBACK
• Yet another self-evaluation activity. Page back to the preceding learning unit where
this question was also briefly addressed.
LGL3702/1 95
5.3.3 Municipal accountability
In general, accountability concerns the need to explain or defend certain actions.
Persons in positions of power must take responsibility for their actions and be held
accountable for them. Accountability, therefore, ensures checks and balances for
local communities and it plays a vital role in reflecting the aspirations of the com-
munity. Through the implementation of the concept of accountability, the concept
of participation also deepens in local democracy since citizens would start feeling
more at ease in participating in local government affairs. Government is required to
establish paths to enhance accountability at local government level. The municipality
is accountable to the institutions that form part of the municipality as well as to the
public and all other stakeholders outside the municipality (see the diagram under
section 4.1.6 p 482 referred to above under the heading “learning materials”). Note
that there should be a balance between the needs and aspirations of workers and
the needs of the community that pertain to sustainable services. Take note also of
the following forms of accountability:
• there is accountability between the executive authority and the municipal council
• the municipal council and the administration are accountable to each other
• there is accountability between the municipality as employer and organised labour
• there is accountability between municipalities and other spheres of government
(the different spheres of government are also accountable to the municipalities)
• all spheres of government (including municipalities) are accountable to the
constitutional model and to all citizens of the Republic (section 1(d) of the
Constitution)
Please note:
A number of initiatives have been implemented in order to ensure that municipal
government is accountable. They are the following:
• codes of conduct (for councillors, traditional leaders and officers)

• full-time appointed councillors
• new structures and functionaries under the new legislative scheme
• performance management (these are measured against key performance indicators)
• public rights and responsibilities
Please note further (and this is important):
You should be able to discuss (a) the various forms of accountability and (b) how
government ensures that effect is given to these forms.
In addition, a municipality must define and specify the responsibility of each of its
political structures and political office bearers. Section 53 of the Systems Act regu-
lates the manner in which this allocation of roles and responsibilities must take place.
53. Roles and responsibilities.

(1) A municipality must, within the framework of and in accordance with relevant provi-
sions of the Municipal Structures Act, this Act and other applicable legislation, define
the specific role and area of responsibility of each political structure and political office
bearer of the municipality and of the municipal manager.
(2) The respective roles and areas of responsibility of each political structure and political
office bearer and of the municipal manager must
(a) be defined in precise terms by way of separate terms of reference, in writing, for
each political structure or political office bearer and the municipal manager; and
(b) be acknowledged and given effect to in the rules, procedures, instructions, policy
statements and other written instruments of the municipality.
96
(3) Instruments defining, acknowledging or giving effect to the roles and areas of re-
sponsibility of these political structures and political office bearers and the municipal
manager must be appropriate to the category and type in which the municipality falls.
(4) Terms of reference mentioned in subsection (2)(a) may include the delegation of powers
and duties to the relevant political structure or political office bearer or the municipal
manager in terms of section 59.
(5) When defining the respective roles and areas of responsibility of each political structure
and political office bearer and of the municipal manager, the municipality must determine
(a) the relationships among those political structures and political office bearers and
the municipal manager, and the manner in which they must interact;
(b) appropriate lines of accountability and reporting for those political structures and
political office bearers and the municipal manager;
(c) mechanisms, processes and procedures for minimising cross-referrals and un-
necessary overlapping of responsibilities between those political structures and
political office bearers and the municipal manager;
(d) mechanisms, processes and procedures for resolving disputes between those
political structures and political office bearers and the municipal manager; and
(e) mechanisms, processes and procedures for interaction, between
(i) those political structures and political office bearers and the municipal man-
ager and other staff members of the municipality; and
(ii) councillors and the municipal manager and other staff members of the
municipality.
(6) If a municipality has a decentralised regional administration in any part of its area, the
municipality must determine mechanisms, processes and procedures for interaction
between the regional management of the municipality and
(a) the ward councillor or other councillor responsible for that part of the municipal-
ity’s area;
(b) any sub-council or ward committee, where applicable, in that part of the munici-
pality’s area; and
(c) the local community in that part of the municipality’s area.
5.4 MUNICIPAL PERFORMANCE MANAGEMENT

5.4.1 Introduction: the establishment, development and core components
of performance management systems (PMSs)
Performance management can be defined as a process in terms of which municipalities
must seek to improve constantly their daily operations and accountability. The municipal-
ity’s performance is assessed to determine whether its plans have been implemented,
whether its resources are being used optimally and whether it is generally fulfilling its
duties. Contrary to the previous local government system, the new legislative framework
that regulates local government in the constitutional dispensation makes provision for
the enhancing of municipal performance management (Chapter 6 of the Local Govern-
ment: Municipal Systems Act). All municipalities are now required to create and develop
performance management systems (PMSs). Section 38(a)–(c) of the Systems Act
regulates the establishment of performance management systems as follows:
38. Establishment of performance management system.

A municipality must
(a) establish a performance management system that is
(i) commensurate with its resources;
(ii) best suited to its circumstances; and
(iii) in line with the priorities, objectives, indicators and targets contained in its inte-
grated development plan;
(b) promote a culture of performance management among its political structures, political
office bearers and councillors and in its administration; and
(c) administer its affairs in an economical, effective, efficient and accountable manner.
LGL3702/1 97
Section 39(1)(c) of the Systems Act regulates the development of performance man-
agement systems as follows:
39. Development of performance management system.

The executive committee or executive mayor of a municipality or, if the municipality does not
have an executive committee or executive mayor, a committee of councillors appointed by
the municipal council must
(a) manage the development of the municipality’s performance management system;
(b) assign responsibilities in this regard to the municipal manager, and
(c) submit the proposed system to the municipal council for adoption.
Section 40 of the Systems Act states that each municipality is also obliged to estab-
lish mechanisms in order to monitor and review its PMS. The legislation does not
give any guidance regarding the type of mechanisms that should be implemented.
Section 41(1)(a)–(e) lists the core components that each PMS must include as follows:
41. Core components.

(1) A municipality must in terms of its performance management system and in accord-
ance with any regulations and guidelines that may be prescribed
(a) set appropriate key performance indicators as a yardstick for measuring perfor-
mance, including outcomes and impact, with regard to the municipality’s develop-
ment priorities and objectives set out in its integrated development plan;
(b) set measurable performance targets with regard to each of those development
priorities and objectives;
(c) with regard to each of those development priorities and objectives and against
the key performance indicators and targets set in terms of paragraphs (a) and (b)
(i) monitor performance; and
(ii) measure and review performance at least once per year;
(d) take steps to improve performance with regard to those development priorities
and objectives where performance targets are not met; and
(e) establish a process of regular reporting to
(i) the council, other political structures, political office bearers and staff of the
municipality; and
(ii) the public and appropriate organs of state.
Section 42 of the Systems Act provides that the local community must be involved
in the development, implementation and review of the municipality’s PMS. In terms
of section 43(1)(a)–(b) of the Systems Act, the Minister of Co-operative Government
and Traditional Affairs (previously known as the Department of Provincial and Local
Government) (after consulting with the MEC for local government and organised local
government nationally) may prescribe, in terms of regulation, general key performance
indicators (KPIs). These indicators must be appropriate to local government in general
and must be applied to all municipalities. The Minister is also under an obligation to
review and adjust the KPIs when necessary. Municipalities must inform the general
public which KPIs have been set by the specific municipality in order to meet the
aims of its PMS. The municipality’s success in meeting its PMS must be audited by
the auditor-general each year as part of the general auditing process (sections 44
and 45 of the Systems Act).
ACTIVITY 5.12
• What is a Performance Management System (PMS) and why do you think it is important
for a municipality to have such a system?
98
79 FEEDBACK
As you will recognise by now, this is obviously a self-evaluation activity. Return to the
preceding paragraphs to tackle this activity. Hint: As to the importance of such a system
think along the lines of managing people or an institution carefully to provide for good and
proper governance.
ACTIVITY 5.13
• What should each PMS contain?
80 FEEDBACK
Once again this is a self-evaluation activity. Return to the preceding paragraphs to tackle
this activity. Hint: Look at the provisions of section 41(1).
ACTIVITY 5.14
• What should each PMS contain?
ACTIVITY 5.15
• Who should ensure that the municipality complies with its PMS and, in fact, develops
its own PMS?
81 FEEDBACK
5.4.2 Reports regarding PMSs

Section 46(1)(a)–(c) of the Systems Act regulates the municipality’s reports regarding
its PMS as follows:
46. Annual performance reports.

(1) A municipality must prepare for each financial year a performance report reflecting
(a) the performance of the municipality and of each external service provider during
that financial year;
(b) a comparison of the performances referred to in paragraph (a) with targets set for
and performances in the previous financial year; and
(c) measures taken to improve performance.
LGL3702/1 99
In addition, the MEC for local government in a province must compile and submit an
annual report on the performance of municipalities in that province to the provincial
legislature and national minster responsible for local government. This report must
identify all the municipalities that have underperformed during the year and must
indicate the remedial actions that will follow. The report must be published in the
Provincial Gazette (section 47(1)–(2) of the Systems Act). Section 48 of the Systems
Act provides that the Minister for local government must submit to Parliament and
the nine MECs for local government a general report regarding local government
performance in terms of the general key performance indicators (KPI). This report
should be published in the National Gazette. Take note of the following regulations and
guidelines that the national Minister may make in order to regulate certain municipal
matters (section 49(1)(a)–(k)):
49. Regulations and guidelines.

(1) The Minister may for the purposes of this Chapter make regulations or issue guidelines
in terms of section 120 to provide for or regulate
(a) incentives to ensure that municipalities establish their performance management
systems within the applicable prescribed period, and comply with the provisions
of this Act concerning performance management systems;
(b) the setting of key performance indicators by a municipality with regard to its de-
velopment objectives;
(c) the identification of appropriate general key performance indicators that can be ap-
plied to municipalities generally and that reflect the object and intent of section 23;
(d) the regular review by a municipality of its key performance indicators;
(e) the setting of a framework for performance targets by municipalities consistent with
their development priorities, objectives and strategies set out in their integrated
development plans;
(f) mechanisms, systems and processes for the monitoring and measurement of
performance by a municipality with regard to its development objectives;
(g) the internal auditing of performance measurements;
(h) the assessment of those performance measurements by a municipality;
(i) the assessment of progress by a municipality with the implementation of its inte-
(j) the improvement of performance;
(k) any other matter that may facilitate
(i) the implementation by municipalities of an efficient and effective system of

performance management; or
(ii) the application of this Chapter.
These regulations and guidelines cater for the effectiveness of the systems since the
statutory requirements do not constitute a complete legal system. The Minister there-
fore has wide discretion to make regulations and guidelines, although he/she must
take into account the capacity of municipalities, which often means that he/she must
also differentiate between the municipalities (section 49(2)–(4) of the Systems Act).
One can conclude that each municipality must identify its areas (both external and
internal transformation necessities) where performance improvement is necessary.
The national government must assist municipalities by identifying general performance
areas applicable to all municipalities, including access to basic services. Municipalities
must also assess their own performance in an objective manner and this is crucial
to the maintenance of effective local government PMSs.
Please note:
Also take note of the core elements that all PMSs should contain (you should study
these elements as you will find them discussed under section 4.6.1 on p 489–490 –
see “learning material” above):
• performance measurement
100
• performance monitoring and evaluation

• performance reporting
• capacity building
• intervention
• performance incentives
This area of local government law shows how national government oversees and, to
some extent, regulates the operation of local government.
ACTIVITY 5.16
• Write a few paragraphs explaining how national government prescribes the performance
areas in which local government should invest more time and effort.
82 FEEDBACK
• Yet another self-evaluation activity. Return to the preceding paragraphs to tackle this
activity. Hint: Look at section 49 of the Systems Act as stated above in particular.
5.4.3 Implementation of PMSs

In terms of sections 1, 152 and 153 of the Constitution, local government must achieve
certain municipal objectives. In order to determine whether municipalities meet these
requirements, a system of performance management and accountability is neces-
sary. Bekink states that a new legal framework for national performance management
has been enacted and will function as follows (Bekink identifies 6 steps (on p 491)):
• All municipalities must identify areas that require performance measuring and
improvement.
• Once these areas have been identified, the municipality must monitor and measure
its performance by developing indicators and targets for each of the development
priorities.
• The municipality must evaluate its performance and improve performance where
its targets have not been met.
• National government will identify areas fundamental to the overall reconstruction
and development of South Africa.
• Each municipality must report on these areas by means of prescribed national
indicators and targets.
• Municipalities may not perform below the targets.

Please note:
The following example illustrates Bekink’s explanation of the “new legal framework”:
50% of municipality A’s residents do not have access to clean water. The municipal-
ity will identify water provision as an area that requires performance improvement
since access to water is a very important municipal service (people need water in
order to function (and survive) as dignified human beings). The provision of water
will therefore be set as a priority and the objective will be to foster conditions that
would make it possible to give all residents access to a minimum number of litres
of water per day. This objective will translate into certain strategies (for example,
investment programmes). The municipality must monitor its performance through
LGL3702/1 101
the development of Key Performance Indicators (KPIs) and targets. Take note of
the following KPIs:
• percentage of households that do not have access to water

• bacteria count in water
• time spent transferring water to households
• percentage of residents paying for water
The targets to be taken note of

The following targets need to be taken note of:
• reduce households without water (from 50% to 30% in two years)

• ensure quality drinkable (potable) water
• reduce time to transfer water
• ensure that mechanisms are put in place to service payment collections better
The improvement of performance should targets not have been met

Where these targets are not met, the municipality would have to improve its performance.
Possible mechanisms
The following are possible mechanisms:
• recording data on households that have access to water

• ensuring the quality of the water on an ongoing basis (testing it regularly)
• implementing a proper water services billing system
The municipality must also report on its performance management in each area (see
section 46 of the Systems Act discussed above).
5.5 MUNICIPAL CAPACITY BUILDING

Under the new constitutional dispensation, municipalities have been afforded specific
autonomy and powers. This also means that municipalities must take care of their
own affairs. Capacity building is an important objective for all municipalities and has
the following advantages:
• services are delivered according to legal requirements

• powers can be delegated to the municipal level
• better investment opportunities can be created
Bekink (at p 493) states that the new local government system must ensure the fol-
lowing results:
• respond to municipal needs

• be acceptable and aimed at all people
• offer capacity building that qualifies officials and workers for promotion and further
development
• address capacity building needs of rural communities
• ensure the involvement of roleplayers to find solutions for municipal challenges
• In conclusion, all municipalities must implement new initiatives in order to adhere
to the vision of local government which is to create a customer-orientated public
service. Councillors and all municipal staff must be held accountable for their
actions and take control of municipal affairs. Local government should also be
more people-orientated and, in general, should aim to accommodate the needs
of all citizens.
102
ACTIVITY 5.17
• How can local government be held accountable if it does not deliver the necessary
services?
83 FEEDBACK
QUESTION 1
Define the following concepts:
1.1 public administration

1.2 municipal accountability
1.3 public participation
QUESTION 2
Fully explain the purpose of a performance management system. In your answer you should
explain how a PMS is established and developed.
QUESTION 3
Describe how the Minister regulates municipalities with regard to their performance.
QUESTION 4
By way of example, explain how municipalities implement PMSs. Try to create your own example.
LGL3702/1 103
6 LEARNING UNIT 6
6 Powers and functions
INTRODUCTION
This learning unit considers the powers and functions of local government. The
powers and functions of municipalities are founded in the Constitution and national
legislation. The different functions they have are examined here in line with the found-
ing constitutional principles that pertain to local government powers. The national
legislation that elaborates on the foundational powers and functions as included in
the Constitution are also analysed in detail. These functions can be defined as direct
or indirect, depending on the origin of the specific function. Throughout the unit you
should also take special care to distinguish between executive and legislative func-
tions and powers. Municipalities also have financial and law enforcement powers and
we explain both these powers.
On completion of this unit, you should be able to:
• explain local government powers as included in the Constitution

• give a thorough analysis of municipal functions as enacted in local government
legislation
• distinguish between and explain executive and legislative local government powers
• distinguish between and explain direct and indirect local government powers
• explain the division of powers between different municipalities
• give a full explanation of municipal financial and law enforcement powers
LEARNING MATERIAL
Steytler NC & De Visser J Local Government Law of South Africa (2007) 5–21
Fedsure Life Assurance v Greater JHB TMC 1999 (1) SA 374 (CC) paras 41–42
Capricorn District Municipality and Another v South African National Civic Organisa-
tion [2014] ZASCA 39 (SCA); 2014 SA 335 (SCA) (the decision in full)
Nealer E & Raga K “Nature and extent of local governance in South Africa” (2007)
42 Journal of Public Administration 171–182, pages 173–178
Steytler N & Fessha YT “Defining local government powers and functions” (2007)
124 SALJ 320–337, pages 320–337
6.1 INTRODUCTION
Local government is recognised as a distinctive and autonomous sphere of government
and, in terms of the Constitution, is awarded certain powers and functions. These
powers and functions are unique to local government and may not be amended by
higher spheres of government without the Constitution itself having to be amended
(section 156 and Schedule 4 and 5 Part B of the Constitution). However, these powers
are not absolute and are therefore subject to certain national and provincial require-
ments. Municipalities can invoke only such powers and perform only such functions
as are legally permissible. Furthermore, these authorised powers and functions
must be performed in accordance with the stipulated legal requirements – including
the correct procedural requirements. The correct procedural requirements entail an
104
LEARNING UNIT 6: Powers and functions
evaluation of the manner in which the powers are exercised. You should also keep in
mind that all municipal powers can be scrutinised by higher spheres of government
(section 155(7) of the Constitution).
All municipal powers are divided between executive and legislative functions.
• Legislative authority is the power to make laws. It also includes the authority to
amend or repeal laws.
• Executive authority entails the power to implement and enforce legislation. It also
includes the power to manage administration and develop governmental policies.
These powers are distributed between the different spheres of government. How-
ever, in the national and provincial government spheres these powers are vested in
different government bodies, while in the local sphere of government both executive
and legislative functions are vested in the municipal council. The municipal council
is therefore responsible for the exercising and performance of both executive and
legislative powers and functions (section 151(2) of the Constitution).
Bekink (p 214) mentions four reasons for only one body to exercise both executive
and legislative functions and powers:
• greater effectiveness
• quicker decision-making
• quicker performance of functions
• money saving
However, the negative impact of this state of affairs, namely that the municipal council
is vested with both executive and legislative functions and powers, is that as Bekink
explains, “the built-in checks and balances of one government over the other is lost”
(p 214). There is therefore no means in terms of which one governmental body can
weigh or consider the decisions or powers of another – in this instance, the municipal
council. It has been suggested that the impact of the loss of internal control over the
powers and functions of the municipal council could be sufficiently balanced by other
mechanisms, including the supervisory role that provincial and national government
has over the powers and functions of municipalities (section 155(7) of the Constitution).
Please note:
The following challenges are currently experienced by local government:
• an increase in municipal responsibilities (a number of issues are assigned or

delegated to municipalities)
• municipal functions are vaguely defined, “especially where services are vertically
integrated or shared by other spheres” (Bekink p 215).
• when decisions are taken by the “higher” spheres of government, municipalities
are often ignored and
• they (municipalities) also often lack the required capacity to perform the functions
designated to them
ACTIVITY 6.1
• What are the negative effects of vesting both executive and legislative powers in the
municipal council?
LGL3702/1 105
84 FEEDBACK
ACTIVITY 6.2
• How can these effects be remedied?
85 FEEDBACK
to guide you through the answer to the activity. Can you think of any other remedies?
Write them down.
6.2 MUNICIPAL POWERS AND FUNCTIONS IN TERMS OF THE

CONSTITUTION
The Constitution addresses issues of municipal powers and functions in two catego-
ries, namely direct and indirect municipal powers and functions.
6.2.1 Direct constitutional directives

Section 156 of the Constitution regulates the direct municipal powers and functions
as follows:
156. Powers and functions of municipalities.
(1) A municipality has executive authority in respect of, and has the right to administer
(a) the local government matters listed in Part B of Schedule 4 and Part B of Schedule
5; and
(b) any other matter assigned to it by national or provincial legislation.
(2) A municipality may make and administer by-laws for the effective administration of the
matters which it has the right to administer.
(3) Subject to section 151(4), a by-law that conflicts with national or provincial legislation
is invalid. If there is a conflict between a by-law and national or provincial legislation
that is inoperative because of a conflict referred to in section 149, the by-law must be
regarded as valid for as long as that legislation is inoperative.
of Schedule 4 or Part A of Schedule 5 which necessarily relates to local government, if
(5) A municipality has the right to exercise any power concerning a matter reasonably
necessary for, or incidental to, the effective performance of its functions.
From this section, you should note that municipalities have the right to administer
municipal executive matters. The Constitution makes a distinction between the ex-
ecutive authority and the administration of such matters. In terms of this section, the
Constitution identifies the matters that local government has executive and adminis-
trative authority over. The Constitution identifies two sources, namely the municipal
106
matters listed in Part B of Schedule 4 and Part B of Schedule 5 of the Constitution.

These matters are included in the Constitution and therefore cannot be amended
without the Constitution having to be amended as well. These municipal functions
are therefore fixed and predetermined.
6.2.1.1 Schedule 4 Part B and Schedule 5 Part B – original powers

Schedule 4
FUNCTIONAL AREAS OF CONCURRENT NATIONAL AND PROVINCIAL LEGISLA-
TIVE COMPETENCE
PART B
The following local government matters to the extent set out in section 155(6)(a)
and (7):
Air pollution
Building regulations
Child care facilities
Electricity and gas reticulation
Fire-fi ghting services
Local tourism
Municipal airports
Municipal planning
Municipal health services
Municipal public transport
Municipal public works only in respect of the needs of municipalities in the discharge
of their responsibilities to administer functions specifically assigned to them under
this Constitution or any other law
Pontoons, ferries, jetties, piers and harbours, excluding the regulation of interna-
tional and national shipping and matters related thereto
Stormwater management systems in built-up areas
Trading regulations
Water and sanitation services limited to potable water supply systems and domestic
waste-water and sewage disposal systems
Schedule 5
FUNCTIONAL AREAS OF EXCLUSIVE PROVINCIAL LEGISLATIVE COMPETENCE
PART B
The following local government matters to the extent set out for provinces in sec-
tion 155(6)(a) and (7):
Beaches and amusement facilities
Billboards and the display of advertisements in public places,
Cemeteries, funeral parlours and crematoria
Cleansing
Control of public nuisances
Control of undertakings that sell liquor to the public
Facilities for the accommodation, care and burial of animals
Fencing and fences
Licensing of dogs
Licensing and control of undertakings that sell food to the public
Local amenities
Local sport facilities
Markets
Municipal abattoirs
Municipal parks and recreation
Municipal roads
Noise pollution
Pounds
Public places
Refuse removal, refuse dumps and solid waste disposal
Street trading
LGL3702/1 107
Street lighting
Traffi c and parking
The matters listed in Part B of Schedule 4 are areas that fall under concurrent na-
tional and provincial legislative competences. These matters therefore require some
degree of inter-governmental cooperation since all three spheres of government
have powers over them. Matters listed under Part B of Schedule 5 are functions
that pertain typically to local government and the provincial legislature has exclusive
legislative competences over them. You should note that national government may
therefore not exercise any legislative authority over these matters except in the case
of an emergency situation as envisaged under section 44(2) of the Constitution.
ACTIVITY 6.3
• Summarise the provisions of both Schedule 4 Part B and Schedule 5 Part B.
86 FEEDBACK
• This endeavour will ensure that you study the provisions properly. In other words, this
is a self-evaluation activity and no further comment is required.
ACTIVITY 6.4
• Look at the provisions of section 44(2) of the Constitution and summarise what would
be considered “emergency powers” when Parliament is allowed to intervene legislatively
in matters pertaining to Schedule 5 Part B.
87 FEEDBACK
• This is obviously a self-evaluation exercise. Look up the provisions of section 44(2)
with heading, “National legislative authority” and summarise the fi ve (5) instances
when parliament may intervene legislatively. One of them, for example, is to maintain
national security.
ACTIVITY 6.5
• Consider the functional areas above and explain why local government should have
powers regarding these issues.
88 FEEDBACK
• This is obviously a self-evaluation exercise. However, for a “proper” answer you also
need to page back to preceding learning units to compile the answer.
108
ACTIVITY 6.6
• Would it be logical, and in fact practical, for national government to have any powers
over the matters listed in Schedule 5 Part B? Give reasons for your answer.
89 FEEDBACK
• This is obviously a self-evaluation exercise. Nonetheless, for the provision of reasons
you need to explain in your own words what they are. Hint: Bear in mind that local
government is the nearest to its citizens and link this reality to the matters listed in
the activity.
ACTIVITY 6.7
• Study the following: Nealer E & Raga K “Nature and extent of local governance in South
Africa” (2007) 42 Journal of Public Administration 171–182, pages 173–178. Write a
few paragraphs in which you summarise Nealer & Raga’s views regarding additional
municipal powers and functions. Do you agree with their viewpoint? Substantiate your
answer.
90 FEEDBACK
• Again this is a self-evaluation activity. In order to familiarise you with the content of
the prescribed article you need to read and re-read the few pages. The next step is
to write the said paragraphs introducing them with (a) a brief listing of these views,
(b) followed by a discussion of these views (their content). Your conclusion will be (c)
whether you agree or disagree with the authors’ views and finally (d) setting out why
you agree or disagree.
Please note:
Study Steytler N & Fessha YT “Defining local government powers and functions”
(2007) 124 SALJ 320–337, pages 320–337.
Some comments on the above-mentioned material to be studied:
You should be able to answer an essay-type question in the exam regarding the
overlap of powers.
You should also be able to explain the difficulties arising from unclear definitions.

You should treat the above-mentioned extracts from the prescribed article as in es-
sence an activity as well. So it will be worth your while to attempt such an essay and
proceed to write such essay to address the questions posed.
6.2.1.2 Schedule 4 Part A and Schedule 5 Part A – assigned powers

In terms of section 156(1)(b) of the Constitution, local government also has author-
ity over certain issues that have been assigned to it in terms of either provincial or
LGL3702/1 109
national legislation. Such assignment can take the form of either a general or specific
assignment.
Please note:
As regards matters assigned to local government one should take note of the follow-
ing (section 156(4) of the Constitution):
of Schedule 4 or Part A of Schedule 5, which necessarily relates to local government,
if
A municipality must therefore agree to the assignment only if certain conditions are
provided for – for instance, if financial support is provided for by the “higher” sphere
of government. What is not clear from section 156(4) of the Constitution is whether
municipalities have executive authority over matters listed in Part A of Schedules 4
and 5. The Constitution does afford municipalities the right to exercise any power
necessary in relation to an issue for the effective performance of its functions. Munici-
palities therefore have residual powers (executive or legislative) in order to perform
their functions effectively. Bekink draws the following conclusion in this regard (p 219):
One can thus conclude that municipalities do not only have administrative powers on
matters assigned to them but also executive authority, notwithstanding the fact that
the matter assigned to them is a matter falling under either Part A of Schedule 4 or
Part A of Schedule 5 of the Constitution. However, an aspect that is very clear from
the Constitution, is the fact that if a matter falls outside the matters that are listed in
Part B of Schedule 4 or 5 of the Constitution and that matter has not been lawfully
assigned to a municipality, then a municipality has no executive or administrative
authority over such matter or matters.

In a footnote to this conclusion (fn 20), he (Bekink) states the following as regards
his conclusion: “This is, of course, excluding matters that are reasonably necessary
for, or incidental to, the effective performance of the functions already entrusted to
local governments. The Constitution s 156(5)”.
ACTIVITY 6.8
• Do you agree with Bekink’s reasoning? Provide reasons for your answer.
91 FEEDBACK
• This is a self-evaluation activity. Use the information given above to guide you through
the answer to the activity. Obviously in providing reasons you need to think about what
the author wrote and then provide your considered opinion. That is your reasons why
you agree or disagree with the author.
However, section 156(2) of the Constitution makes provision for the legislative au-
thority of municipalities. In terms of this section, municipalities can make by-laws
in order to administer effectively the matters for which they are responsible. Part of
legislative authority is the enactment of by-laws. In terms of section 156(1)(a)–(b) of
110
the Constitution it would seem that municipalities may make and administer by-laws
in respect of those matters that they must administer. In other words, the matters
listed in Schedule 4 Part B and Schedule 5 Part B, or any other matter assigned to
a municipality by either national or provincial legislation.
Municipal by-laws are subordinate to national or provincial legislation. Any by-law

that conflicts with national or provincial legislation would automatically be invalid
(section 156(3) of the Constitution). However, one should also take note that national
or provincial government may not compromise or impede a municipality’s ability or
right to exercise its powers or perform its functions (section 156(3) read with section
151(4) of the Constitution). One can therefore conclude that, if national or provincial
legislation has the effect of impeding a municipality’s right to exercise its powers, a
municipal by-law should have preference over the national or provincial legislation.
Section 149 of the Constitution regulates the position where a court decides that
either national or provincial legislation should prevail over other legislation. Such
a decision would not invalidate the legislation but merely render the “subordinate”
legislation ineffective for as long as the conflict remains. In a case where there is
a conflict between national and provincial legislation one should bear in mind that
national legislation does not have automatic dominance over provincial legislation
(section 146 of the Constitution). Where a by-law is in conflict with legislation that
has been declared inoperative due to the fact that it is in conflict with any other leg-
islation, the by-law would not be invalid but rather operative for as long as the other
legislation is inoperative.
ACTIVITY 6.9
• List the matters that municipalities can regulate by means of legislation.
92 FEEDBACK
the answer to the activity. However, take note of the instruction, which reads that you
only need to list the matters that municipalities can regulate by means of legislation.
ACTIVITY 6.10
• What would the status of a by-law be if it were to contravene provincial legislation?

Would this always be the case?
93 FEEDBACK
to guide you through the answer to the activity. Be careful of the second part of the
question “would this always be the case?” There’s a catch and you therefore need to
read and study the above paragraph(s) very carefully.
LGL3702/1 111
ACTIVITY 6.11
• Study the decision of the Supreme Court of Appeal in Capricorn District Municipality
and Another v South African National Civic Organisation [2014] ZASCA 39 (SCA); 2014
SA 335 (SCA) carefully and then summarise the decision under the following headings:
(a) the facts of the case; (b) what the SCA decided (based on the facts) regarding the
kind of functions the district municipality performed; and, (c) why the SCA held as
follows, “the application is dismissed with costs” (para 27).
94 FEEDBACK
• This is obviously a self-evaluation question. You are required to study this decision as
part of your study material and add to it your own insight as to why you think that the
SCA reached the conclusion it indeed reached.
6.2.1.3 Additional assignments – executive and legislative

The assignment of executive powers is regulated as follows in sections 99 and 126
of the Constitution:
99. Assignment of functions.

A Cabinet member may assign any power or function that is to be exercised or performed in
terms of an Act of Parliament to a member of a provincial Executive Council or to a Municipal
Council. An assignment
(a) must be in terms of an agreement between the relevant Cabinet member and the Ex-
ecutive Council member or Municipal Council;
(b) must be consistent with the Act of Parliament in terms of which the relevant power or
function is exercised or performed; and
(c) takes effect upon proclamation by the President.
126. Assignment of functions.

A member of the Executive Council of a province may assign any power or function that is to
be exercised or performed in terms of an Act of Parliament or a provincial Act, to a Municipal
Council. An assignment
(a) must be in terms of an agreement between the relevant Executive Council member
and the Municipal Council;
(b) must be consistent with the Act in terms of which the relevant power or function is
exercised or performed; and
(c) takes effect upon proclamation by the Premier.
In addition, section 164 of the Constitution vests a residual power in national gov-
ernment. It provides that “[a]ny matter concerning local government not dealt with in
the Constitution may be prescribed by national legislation or by provincial legislation
within the framework of national legislation.”
Please note:
In terms of sections 44(1)(a)(iii) and 104(1)(c) of the Constitution, national or provincial
legislatures can assign any of their legislative powers to specific municipal councils.
6.2.1.4 The overlap between Schedules 4A/5A and Schedules 4B/5B

Most functional areas listed in Part B of Schedules 4 and 5 can be included in one or
more of the functional areas listed in Part A of Schedules 4 and 5. Steytler and De
112
Visser use the following example to illustrate this reality as follows and we paraphrase
their example – to manage the overlap between the environment (provincial compe-
tence) and beaches (local competence), the latter should be defined first, rather than
attempting to define the broad provincial competence – Steytler & De Visser 5–21.
It is suggested that, rather than attempt an exhaustive definition of both parts, the
more specific and included local government areas should be defined first, leaving
the residual areas to the provinces.
Please note:
Steytler & De Visser call this methodology a “bottom-up interpretation of functional
areas” (5–21).
See, for instance, City of Johannesburg Metropolitan Municipality v Gauteng Devel-
opment Tribunal 2010 (2) BCLR 157 (SCA) paras 35–36:
That line of reasoning seems to me to approach the matter the wrong way round. It
is to be expected that the powers that are vested in government at national level will
be described in the broadest of terms, that the powers that are vested in provincial
government will be expressed in narrower terms, and that the powers that are vested
in municipalities will be expressed in the narrowest terms of all. To reason inferentially
with the broader expression as the starting point is bound to denude the narrower
expression of any meaning and by so doing to invert the clear constitutional intention
of devolving powers on local government.
See also City of Johannesburg Metropolitan Municipality v Gauteng Development

Tribunal and Others 2010 (6) SA 182 (CC) paras 55 & 62:
It is, however, true that the functional areas allocated to the various spheres of govern-
ment are not contained in hermetically sealed compartments. But that notwithstanding,
they remain distinct from one another. This is the position even in respect of functional
areas that share the same wording like roads, planning, sport and others. The distinc-
tiveness lies in the level at which a particular power is exercised. For example, the
provinces exercise powers relating to provincial roads whereas municipalities have
authority over municipal roads. The prefix attached to each functional area identifies
the sphere to which it belongs and distinguishes it from the functional areas allocated
to the other spheres. In the example just given, the functional area of provincial roads
does not include municipal roads. In the same vein, provincial planning and regional
planning and development do not include municipal planning. (para 55)
The purposive construction of the schedules requires, in the present context, that a
restrictive meaning be ascribed to development to enable each sphere to exercise
its powers without interference by the other spheres. This restrictive approach co-
heres with the functional scheme of the schedules, which vests specific powers in
municipalities. (para 62)
ACTIVITY 6.12
• With reference to City of Johannesburg Metropolitan Municipality v Gauteng Development

Tribunal and Others 2010 (6) SA 182 (CC), explain how the overlap of functions in local
and provincial government can be explained and resolved.
LGL3702/1 113
95 FEEDBACK
ACTIVITY 6.13
• Is an overlap of functions necessarily problematic?
96 FEEDBACK
guide you through the answer to the activity. Hint: Go back to Steytler and De Visser’s
views (as well as your own opinion provided in the preceding activity).
6.2.2 Constitutional directives that have an indirect impact on local

government powers
• Both the executive and legislative authority of a municipality vests in the municipal
council: section 151(2) of the Constitution.
• Municipalities are empowered with the right to govern local government affairs of
their communities on their own initiative: section 151(3) of the Constitution.
• National or provincial legislation may not impede a municipality’s right to exercise
its powers: section 151(4) of the Constitution.
• Municipal powers and functions are subject to national and provincial legislation,
although national and provincial legislation also influence municipal powers and
functions. See, for example, section 155(3)(2) and (3)(a) of the Constitution.
• National and provincial governments have executive and legislative authority to
oversee the performance of municipalities – specifically their functions with reference
to the matters listed in Schedules 4 and 5: section 155(7) of the Constitution.
• The municipal council must make all the decisions that concern the exercising of
powers and performance of functions in the municipality: section 160(1)(a) and
(b) of the Constitution. It is important to remember that the municipal legislative
authority rests with the municipal council and may not be delegated to another
body (section 160(2)(a) of the Constitution).
• The municipal council must make by-laws which prescribe rules and orders
for its internal arrangements; its business and proceedings; and the
establishment, composition, procedures, powers and functions of its committees
(section 160(6) of the Constitution).
6.3 NATIONAL LEGISLATION THAT PERTAINS TO THE POWERS

AND FUNCTIONS OF MUNICIPAL COUNCILS
6.3.1 Introduction
The Constitution requires that national legislation must provide for the appropriate
division of powers and functions between category B (local) and C (district) municipali-
ties: section 155(3)(c) of the Constitution. Category A municipalities have exclusive
municipal executive and legislative authority in their areas of jurisdiction. (Page back
to learning unit 3 for the full definitions of the different municipal categories.)
114
6.3.2 Functions and powers of municipalities in terms of the Municipal

Structures Act
The point of departure here is that a municipality has the powers and functions
assigned to it in terms of sections 156 and 229 of the Constitution. These powers
should be divided between the local and district municipality: (section 83(1) and (2)
of the Structures Act).
Section 83 of the Structures Act provides as follows:

83. General.
(1) A municipality has the functions and powers assigned to it in terms of sections 156
and 229 of the Constitution.
(2) The functions and powers referred to in subsection (1) must be divided in the case of
a district municipality and the local municipalities within the area of the district munici-
pality, as set out in this Chapter.
(3) A district municipality must seek to achieve the integrated, sustainable and equitable
social and economic development of its area as a whole by
(a) ensuring integrated development planning for the district as a whole;
(b) promoting bulk infrastructural development and services for the district as a whole;
(c) building the capacity of local municipalities in its area to perform their functions
and exercise their powers where such capacity is lacking; and
(d) promoting the equitable distribution of resources between the local municipalities
in its area to ensure appropriate levels of municipal services within the area.
District municipalities are afforded the following functions and powers (section 84(1)
(a)–(p) of the Structures Act):
84. Division of functions and powers between district and local municipalities.
(1) A district municipality has the following functions and powers:
(a) Integrated development planning for the district municipality as a whole, including
a framework for integrated development plans of all municipalities in the area of
the district municipality.
(b) Potable water supply systems.
(c) Bulk supply of electricity, which includes for the purposes of such supply, the
transmission, distribution and, where applicable, the generation of electricity.
(d) Domestic waste-water and sewage disposal systems.
(e) Solid waste disposal sites, in so far as it relates to
(i) the determination of a waste disposal strategy;
(ii) the regulation of waste disposal;
(iii) the establishment, operation and control of waste disposal sites, bulk waste
transfer facilities and waste disposal facilities for more than one local mu-
nicipality in the district.
(f) Municipal roads which form an integral part of a road transport system for the area
of the district municipality as a whole.
(g) Regulation of passenger transport services.
(h) Municipal airports serving the area of the district municipality as a whole.
(i) Municipal health services.
(j) Firefighting services serving the area of the district municipality as a whole, which
includes
(i) planning, co-ordination and regulation of fire services;
(ii) specialised firefighting services such as mountain, veld and chemical fire
services;
(iii) co-ordination of the standardisation of infrastructure, vehicles, equipment
and procedures;
(iv) training of fire officers.
(k) The establishment, conduct and control of fresh produce markets and abattoirs
serving the area of a major proportion of the municipalities in the district.
(l) The establishment, conduct and control of cemeteries and crematoria serving the
area of a major proportion of municipalities in the district.
LGL3702/1 115
(m) Promotion of local tourism for the area of the district municipality.
(n) Municipal public works relating to any of the above functions or any other functions
assigned to the district municipality.
(o) The receipt, allocation and, if applicable, the distribution of grants made to the
district municipality.
(p) The imposition and collection of taxes, levies and duties as related to the above
functions or as may be assigned to the district municipality in terms of national
legislation.
It therefore follows that the remaining powers under section 83(1) not afforded to
district municipalities in terms of section 84 will fall under the authority of the relevant
local municipality: section 84(2) of the Structures Act.
Section 84(3)(a) provides that the Minister may authorise a local municipality to perform
a function or exercise a power mentioned in section 84(1)(b), (c), (d) or (i) in its area,
provided that the Minister first consult with the Cabinet member responsible for the
functional area in question as well as the MEC for local government in the province
and place a notice in the Government Gazette. Section 84(3) also states the following:
(b) The Minister must in the notice referred to in paragraph (a) regulate the legal, practical
and other consequences of the authorisation, which may include
(i) the transfer of staff;
(ii) the transfer of assets, liabilities, rights and obligations, and administrative and
other records; and
(iii) the continued application of any by-laws and resolutions in the area of the mu-
nicipalities concerned and the extent of such application.
(c) The Minister may

(i) amend a notice issued in terms of paragraph (a); and
(ii) regulate the legal, practical and other consequences of such amendment.
(d) Whenever the Minister revokes an authorisation envisaged by paragraph (a) the Minis-
ter must in the notice revoking that authorisation regulate the legal, practical and other
consequences of the revocation, which may include
(i) the transfer of staff;
(ii) the transfer of assets, liabilities, rights, obligations and administrative and other
records; and
(iii) the continued application of any by-laws and resolutions in the area of the mu-
nicipalities in question and the extent of such application.
(e) The Minister must comply with the consultation requirements as set out in paragraph
(a) when a power referred to in paragraphs (c) or (d) is to be exercised.
The division of functions and powers between district and local municipalities can
also be adjusted in terms of the Structures Act. The MEC for local government may
adjust the powers and functions as listed in section 84(1) and (2) by allocating some
of the powers vested in the local municipality to the district municipality and vice
versa. However, functions referred to in section 84(1)(a)–(d), (i), (o) and (p) are ex-
cluded from such allocation. These powers must therefore be exercised by the district
municipality. One should note that the allocation of functions may take place only
if the municipality in which the function is vested lacks the capacity to perform the
specific function itself. It is also required that the MEC must have consulted with the
Demarcation Board and have considered the capacity of the municipality concerned.
The Demarcation Board must take account of the capacity of the district or local munici-
pality to perform its functions as determined in section 84(1) and (2) of the Structures
Act. The Board must consider the municipality’s capacity in two instances, namely when
the Board is determining or re-determining the boundaries of a municipality; or when
it is requested to do so by the MEC for Local Government in terms of section 85(2)
(b) of the Structures Act. The adjustment of the division of powers must be indicated
116
in the section 12 notices in terms of which municipalities are established. Section

85(7)–(9) of the Structures Act provides that the MEC is responsible for amending the
section 12 notice and must regularly review the capacity of municipalities to ensure
that they can perform their functions. Section 86 of the Structures Act provides that
the MEC must publish a notice in the Provincial Gazette defining the roles of both
district and local municipalities should a dispute arise between a district and local
municipality regarding the performance of a specific function. In such an instance,
the MEC must also first consult with the municipalities concerned.
Importantly, if the provision of basic services by a district or local municipality col-

lapses as a result of lack of capacity or for any other reason, the MEC may allocate
any function or power in order to restore the delivery of basic services to a local or
district municipality, provided that the MEC has given written notice to the relevant
municipality: section 87 of the Structures Act. The written notice would have immedi-
ate effect.
The municipality may lodge a complaint with the Minister against such an emergency
allocation. The Minister must consult with the Demarcation Board and either confirm,
vary or withdraw the allocation. If the municipality lodges a complaint against an al-
location it must, in addition, lodge a written objection against the allocation within
fourteen days of the notice being placed in the Provincial Gazette by the MEC. Fail-
ure to lodge a complaint will be regarded as consent by the affected municipality. In
a case where a municipality has lost its capacity to perform a certain function and
where the MEC has allocated that function to a different municipality, the MEC must
reallocate the function to the original municipality as soon as it is in a position to
resume its functions: section 87(2)–(4) of the Structures Act.
Please note:
Take note that in a category A municipality, all powers and functions are vested in
the metropolitan council and no division of powers is applicable. Similarly, in district
management areas, all powers and functions are vested in the district municipality:
section 89 of the Structures Act.
The principle of co-operative government is evident if you consider the ways in which
municipalities have to co-operate in order to provide basic services to all communities.
This type of support exists between district and local municipalities, but also between
local municipalities inter se: section 88(1)–(3) of the Structures Act.
ACTIVITY 6.14
• What functions are district municipalities responsible for?
97 FEEDBACK
learning unit to guide you through the answer to the activity.
ACTIVITY 6.15
• What functions are local municipalities responsible for?
LGL3702/1 117
98 FEEDBACK
to guide you through the answer to the activity. Note though that this activity requires
that you read and study the earlier information very carefully.
ACTIVITY 6.16
• Can the division of powers and functions between district and local municipalities be
amended? Give full reasons for your answer.
99 FEEDBACK
ACTIVITY 6.17
• What should happen in the case where a municipality does not have the capacity to
perform its functions?
100 FEEDBACK
• This activity requires you to provide your own considered opinion – the reasons for
your view. You will obviously find the answer in the information given earlier in this
learning unit.
6.3.3 Functions and powers of municipalities in terms of the Municipal

Systems Act
The Systems Act provides that a municipality has the right to do anything reasonably
necessary for the effective performance of its functions: section 8(2) of the Systems Act.
The Systems Act allows for the assignment of functions or powers to municipalities
by Acts of Parliament or provincial Acts. Bear in mind the provisions of section 9(1) of
the Systems Act in terms of which functions are assigned to municipalities, in general,
in terms of national legislation:
9(1) A Cabinet member or Deputy Minister initiating the assignment of a function or a power
by way of national legislation to municipalities generally must, before the draft legisla-
tion is introduced in Parliament
(a) consult the Minister, the national Minister of Finance and organised local govern-
ment representing local government nationally:
(b) consider any assessment by the Financial and Fiscal Commission in terms of
subsection (4): and
(c) publish the draft legislation in terms of section 154(2) of the Constitution.
118
Section 9(2) regulates the position in terms of which the MEC initiates assignments
by way of provincial legislation:
(2) An MEC initiating the assignment of a function or a power by way of provincial legislation
to municipalities in the province generally must, before the draft legislation providing
for the assignment is introduced in the relevant provincial legislature –
(a) consult the MEC responsible for finance in the province, the MEC for local govern-
ment in the province and organised local government representing local govern-
ment in the province;
(b) consider any assessment by the Financial and Fiscal Commission in terms of
subsection (4); and
(c) publish the draft legislation in terms of section 154(2) of the Constitution.
Bear in mind the additional requirements in terms of section 9(3) and (4) of the Sys-
tems Act:
(3) The Cabinet member, Deputy Minister or MEC initiating the national or provincial
legislation referred to in subsections (1) and (2) must take appropriate steps to ensure
sufficient funding, and capacity building initiatives as may be needed, for the perfor-
mance of the assigned function or power by the municipalities concerned if
(a) the assignment imposes a duty on the municipalities concerned;
(b) that duty falls outside the functional areas listed in Part B of Schedule 4 or Part
B of Schedule 5 to the Constitution or is not incidental to any of those functional
areas; and
(c) the performance of that duty has financial implications for the municipalities
concerned.
(4) The Cabinet member, Deputy Minister or MEC initiating the national or provincial
legislation referred to in subsections (1) and (2) must request the Financial and Fiscal
Commission to make an assessment of the financial implications of the legislation.
Section 10 of the Systems Act regulates the position in terms of which the executive
initiates assignments to specific municipalities:
10(1) A Cabinet member initiating the assignment of a function or a power to any specific
municipality
(a) by way of national legislation, must consult the Minister before the draft legislation
providing for the assignment is introduced in Parliament; or
(b) by way of an agreement in terms of section 99 of the Constitution, must consult
the Minister before the agreement is concluded.
(2) An MEC initiating the assignment of a function or a power to any specific municipality
(a) by way of provincial legislation, must consult the MEC for local government in the
province before the draft legislation providing for the assignment is introduced in
the relevant provincial legislature; or
(b) by way of an agreement in terms of section 126 of the Constitution, must consult
the Minister before the agreement is concluded.
(3) The Cabinet member or MEC initiating the legislation or agreement referred to in
subsections (1) and (2), respectively, must take appropriate steps to ensure sufficient
funding, and capacity building initiatives as may be needed, for the performance of the
assigned function or power by the municipality concerned if
(a) the assignment of the function or power imposes a duty on the municipality
concerned;
(b) that duty falls outside the functional areas listed in Part B of Schedule 4 or Part
B of Schedule 5 to the Constitution or is not incidental to any of those functional
areas; and
(c) the performance of that duty has financial implications for the municipality concerned.
LGL3702/1 119
Please note:
It is important to take cognisance of the fact that the Cabinet member, MEC or other
organ of state initiating the assignment of a function to a municipality in terms of sec-
tions 9 or 10 of the Systems Act must ensure that there are sufficient funding and
capacity building initiatives for the effective performance of the assigned function if
a) the assignment imposes a duty on the municipality; b) the function falls outside the
areas listed in parts B of Schedules 4 and 5 of the Constitution; or c) the function has
financial implications for the municipality: section 10A of the Systems Act.
ACTIVITY 6.18
• List and briefly explain who/which institution can assign functions to local government.
101 FEEDBACK
to guide you through the answer to the activity. Note the instruction though – to first list
who (the person) and which institution before proceeding to an explanation of the list.
ACTIVITY 6.19
• Mention the requirements for these assignments.
102 FEEDBACK
learning unit to guide you through the answer to the activity. (It is a natural progression
from the preceding learning unit.)
6.3.4 Executive and legislative functioning in terms of the Systems Act

Section 11 of the Systems Act confirms that the legislative and executive functions
of municipalities are exercised by the relevant municipal council of the municipal-
ity concerned. However, section 59 of the Systems Act makes it possible for the
municipal council to delegate certain powers to other functionaries while retaining
final responsibility for all municipal functions (including the functions delegated to
other functionaries): section 59(2)(a) of the Systems Act. Municipalities are gener-
ally authorised to exercise executive and legislative authority within their relevant
boundaries. However, a municipality can also exercise executive authority in the area
of another municipality by agreement with that municipality and subject to Chapter 5
of the Municipal Structures Act: Systems Act section 11(2).
Section 11(3)(a)–(n) of the Systems Act lists the following ways in which a municipal-
ity exercises its legislative and executive authority. (These “ways” or “means” are
general and must be read in line with more specific requirements as dealt with in the
Constitution and other national legislation, which will be discussed in other units.):
120
(3) A municipality exercises its legislative or executive authority by

(a) developing and adopting policies, plans, strategies and programmes, including
setting targets for delivery;
(b) promoting and undertaking development;
(c) establishing and maintaining an administration;
(d) administering and regulating its internal affairs and the local government affairs
of the local community;
(e) implementing applicable national and provincial legislation and its by-laws;
(f) providing municipal services to the local community or appointing appropriate
service providers in accordance with the criteria and process set out in section 78;
(g) monitoring and, where appropriate, regulating municipal services where those
services are provided by service providers other than the municipality;
(h) preparing, approving and implementing its budgets;
(i) imposing and recovering rates, taxes, levies, duties, service fees and surcharges
on fees, including setting and implementing tariff, rates and tax and debt collec-
tion policies;
(j) monitoring the impact and effectiveness of any services, policies, programmes
or plans;
(k) establishing and implementing performance management systems;
(l) promoting a safe and healthy environment;
(m) passing by-laws and taking decisions on any of the above-mentioned matters; and
(n) doing anything else within its legislative and executive competence.
6.4 LEGISLATIVE FUNCTIONS AND PROCEDURES

• Section 156(1) and (2) of the Constitution clearly state that municipal legislative
powers are inherently restricted in the sense that municipalities have legislative
powers over matters only where necessary for the municipality to ensure effective
administration.
• Section 156(3) of the Constitution also provides that a municipality should not
enact by-laws that are in conflict with national or provincial legislation.
• The municipal council must make decisions concerning the exercising of all
functions, including legislative powers. Section 160(1)(a) and (2)(b) of the Constitution
specifically state that municipal legislative powers may not be delegated to another
organ or functionary of that council.
Please note:
In Fedsure Life Assurance v Greater JHB TMC 1999 (1) SA 374 (CC) paras 41–42 the
Constitutional Court held that a municipal council is a deliberative legislative body.
Decisions taken by such a body must be lawful. The making of by-laws by a council
in accordance with the prescribed legal framework, which consists of prescribed
constitutional and legislative rules, cannot be challenged by “every person” affected
by such laws.
• A majority of the municipal council must be present before a vote can be taken
on any matter but matters concerning the passing of by-laws are taken by that
council with the support of a majority of its members: section 160(3)(a) and (b) of
the Constitution.
• Importantly, it is required that all the members of the municipal council must have
been given reasonable notice of a by-law – and that the proposed by-law must
have been published for public comment – before a by-law may be passed. Both
these requirements must be met before a municipal council can lawfully enact a
by-law: section 160(4)(a) and (b) of the Constitution.
• The proposed by-law must be published in the official gazette of the relevant
province. Municipal by-laws must be accessible to the public: section 162 of the
Constitution.
LGL3702/1 121
Chapter 3 was included in the Municipal Systems Act to further enhance the basic
constitutional framework regarding the legislative functions of municipalities. Legisla-
tive procedures, the publication of by-laws, draft by-laws and the municipal code are
all addressed in Chapter 3.
Section 12 regulates legislative procedures as follows:

12(1) Only a member or committee of a municipal council may introduce a draft by-law in
the council.
(2) A by-law must be made by a decision taken by a municipal council
(a) in accordance with the rules and orders of the council; and
(b) with a supporting vote of a majority of its members.
(3) No by-law may be passed by a municipal council unless

(a) all the members of the council have been given reasonable notice; and
(b) the proposed by-law has been published for public comment in a manner that
allows the public an opportunity to make representations with regard to the pro-
posed by-law.
(4) Subsections (1) to (3) also apply when a municipal council incorporates by reference,
as by-laws, provisions of –
(a) legislation passed by another legislative organ of state; or
(b) standard draft by-laws made in terms of section 14.
Section 13 regulates the publication of by-laws:

13. A by-law passed by a municipal council
(a) must be published promptly in the Provincial Gazette and, when feasible, also in
a local newspaper or in any other practical way to bring the contents of the by-law
to the attention of the local community; and
(b) takes effect when published or on a future date determined in or in terms of the
by-law.
Section 14 of the Systems Act regulates the enactment of draft by-laws:

14(1) (a) The Minister, at the request of organised local government representing local govern-
ment nationally, or after consulting the MECs for local government and organised
local government, may by notice in the Gazette
(i) make standard draft by-laws concerning any matter, including standard draft
rules and orders referred to in section 160(6) of the Constitution, for which
municipal councils may make by-laws; and
(ii) amend any standard draft by-laws made in terms of subparagraph (i).
(b) Before making any standard draft by-laws or amendment in terms of paragraph
(a), the Minister must
(i) publish the proposed standard draft by-laws or amendment in the Gazette
for public comment; and
(ii) consult the Cabinet member concerned if those standard draft by-laws or
amendment affects that Cabinet member’s area of responsibility.
(2) (a) An MEC for local government, on request by organised local government represent-
ing local government in the province, or after consulting the Minister and organised
local government, may by notice in the Provincial Gazette –
(i) make standard draft by-laws concerning any matter for which municipal
councils in the province may make by-laws; and
(ii) amend any standard draft by-laws made in terms of subparagraph (i).
(b) Before making any standard draft by-laws or amendment in terms of paragraph
(a), the MEC must
(i) publish the proposed standard draft by-laws or amendment in the Provincial
Gazette for public comment: and
122
(ii) consult the MEC concerned if those standard draft by-laws or amendment
affects that MEC’s area of responsibility.
(3) (a) A standard draft by-law or an amendment of a standard draft by-law is applicable
in a municipality only if, and to the extent and subject to any modifications and
qualifications, adopted by the council of that municipality.
(b) The repeal of a standard draft by-law after it has been adopted by a municipality
does not affect the continuation of that by-law in that municipality.
(4) If a municipal council intends to adopt a standard draft by-law with or without any
modifications or qualifications, it must follow the procedure set out in section 12(3)
and, after adoption, publish the by-law in accordance with section 13.
Section 15 of the Systems Act stipulates the responsibility of municipalities in respect

of the compilation of a municipal code:
15(1) A municipality must compile and maintain in bound or loose-leaf form, and when fea-
sible also in electronic format, a compilation of all its by-laws, including any provisions
incorporated by reference as by-laws of the municipality.
(2) This compilation, to be known as the municipal code, must be
(a) constantly updated and annotated; and
(b) kept at the municipality’s head office as the municipality’s official record of all
applicable by-laws.
(3) The municipality, at the request of a member of the public, must provide that person
with a copy of or an extract from its municipal code against payment of a reasonable
fee determined by the municipal council.
ACTIVITY 6.20
• What is the required procedure in the case where a municipality wishes to enact laws?
103 FEEDBACK
• This is obviously a self-evaluation question. Use the preceding comments to guide
you when you tackle this activity. Please remember to introduce your answer with a
reference to the correct section of the pertinent legislations as well.
ACTIVITY 6.21
• What requirements must fi rst be met before a by-law can be enacted?
104 FEEDBACK
• A self-evaluation question. Return to the earlier paragraphs for the required guidance.
ACTIVITY 6.22
• Explain the publication of by-laws.
LGL3702/1 123
105 FEEDBACK
6.5 MUNICIPAL FINANCIAL POWERS

Section 229 of the Constitution provides the foundation regarding municipal fiscal
functions:
(1) Subject to subsections (2), (3) and (4), a municipality may impose
(a) rates on property and surcharges on fees for services provided by or on behalf
of the municipality; and
(b) if authorised by national legislation, other taxes, levies and duties appropriate to
local government or to the category of local government into which that municipality
falls, but no municipality may impose income tax, value-added tax, general sales
tax or customs duty.
(2) The power of a municipality to impose rates on property, surcharges on fees for services
provided by or on behalf of the municipality, or other taxes, levies or duties
(a) may not be exercised in a way that materially and unreasonably prejudices national
economic policies, economic activities across municipal boundaries, or the national
mobility of goods, services, capital or labour; and
(b) may be regulated by national legislation.
(3) When two municipalities have the same fiscal powers and functions with regard to the
same area, an appropriate division of those powers and functions must be made in
terms of national legislation. The division may be made only after taking into account
at least the following criteria:
(a) The need to comply with sound principles of taxation.
(b) The powers and functions performed by each municipality.
(c) The fiscal capacity of each municipality.
(d) The effectiveness and efficiency of raising taxes, levies and duties.
(e) Equity.
(4) Nothing in this section precludes the sharing of revenue raised in terms of this section
between municipalities that have fiscal power and functions in the same area.
(5) National legislation envisaged in this section may be enacted only after organised local
government and the Financial and Fiscal Commission have been consulted, and any
recommendations of the Commission have been considered.
It follows that local governments have significant fiscal powers and national legisla-
tion may regulate such powers quite extensively. Even though municipalities do have
wide fiscal powers, the Constitution disallows municipalities from imposing income
tax, value-added tax, general sales tax or customs duty.
Please note:
Restrictions are placed on municipalities regarding their fiscal powers. Also note
the prescribed procedure that has to be followed in a case where two municipalities
have the same powers over the same area of land. In this regard, Bekink argues that
regulation through national legislation is “significant” after the criteria set out in section
229(3)(a)–(e) of the Constitution have been taken into account (p 235).
6.6 MUNICIPAL LAW ENFORCEMENT

In comparison to the system in place under the previous apartheid regime, munici-
palities have been allocated stronger powers regarding municipal law enforcement.
124
However, neither Part B of Schedule 4 nor Part B of Schedule 5 refers to this func-
tional area of municipal law enforcement. Part A of Schedule 4 deals with the police
and chapter 11 of the Constitution confers these competences upon the provincial
legislatures. Municipal law enforcement is therefore not a direct executive function
but rather a legislative competence. These competences can therefore be exercised
by municipalities only if assigned to them in terms of national or provincial legislation.
The South African Police Service Act, as amended by Act 83 of 1998, makes provision
for the establishment of municipal police services (section 64A of the Act). In terms
of this section, any municipality may apply to the MEC of a province for the establish-
ment of a municipal police service for its area of jurisdiction. Once established, the
chief executive officer of the municipality is responsible to the municipal council for
the functioning of the municipal police service (MPS), although the council remains
ultimately responsible for the MPS. The municipal council also appoints a member of
the MPS as the executive head of the MPS. This person exercises control over the
MPS, which includes being responsible for maintaining efficient municipal police ser-
vices, being responsible for the administration of staff, and for ensuring the discipline
of the MPS. The functions of the MPS are as follows (section 64E of the Police Act):
64E. The functions of a municipal police service are

(a) traffic policing, subject to any legislation relating to road traffic;
(b) the policing of municipal by-laws and regulations, which are the responsibility of the
municipality in question; and
(c) the prevention of crime.
QUESTION 1
Give a full explanation of the powers and functions of municipalities as derived from the
Constitution.
QUESTION 2
Based on your answer in 1, analyse local government’s functions as enacted in the Municipal
Structures and Municipal Systems Acts.
QUESTION 3
Explain the division of powers between different municipalities, specifically local and district
municipalities.
QUESTION 4
Make two full lists – one listing municipalities’ executive powers and the other listing munici-
palities’ legislative powers.
QUESTION 5
Once you have made the two lists in 4, indicate whether the powers are direct or indirect powers.
QUESTION 6
Briefly explain municipalities’ financial and law enforcement powers.
LGL3702/1 125
7 LEARNING UNIT 7
7 Municipal service delivery
OVERVIEW
The purpose of this learning unit is to examine municipal service delivery in the
constitutional dispensation. Service delivery is generally considered to be the most
important function of municipalities. The White Paper on Local Government and the
Constitution sets the background vision for municipal service delivery. Local govern-
ment legislation elaborates on these foundational principles and values by regulating
all aspects of municipal service delivery. The creation of municipal service districts and
multi-jurisdictional municipal service utilities and the operation of these districts and
utilities are important developments of which special note should be taken. Throughout
this learning unit, pay special attention to the various services municipalities render.
• explain the foundational vision of municipal service delivery with reference to the
Constitution
• describe municipal duties regarding services and tariffs – referring to the specific
sections in the applicable statutes
• provide an extensive explanation of municipal services in terms of legislation
• distinguish service delivery based on competitive bidding from general municipal
services
• explain the establishment and functioning of municipal service districts
• thoroughly explain the establishment, functioning and operation of multi-jurisdictional
municipal service utilities
• give an extensive examination of municipal services
LEARNING MATERIAL
Bekink page 312–319
Phago KG & Malan LP “Public Private Partnerships (PPPs) and their role in extend-
ing access to local governance” (2004) 39 Journal of Public Administration
481–491, pages 482–485
Mubangizi BC “Improving public service delivery in the new South Africa: Some re-
flections” (2005) 40 Journal of Public Administration 633–648, pages 639–648
Nkuna NW & Nemutanzhela TL “Locating the role of service delivery within powers
and functions of local government in South Africa” (2012) 47 Journal of Public
Administration 355–368, pages 359–366
Capricorn District Municipality v South African National Civic Organisation [2014]
ZASCA 39 (SCA); 2014 (4) SA 335 (SCA)
7.1 INTRODUCTION
The following observation relating to municipalities’ service delivery summarises this
crucial power/duty most appropriately:
126
LEARNING UNIT 7: Municipal service delivery
The provision of services by a municipality is not merely a matter of defining compe-

tences. Rather it is an issue that defines and constitutes the very nature of this state
institution. Of all the three spheres of government, the notion of a government in ser-
vice of its community is perhaps most compelling with respect to local government.
Not only is the role of the municipality that of service provider, but also, very distinctly
that of developer of the community. The notion of developmental local government
should therefore be the leitmotif in interpreting the constitutional mandate with regard
to municipal mandate with regard to municipal services. In addition, local govern-
ment provides the best opportunity for citizens to assist government in the shaping of
solutions to problems of local concern. (Steytler and De Visser “Local government”
in Woolman et al Constitutional law of South Africa (CLOSA) (2008) 22-63-22-64).
The Supreme Court of Appeal (SCA) affirmed this view when Bosielo JA held as fol-
lows in Rademan v Moghaka and Others [2012] JOL 28591 (SCA) at para 8:
Essentially every municipality stands at the coal-face of delivery of various municipal

services for its communities. Service delivery has become the core if not primary
function of every municipality in line with the objects as set out in section 152 of the
Constitution.
Although local government as one of the spheres of government is “interrelated” with

the other two spheres of government, it is nonetheless a reality that it is the sphere
of government closest to local communities. Local government is therefore the
sphere of government that is responsible for the development and provision of basic
services to all communities. Section 152(1)(b) of the Constitution confirms one of the
main objectives of local government, namely to ensure the sustainable provision of
services to all communities.
152 Objects of local government

(1) The objects of local government are,
…
From the quotes above it is obvious that this is the most important function of local
government. One should also recognise the immensity of this task and understand
that there are a number of obstacles in the way of this fundamental obligation. One
example is the changing circumstances from one municipality to the next – for exam-
ple, municipalities that are experiencing drastic urbanisation will encounter municipal
difficulties when facing planning and service delivery objectives. Also, note that a
municipality must enact a tariff policy on the levying of fees for municipal services.
These services are provided either by the municipality itself or by way of service
delivery agreements. The municipality may levy and recover fees, charges or tariffs
in respect of a function or service that it renders. Any shortfalls or non-payment of
charges will leave a municipality vulnerable and in extreme cases completely unable
to deliver services.
Section 1 of the Systems Act defines a “municipal service” as follows:
A service that a municipality in terms of its powers and functions provides or may provide to
or for the benefit of the local community irrespective of whether
(a) such a service is provided, or to be provided, by the municipality through an internal
mechanism contemplated in section 76 or by engaging an external mechanism con-
templated in section 76; or
(b) fees, charges or tariffs are levied in respect of such a service or not.
LGL3702/1 127
Municipalities provide services by exercising their powers in terms of either the Con-
stitution or an assignment. Municipalities are inherently restricted with regard to the
extent of services that they may provide since they may act in accordance only with
the regulatory framework – that is the Constitution and applicable legislation. Municipal
services that are outsourced remain the responsibility of the relevant municipality.
ACTIVITY 7.1
• Why do you think is it necessary for a municipality sometimes to outsource a certain

service?
106 FEEDBACK
ACTIVITY 7.2
• What type of services can a municipality outsource?
107 FEEDBACK
• This is an activity requiring you to read and re-read earlier paragraphs, as well as
further paragraphs below before tackling the answer. Hint: This is perhaps the kind of
activity, which requires you to list the activities fi rst.
ACTIVITY 7.3
• Why do you think a municipality remains responsible for services rendered, even if the
service is provided by a private service provider?
108 FEEDBACK
• This is a self-evaluation activity. However, it is an activity requiring you to think about
it fi rst before tackling it – think along the lines of the “position” of local government as
one of the three spheres of government.
ACTIVITY 7.4
• Study the following: Mubangizi BC “Improving public service delivery in the new South
Africa: Some refl ections” (2005) 40 Journal of Public Administration 633–648, pages
639–642. Having done so, summarise in your own words the author’s thoughts.
128
109 FEEDBACK
• In the words of the Nike advertisement – “just do it” ̶ summarise the author’s views.
ACTIVITY 7.5
• Carefully read Nkuna NW & Nemutanzhela TL “Locating the role of service delivery
within powers and functions of local government in South Africa” (2012) 47 Journal
of Public Administration 355–368, pages 359–366 and write an essay explaining the
relationship between the powers (and functions) and services of a municipality. (You
should be able to answer an essay-type question on this topic in the examination for
about 20 marks.)
110 FEEDBACK
• This is obviously a self-evaluation activity. In your essay you need to explain what the
authors have in mind with the reference to “relationship” as a point of departure. Only
then you can proceed to explain the content of the powers and functions of a municipality
to be followed by a description of its provision of services. Only after providing the
description, would you be able to explain the relationship properly.
7.2 BACKGROUND: THE “VISION” FOR MUNICIPAL SERVICE

DELIVERY
All municipalities should strive to ensure sustainable service delivery and each mu-
nicipality has a number of options that it could implement in order to give effect to this
overarching purpose. Each municipality should therefore constantly assess and plan
the most effective mechanisms within its municipal areas to fulfil this constitutional
obligation of service delivery. The municipal administrators must decide which service
delivery options are most suitable to ensure maximum benefit to the communities.
The municipal government should therefore choose the delivery system that best
suits the specific municipality, considering the type of municipality and the specific
needs of the community. In terms of the White Paper on Local Government (1998) p
113–114, municipalities should be guided by the following principles when choosing
an appropriate service delivery system:
• Accessibility – communities should have access to the minimum level of service

• Simplicity – municipal services should be simple and easy to use
• Affordability – services should be as affordable as possible
• Quality – services should be suitable for their purpose, provided timely and be safe
• Accountability – municipal government must be accountable for all its activities,
including the provision of quality services
• Integration – municipalities must adopt an integrated approach with respect to
planning and must ensure that municipal services are provided in a sustainable
manner
• Sustainability – service provision is an ongoing obligation and process and requires
properly managed municipal institutions
• Value for money – municipalities should provide value-for-money services
• Promotion of competitiveness – sufficient transparency is needed in the sense
that all investors in a given municipal area must be aware of the costs involved in
doing business in that area
LGL3702/1 129
• Promotion of the new constitutional values – municipalities must aim to give effect
to the values enshrined in the new constitutional dispensation
The above-mentioned criteria should assist a municipality in deciding which service

delivery options it should implement and “which service delivery options would be
best for its particular area of jurisdiction” (Bekink p 284). The White Paper on Local
Government (1998) Section F 2.2 (pp 115–117) lists the following mechanisms (in
essence “specific delivery mechanisms” – Bekink p 284) to achieve the most appro-
priate service delivery options for a particular municipality:
• Building on existing capacity – municipal governments must build on their

existing infrastructure and existing municipal capacities. However, in a number of
municipalities, reform measures would have to be introduced
• Corporatisation – the separation of service delivery units from municipal councils
• Establishment of public-public partnerships – public joint ventures allow for
horizontal co-operation between municipalities
• Establishment of partnerships with community-based organisations and non-
governmental organisations – such partnerships help to involve local communities
and stimulate local economic development
• Public-private partnerships – municipalities should enter into partnerships with local
businesses in order to enhance service delivery and lessen local government’s
financial burdens. Note that section 120 headed “Conditions and process for public-
private partnerships” of the Local Government: Municipal Finance Management Act
2003 is applicable to these types of partnerships and entails extensive regulations,
procedures and requirements regarding the following: a feasibility study; the
approval process; the procurement process; and the final PPP (public-private
partnership agreements)
• Outsourcing – the contracting out of services to specialist private companies. The
municipality must take special precautions to ensure that minimum standards are
met and the municipality must have control over the services provided. Services
are usually outsourced by means of tenders
• Leases and concessions – the conclusion of either leases or concessions is a form
of service delivery. These agreements are forms of public-private partnerships and
usually occur where large-scale capital investment is required. The agreements
usually extend over relatively long periods. The contractor must take charge of
the assets and infrastructure associated with the services for the duration of the
contract. Usually, the contractor will also require ownership of the assets during
the contract period. As soon as the contract lapses, ownership and infrastructure
will be transferred to the municipality
• Privatisation/transfer of ownership – transfer of ownership from municipalities to
private or community-based entities. This refers to the sale of municipal assets
together with the transfer of municipal services regarding those assets. Privatisation
usually takes place only with regard to secondary sources such as parks, recreation
and refuse removal services
In order to meet the basic requirements with regard to service delivery, the local
government will have to meet the following capacities:
• Municipalities must become more strategic regarding their orientation, which

includes their capability to deal with unforeseen circumstances. Or, as Bekink
explains, “[t]hey should be open and flexible to new or unforeseen demands” (p 287)
• Municipalities should be able to maximise integrated capacity. In footnote 16, p 287,
Bekink suggests the following: “The vertical integration of national and provincial
programmes with municipal administrative systems may be a particularly effective
way for rural municipalities to build their administrative capacity”
• Municipalities should aim to become more community orientated
130
Municipal councils are responsible for the development of mechanisms that make it
possible to interact with community groups and identify required services. The capac-
ity to strategise, integrate and interface with non-municipal groups is very important
if a municipality is to provide sustainable services in the future – this requires strong
leadership and the support of the municipal council. Service delivery will improve
if built on existing capacity and structured as a partnership amongst the municipal
council, management, labour and community. Finally, national and provincial govern-
ment must oversee the performance of municipal functions
ACTIVITY 7.6
• Study Phago KG & Malan LP “Public Private Partnerships (PPPs) and their role in
extending access to local governance” (2004) 39 Journal of Public Administration
481–491, pages 482–485 in order to better understand the functions and role of PPPs.
Having studied the prescribed pages summarise the thoughts of the authors under
the following two headings: (a) “Introduction” and (c) “Purpose of PPPs”. In addition,
incidentally, can you think of any drawbacks to PPPs? If so, write them down. Can you
think of any benefits? If you can, write them down as well.
111 FEEDBACK
• See the request above pertaining to the activity. The same request applies to this activity.
ACTIVITY 7.7
• Study Mubangizi BC “Improving public service delivery in the new South Africa: Some
refl ections” (2005) 40 Journal of Public Administration 633–648, pages 643–646 and
in summary format explain what “outsourcing” within a municipal context means.
112 FEEDBACK
• This is obviously a self-evaluation question. It is vitally important you read and re-read
the prescribed Mubangizi article.
ACTIVITY 7.8
• Write in summary format a few paragraphs explaining (and distinguishing between) the
following: (a) the different principles that a municipality must take into account when
deciding on the appropriate service delivery mechanism; (b) the different types of
service delivery mechanisms; and (c) the capacities that municipalities have to meet
in order to ensure effective service delivery.
113 FEEDBACK
you when you tackle this activity. Please note too that you need to give reasons for
your opinion.
LGL3702/1 131
7.3 LEGISLATIVE REQUIREMENTS AS REGARDS MUNICIPAL
SERVICES AND SERVICE PROVISION
7.3.1 Constitutional basis
In terms of the new constitutional framework, municipalities are obliged to provide certain
services and achieve certain objectives. Section 152(1)(a)–(e) of the Constitution (“Ob-
jects of local government”) states that municipalities must strive to achieve the following:
• a democratic and accountable government

• the provision of services in a sustainable manner
• social and economic development
• safe and healthy environments
• community involvement in local government matters
A municipality must structure and manage its administration, budgeting and plan-
ning processes to give priority to the basic needs of the community and to promote
the social and economic development of the community. Municipalities must also
participate in national and provincial development programmes: section 153 of the
Constitution. An interesting aspect that requires some reflection is the meaning of “ba-
sic needs”. Bekink (p 288) states that some needs are universal and should therefore
take priority in a given municipal service delivery programme. These services would
usually include the provision of water and electricity, solid waste disposal and general
municipal infrastructure. Section 155(4) (section 155 deals with the “establishment of
municipalities”) of the Constitution confirms that these services must be provided in
an equitable and sustainable manner. Municipalities must also be legally authorised
to provide services and to charge tariffs for such services.
ACTIVITY 7.9
• Why do you think is it important for municipalities to charge tariff s and for citizens to
pay for certain services?
114 FEEDBACK
• This answer requires you to study the preceding paragraphs. In addition, think about
your own surroundings and comment on them – are you able to provide evidence or
examples of any “interaction” between the charging of tariff s by municipalities and the
payment or non-payment of tariff s by citizens?
ACTIVITY 7.10
• Is free service justifi able? Give a reason for your answer.
115 FEEDBACK
• This is an obvious self-evaluation activity but note that any reason you provide must be
judicially justifi able. However, also see the paragraphs below and note the explanation
for such a possibility. See too a subsequent activity dealing with this matter.
Section 155(6)(b) of the Constitution requires provincial governments to establish

municipalities in such a manner to promote the development of local government
132
capacity in each province. This should also support municipalities in performing their
functions and managing their internal affairs. In terms of section 155(7) of the Con-
stitution, both national and provincial governments should oversee a municipality’s
effective performance of its functions regarding the matters listed in Schedules 4 and
5 of the Constitution. Section 156(5) also states that, in order for a municipality to
perform its functions, it has the right to exercise any power concerning a matter that
is reasonably necessary for the performance of its normal functions. Section 160(1)
(a) and (d) makes it clear that the municipal council is responsible for all decisions
pertaining to the performance of municipal functions.
7.3.2 Municipal services in terms of legislation

7.3.2.1 General municipal duties regarding services and tariffs
The Local Government: Municipal Systems Act 32 of 2000 outlines specific duties
and requirements for all municipalities. Section 73(1) of the Systems Act states the
following:
73. General duty.
(1) A municipality must give effect to the provisions of the Constitution and
(a) give priority to the basic needs of the local community;

(b) promote the development of the local community; and
(c) ensure that all members of the local community have access to at least the mini-
mum level of basic municipal services.
Section 73(2) of the Act also stipulates the following requirements that municipal
services must adhere to:
(2) Municipal services must
(a) be equitable and accessible;

(b) be provided in a manner that is conducive to
the prudent, economic, efficient and effective use of available resources; and the
improvement of standards of quality over time;
(c) be financially sustainable;

(d) be environmentally sustainable; and
(e) be regularly reviewed with a view to upgrading, extension and improvement.
The Act does not give any information regarding the mechanisms that municipali-
ties should implement in order to achieve the outcomes mentioned. These initia-
tives therefore rest with the municipal councils and they should continuously aim to
align their functions and outcomes with these requirements. National and provincial
governments should facilitate compliance by local government with these general
requirements by enacting detailed legislation or more specific guidelines issued by
the executive (either national or provincial).
The Systems Act also determines that municipal councils must adopt and implement
tariff policies regarding the levying of fees for services provided by the municipality
(section 74(1) of the Systems Act). In terms of section 74(2) of the Systems Act, the
tariff policy must comply with a number of minimum principles, namely:
(2) A tariff policy must reflect at least the following principles, namely that
(a) users of municipal services should be treated equitably in the application of tariffs;
(b) the amount individual users pay for services should generally be in proportion to
their use of that service;
(c) poor households must have access to at least basic services through
LGL3702/1 133
(i) tariffs that cover only operating and maintenance costs;
(ii) special tariffs or life line tariffs for low levels of use or consumption of services
or for basic levels of service; or
(iii) any other direct or indirect method of subsidisation of tariff s for poor
households;
(d) tariffs must reflect the costs reasonably associated with rendering the service,
including capital, operating, maintenance, administration and replacement costs,
and interest charges;
(e) tariffs must be set at levels that facilitate the financial sustainability of the service,
taking into account subsidisation from sources other than the service concerned;
(f) provision may be made in appropriate circumstances for a surcharge on the tariff
for a service;
(g) provision may be made for the promotion of local economic development through
special tariffs for commercial and industrial category users;
(h) the economical, efficient and effective use of resources, the recycling of waste,
and other appropriate environmental objectives must be encouraged;
(i) the extent of subsidisation of tariffs for poor households and other categories of
users should be fully disclosed.
Please note:
A tariff policy may lawfully differentiate between various categories of service users,
provided that the differentiation does not amount to unfair discrimination – section
74(3) of the Systems Act. Once the tariff policy has been finalised, the municipal
council should implement a number of municipal by-laws in order to enforce the policy.

Study the decision in Capricorn District Municipality v South African National Civic
Organisation [2014] ZASCA 39 (SCA); 2014 (4) SA 335 (SCA) – pay particular
attention to paragraphs 19–22.
ACTIVITY 7.11
• Section 74(3) of the Systems Act in essence results in some citizens being provided
with certain services without any charge. What would the reason for such a policy
decision be?
116 FEEDBACK
• This is once again a self-evaluation activity. See too an earlier activity above where
we also touched on this question in passing.
ACTIVITY 7.12
• Can you imagine a scenario where such a policy would discriminate unfairly?
ACTIVITY 7.13
134
• Summarise the facts of the Capricorn decision and discuss whether the municipality
acted within its powers concerning the levying of tariff s. If not, provide reasons for
your answer.
117 FEEDBACK
• Since you are required to study the particular case and its facts, you just need to follow
this instruction.
Municipalities may also, in general, levy and recover fees, charges and tariffs in
respect of municipal functions and services. These fees are levied by municipalities
in terms of a resolution passed by the municipal council (section 75A(1) and (2) of
the Systems Act).
7.3.2.2 The provision of municipal services in terms of legislation

Municipal services are provided by municipalities and services can be rendered by
means of either internal or external mechanisms. The internal mechanisms include a
department or administrative unit within the municipality, any business unit devised by
the municipality or any other component of the municipal administration. An external
mechanism refers to a service delivery agreement entered into by the municipality and
either a municipal entity, another municipality, an organ of state, a non-governmental
organisation or any other institution.
Please note:
It is essential that you memorise and understand this distinction between external
and internal rendering of municipal services.

Section 76(a) of the Systems Act lists the internal and external mechanisms as fol-
lows. (It is essential that you study these mechanisms.):
76. Mechanisms for provision of services. A municipality may provide a municipal service
in its area or a part of its area through
(a) an internal mechanism, which may be
(i) a department or other administrative unit within its administration;
(ii) any business unit devised by the municipality, provided it operates within the
municipality’s administration and under the control of the council in accordance
with operational and performance criteria determined by the council; or
(iii) any other component of its administration; or
(b) an external mechanism by entering into a service delivery agreement with

(i) a municipal entity;
(ii) another municipality;
(iii) an organ of state, including
(aa) a water services committee established in terms of the Water Services
Act, 1997
(bb) a licensed service provider registered or recognised in terms of national
legislation; and
(cc) a traditional authority;
(iv) a community-based organisation or other non-governmental organisation le-

gally competent to enter into such an agreement; or
(v) any other institution, entity or person legally competent to operate a business
activity.
LGL3702/1 135
Bekink (p 293) mentions that it is somewhat unfortunate that the Act does not give
detail regarding the competencies of the partners in the external relationship and that
the municipality is therefore left with the obligation of ensuring that the party providing
the services is indeed competent to provide the municipal services.
Services provided through internal mechanisms must be reviewed by the munici-

palities. Section 77 of the Systems Act lists the occasions when municipalities must
review and decide on mechanisms to provide municipal services.
Please note:
It is essential that you study the provisions of section 77 of the Systems Act (“Oc-
casions when municipalities must review and decide on mechanisms to provide
municipal services):
77. Occasions when municipalities must review and decide on mechanisms to provide
municipal services. A municipality must review and decide on the appropriate mechanism to
provide a municipal service in the municipality or a part of the municipality
(a) in the case of a municipal service provided through an internal mechanism contemplated
in section 76, when
(i) an existing municipal service is to be significantly upgraded, extended or improved;
(ii) a performance evaluation in terms of Chapter 6 requires a review of the mecha-
nism; or
(iii) the municipality is restructured or reorganised in terms of the Municipal Structures
Act;
(b) in the case of a municipal service provided through an external mechanism contem-
plated in section 76, when
(i) a performance evaluation in terms of Chapter 6 requires a review of the service
delivery agreement;
(ii) the service delivery agreement is anticipated to expire or be terminated within
the next 12 months; or
(iii) an existing municipal service or part of that municipal service is to be significantly
upgraded, extended or improved and such upgrade, extension or improvement is
not addressed in the service delivery agreement;
(c) when a review is required by an intervention in terms of section 139 of the Constitution;
(d) when a new municipal service is to be provided;
(e) when requested by the local community through mechanisms, processes and procedures
established in terms of Chapter 4; or
(f) when a review of its integrated development plan requires a review of the delivery
mechanism.
The assessment criteria are regulated in section 78 of the Systems Act and these
criteria must be fulfilled when a municipality has decided on a particular mechanism
to provide municipal services – or to review some of its existing services.
Please note:
You should study these assessment criteria, which must be fulfilled when a munici-
pality has decided on a particular mechanism to provide municipal services – or to
review some of its existing services.
78. Criteria and process for deciding on mechanisms to provide municipal services.
(1) When a municipality has in terms of section 77 to decide on a mechanism to provide
a municipal service in the municipality or a part of the municipality, or to review any
existing mechanism
(a) it must first assess
(i) the direct and indirect costs and benefits associated with the project if the
service is provided by the municipality through an internal mechanism,
136
including the expected effect on the environment and on human health,

wellbeing and safety;
(ii) the municipality’s capacity and potential future capacity to furnish the skills,
expertise and resources necessary for the provision of the service through
an internal mechanism mentioned in section 76(a);
(iii) the extent to which the re-organisation of its administration and the develop-
ment of the human resource capacity within that administration as provided
for in sections 51 and 68, respectively, could be utilised to provide a service
through an internal mechanism mentioned in section 76(a);
(iv) the likely impact on development, job creation and employment patterns in
the municipality, and
(v) the views of organised labour; and
(b) it may take into account any developing trends in the sustainable provision of
municipal services generally.
(2) After having applied subsection (1), a municipality may

(a) decide on an appropriate internal mechanism to provide the service; or
(b) before it takes a decision on an appropriate mechanism, explore the possibility of
providing the service through an external mechanism mentioned in section 76(b).
(3) If a municipality decides in terms of subsection (2)(b) to explore the possibility of pro-
viding the municipal service through an external mechanism it must
(a) give notice to the local community of its intention to explore the provision of the
municipal service through an external mechanism;
(b) assess the different service delivery options in terms of section 76(b), taking into
account
(i) the direct and indirect costs and benefits associated with the project, including
the expected effect of any service delivery mechanism on the environment
and on human health, wellbeing and safety;
(ii) the capacity and potential future capacity of prospective service providers
to furnish the skills, expertise and resources necessary for the provision of
the service;
(iii) the views of the local community;
(iv) the likely impact on development, job creation and employment patterns in
the municipality; and
(v) the views of organised labour; and
(c) conduct or commission a feasibility study which must be taken into account and
which must include
(i) a clear identification of the municipal service for which the municipality intends
to consider an external mechanism;
(ii) an indication of the number of years for which the provision of the municipal
service through an external mechanism might be considered;
(iii) the projected outputs which the provision of the municipal service through
an external mechanism might be expected to produce;
(iv) an assessment as to the extent to which the provision of the municipal service
through an external mechanism will
(aa) provide value for money;
(bb) address the needs of the poor;
(cc) be affordable for the municipality and residents; and
(dd) transfer appropriate technical, operational and financial risk;
(v) the projected impact on the municipality’s staff, assets and liabilities;
(vi) the projected impact on the municipality’s integrated development plan;
(vii) the projected impact on the municipality’s budgets for the period for which
an external mechanism might be used, including impacts on revenue, ex-
penditure, borrowing, debt and tariffs; and
(viii) any other matter that may be prescribed.
(4) After having applied subsection (3), a municipality must decide on an appropriate
internal or external mechanism, taking into account the requirements of section 73(2)
in achieving the best outcome.
LGL3702/1 137
(5) When applying this section a municipality must comply with
(a) any applicable legislation relating to the appointment of a service provider other
than the municipality; and
(b) any additional requirements that may be prescribed by regulation.
(6) The national government or relevant provincial government may, in accordance with
an agreement, assist municipalities in carrying out a feasibility study referred to in
subsection (3)(c), or in preparing service delivery agreements.
In essence, this section makes it clear that the municipality must assess the criteria;
take into account all the developing trends that are applicable to sustainable provi-
sion of municipal services; decide on the appropriate internal mechanisms to provide
services; and explore the possibility of providing the service through external mecha-
nisms. If the municipality decides to provide the service through external mechanisms,
it must give notice to the local community of its intention to do so and must assess
the delivery options. The municipality must also conduct a feasibility study. Once the
municipality has gone through these steps it can decide on the appropriate internal
or external mechanism that will achieve the required outcome.
ACTIVITY 7.14
• Why should the community be informed of the municipality’s decision to provide services
through external means?
118 FEEDBACK
guide you through the answer to the activity. Hint: Think along the lines of a possibility
that when services are provided through external means the municipality to a certain
extent will “relinquish” its powers. Do you agree with this hint or are you able to provide
another substantiated opinion?
Please note:
Note that the purpose of sections 77 and 78 of the Systems Act is to compel munici-
palities to consider how services can be rendered and to consider first how services
can be provided through internal mechanisms. If a municipality has decided to use
internal mechanisms, it should allocate sufficient human resources as well as finan-
cial resources appropriate for the provision of the envisaged services (section 79 of
the Systems Act).
ACTIVITY 7.15
• Why do you think it is important for a municipality to consider internal mechanisms first?
119 FEEDBACK
• This is a self-evaluation activity. Hint: Consider the duty/duties of municipalities provided
for in both the Constitution and legislation as well as, for example, the matter of costs.
Is there any other reason you can put forward? Write it down.
138
Section 80(1) regulates instances where a municipality decides to provide a service

through a service delivery agreement in terms of section 76(b) of the Systems Act
as follows:
80. Provision of services through service delivery agreements with external mechanisms.
(1) If a municipality decides to provide a municipal service through a service delivery
agreement in terms of section 76(b) with
(a) a municipal entity or another municipality, it may, subject to subsection (3), negotiate
and enter into such an agreement with the relevant municipal entity or municipality
without applying Part 3 of this Chapter;
(aA) a national or provincial organ of state, it may enter into such an agreement with
the relevant organ of state without applying Part 3 of this Chapter; or
(b) any institution or entity, or any person, juristic or natural, not mentioned in para-
graph (a) or (aA), it must apply Part 3 of this Chapter before entering into such
an agreement with any such institution, entity or person.
Section 80(3) of the Systems Act provides that a municipality must first establish
a community consultation programme and engage in information dissemination
regarding the service delivery agreement with the external service provider before
it enters into a service delivery agreement. The local community must be informed
(through the media) of the contents of the service delivery agreement. This section
also states that where two municipalities enter into a service delivery agreement with
each other, the municipality that decided to request the service must conduct a feasi-
bility study before the agreement is finalised. Where a municipal service is provided
through a service delivery agreement with an external mechanism, the municipality
remains responsible for ensuring that the service is provided to the community in
line with the constitutional and legislative requirements. Section 81(1) states the fol-
lowing in this regard:
81. Responsibilities of municipalities when providing services through service delivery

agreements with external mechanisms.
(1) If a municipal service is provided through a service delivery agreement in terms of sec-
tion 76(b), the municipality remains responsible for ensuring that that service is provided
to the local community in terms of the provisions of this Act, and accordingly must
(a) regulate the provision of the service, in accordance with section 41;
(b) monitor and assess the implementation of the agreement, including the performance
of the service provider in accordance with section 41;
(c) perform its functions and exercise its powers in terms of Chapters 5 and 6 if the
municipal service in question falls within a development priority or objective in
terms of the municipality’s integrated development plan;
(d) within a tariff policy determined by the municipal council in terms of section 74,
control the setting and adjustment of tariffs by the service provider for the municipal
service in question; and
(e) generally exercise its service authority to ensure uninterrupted delivery of the
service in the best interest of the local community.
Section 81(2) clarifies the extent to which a municipality can ensure that sustainable
services are provided by external service providers:
(2) A municipality, through a service delivery agreement
(a) may assign to a service provider responsibility for
(i) developing and implementing detailed service delivery plans within the
framework of the municipality’s integrated development plan;
(ii) the operational planning, management and provision of the municipal service;
(iii) undertaking social and economic development that is directly related to the
provision of the service;
(iv) customer management;
(v) managing its own accounting, financial management, budgeting, investment
and borrowing activities within a framework of transparency, accountability,
LGL3702/1 139
reporting and financial control determined by the municipality, subject to the
Municipal Finance Management Act;
(vi) the collection of service fees for its own account from users of services in
accordance with the municipal council’s tariff policy in accordance with the
credit control measures established in terms of Chapter 9.
Bekink (p 297) mentions the following additional obligations of municipalities:
• the municipality may make funds available to the service provider for the
subsidisation of services to the poor – in addition, this process must be monitored
and be transparent
• the municipality must ensure that the agreement between itself and the service
provider makes provision for dispute resolution mechanisms
• where the municipality is required to transfer staff members to the external service
provider it must ensure that this is done in accordance with labour legislation
• the municipality must ensure continuous service delivery if the external service
provider is placed under judicial management, becomes insolvent, is liquidated
or for some other reason is unable to continue providing services
• when the service delivery agreement expires or, is terminated, the municipality
must take over the services – including the assets
Section 81(3) of the Systems Act provides that the service delivery agreement may
make provision for the adjustment of tariffs by the service provider, although the
municipal council must determine the limits for these adjustments. A service delivery
agreement can also be amended by agreement between the parties, except if the
agreement was concluded after a competitive bidding process.
7.3.2.3 Service delivery agreements that involve competitive bidding

Section 83 of the Systems Act regulates the position where a municipality decides
to provide a municipal service through a service delivery agreement with a person
referred to in section 80(1)(b) of the Act. The service provider must be selected
through the following process:
83. Competitive bidding.

(1) If a municipality decides to provide a municipal service through a service delivery agree-
ment with a person referred to in section 80(1)(b), it must select the service provider
through selection processes which
(a) comply with Chapter 11 of the Municipal Finance Management Act;
(b) allow all prospective service providers to have equal and simultaneous access to
information relevant to the bidding process;
(c) minimise the possibility of fraud and corruption;
(d) make the municipality accountable to the local community about progress with
selecting a service provider, and the reasons for any decision in this regard; and
(e) take into account the need to promote the empowerment of small and emerging
enterprises.
Interestingly, a municipality may determine preference service providers based on

the providers’ previous unfair treatment – in other words, the person must have been
previously disadvantaged by unfair discrimination. Affirmative action appointments
or black empowerment groups may therefore be preferred, provided that minimum
standards are not compromised. The preference must be exercised in a manner that
does not negatively impact the quality or sustainability of services provided. In addi-
tion, the selection of preferential service providers must be “fair, equitable, transpar-
ent, competitive and cost-effective” and as per the constitutional requirements set
out in section 217(1) (of the Constitution).
140
Section 84(1)–(3) of the Systems Act provides that, once a municipality has entered
into a service delivery agreement, it must:
• make copies of the agreement and make these available at its office for public
inspection
• give particulars of the service that will be provided
• provide the name of the service provider
• give notice of the place and period where copies of the agreement will be made
available for public inspection (all the information should be made available in
the media)
7.3.2.4 Legal requirements pertaining to internal municipal service districts

In order to lighten the burden on service delivery, specifically for bigger municipali-
ties, and to ensure sustainable service delivery, the legislation now makes it pos-
sible to establish “internal municipal service districts”. This policy makes it possible
for a municipality to establish part of itself as an Internal Municipal Service District
(IMSD). The IMSD must facilitate the provision of municipal services in the part of
the municipality so established.
Section 85 of the Systems Act regulates the establishment of an internal municipal

service district as follows:
85. Establishment of internal municipal service districts.
(1) A municipality may, in accordance with the policy framework referred to in section 86,
establish a part of the municipality as an internal municipal service district to facilitate
the provision of a municipal service in that part of the municipality.
(2) Before establishing an internal municipal service district, the municipality must
(a) consult the local community on the following matters:
(i) the proposed boundaries of the service district;
(ii) the proposed nature of the municipal service that is to be provided;
(iii) the proposed method of financing the municipal service; and
(iv) the proposed mechanism for the provision of the municipal service; and
(b) obtain the consent of the majority of the members of the local community in the
proposed service district that will be required to contribute to the provision of the
municipal service.
(3) when a municipality establishes an internal municipal service district, the municipality
(a) must determine the boundaries of the district;
(b) must determine the mechanism that will provide the service in the district;
(c) in order to finance the service in the district, may
(i) set a tariff or levy for the service in the district;
(ii) impose a special surcharge in the district on the tariff for the service; or
(iii) increase the tariff in the district for that service;
(d) must establish separate accounting and other record-keeping systems with respect
to the provision of the service in the district; and
(e) may establish a committee composed of persons representing the community in
the district to act as a consultative and advisory forum for the municipality regard-
ing the management of and other matters relating to the service in the district,
provided that gender representivity is taken into account when such a committee
is established.
Section 86 of the Systems Act gives detail regarding the policy framework that should
be developed and adopted by the municipality. The policy framework must establish,
regulate and manage the intended IMSD and it should reflect the following:
LGL3702/1 141
86. Policy framework for internal municipal service district.
(1) A municipality must develop and adopt a policy framework for the establishment,
regulation and management of an internal municipal service district.
(2) Such a policy framework must reflect at least the following:
(a) The development needs and priorities of designated parts of the municipality that
must be balanced against that of the municipality as a whole;
(b) the extent to which the establishment of one or more internal municipal service
districts
(i) will promote the local economic development of the municipality as a whole;
(ii) will contribute to enhancing the social, economic and spatial integration of
the municipality; and
(iii) may not entrench or contribute to further disparities in service provision.
Please note:
You have to bear the amendments to section 86 of the Systems Act in mind – section
86A incorporates a number of additional issues under section 86. (You only need to
read this section carefully.):
86A. Regulations and guidelines regarding municipal services.

(1) The Minister may for purposes of this Chapter make regulations or issue guidelines in
accordance with section 120 to provide for or regulate the following matters:
(a) The preparation, adoption and implementation of a municipal tariff policy;
(b) the subsidisation of tariffs for poor households through
(i) cross-subsidisation within and between services;
(ii) equitable share allocations to municipalities; and
(iii) national and provincial grants to municipalities;
(c) limits on tariff increases;

(d) incentives and penalties to encourage
(i) the economical, efficient and effective use of resources when providing
services;
(ii) the recycling of waste; and
(iii) other environmental objectives;
(e) criteria to be taken into account by municipalities when assessing options for the
provision of a municipal service;
(f) measures against malpractice in selecting and appointing service providers, in-
cluding measures against the stripping of municipal assets;
(g) mechanisms and procedures for the co-ordination and integration of sectoral
requirements in terms of legislation with this Chapter, and the manner in which
municipalities must comply with these;
(h) standard draft service delivery agreements;
(i) the minimum content and management of service delivery agreements;
(j) additional matters that must be included in a feasibility study in terms of section
78(3)(c), which may include
(i) the strategic and operational costs and benefits of an external mechanism
in terms of the municipality’s strategic objectives;
(ii) an assessment of the municipality’s capacity to effectively monitor the provi-
sion of the municipal service through an external mechanism and to enforce
the service delivery agreement;
(k) performance guarantees by service providers; and

(l) any other matter that would facilitate
(i) the effective and efficient provision of municipal services; or
Section 86A(2)–(3) of the Systems Act states that the Minister may make regulations
regarding fiscal matters but that he/she must first consult the Minister of Finance
whose portfolio would be affected by such regulations. The Minister must also take
142
into account the capacities of municipalities before implementing regulations. Merely

take note of the following kinds of municipal entities (section 86B of the Systems Act):
86B. Kinds of municipal entities.

(1) There are the following kinds of municipal entities:
(a) a private company
(i) established by one or more municipalities in terms of Part 2; or
(ii) in which one or more municipalities have acquired or hold an interest in
terms of Part 2;
(b) a service utility established by a municipality in terms of Part 3; and

(c) a multi-jurisdictional service utility established by two or more municipalities in
terms of Part 4.
(2) No municipality may establish, or participate in the establishment of, or acquire or hold
an interest in, a corporate body, including a trust, except where such corporate body is
(a) a private company, service utility or multi-jurisdictional service utility referred to
in subsection (1); or
(b) a fund for the benefit of its employees in terms of a law regulating pensions or
medical aid schemes.
(3) Subsection (2) does not apply to the acquisition by a municipality for investment pur-
poses of securities in a company listed on the Johannesburg Securities Exchange in
accordance with the investment framework envisaged in section 13 of the Municipal
Finance Management Act.
Please note:
The discussion of section 86C, and the sections that follow (sections 86E, 86F, 86G
and 86H) are important and should be studied.
Section 86C of the Systems Act regulates the position where a municipality estab-
lishes or participates in the establishment of a private company.
86C. Establishment and acquisition of private companies.

(1) A municipality may, subject to subsection (2)
(a) establish or participate in the establishment of a private company in accordance
with the Companies Act, 1973 (Act No. 61 of 1973); or
(b) acquire or hold an interest in a private company in accordance with the Companies
Act, 1973 (Act No. 61 of 1973).
(2) (a) A municipality may in terms of subsection (1)(a) or (b) either acquire or hold full owner-
ship of a private company, or acquire or hold a lesser interest in a private company.
(b) A municipality may acquire or hold such a lesser interest in a private company only
if all the other interests are held by
(i) another municipality or municipalities;
(ii) a national or provincial organ of state or organs of state; or
(iii) any combination of institutions referred to in subparagraphs (i) and (ii).
(c) A municipality may, despite paragraph (b), acquire or hold an interest in a pri-
vate company in which an investor other than another municipality or a national
or provincial organ of state has an interest, but only if effective control in the pri-
vate company vests in
(i) that municipality;
(ii) another municipality; or
(iii) that municipality and another municipality collectively.
(3) If a municipality establishes a private company or acquires or holds an interest in such

a company, it must comply with the Companies Act, 1973 (Act No. 61 of 1973), and
any other law regulating companies, but if any conflict arises between that Act or such
law and a provision of this Act, this Act prevails.
LGL3702/1 143
A private company, as referred to in section 86C(1), is a municipal entity if a municipality
has effective control of such private company. Such a private company must restrict
its activities to the purpose for which the municipality established it. The company
has no competence to perform any activities that fall outside the functions of the
municipality (section 86D of the Systems Act). Section 86E lists the conditions for
the establishment or acquisition of interests in a private company:
86E(1) A municipality may establish a private company or acquire an interest in such a com-
pany only
(a) for the purpose of utilising the company as a mechanism to assist it in the performance
of any of its functions or powers referred to in section 8;
(b) if the municipality can demonstrate that
(i) there is a need to perform that function or power in accordance with business
practices in order to achieve the strategic objectives of the municipality more
effectively; and
(ii) the company would benefit the local community; and
(c) if any other conditions that may be prescribed have been complied with.
Section 86F regulates the position where two or more municipalities intend to establish a
private company (or acquire interests in a private company):
86F. Conditions precedent for co-owning of private companies. If two or more municipalities
intend to establish a private company or to acquire interests in the same private company,
each of those municipalities must
(a) comply with section 86E;
(b) consider and reach agreement on proposals for shared control of the company; and
(c) consider cash flow projections of the company’s proposed operations for at least three
financial years.
A municipality may transfer ownership or dispose of its interest in a private company

if the transfer will not result in an infringement of section 86G of the Systems Act.
In terms of section 86H, a municipality may also establish a service utility. This sec-
tion states the following:
86H. Establishment.
(1) A municipality may pass a by-law establishing a service utility.
(2) A by-law establishing a service utility must
(a) state the purpose for which the service utility is established;
(b) confer the powers and impose the duties on the service utility which are necessary
for the attainment of such purpose;
(c) provide for
(i) a board of directors to manage the service utility;
(ii) the number of directors to be appointed;
(iii) the appointment of directors, the filling of vacancies and the replacement
and recall of directors by the parent municipality;
(iv) the terms and conditions of appointment of directors;
(v) the appointment of a chairperson;
(vi) the operating procedures of the board of directors;
(vii) the delegation of powers and duties to the board of directors;
(viii) any other matter necessary for the proper functioning of the board of directors;
(ix) the acquisition of infrastructure, goods, services, supplies or equipment by
the service utility, or the transfer of infrastructure, goods, services, supplies
or equipment to the service utility;
(x) the appointment of staff by the service utility, or the transfer or secondment
of staff to the service utility in accordance with applicable labour legislation;
(xi) the terms and conditions on which any acquisition, transfer, appointment or
secondment is made;
(xii) the governance of the service utility; and
(xiii) any other matter necessary for the proper functioning of the service utility; and
144
(d) determine budgetary and funding arrangements for implementation of the by-law.
(3) A by-law made in terms of this section must be consistent with this Act and the Local
Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003).
(4) No by-law may confer on a service utility any functions or powers falling outside
the competence of the parent municipality contemplated by section 8.
A service utility is a juristic person and a municipal entity under the sole control of
the municipality, which established it. A service utility must restrict its activities to the
purpose for which it was established; and has no competence to perform any activ-
ity that falls outside its functions or powers in terms of a by-law of the municipality:
section 86I of the Systems Act.
ACTIVITY 7.16
• Define a service utility in your own words and provide a summary of the importance of
service utilities in general as found spelt out in the pertinent legislation.
120 FEEDBACK
• This is a self-evaluation activity (obviously). Use the extensive information given earlier
in this learning unit to guide you through the answer to the activity.
Please note:
A municipality may establish a service utility only for using it as a mechanism that
will assist the municipality in the performance of its functions. In addition, the munici-
pality must show that the function can be provided more efficiently by the separate
structure in giving effect to the objectives of the municipality. The service utility must
also benefit the local community: section 86J of the Systems Act.
7.3.2.5 Multi-jurisdictional Municipal Service Utilities (MMSUs)

In terms of section 87 of the Systems Act, municipalities may establish Multi-juris-
dictional Service Utilities (MMSUs). The Minister may, in the national interest and in
consultation with the Cabinet member responsible for the functional area in question,
request two or more municipalities to establish a multi-jurisdictional service utility to
conform to the requirements of national legislation applicable to the provision of a
specific municipal service. Municipalities that receive a request in terms of subsection
(1) must, within two months of receiving such request, decide whether to accede to the
request and must convey their decision to the Minister: section 88 of the Systems Act.
Section 89 of the Systems Act stipulates the contents of agreements establishing multi-
jurisdictional service deliveries:
89. Contents of agreements establishing multi-jurisdictional service utilities. An agreement

establishing a multi-jurisdictional service utility must describe the rights, obligations and re-
sponsibilities of the parent municipalities, and must
(a) determine the boundaries of the area for which the multi-jurisdictional service utility is
established;
(b) identify the municipal service or other function to be provided in terms of the agreement;
(c) determine budgetary and funding arrangements for implementation of the agreement;
(d) provide for
(i) a board of directors for the multi-jurisdictional service utility;
LGL3702/1 145
(ii) the appointment of directors by the respective parent municipalities, the filling of
vacancies and the replacement and recall of directors;
(iii) the number of directors appointed by each parent municipality;
(iv) the terms and conditions of appointment of directors;
(v) the appointment of a chairperson;
(vi) the operating procedures of the board of directors;
(vii) the delegation of powers and duties to the board of directors; and
(viii) any other matter relating to the proper functioning of the board of directors;
(e) provide for

(i) the acquisition of infrastructure, goods, services, supplies or equipment by the
multi-jurisdictional service utility, or the transfer of infrastructure, goods, services,
supplies or equipment to the multi-jurisdictional service utility;
(ii) the appointment of staff by the multi-jurisdictional service utility, or the transfer
or secondment of staff to the multi-jurisdictional service utility in accordance with
applicable labour legislation; and
(iii) the terms and conditions on which any acquisition, transfer, appointment or se-
condment is made;
(f) determine the conditions for, and consequences of, the withdrawal from the agreement
of a parent municipality;
(g) determine the conditions for, and consequences of, the termination of the agreement,
including
(i) the method and schedule for winding-up the operations of the multi-jurisdictional
service utility;
(ii) the distribution of the proceeds; and
(iii) the allocation among the parent municipalities of any assets and liabilities; and
(h) provide for

(i) the governing of the multi-jurisdictional service utility;
(ii) compulsory written reports regarding the activities and performance of the multi-
jurisdictional service utility to a parent municipality;
(iii) information that may be requested from the multi-jurisdictional service utility by
a parent municipality;
(iv) the amendment of the agreement; and
(v) any other matter necessary for the proper functioning of the multi-jurisdictional
service utility.
A multi-jurisdictional service utility is both a juristic person and a municipal entity

under the shared control of the parent municipalities. A multi-jurisdictional service
utility must restrict its activities to the object for which it was established; and has
no competence to perform any activity which falls outside its functions in terms of
the agreement referred to in section 87: section 90 of the Systems Act. Section 1 of
the Systems Act defines a “parent municipality” as follows:
(a) In relation to municipal entity, which is a private company in respect of which effective
control vests in a single municipality, means that municipality;
(b) In relation to a municipal entity which is a private company in respect of which effective
control vests in two or more municipalities collectively, means each of those municipalities;
(c) In relation to a municipal entity which is a service utility, means the municipality which
established the entity; or
(d) In relation to a municipal entity, which is a multi-jurisdictional service utility, means each
municipality, which is a party to the agreement establishing the service utility.
Section 92 of the Systems Act states that a multi-jurisdictional service utility is accountable
to its parent municipalities; and must comply with the Municipal Finance Management Act
56 of 2003. A parent municipality is entitled to receive regular written reports from the multi-
jurisdictional service utility with respect to its activities and performance; may request the
multi-jurisdictional service utility to furnish it with such information regarding its activities;
and may appoint a nominee to inspect the books, records, operations and facilities of the
multi-jurisdictional service utility.
In terms of section 93 of the Systems Act, a multi-jurisdictional service utility terminates auto-
matically when there is only one remaining parent municipality; by written agreement among
146
all of the parent municipalities; upon its predetermined termination date or upon fulfilment
of any condition for termination contained in the agreement under which it was established.
Section 93A of the Systems Act regulates the duties of the parent municipalities in relation to
the multi-jurisdictional service utilities:
The parent municipality of a municipal entity
(a) must exercise any shareholder, statutory, contractual or other rights and powers it may
have in respect of the municipal entity to ensure that
(i) both the municipality and the municipal entity comply with this Act, the Municipal
Finance Management Act and any other applicable legislation; and
(ii) the municipal entity is managed responsibly and transparently, and meets its
statutory, contractual and other obligations;
(b) must allow the board of directors and chief executive officer of the municipal entity to
fulfil their responsibilities; and
(c) must establish and maintain clear channels of communication between the municipality
and the municipal entity.
Sections 93B and 93C of the Systems Act make a distinction between municipalities that have
sole control and shared control. This distinction has an impact on a municipality’s duties with
regard to the multi-jurisdictional service utility.
Section 93B regulates the duties of municipalities that have sole control of a municipal entity
as follows:
93B. Parent municipalities having sole control. A parent municipality which has sole control of a
municipal entity, or effective control in the case of a municipal entity which is a private company
(a) must ensure that annual performance objectives and indicators for the municipal entity
are established by agreement with the municipal entity and included in the municipal
entity’s multi-year business plan in accordance with section 87(5)(d) of the Municipal
Finance Management Act;
(b) must monitor and annually review, as part of the municipal entity’s annual budget process
as set out in section 87 of the Municipal Finance Management Act, the performance
of the municipal entity against the agreed performance objectives and indicators; and
(c) may liquidate and disestablish the municipal entity
(i) following an annual performance review, if the performance of the municipal entity
is unsatisfactory;
(ii) if the municipality does not impose a financial recovery plan in terms of the Mu-
nicipal Finance Management Act and the municipal entity continues to experience
serious or persistent financial problems; or
(iii) if the municipality has terminated the service delivery agreement or other agree-
ment it had with the municipal entity.
Section 93C of the Systems Act regulates the duties of municipalities that have shared control
of a municipal entity as follows:
93C. Parent municipalities having shared control. Parent municipalities that have shared
control of a municipal entity
(a) must enter into a mutual agreement determining and regulating
(i) their mutual relationships in relation to the municipal entity;
(ii) the exercise of any shareholder, contractual or other rights and powers they may
have in respect of the municipal entity;
(iii) the exercise of their powers and functions in terms of this Act and the Municipal
Finance Management Act with respect to the municipal entity;
(iv) measures to ensure that annual performance objectives and indicators for the mu-
nicipal entity are established by agreement with the municipal entity and included
in the municipal entity’s multi-year business plan in accordance with section 87(5)
(d) of the Municipal Finance Management Act;
(v) the monitoring and annual review, as part of the municipal entity’s annual budget
process as set out in section 87 of the Municipal Finance Management Act, of
the performance of the municipal entity against the established performance
objectives and indicators;
(vi) the payment of any monies by the municipalities to the municipal entity or by the
municipal entity to the municipalities;
LGL3702/1 147
(vii) procedures for the resolution of disputes between those municipalities;
(viii) procedures governing conditions for and consequences of withdrawal from the
municipal entity by a municipality;
(ix) procedures for terminating the appointment and utilisation of the municipal entity
as a mechanism for the performance of a municipal function;
(x) the disestablishment of the municipal entity, the division, transfer or liquidation of
its assets and the determination of the responsibility for its liabilities; and
(xi) any other matter that may be prescribed; and
(b) may liquidate and disestablish the municipal entity

(i) following an annual performance review, if the performance of the municipal entity
is unsatisfactory;
(ii) if the municipality does not impose a financial recovery plan in terms of the Mu-
nicipal Finance Management Act and the municipal entity continues to experience
serious or persistent financial problems; or
(iii) if the municipality has terminated the service delivery agreement or other agree-
ment it had with the municipal entity.
Section 93D of the Systems Act regulates municipal representation in relation to municipal
entities as follows. (You are required merely to read this section.):
93D. Municipal representatives.
(1) The council of a parent municipality must designate a councillor or an official of the parent
municipality, or both, as the representative or representatives of the parent municipality
(a) to represent the parent municipality as a non-participating observer at meetings
of the board of directors of the municipal entity concerned; and
(b) to attend shareholder meetings and to exercise the parent municipality’s rights and
responsibilities as a shareholder, together with such other councillors or officials
that the council may designate as representatives.
(2) (a) The official lines of communications between a municipal entity and the parent
municipality exist between the chairperson of the board of directors of the munici-
pal entity and the mayor or executive mayor, as the case may be, of the parent
municipality.
(b) The mayor or executive mayor, as the case may be, of a parent municipality may
at any time call or convene any meeting of shareholders or other general meet-
ing comprising the board of directors of the municipal entity concerned and the
representatives of the parent municipality, in order for the board of directors to give
account for actions taken by it.
(c) The council of a parent municipality may determine the reporting responsibilities
of a municipal representative referred to in subsection (1)(a) or (b).
(3) (a) A municipal representative referred to in subsection (1)(b), must represent the parent
municipality faithfully at shareholder meetings, without consideration of personal
interest or gain, and must keep the council informed of
(i) how voting rights were exercised; and
(ii) all relevant actions taken on behalf of the municipality by the representative.
(b) A municipal representative referred to in subsection (1)(a) or (b)

(i) must act in accordance with the instructions of the council; and
(ii) may be reimbursed for expenses in connection with his or her duties as a
municipal representative, but may not receive any additional compensation
or salary for such duties.
The board of directors of a municipal entity must have the requisite range of expertise
to manage and guide the activities of the municipal entity effectively; must consist of
at least a third non-executive directors; and must have a non-executive chairperson.
The parent municipality of a municipal entity must, before nominating or appointing a
director, establish a process through which applications for nomination or appointment
are widely solicited; compile a list of all applicants and any prescribed particulars
concerning applicants; through which the municipal council makes the appointment
or nomination: section 93E of the Systems Act. Take note of section 93F that lists
148
disqualified persons. Also take note of section 93G that regulates the removal of
directors. The board of directors of a municipal entity must appoint a chief execu-
tive officer who is accountable to the board of directors for the management of the
municipal entity: section 93J of the Systems Act.
In terms of section 93H, the board of directors is obliged to do the following:

93H. Duties of directors.
(1) The board of directors of a municipal entity must
(a) provide effective, transparent, accountable and coherent corporate governance
and conduct effective oversight of the affairs of the municipal entity;
(b) ensure that it and the municipal entity comply with all applicable legislation and
agreements;
(c) communicate openly and promptly with the parent municipality of the municipal
entity; and
(d) deal with the parent municipality of the municipal entity in good faith.
(2) A director must

(a) disclose to the board of directors, and to the representative of the parent mu-
nicipality, any direct or indirect personal or business interest that the director or
his or her spouse or partner may have in any matter before the board, and must
withdraw from the proceedings of the board when that matter is considered, un-
less the board decides that the director’s direct or indirect interest in the matter is
trivial or irrelevant; and
(b) at all times act in accordance with the Code of Conduct for directors referred to
in section 93L.
The meetings of the board of directors of a municipal entity must (according to sec-
tion 93I) be open to the municipal representatives and these representatives have
non-participating observer status in such a meeting.
Please note:
A municipal entity may not establish or participate in the establishment of a com-
pany or any other corporate body, including a trust, or acquire or hold an interest in
a company or any other corporate body, including a trust. However, this rule does
not apply to the acquisition by a municipal entity of securities in a company listed
on the Johannesburg Securities Exchange for investment purposes, subject to any
applicable provisions of the Municipal Finance Management Act, or a fund for the
benefit of employees of a municipal entity in terms of a law regulating pensions or
medical aid schemes: section 93K.
Finally, section 93L of the Systems Act regulates the code of conduct for directors
(and members of staff ) of a municipal entity as follows:
93L Code of Conduct for directors and members of staff of municipal entity
(1) (a) The Code of Conduct for councillors contained in Schedule 1 applies, with the
necessary changes, to directors of a municipal entity.
(b) In the application of item 14 of Schedule 1 to directors of a municipal entity, that
item must be regarded as providing as follows:
“14. Breaches of Code.
(1) The board of directors of a municipal entity may
(a) investigate and make a finding on any alleged breach of a provision of

this Code by a director; or
(b) establish a special committee
(i) to investigate and make a finding on any alleged breach of a provision

of this Code by a director; or
LGL3702/1 149
(ii) to make appropriate recommendations to the board of directors.
(2) If the board of directors or special committee finds that a director has breached
a provision of this Code, the board of directors may
(a) issue a formal warning to the director;

(b) reprimand the director;
(c) fine the director; or
(d) recommend to the parent municipality that the director be removed or
recalled in terms of section 93G.
(3) The board of directors of a municipal entity must inform a parent municipality
of that entity of any action taken against a director in terms of subsection (2).”
(2) The Code of Conduct for municipal staff members contained in Schedule 2 applies,
with the necessary changes, to members of staff of a municipal entity.
(3) For purposes of this section, any reference in Schedule 1 or 2 to a “councillor”, “MEC
for local government in the province”, “municipal council”, “municipality” and “rules and
orders” must, unless inconsistent with the context or otherwise clearly inappropriate, be
construed as a reference to a director of a municipal entity, parent municipality, board
of directors, municipal entity and procedural rules, respectively.
ACTIVITY 7.17
• Summarise what multi-jurisdictional service utilities are. Your summary must include
(a) an explanation of the contents of the agreements establishing such utilities, (b) the
duties of parent municipalities and (c) the distinction between municipalities that have
sole control and those that have shared control of such entities.
121 FEEDBACK
to guide you through the answer to this activity.
7.4 SERVICES GENERALLY PROVIDED BY LOCAL GOVERNMENTS

7.4.1 Factors that influence municipal services
The following factors have an impact on service provision and have a substantial
influence on the achievement of effective and sustainable service delivery:
• financial resources: generated via national revenue (sharing in that revenue) raised
and local revenue raised (rates, taxes, surcharges on services)
Bekink writes as follows about this factor (page 308):
Without financial resources there can be no effective and sustainable provision of

municipal services. All municipalities should maximise their potential financial income
and should utilise resources sparsely and diligently.
• training and municipal planning
Bekink explains, “planning” as follows (page 309):
Planning in general is an inseparable part of the processes of public administration …

In basic terms, municipal planning means looking ahead by anticipating and making
150
arrangements for dealing with future problems by projecting trends…. Planning thus
has its roots in the past, but with a view to deciding the future in the present.
• accountability, effective decision-making and local democratic governance: based

on section 1(d) of the Constitution
Section 1(d) reads as follows:

The Republic of South Africa is one, sovereign democratic state founded on the following values:
…
(d) … a multi-party system of democratic government, to ensure accountability, responsive-
ness and openness.
Bekink comments as follows on these values (page 309):
Municipalities must take decisive steps to eradicate all forms of maladministration

and corruption and must align themselves with the new supreme values in the state.
Without a concerted effort to establish a new, clean and accountable local govern-
ance, there is little chance that the … established local government structures will
secure and fulfil their obligations towards effective and sustainable service delivery.
• public participation and social and economic development
Bekink’s comments on these factors are as follows (page 309–310):
In general, participation leads to information, which in turn ensures support. It is

further a well-known fact that people generally support and participate in processes
in which they have a direct or even indirect stake.
ACTIVITY 7.18
• Briefly explain, in your own words, how these factors impacting on service provision
by municipalities can influence the sustainable delivery of municipal services.
122 FEEDBACK
you when you tackle this activity.
7.4.2 Municipal services in terms of the Constitution

Distinguish between the following:
Functions: A municipal function is linked to the nature of governance. Government

must perform certain functions in order to govern. These functions
include making laws and levying taxes.
Services: A service is generally provided by one person (or institution) to another
person or group/s.
The new legal framework refers to the powers, functions, objects and duties of munici-
palities. No direct mention is made of the specific services that municipalities should
render to their communities. However, a closer evaluation of the powers, functions,
LGL3702/1 151
objects and duties of municipalities that are mentioned indicate certain services that
have to be rendered.
Municipalities have executive and legislative powers with regard to matters listed in
Part B of Schedules 4 and 5 of the Constitution. Municipalities also have executive
and legislative powers with regard to matters assigned to them in terms of national
and provincial legislation: section 156(1) of the Constitution.
Please note:
In terms of item 2 of Schedule 6 of the Constitution, old order legislation (e.g. provincial
ordinances) are still in force and many of them require that extra services be rendered.
Municipal services can be divided into two broad categories, namely support services
and operational services. Support services are important for the effective operation
of the municipality, while operational services refer to services that a municipality
renders to its local community.
Support services can be listed as follows:
• legal services
• financial services
• personnel services
• repair and maintenance services
• information and technology services
• supply services
Operational services are listed in Schedule 4 Part B and Schedule 5 Part B of the
Constitution.
Please note:
Since you should be able to give a detailed discussion of each service, you need to
study Bekink’s explanation of each of these services (page 312–319):
Schedule 4 Part B
– Air pollution
– Building regulations: regarded as one of the “inspection services”. Regulations that
pertain to buildings are set nationally but their enforcement take place on a local level.
– Child care facilities
– Electricity and gas reticulation: regarded as a traditional service. This service relates to
the provision of such commodities to local premises. Residents must enter into service
provision agreements with their local municipality. Residents must also pay for these
services.
– Fire-fi ghting services
– Local tourism
– Municipal airports
– Municipal planning: management and control of land use or land use rights
– Municipal health services
– Municipal public transport
– Municipal public works: only in respect of the needs of municipalities in the discharge
of their responsibilities to administer functions specifically assigned to them under the
Constitution or any other law
– Pontoons, ferries, jetties, piers and harbours: excluding the regulation of international
and national shipping and matters related thereto
– Storm water management systems in built-up areas
– Trading regulations
– Water and sanitation services: limited to potable water supply systems and domestic
waste-water and sewage disposal systems
152
Schedule 5 Part B
– Beaches and amusement facilities
– Billboards and the display of advertisements in public places: take note of the African
Billboard Advertising v NSS Central Local Councils 2004 (3) SA 223 (N) case
– Cemeteries, funeral parlours and crematoria
– Cleansing services
– Control of public nuisances
– Control of undertakings that sell liquor to the public
– Facilities for the accommodation, care and burial of animals
– Fencing and fences
– Licensing of dogs
– Licensing and control of undertakings that sell food to the public
– Local amenities
– Local sport facilities
– Markets
– Municipal abattoirs
– Municipal parks and recreation
– Municipal roads
– Noise pollution
– Pounds
– Public places
– Refuse removal, refuse dumps and solid waste disposal
– Street trading
– Street lighting
– Traffi c and parking
ACTIVITY 7.19
• In order to assist you in memorising/internalising the distinction (used the more

elegant word) between “support services” (and its function) and “operational services”
(and its function) write a note to explain the distinction.
123 FEEDBACK
the answer to the activity.

As noted above there are older laws that are still in place and they confirm certain
functions local government must fulfil.
• Civil protection services: municipalities must provide emergency protection services

– for example, in the event of floods and natural disasters
• Housing: municipalities must interact with programmes of the other two spheres
of government and assess local housing needs
• Licensing services: for example, vehicle licensing services
• Civic centres, city halls and public libraries
• Law enforcement and municipal police services
QUESTION 1
List and explain all municipal services as listed in both the Constitution and legislation.
LGL3702/1 153
QUESTION 2
Explain in two paragraphs the foundational values and principles that underlie municipal
service delivery.
QUESTION 3
Write an essay explaining the difference between municipal service districts and multi-juris-
dictional municipal service utilities. Refer to the applicable sections of the different statutes
that regulate both.
QUESTION 4
Write an essay carrying 30 marks in which you provide an explanation of municipal services
in terms of legislation.
154
8 LEARNING UNIT 8
8 Municipal finance and fiscal management
OVERVIEW
This extensive (meaning it is long, extremely “dense” and packed with information)
learning unit contains no less than 57 (a huge number) activities. It deals with all as-
pects of municipal finances. That it deals with matters financial explains the reason
for the size/extent of this unit.
The Constitution provides for the foundational principles that concern municipal
finances, while the Local Government: Municipal Finance Management Act 56 of
2003 (MFMA) regulates municipal finances in their entirety and in great detail. The
MFMA regulates municipal financial management extensively and the Act addresses
all aspects of this topic. Municipal financial management concerns municipal revenue,
municipal budgets, co-operative governance, municipal debt control and regulation,
responsibilities of mayors and municipal officers, goods and services, reporting of
financial statements and auditing, addressing financial problems, and managing
financial misconduct. It is also necessary to distinguish between the financial af-
fairs of municipalities and municipal entities. Finally, municipal fiscal management
consists of a number of different matters that are interlinked to a certain extent and
these require some consideration.
• explain briefly the underlying constitutional principles that pertain to municipal

financial management
• describe the broad structure of municipal finance with reference to all the different
aspects of this field of local government law
• give a thorough explanation of municipal revenue, referring to the relevant sections
of the MFMA
• explain how municipal budgets function, referring to the relevant sections of the
MFMA
• distinguish between short and long-term debt with reference to the relevant
provisions in the MFMA and explain how and when municipalities may incur
these debts
• explain the financial responsibilities of mayors and municipal officers – reference
to the relevant sections of the MFMA is essential
• give an extensive explanation, in line with the relevant sections of the MFMA, of
how municipalities go about their everyday affairs in relation to goods that must
be supplied and services that must be rendered (reference to public-private
relationships is imperative)
• clarify briefly the use and importance of financial reporting and auditing in
municipalities
• explain how municipalities should deal with financial problems and misconduct
(reference to the provisions laid down in the MFMA is essential)
• differentiate between the financial management of municipalities and municipal
entities
LGL3702/1 155
LEARNING MATERIAL
Meadow Glen Home Owners Association and Others v City of Tshwane Metropolitan
Municipality and Another [2014] ZASCA 209 (SCA); 2015 (2) SA 413 (SCA) par 23
Please note:
Since this learning unit is so extensive, we decided to “abbreviate” the feedback to the
activities to write merely, “This is a self-evaluation activity” and leave it at that. Obvi-
ously when any feedback to a particular activity requires elaboration of some kind or
when a hint will assist you in finding your way towards answering/addressing the activ-
ity, we will give such hints. Moreover, when activities require you for example to page
back to preceding learning units, the feedback will provide you with such information.
To repeat: As written above, the provision of feedback will be for the most a brief and
concise reference to the activity as a self-evaluation one – a one-liner along the lines
of the said, “This is a self-evaluation activity”.
8.1 INTRODUCTION
It is a fact that all municipalities require adequate financial resources to achieve their
constitutional objectives. Municipal income resources should therefore be protected
and the necessary expenditure policies and financial control mechanisms should
be implemented. Local government expenditure practices must be accountable
and transparent. The legal framework regarding municipal finance management is
founded in the Constitution. It requires local government to aim at meeting the basic
needs of its communities while remaining within budget. The White Paper on Local
Government identified the following three matters that the financial framework should
aim to implement (page 129):
• addressing the causes of current financial problems

• balancing programmes for poverty eradication and strategies of growth and job
creation
• fulfilling overall constitutional mandates
8.2 CONSTITUTIONAL FOUNDATION REGARDING MUNICIPAL

FINANCE
Section 153 of the Constitution states that a municipality must structure and manage
its administration, budgeting and planning processes to give priority to the basic needs
of the community, that it should promote the social and economic development of
the community, and that it should participate in national and provincial development
programmes. You should also note that the national or provincial government may
not compromise or impede a municipality’s ability or right to exercise its powers or to
perform its functions (section 151(4) of the Constitution). Higher spheres of government
must therefore support local government in managing its affairs and performing its
functions. Chapter 13 of the Constitution headed “General Financial Matters” deals
with the financial affairs of all three spheres of government. Note the following:

(1) There is a National Revenue Fund into which all money received by the national gov-
ernment must be paid, except money reasonably excluded by an Act of Parliament.
(2) Money may be withdrawn from the National Revenue Fund only
(a) in terms of an appropriation by an Act of Parliament; or
156
LEARNING UNIT 8: Municipal finance and fi scal management
(b) as a direct charge against the National Revenue Fund, when it is provided for in
the Constitution or an Act of Parliament.
(3) A province’s equitable share of revenue raised nationally is a direct charge against the
National Revenue Fund.
ACTIVITY 8.1
• To ensure that you study this important over-arching provision properly and know its
contents, summarise its provisions in your own words.
124 FEEDBACK
• This is a self-evaluation activity.
(a) Equitable shares and allocations of revenue

(1) An Act of Parliament must provide for
(a) the equitable division of revenue raised nationally among the national, provincial
and local spheres of government;
(b) the determination of each province’s equitable share of the provincial share of
that revenue; and
(c) any other allocations to provinces, local government or municipalities from the
national government’s share of that revenue, and any conditions on which those
allocations may be made.
(2) The Act referred to in subsection (1) may be enacted only after the provincial govern-
ments, organised local government and the Financial and Fiscal Commission have
been consulted, and any recommendations of the Commission have been considered,
and must take into account
(a) the national interest;

(b) any provision that must be made in respect of the national debt and other national
obligations;
(c) the needs and interests of the national government, determined by objective criteria;
(d) the need to ensure that the provinces and municipalities are able to provide basic
services and perform the functions allocated to them;
(e) the fiscal capacity and efficiency of the provinces and municipalities;
(f) developmental and other needs of provinces, local government and municipalities;
(g) economic disparities within and among the provinces;
(h) obligations of the provinces and municipalities in terms of national legislation;
(i) the desirability of stable and predictable allocations of revenue shares; and
(j) the need for flexibility in responding to emergencies or other temporary needs,
and other factors based on similar objective criteria.
ACTIVITY 8.2
• To ensure that you study this important provision properly and know its contents,
summarise its provisions in your own words. Pay particular attention to the provisions
pertaining to municipalities.
LGL3702/1 157
125 FEEDBACK
The Constitution entitles local government to an equitable share of revenue raised

nationally. Payments to local government from this revenue are generally referred to
as “intergovernmental transfers” (IGTs).
• Municipalities can therefore generate their own revenue and acquire revenue
raised nationally.
ACTIVITY 8.3
• In your opinion, how can local government generate its own revenue?
126 FEEDBACK
• This is a self-evaluation activity. Hint: Turn to learning unit 9 if you are unable to think
of any examples.
(b) National, provincial and municipal budgets

Section 215 of the Constitution requires that:
(1) National, provincial and municipal budgets and budgetary processes must promote
transparency, accountability and the effective financial management of the economy,
debt and the public sector.
(2) National legislation must prescribe
(a) the form of national, provincial and municipal budgets;

(b) when national and provincial budgets must be tabled; and
(c) that budgets in each sphere of government must show the sources of revenue
and the way in which proposed expenditure will comply with national legislation.
(3) Budgets in each sphere of government must contain
(a) estimates of revenue and expenditure, differentiating between capital and current
expenditure;
(b) proposals for financing any anticipated deficit for the period to which they apply; and
(c) an indication of intentions regarding borrowing and other forms of public liability
that will increase public debt during the ensuing year.
ACTIVITY 8.4
• To ensure that you study this provision properly and know its contents, summarise its
provisions in your own words.
127 FEEDBACK
• This is obviously a self-evaluation activity.
158
(c) Treasury control and procurement

National legislation must establish a national treasury and prescribe measures to
ensure both transparency and expenditure control in each sphere of government. It is
required to achieve this by introducing: (a) generally recognised accounting practice;
(b) uniform expenditure classifications; and (c) uniform treasury norms and standards.
The national treasury must enforce compliance and may stop the transfer of funds to
an organ of state if that organ of state commits a serious or persistent material breach
of the measures prescribed: section 216(1)–(2) of the Constitution.
Section 217 regulates procurement as follows:
(1) When an organ of state in the national, provincial or local sphere of government, or
any other institution identified in national legislation, contracts for goods or services, it
must do so in accordance with a system which is fair, equitable, transparent, competi-
tive and cost-effective [our emphasis].
(2) Subsection (1) does not prevent the organs of state or institutions referred to in that
subsection from implementing a procurement policy providing for
(a) categories of preference in the allocation of contracts; and

(b) the protection or advancement of persons, or categories of persons, disadvantaged
by unfair discrimination.
(3) National legislation must prescribe a framework within which the policy referred to in
subsection (2) must be implemented.
ACTIVITY 8.5
• To ensure that you understand what procurement entails, look for a synonym in any
dictionary. Having done that, summarise the provisions of section 217 in your own words.
128 FEEDBACK
• Since you are required to summarise this provision this is obviously a self-evaluation
activity.
Please note:
The Preferential Procurement Policy Framework Act 5 of 2000 (PPPFA) has been
enacted to give effect to section 217 of the Constitution.
(d) Government guarantees

National government, a provincial government or a municipality may guarantee a loan only if
the guarantee complies with any conditions set out in national legislation. The legislation may
be enacted only after any recommendations of the Financial and Fiscal Commission have
been considered. Each year, every government must publish a report on the guarantees it
has granted: section 218 of the Constitution.
(e) Remuneration of persons holding public office
This is regulated in terms of section 219 of the Constitution: (You must read this section
carefully.)
219. Remuneration of persons holding public office.
(1) An Act of Parliament must establish a framework for determining
(a) the salaries, allowances and benefits of members of the National Assembly, per-
manent delegates to the National Council of Provinces, members of the Cabinet,
LGL3702/1 159
Deputy Ministers, traditional leaders and members of any councils of traditional
leaders; and
(b) the upper limit of salaries, allowances or benefits of members of provincial legis-
latures, members of Executive Councils and members of Municipal Councils of
the different categories.
(2) National legislation must establish an independent commission to make recommenda-

tions concerning the salaries, allowances and benefits referred to in subsection (1).
(3) Parliament may pass the legislation referred to in subsection (1) only after consider-
ing any recommendations of the commission established in terms of subsection (2).
(4) The national executive, a provincial executive, a municipality or any other relevant
authority may implement the national legislation referred to in subsection (1) only
after considering any recommendations of the commission established in terms of
subsection (2).
(5) National legislation must establish frameworks for determining the salaries, allowances
and benefits of judges, the Public Protector, the Auditor-General, and members of
any commission provided for in the Constitution, including the broadcasting authority
referred to in section 192.
(f) … Establishment of the Financial and Fiscal Commission

The Republic has a Financial and Fiscal Commission (FFC). As envisaged in Chapter 13 of
the Constitution or in national legislation, it makes recommendations to Parliament, provincial
legislatures and any other authorities determined by national legislation. The Commission is
independent, subject only to the Constitution and the law, and must be impartial: section 220
of the Constitution. Section 221 regulates the composition of the FFC and section 222 states
that the FFC must report regularly to Parliament and the provincial legislatures.
ACTIVITY 8.6
• To ensure that you are able to defi ne the FFC and explain its purpose you should
write a note in which you provide (a) a definition of the FFC and most importantly, (b)
its purpose.
129 FEEDBACK
• This is obviously a self-evaluation activity. Note though that your answer needs to
start by explaining what the FFC is and then to explain what its purpose (function) is.
(g) Provincial revenue funds and national sources of provincial and local government
funding
Section 226 of the Constitution provides for a Provincial Revenue Fund for each province
into which all money received by the provincial government must be paid – with the excep-
tion of money reasonably excluded by an Act of Parliament. Money may be withdrawn from
a Provincial Revenue Fund only
(a) in terms of an appropriation by a provincial Act; or
(b) as a direct charge against the Provincial Revenue Fund, when it is provided for in
the Constitution or a provincial Act.
(3) Revenue allocated through a province to local government in that province in terms of
section 214(1), is a direct charge against that province’s Revenue Fund.
(4) National legislation may determine a framework within which
(a) a provincial Act may in terms of subjection (2)(b) authorise the withdrawal of money
as a direct charge against a Provincial Revenue Fund; and
(b) revenue allocated through a province to local government in that province in terms
of subsection (3) must be paid to municipalities in the province.
160
Please note:
The Intergovernmental Fiscal Relations Act 97 of 1997 was enacted for this purpose,
which mainly relates to the promotion of co-operation between the spheres of govern-
ment regarding fiscal and budgetary matters.
Section 227(1) provides that both local government and each province be entitled to an equi-
table share of revenue raised nationally to enable them to provide basic services and perform
the functions allocated to them. In addition, they may receive other allocations from national
government revenue, either conditionally or unconditionally. Importantly, section 227(2) states
that additional revenue raised by provinces or municipalities may not be deducted from their
share of revenue raised nationally, or from other allocations made to them out of national
government revenue. Equally, there is no obligation on national government to compensate
provinces or municipalities that do not raise revenue commensurate with their fiscal capacity
and tax base.
(h) Municipal fiscal powers and functions (We include a brief discussion here to complete
the picture but these powers and functions will be dealt with in more detail in the next learning
unit – learning unit 9.)
Section 229(1) of the Constitution provides that municipalities may impose rates on property
and surcharges on fees for services provided by or on behalf of the municipality. In addition,
if authorised by national legislation, a municipality may impose other taxes, levies and duties
appropriate to local government or to the category of local government into which that munici-
pality falls. However, no municipality may impose income tax, value-added tax, general sales
tax or customs duty. Only national government may impose these taxes.
Section 229(2) further provides that the power of a municipality to impose rates on property,
surcharges on fees for services provided by or on behalf of the municipality, or other taxes,
levies or duties:
(a) may not be exercised in a way that materially and unreasonably prejudices national
Finally, section 229(3) regulates the position where two municipalities have the same fiscal
powers and functions with regard to the same area. The section provides that an appropriate
division of those powers and functions must be made in terms of national legislation. The
division may be made only after taking into account at least the following criteria:
(a) The need to comply with sound principles of taxation.
(b) The powers and functions performed by each municipality.
(c) The fiscal capacity of each municipality.
(d) The effectiveness and efficiency of raising taxes, levies and duties.
(e) Equity.
(i) … Municipal loans

Section 230A provides that a municipal council may raise loans for capital or current expenditure
for the municipality, but loans for current expenditure may be raised only when necessary for
bridging purposes during a fiscal year. A municipal council may also bind itself and a future
council in the exercise of its legislative and executive authority to secure loans or investments
for the municipality.
ACTIVITY 8.7
• Make (a) a list of all the different forms of revenue that a municipality can generate
and then (b) write a brief explanation next to each form; followed (c) by also indicating
the requirements for that form of revenue to be raised. Then, fi nally (d) make sure that
you also refer to the correct relevant law.
LGL3702/1 161
130 FEEDBACK
• Since you are required to study the provisions of earlier paragraphs this is obviously
a self-evaluation activity. Note that this activity is important.
8.3 LEGISLATIVE CONTROL OVER MUNICIPAL FINANCES

8.3.1 Parliamentary control
Parliament enacted the Local Government: Municipal Finance Management Act
(MFMA) 56 of 2003. In terms of section 2 (“object of Act”), the object of the Act is
to secure sound and sustainable management of the fiscal and financial affairs of
municipalities and municipal entities by establishing norms and standards and other
requirements for:
• ensuring transparency, accountability and appropriate lines of responsibility in the

fiscal and financial affairs of municipalities and municipal entities
• the management of their revenues, expenditures, assets and liabilities and the
handling of their financial dealings
• budgetary and financial planning processes and the co-ordination of those
processes with the processes of organs of state in other spheres of government
• borrowing
• the handling of financial problems in municipalities
• supply chain management
• other financial matters
8.3.2 Broad requirements of the MFMA

8.3.2.1 Application and supervision
The MFMA applies to all municipalities, all municipal entities, and national and provin-
cial organs of state to the extent of their financial dealings with municipalities. In the
event of any inconsistency between a provision of the Act and any other legislation
in force, which regulates any aspect of the fiscal and financial affairs of municipali-
ties or municipal entities, the provisions of the Act prevail: section 3 of the MFMA
(“Institutions to which Act applies”).
Section 5 of the MFMA (“General functions of National Treasury and provincial treasures”)
regulates the functions of the National Treasury and provincial treasuries.
5. General functions of National Treasury and provincial treasuries.
(1) The National Treasury must
(a) fulfil its responsibilities in terms of Chapter 13 of the Constitution and this Act;
(b) promote the object of this Act as stated in section 2
(i) within the framework of co-operative government set out in Chapter 3 of the
Constitution; and
(ii) when co-ordinating intergovernmental financial and fiscal relations in terms
of the Intergovernmental Fiscal Relations Act, 1997 (Act No. 97 of 1997), the
annual Division of Revenue Act and the Public Finance Management Act; and
(c) enforce compliance with the measures established in terms of section 216(1) of
the Constitution, including those established in terms of this Act.
(2) To the extent necessary to comply with subsection (1), the National Treasury may
(a) monitor the budgets of municipalities to establish whether they
162
(i) are consistent with the national government’s fiscal and macroeconomic
policy; and
(ii) comply with Chapter 4;
(b) promote good budget and fiscal management by municipalities, and for this pur-
pose monitor the implementation of municipal budgets, including their expenditure,
revenue collection and borrowing;
(c) monitor and assess compliance by municipalities and municipal entities with
(i) this Act; and
(ii) any applicable standards of generally recognised accounting practice and
uniform expenditure and revenue classification systems;
(d) investigate any system of financial management and internal control in any mu-
nicipality or municipal entity and recommend improvements;
(e) take appropriate steps if a municipality or municipal entity commits a breach of this
Act, including the stopping of funds to a municipality in terms of section 216(2) of
the Constitution if the municipality, or a municipal entity under the sole or shared
control of that municipality, commits a serious or persistent material breach of any
measures referred to in that section; and
(f) take any other appropriate steps necessary to perform its functions effectively.
(3) A provincial treasury must in accordance with a prescribed framework

(a) fulfil its responsibilities in terms of this Act;
(b) promote the object of this Act as stated in section 2 within the framework of co-
operative government set out in Chapter 3 of the Constitution; and
(c) assist the National Treasury in enforcing compliance with the measures estab-
lished in terms of section 216(1) of the Constitution, including those established
in terms of this Act.
(4) To the extent necessary to comply with subsection (3), a provincial treasury
(a) must monitor
(i) compliance with this Act by municipalities and municipal entities in the
province;
(ii) the preparation by municipalities in the province of their budgets;
(iii) the monthly outcome of those budgets; and
(iv) the submission of reports by municipalities in the province as required in
terms of this Act;
(b) may assist municipalities in the province in the preparation of their budgets;
(c) may exercise any powers and must perform any duties delegated to it by the Na-
tional Treasury in terms of this Act; and
(d) may take appropriate steps if a municipality or municipal entity in the province com-
mits a breach of this Act.
(5) The functions assigned to the National Treasury or a provincial treasury in terms of this
Act are additional to those assigned to the National Treasury or a provincial treasury
in terms of the Public Finance Management Act.
(6) The Minister, as the head of the National Treasury, takes all decisions of the National
Treasury in terms of this Act, except those decisions taken as a result of a delegation
in terms of section 6(1).
(7) The MEC for finance in a province, as the head of the provincial treasury, takes all
decisions of the provincial treasury in terms of this Act, except those decisions taken
as a result of a delegation in terms of section 6(4).
(8) A provincial treasury must submit all information submitted to it in terms of this Act to
the National Treasury on a quarterly basis, or when requested.
ACTIVITY 8.8
• You should be able to explain the functions of the National Treasury. In this regard,
you have to distinguish between the peremptory functions provided for in the relevant
LGL3702/1 163
subsection (indicated with the word “must”) and the National Treasury’s directory
functions (indicated with the word “may”).
131 FEEDBACK
• Again, this is a self-evaluation exercise. However, since the provisions of the section
are so extensive, it is perhaps a solution to draw up a table under the headings
“peremptory provisions” and “directory provisions” respectively. In this way, you will
be able to come to grips with the provisions more easily since, as observed above,
the provisions are quite a mouthful.
Section 6 of the MFMA regulates the delegation of powers by the National Treasury and
provincial treasuries.
6. Delegations by National Treasury.
(1) The Minister may delegate any of the powers or duties assigned to the National Treas-
ury in terms of this Act to
(a) the Director-General of the National Treasury; or
(b) the MEC responsible for a provincial department, as the Minister and the MEC
may agree.
(2) The Minister may not delegate the National Treasury’s power to stop funds to a mu-
nicipality in terms of section 5(2)(e).
(3) A delegation in terms of subsection (1)
(a) must be in writing;
(b) is subject to any limitations or conditions which the Minister may impose;
(c) may, subject to any such limitations or conditions, authorise
(i) the Director-General of the National Treasury to sub-delegate a delegated
power or duty to a staff member of the National Treasury; and
(ii) the MEC responsible for the relevant provincial department to sub-delegate
a delegated power or duty to a staff member of that department; and
(d) does not divest the National Treasury of the responsibility concerning the exercise
of the delegated power or the performance of the delegated duty.
(4) The MEC for finance in a province may delegate any of the powers or duties assigned
to a provincial treasury in terms of this Act to the head of the relevant provincial depart-
ment of which the provincial treasury forms part.
(b) is subject to any limitations or conditions which the MEC for finance in the province
may impose;
(c) may, subject to any such limitations or conditions, authorise the relevant head of
the provincial department to sub-delegate a delegated power or duty to a staff
member of that treasury; and
(d) does not divest the provincial treasury of the responsibility concerning the exercise
(6) The Minister or MEC for finance in a province, as may be appropriate, may confirm,
vary or revoke any decision taken in consequence of a delegation or sub-delegation
in terms of this section, but no such variation or revocation of a decision may detract
from any rights that may have accrued as a result of the decision.
8.3.2.2 Municipal revenue (Chapter 3 of the MFMA)

Section 7 of the MFMA (“Opening of bank accounts”) requires that every municipality
must open and maintain at least one bank account in the name of the municipality.
All money received by a municipality must be paid into its bank account or accounts,
and this must be done promptly and in accordance with the MFMA. A municipality
164
may not open a bank account abroad or with an institution not registered as a bank
in terms of the Banks Act 94 of 1990. Section 8 (“Primary bank account”) requires
that a municipality must have a primary bank account and the following moneys must
be paid into the primary bank account (section 8(2) of the MFMA):
• all allocations to the municipality, including those made to the municipality for
transmission to a municipal entity or other external mechanism assisting the
municipality in the performance of its functions
• all income received by the municipality on its investments
• all income received by the municipality in connection with its interest in any
municipal entity, including dividends
• all money collected by a municipal entity or other external mechanism on behalf
of the municipality
• any other moneys as may be prescribed
Section 9 of the MFMA headed “Bank account details to be submitted to provincial

treasuries and Auditor-General” provides that the accounting officer of a municipality
must submit to the relevant provincial treasury and the Auditor-General, in writing,
within 90 days of the municipality having opened a new bank account, the name of the
bank where the account has been opened and the type and number of the account.
In addition, annually before the start of a financial year, the name of each bank where
the municipality holds a bank account, and the type and number of each account must
be submitted to the relevant provincial treasury and the Auditor-General. In terms of
section 10 of the MFMA (“Control of bank accounts”), the accounting officer of the
municipality must administer all the municipality’s bank accounts and is accountable
to the municipal council for the municipality’s bank accounts.
Please note:
The accounting officer may delegate his/her duties – to open bank accounts in terms
of section 7, requirements as regards primary bank accounts in terms of section 8
and provisions regarding withdrawals from municipal bank accounts under section
11 to the municipality’s chief financial officer only (section 10(2)).
Section 11 of the MFMA regulates withdrawals from municipal bank accounts as follows:
11. Withdrawals from municipal bank accounts.
(1) Only the accounting officer or the chief financial officer of a municipality, or any other
senior financial official of the municipality acting on the written authority of the account-
ing officer, may withdraw money or authorise the withdrawal of money from any of the
municipality’s bank accounts, and may do so only
(a) to defray expenditure appropriated in terms of an approved budget;

(b) to defray expenditure authorised in terms of section 26(4); [section 26(4) deals
with withdrawals as a consequence of “failure to approve budget before start of
budget year”]
(c) to defray unforeseeable and unavoidable expenditure authorised in terms of sec-
tion 29(1);
(d) in the case of a bank account opened in terms of section 12, to make payments
from the account in accordance with subsection (4) of that section; [section 12
deals with the opening of a separate account in the name of the municipality “for
the purpose of a relief, charitable, trust or other fund”]
(e) to pay over to a person or organ of state money received by the municipality on
behalf of that person or organ of state, including
(i) money collected by the municipality on behalf of that person or organ of

state by agreement; or
(ii) any insurance or other payments received by the municipality for that person
or organ of state;
LGL3702/1 165
(f) to refund money incorrectly paid into a bank account;
(g) to refund guarantees, sureties and security deposits;
(h) for cash management and investment purposes in accordance with section 13;
[section 13 deals with “cash management and investments”]
(i) to defray increased expenditure in terms of section 31; [section 31 deals with the
“shifting of funds between multi-year appropriations”] or
(j) for such other purposes as may be prescribed.
ACTIVITY 8.9
• Explain (a) when withdrawals may take place in terms of section 11(1) of the MFMA.
In your answer, you must (b) indicate who may make such withdrawals.
132 FEEDBACK
• This is a self-evaluation activity. What you need to do is identify the offi cials who are
permitted to make withdrawals and to make a list of the circumstances when withdrawals
may be made legally.
Section 11(4) provides that the accounting officer must, within 30 days of the end of
each quarter, table in the municipal council a consolidated report of all withdrawals
made in terms of subsection (1) during that quarter. A copy of the report must also
be submitted to the relevant provincial treasury and to the Auditor-General.
ACTIVITY 8.10
• Why do you think is it important to keep track of these withdrawals?
133 FEEDBACK
• This is a self-evaluation activity. Hint: Think in terms of the legal constitutional provisions
of openness and transparency. Are there any other reasons you can think of? Write
them down.
ACTIVITY 8.11
• Does the public have any interest in the municipality’s expenditures?
134 FEEDBACK
• This is a self-evaluation activity. However, do return to earlier learning units if you are
uncertain about how to tackle this activity. You can also come back to this activity after
having studied the next learning unit (unit 9).
In terms of section 12 of the MFMA headed “Relief, charitable, trust or other funds”,
no political structure or office-bearer of a municipality may set up a relief, charitable,
166
trust or other fund of whatever description except in the name of the municipality.
Only the municipal manager may be the accounting officer of any such fund (section
12(1)). A municipality may open a separate bank account in the name of the munici-
pality for the purpose of a relief, charitable, trust or other fund (section 12(2)). Money
received by the municipality for the purpose of a relief, charitable, trust or other fund
must be paid into a bank account of the municipality, or if a separate bank account
has been opened, into that account (subsection (3)). Money in a separate account
opened in terms of the MFMA may be withdrawn from the account (a) by or on the
written authority of the accounting officer acting in accordance with decisions of the
municipal council and (b) for the purposes for which the fund was established or for
which the money in the fund was donated (subsection (4)).
Section 13 of the MFMA regulates municipal cash management and investments.

Section 13(1) states that the Minister (of Finance), acting with the concurrence of
the Cabinet member responsible for local government, may prescribe a framework
within which municipalities must conduct their cash management and investments;
and invest money not immediately required. Section 13(2) provides that a municipality
must establish an appropriate and effective cash management and investment policy
in accordance with any framework that may be prescribed in terms of section 13(1).
In terms of section 13(3) and 13(4), banks are required to do the following:
• A bank at which a municipality holds a bank account must, within 30 days of

the end of each financial year, notify the Auditor-General in writing of such bank
account, including the type and number of the account; and must include details
of the opening and closing balances of that bank account in that financial year. In
addition, the bank must promptly disclose information regarding the account when
requested to do so by the National Treasury or the Auditor-General.
• A bank, insurance company or other financial institution which at the end of a
financial year holds, or at any time during a financial year held, an investment
for a municipality must, within 30 days of the end of that financial year, notify
the Auditor-General, in writing, of that investment, including the opening and
closing balances of that investment in that financial year; and promptly disclose
information regarding the investment when so requested by the National Treasury
or the Auditor-General.
The disposal of capital assets is regulated in terms of section 14 of the MFMA. It

states as follows:
14. Disposal of capital assets.
(1) A municipality may not transfer ownership as a result of a sale or other transaction or
otherwise permanently dispose of a capital asset needed to provide the minimum level
of basic municipal services.
(2) A municipality may transfer ownership or otherwise dispose of a capital asset other
than one contemplated in subsection (1), but only after the municipal council, in a
meeting open to the public
(a) has decided on reasonable grounds that the asset is not needed to provide the
minimum level of basic municipal services; and
(b) has considered the fair market value of the asset and the economic and community
value to be received in exchange for the asset.
(3) A decision by a municipal council that a specific capital asset is not needed to provide
the minimum level of basic municipal services, may not be reversed by the municipality
after that asset has been sold, transferred or otherwise disposed of.
(4) A municipal council may delegate to the accounting officer of the municipality its power
to make the determinations referred to in subsection (2)(a) and (b) in respect of movable
capital assets below a value determined by the council.
LGL3702/1 167
(5) Any transfer of ownership of a capital asset in terms of subsection (2) or (4) must be
fair, equitable, transparent, competitive and consistent with the supply chain manage-
ment policy which the municipality must have and maintain in terms of section 111.
(6) This section does not apply to the transfer of a capital asset to another municipality or
to a municipal entity or to a national or provincial organ of state in circumstances and
in respect of categories of assets approved by the National Treasury, provided that
such transfers are in accordance with a prescribed framework.
ACTIVITY 8.12
• Why do you think is it important to regulate the disposal of municipal assets?
135 FEEDBACK
ACTIVITY 8.13
• Can you think of typical capital assets that municipalities own?
136 FEEDBACK
• This is a self-evaluation activity. Hint: Consult a dictionary fi rst if you are uncertain
about the meaning of the phrase “capital asset” or use your computer’s search engine.
The point is that you obviously must fi rst know what “capital assets” means before you
can attempt any answer as to what it consists of.
8.3.2.3 Municipal budgets (Chapter 4 of the MFMA)

The general rule is that a municipality may incur expenditure only in terms of an
approved budget and within the limits of the amounts appropriated for the different
votes in an approved budget: section 15 of the MFMA (“Appropriation of funds for
expenditure”). The council of a municipality must approve, for each financial year, an
annual budget for the municipality before the start of that financial year. In order for
a municipality to approve the budget, the mayor of the municipality must table the
annual budget at a council meeting at least 90 days before the start of the budget
year: section 16 of the MFMA headed “Annual budgets”.
Section 17 of the MFMA determines the contents of annual budgets:

17. Contents of annual budgets and supporting documents.
(1) An annual budget of a municipality must be a schedule in the prescribed format
(a) setting out realistically anticipated revenue for the budget year from each revenue
source;
(b) appropriating expenditure for the budget year under the different votes of the
municipality;
(c) setting out indicative revenue per revenue source and projected expenditure by
vote for the two financial years following the budget year;
(d) setting out
(i) estimated revenue and expenditure by vote for the current year; and
(ii) actual revenue and expenditure by vote for the financial year preceding the
current year; and
168
(2) a statement containing any other information required by section 215(3) of the Constitu-
tion or as may be prescribed.
ACTIVITY 8.14
• Summarise the provisions of subsection (1) dealing with the content of annual municipal
budgets to ensure that you know what the content is.
137 FEEDBACK
• Once again, this is a self-evaluation activity.
An annual budget must be divided into a capital and operating budget. Section 17(3)
requires the following documents when an annual budget is tabled: (Read this sec-
tion carefully.)
(a) Draft resolutions
(i) approving the budget of the municipality;
(ii) imposing any municipal tax and setting any municipal tariff s as may be required
for the budget year; and
(iii) approving any other matter that may be prescribed;
(b) measurable performance objectives for revenue from each source and for each vote in
the budget, taking into account the municipality’s integrated development plan;
(c) a projection of cash flow for the budget year by revenue source, broken down per month;
(d) any proposed amendments to the municipality’s integrated development plan follow-
ing the annual review of the integrated development plan in terms of section 34 of the
Municipal Systems Act;
(e) any proposed amendments to the budget-related policies of the municipality;
(f) particulars of the municipality’s investments;
(g) any prescribed budget information on municipal entities under the sole or shared control
of the municipality;
(h) particulars of all proposed new municipal entities, which the municipality intends to
establish or in which the municipality intends to participate;
(i) particulars of any proposed service delivery agreements, including material amend-
ments to existing service delivery agreements;
(j) particulars of any proposed allocations or grants by the municipality to
(i) other municipalities
(ii) any municipal entities and other external mechanisms assisting the municipality
in the exercise of its functions or powers;
(iii) any other organs of state;
(iv) any organisations or bodies referred to in section 67(1);
(k) the proposed cost to the municipality for the budget year of the salary, allowances and
benefits of
(i) each political office-bearer of the municipality;
(ii) councillors of the municipality; and
(iii) the municipal manager, the chief financial officer, each senior manager of the
municipality and any other official of the municipality having a remuneration pack-
age greater than or equal to that of a senior manager;
(l) the proposed cost for the budget year to a municipal entity under the sole or shared
control of the municipality of the salary, allowances and benefits of
(i) each member of the entity’s board of directors; and
(ii) the chief executive officer and each senior manager of the entity; and
(m) any other supporting documentation as may be prescribed.
LGL3702/1 169
In terms of section 18 (“Funding of expenditure”), an annual budget may be funded
only from:
• realistically anticipated revenues to be collected

• cash-backed accumulated funds from previous years’ surpluses not committed
for other purposes
• borrowed funds, “but only for the capital budget” referred to in section 17(2)
(Section 17(2) reads:
An annual budget must generally be divided into a capital and an operating budget
in accordance with international best practice, as may be prescribed.)
The section further provides that revenue projections in the budget must be realistic,
taking into account projected revenue for the current year based on collection levels
to date and actual revenue collected in previous financial years (section 18(2)).
Section 19 (“Funding of expenditure”) regulates municipal expenditure on capital

projects. It states that a municipality may spend money on a capital project only if
the money for the project has been appropriated in the capital budget; the project
has been approved by the council; and the sources of funding have been considered,
are available and have not been committed for other purposes. However, prior to the
approval of the capital project, the council of the municipality must first consider the
projected cost covering all financial years until the project is operational; as well as
the future operational costs and revenue on the project, including municipal tax and
tariff implications.
ACTIVITY 8.15
• Write an essay in which you explain the requirements in relation to the establishment
of capital projects. In your essay, you also need to explain the conditions to be
met before capital projects can be established.
138 FEEDBACK
• This is once again a self-evaluation question/activity. The objective of this exercise is
to urge you to familiarise yourself with the content of the provisions set out above as
regards capital projects.
In terms of section 20 of the MFMA, headed “Matters to be prescribed”, the Minister

(of Finance), acting with the concurrence of the Cabinet member responsible for lo-
cal government, must prescribe the form of the annual budget for municipalities
(section 20(1)(a)) and may prescribe:
• the form of resolutions and supporting documentation relating to the annual budget
• the number of years preceding and following the budget year for which revenue and
expenditure history or projections must be shown in the supporting documentation
• inflation projections to be used with regard to the budget
• uniform norms and standards concerning the setting of municipal tariffs, financial
risks and other matters where a municipality uses a municipal entity or other
external mechanism for the performance of a municipal service or other function
• uniform norms and standards concerning the budgets of municipal entities
• any other uniform norms and standards aimed at promoting transparency and
expenditure control (section 20(1)(b)(i)–(vi))
170
The mayor of the municipality must conduct the “budget preparation processes”
(section 21 of the MFMA). The mayor must:
(1) (a) co-ordinate the processes for preparing the annual budget and for reviewing the
municipality’s integrated development plan and budget-related policies to ensure
that the tabled budget and any revisions of the integrated development plan and
budget-related policies are mutually consistent and credible;
(b) at least 10 months before the start of the budget year, table in the municipal council
a time schedule outlining key deadlines for
(i) the preparation, tabling and approval of the annual budget;
(ii) the annual review of
(aa) the integrated development plan in terms of section 34 of the Municipal
Systems Act; and
(bb) the budget-related policies;
(iii) the tabling and adoption of any amendments to the integrated development
plan and the budget-related policies; and
(iv) any consultative processes forming part of the processes referred to in sub-
paragraphs (i), (ii) and (iii).
(2) When preparing the annual budget, the mayor of a municipality must
(a) take into account the municipality’s integrated development plan;
(b) take all reasonable steps to ensure that the municipality revises the integrated
development plan in terms of section 34 of the Municipal Systems Act, taking into
account realistic revenue and expenditure projections for future years;
(c) take into account the national budget, the relevant provincial budget, the national
government’s fiscal and macroeconomic policy, the annual Division of Revenue
Act and any agreements reached in the Budget Forum;
(d) consult
(i) the relevant district municipality and all other local municipalities within the
area of the district municipality, if the municipality is a local municipality;
(ii) all local municipalities within its area, if the municipality is a district municipality;
(iii) the relevant provincial treasury, and when requested, the National Treasury;
and
(iv) any national or provincial organs of state, as may be prescribed; and
(e) provide, on request, any information relating to the budget

(i) to the National Treasury; and
(ii) subject to any limitations that may be prescribed, to
(aa) the national departments responsible for water, sanitation, electricity
and any other service as may be prescribed;
(bb) any other national and provincial organs of state, as may be prescribed;
and
(cc) another municipality affected by the budget.
ACTIVITY 8.16
• Summarise (using your own words) the mayor’s role in the “budget preparation process”.
139 FEEDBACK
Section 22 of the MFMA requires the “publication of annual budgets”. After an annual
budget is tabled in a municipal council, the accounting officer of the municipality must
make public the annual budget (as well as the accompanying documents provided
LGL3702/1 171
for in section 17(3) – see section 22(a)(i) and invite the local community to submit
representations in connection with the budget – see section 22(a)(ii). The annual
budget must also be submitted in both printed and electronic formats to the National
Treasury and the relevant provincial treasury (section 22(b)(i)); and in either format
to any prescribed national or provincial organs of state and to other municipalities
affected by the budget (section 22(b)(ii)).
When the annual budget has been tabled, the municipal council must, in terms of sec-
tion 23 of the MFMA headed “Consultations on tabled budgets”, consider any views of:
• the local community

• the National Treasury, the relevant provincial treasury and any provincial or
national organs of state or municipalities, which have made submissions on the

budget (section 23(1)(a)–(b))
Once all budget submissions have been considered, the council must give the mayor
an opportunity to respond to the submissions and, if necessary, to revise the budget
and table amendments for consideration by the council (section 23(2)(a)–(b)). The
National Treasury may issue guidelines on the manner in which municipal councils
should process their annual budgets “including guidelines on the formation of a com-
mittee of the council to consider the budget and to hold public hearings” (section
23(3)). In terms of section 23(4), no guidelines issued in terms of section 23(3) will
be binding on the municipality unless the council adopted them.
In terms of section 24 of the MFMA (“Approval of annual budgets”), the municipal

council must, at least 30 days before the start of the budget year, consider approval
of the annual budget (section 24(1)). An annual budget must be approved before
the start of the budget year (section 24(2)(a)) and is approved by the adoption by
the council of a resolution (section 24(2)(b)). The annual budget must be approved
together with the adoption of such resolutions as may be necessary (section 24(2)
(c)(i)–(v)). These resolutions may typically pertain to the following:
• imposing any municipal tax for the budget year

• setting any municipal tariffs for the budget year
• approving measurable performance objectives for revenue from each source and
for each vote in the budget
• approving any changes to the municipality’s integrated development plan (IDP)
• approving any changes to the municipality’s budget-related policies
The accounting officer of a municipality must submit the approved annual budget to
the National Treasury and the relevant provincial treasury (section 24(3)).
Section 25 deals with any “failure to approve budget before start of budget year”. If a
municipal council fails to approve an annual budget, the council must reconsider the
budget. Within seven days of the council meeting that failed to approve the budget,
the council must vote on the budget again, or on an amended version thereof. This
process must be repeated until a budget is approved. If a municipality has not ap-
proved an annual budget by the first day of the budget year, the mayor must immedi-
ately comply with section 55, which requires that the mayor send a report to the MEC
for local government of the relevant province. Section 26 regulates the consequences
of a failure to approve a budget before the start of a budget year.
172
ACTIVITY 8.17
• Write a few paragraphs in which you explain the required process prior to the approval
of a municipal budget.
140 FEEDBACK
• This is once again a self-evaluation activity. However, for assessment/examination
purposes always take note of the mark allocation. The mark allocation will indicate
whether you only need to write about the provisions of sections 22 and 23 or whether
you are required to provide a full account including a discussion of the provisions of
sections 24–26 as well.
Section 27 of the MFMA regulates the procedure in the case of non-compliance by

a municipality. It states as follows: (Read this section carefully.)
27. Non-compliance with provisions of this Chapter.
(1) The mayor of a municipality must, upon becoming aware of any impending non-com-
pliance by the municipality with any provisions of this Act or any other legislation
pertaining to the tabling or approval of an annual budget or compulsory consultation
processes, inform the MEC for finance in the province, in writing, of such impending
non-compliance.
(2) If the impending non-compliance pertains to a time provision, except section 16(1), the
MEC for finance may, on application by the mayor and on good cause shown, extend
any time limit or deadline contained in that provision, provided that no such extension
may compromise compliance with section 16(1). An MEC for finance must
(a) exercise the power contained in this subsection in accordance with a prescribed
framework; and
(b) promptly notify the National Treasury, in writing, of any extensions given in terms
of this subsection, together with the name of the municipality and the reasons.
(3) The mayor of a municipality must, upon becoming aware of any actual non-compliance
by the municipality with a provision of this Chapter, inform the council, the MEC for
finance and the National Treasury, in writing, of
(a) such non-compliance; and
(b) any remedial or corrective measures the municipality intends to implement to
avoid a recurrence.
(4) Non-compliance by a municipality with a provision of this Chapter relating to the budget
process or a provision in any legislation relating to the approval of a budget-related
policy, does not affect the validity of an annual or adjustments budget.
(5) The provincial executive may intervene in terms of the appropriate provision of section
139 of the Constitution (section 139 is headed “Provincial intervention in local govern-
ment” and deals with the circumstances warranting such intervention) if a municipal-
ity cannot or does not comply with a provision of this Chapter, including a provision
relating to process.
Section 28 of the MFMA (“Municipal adjustment budgets”) makes it possible for a

municipality to revise an approved annual budget. They do this by means of an
“adjustments budget”. In terms of section 28(2) an adjustments budget:
• must adjust the revenue and expenditure estimates downwards if there is material
under-collection of revenue during the current year
• may appropriate additional revenues that have become available over and above
those anticipated in the annual budget, but only to revise or accelerate spending
programmes already budgeted for
• may authorise unforeseeable and unavoidable expenditure recommended by the
mayor of the municipality
LGL3702/1 173
• may authorise the use of projected savings in one vote towards spending under
another vote
• may authorise the spending of funds that were unspent at the end of the past
financial year where the under-spending could not reasonably have been foreseen
• may correct any errors in the annual budget
• may provide for any other expenditure within a prescribed framework
Please note:
In terms of section 25(4), only the mayor may table an adjustments budget in the
municipal council.
When an adjustments budget is tabled, it must in terms of section 28(5), be accom-

panied by:
• an explanation as to how the adjustments budget affects the annual budget

• a motivation of any material changes to the annual budget
• an explanation of the impact of any increased spending on the annual budget and
the annual budgets for the next two financial years
• any other supporting documentation that may be prescribed

Municipal tax and tariffs may not be increased during a financial year “except when
required in terms of a financial recovery plan” (section 28(6)).
Apart from the adjustments budget, section 29 provides that the mayor of a municipal-
ity may in emergency or other exceptional circumstances authorise unforeseeable
and unavoidable expenditure for which no provision was made in an approved
budget. Any such expenditure:
• must be in accordance with any framework that may be prescribed

• may not exceed a prescribed percentage of the approved annual budget
• must be reported by the mayor to the municipal council at its next meeting
• must be appropriated in an adjustments budget (section 29(2)(a)–(d))
ACTIVITY 8.18
• Can you think of an example of such an unforeseeable and unavoidable expenditure

that would be justifi able?
141 FEEDBACK
• The answer obviously is to be found in, amongst others, any form of emergency. Can
you think of such emergencies? Write them down.
The adjustments budget must be passed within 60 days of the expenditure having
been incurred.
Please note:
If such adjustments budget is not passed within the prescribed 60 days, the expenditure
incurred is regarded as “unauthorised” and section 32 will apply. Section 32 deals
with “Unauthorised, irregular or fruitless and wasteful expenditure”. See below.
174
Please take note further:

The appropriation of funds in an annual or adjustments budget lapses where those
funds are unspent at the end of that financial year to which the budget relates. An
exception is made in the case of an appropriation for expenditure made over a pe-
riod longer than that financial year in terms of section 16(3): section 30 of the MFMA
headed “Unspent funds”.
Section 31 further regulates the shifting of funds between multi-year appropriations

as follows:
When funds for a capital programme are appropriated in terms of section 16(3) for
more than one financial year, expenditure for that programme during a financial year
may exceed the amount of that year’s appropriation for that programme, provided that
(a) the increase does not exceed 20 per cent of that year’s appropriation for the programme;
(b) the increase is funded within the following year’s appropriation for that programme;
(c) the municipal manager certifies that
(i) actual revenue for the financial year is expected to exceed budgeted revenue; and
(ii) sufficient funds are available for the increase without incurring further borrowing
beyond the annual budget limit;
(d) prior written approval is obtained from the mayor for the increase; and
(e) the documents referred to in paragraphs (c) and (d) are submitted to the relevant pro-
vincial treasury and the Auditor-General.
Section 32 of the MFMA regulates “unauthorised, irregular or fruitless and waste-

ful expenditure”. The MFMA provides for personal accountability and liability on the
part of both political office-bearers and officials within the municipality, the intention
being to recover unauthorised expenditures. (Section 1 of the MFMA defines “unau-
thorised expenditure”.)
Section 32(1): Without limiting liability in terms of the common law or other legislation
(a) a political office-bearer of a municipality is liable for unauthorised expenditure if that
office-bearer knowingly or after having been advised by the accounting officer of the
municipality that the expenditure is likely to result in unauthorised expenditure, instructed
an official of the municipality to incur the expenditure;
(b) the accounting officer is liable for unauthorised expenditure deliberately or negligently
incurred by the accounting officer, subject to subsection (3);
(c) any political office-bearer or official of a municipality who deliberately or negligently com-
mitted, made or authorised an irregular expenditure, is liable for that expenditure; or
(d) any political office-bearer or official of a municipality who deliberately or negligently
made or authorised a fruitless and wasteful expenditure is liable for that expenditure.
Section 32(2): A municipality must recover unauthorised, irregular or fruitless and wasteful
expenditure from the person liable for that expenditure unless the expenditure
(a) in the case of unauthorised expenditure, is
(i) authorised in an adjustments budget; or
(ii) certified by the municipal council, after investigation by a council committee, as
irrecoverable and written off by the council; and
(b) in the case of irregular or fruitless and wasteful expenditure, is, after investigation by a
council committee, certified by the council as irrecoverable and written off by the council.
The effect of section 32(3) is to protect the accounting officer in a case where the
council, mayor or executive committee of the municipality takes a decision, which
results in unauthorised expenditure.
Section 32(3): If the accounting officer becomes aware that the council, the mayor or
the executive committee of the municipality, as the case may be, has taken a deci-
LGL3702/1 175
sion which, if implemented, is likely to result in unauthorised, irregular or fruitless and
wasteful expenditure, the accounting officer is not liable for any ensuing unauthorised,
irregular or fruitless and wasteful expenditure provided that the accounting officer
has informed the council, the mayor or the executive committee, in writing, that the
expenditure is likely to be unauthorised, irregular or fruitless and wasteful expenditure.
In terms of section 32(4), the accounting officer must promptly inform the mayor, the
MEC for local government in the province and the Auditor-General, in writing, of:
• any unauthorised, irregular or fruitless and wasteful expenditure incurred by the

municipality
• whether any person is responsible or under investigation for such unauthorised,
irregular or fruitless and wasteful expenditure
• the steps that have been taken to recover or rectify such expenditure; and to
prevent a recurrence of such expenditure
ACTIVITY 8.19
• What steps should the accounting offi cer take when he/she realises that there has
been a case of irregular expenditure in the municipality? Write these steps down using
your own words.
142 FEEDBACK
The accounting officer is obligated, in terms of section 32(6) of the MFMA, to report
to the South African Police Service all cases of alleged:
• irregular expenditure that constitute a criminal offence

• theft and fraud that have occurred in the municipality
Section 32(7) provides that the council of a municipality must take all reasonable
steps to ensure that all allegations in terms of section 32(6) are reported to the South
African Police Service if:
• the charge is against the accounting officer or

• the accounting officer fails to comply with the MFMA regarding such unauthorised
expenditure
Finally, in terms of section 33(1) of the MFMA, a municipality may enter into a contract,
which will impose financial obligations on the municipality beyond a financial
year. However, if the contract will impose financial obligations on the municipality
beyond three years, it may do so only if (Carefully read section 33(1) of the MFMA
headed “Contracts having future budgetary implications”.)
(a) the municipal manager, at least 60 days before the meeting of the municipal council at
which the contract is to be approved
(i) has, in accordance with section 21A of the Municipal Systems Act
(aa) made public the draft contract and an information statement summarising
the municipality’s obligations in terms of the proposed contract; and
(bb) invited the local community and other interested persons to submit to the
municipality comments or representations in respect of the proposed con-
tract; and
176
(ii) has solicited the views and recommendations of

(aa) the National Treasury and the relevant provincial treasury;
(bb) the national department responsible for local government; and
(cc) the responsible national department if the contract involves the provision
of water, sanitation, electricity, or any other service as may be prescribed;
(b) the municipal council has taken into account

(i) the municipality’s projected financial obligations in terms of the proposed contract
for each financial year covered by the contract;
(ii) the impact of those financial obligations on the municipality’s future municipal
tariffs and revenue;
(iii) any comments or representations on the proposed contract received from the
local community and other interested persons; and
(iv) any written views and recommendations on the proposed contract by the National
Treasury, the relevant provincial treasury, the national department responsible
for local government and any national department referred to in paragraph (a)
(ii)(cc); and
(c) the municipal council has adopted a resolution in which

(i) it determines that the municipality will secure a significant capital investment or
will derive a significant financial economic or financial benefit from the contract;
(ii) it approves the entire contract exactly as it is to be executed; and
(iii) it authorises the municipal manager to sign the contract on behalf of the municipality.
Please note:
The section 33(1) process does not apply to:
• contracts for long-term debt

• employment contracts
• contracts for categories of goods as may be prescribed
• contracts in terms of which the financial obligation on the municipality is below
budget for the year in which the contract is concluded
ACTIVITY 8.20
• List the exceptions to section 33(1) provided by the MFMA.
143 FEEDBACK
• This is a self-evaluation activity. Hint: The list is summarised in the paragraph above.
However, the point is to list them to assist you in remembering the exceptions to financial
obligations on the municipality beyond a financial year.
All contracts that impose a financial obligation on a municipality must be made available
in their entirety to the municipal council (section 33(3)(a)(i)) and may not be withheld
from public scrutiny “except as provided for in terms of the Promotion of Access to
Information Act, 2000 (Act 2 of 2000)” (PAIA).
8.3.2.4 Municipal financial co-operative government (Chapter 5 of the MFMA)

The Constitution, in dealing with the establishment of municipalities, also requires that
national and provincial governments must assist municipalities in building amongst
others their financial capacities. Section 155(6) reads:
LGL3702/1 177
Each provincial government must establish municipalities in its province … and, by legislative
or other measures must –
(a) … provide for the monitoring and support of local government; and
(b) … promote the development of local government capacity to enable municipalities to
perform their functions and manage their own affairs (in terms of section 155(6) of the
Constitution).
The MFMA (in Chapter 5 headed “Co-operative government”) elaborates on the

constitutional imperative by stating in section 34(3)(a)–(c) headed “Capacity build-
ing” that “[w]hen performing its monitoring function in terms of section 155(6) of the
Constitution”, a provincial government must –
• share with a municipality the results of its monitoring to the extent that those results
may assist the municipality in improving its financial management
• upon detecting any emerging or impending financial problems in a municipality,
alert the municipality to those problems; and
• assist the municipality to avert or resolve financial problems
National and provincial departments and public entities must, in their fiscal and fi-
nancial relations with the local sphere of government,
• promote co-operative government in accordance with Chapter 3 of the Constitution;

• promptly meet their financial commitments towards municipalities;
• provide timely information and assistance to municipalities to enable municipalities
to plan properly; and, in addition,
• prepare their budgets in accordance with the processes set out in Chapter 4 of
the MFMA.
Section 37 headed “Promotion of co-operative government by municipalities” provides that

all municipalities must,
(a) in their fiscal and financial relations with the other two spheres of government – national
and provincial, and other municipalities, promote co-operative government in accord-
ance with the Constitution and the Intergovernmental Fiscal Relations Act;
(b) provide budgetary and other financial information to relevant municipalities and national
and provincial organs of state; and
(c) promptly meet all financial commitments towards other municipalities or national and
provincial organs of state (section 37(1)(a)–(c)).
Section 38 regulates the stopping of funds to municipalities.

38. Stopping of funds to municipalities.
(1) The National Treasury may stop
(a) the transfer of funds due to a municipality as its share of the local government’s
equitable share referred to in section 214(1)(a) of the Constitution, but only if the
municipality commits a serious or persistent breach of the measures established
in terms of section 216(1) of the Constitution; or
(b) the transfer of funds due to a municipality as an allocation referred to in section
214(1)(c) of the Constitution, but only if the municipality or the municipal entity for
which the funds are destined
(i) commits a serious or persistent breach of the measures established in terms
of section 216(1) of the Constitution; or
(ii) breaches or fails to comply with any conditions subject to which the alloca-
tion is made.
(2) Before the National Treasury stops the transfer of funds to a municipality in terms of
subsection (1)(a) or (b), it must
(a) give the municipality an opportunity to submit written representations with regard
to the proposed stopping of the funds;
(b) inform the MEC for local government in the province; and
178
(c) consult the Cabinet member responsible for the national department making the
transfer.
(3) If the stopping of funds in terms of subsection (1)(a) or (b) affects the provision of basic
municipal services in the municipality, the provincial executive must monitor the con-
tinuation of those services. Section 139 of the Constitution applies if the municipality
cannot or does not fulfil its obligations with regard to the provision of those services.
(4) When considering whether to stop the transfer of funds to a municipality in terms of
subsection (1)(a) or (b)(i), the National Treasury must take into account all relevant
facts, including
(a) the municipality’s compliance with the requirements of this Act, in particular those
relating to
(i) annual financial statements, including the submission to the Auditor-General
of its annual financial statements; and
(ii) budgets, including the submission of information on the budget and imple-
mentation of the budget to the National Treasury and the relevant provincial
treasury; and
(b) the municipality’s co-operation with other municipalities on fiscal and financial
matters, in the case of district and local municipalities.
Please note:
A decision by the National Treasury to stop the transfer to a municipality of funds re-
ferred to in section 38(1)(a), may be enforced immediately but lapses after the expiry
of 120 days; and will lapse retrospectively unless Parliament approves it following a
prescribed process. This process must be completed within 30 days of the decision
by the National Treasury to stop the transfer of the funds. Parliament may renew a
decision to stop the transfer of funds referred to in section 38(1)(a) for no more than
120 days at a time. Before Parliament approves or renews a decision to stop the
transfer of funds to a municipality, the municipality must be given an opportunity to
answer the allegations against it before a committee: section 39(3)(b) of the MFMA
headed “Stopping of equitable share allocations to municipalities”.
Section 41 of the MFMA regulates the monitoring of prices and payments for bulk
resources. In terms of this section, the National Treasury must monitor:
• the pricing structure of organs of state for the supply of electricity, water or any
other bulk resources that may be prescribed to municipalities for the provision of
municipal services
• payments made by municipalities and municipal entities for such bulk resources
In terms of section 41(2), each organ of state providing bulk resources to a municipal-
ity must, within 15 days of the end of each month, furnish the National Treasury with
a written statement setting out the following:
• the amount to be paid by the municipality for such bulk resources for that month,
and for the financial year up to the end of that month
• the arrears owing and the age profile of such arrears and
• any actions taken by that organ of state to recover arrears
Section 42 regulates the situation where the prices of bulk resources for the provi-
sion of municipal services increase.
42. Price increases of bulk resources for provision of municipal services.

(1) If a national or provincial organ of state which supplies water, electricity or any other bulk
resource as may be prescribed, to a municipality or municipal entity for the provision of
a municipal service, intends to increase the price of such resource for the municipality
or municipal entity, it must first submit the proposed amendment to its pricing structure
LGL3702/1 179
(a) to its executive authority within the meaning of the Public Finance Management
Act; and
(b) to any regulatory agency for approval, if national legislation requires such approval.
(2) The organ of state referred to in subsection (1) must, at least 40 days before making
a submission in terms of subsection (1)(a) or (b), request the National Treasury and
organised local government to provide written comments on the proposed amendment.
(3) Any submission in terms of subsection (1)(a) or (b) must be accompanied by
(a) a motivation of the reasons for the proposed amendment;
(b) an explanation of how the amendment takes account of
(i) the national government’s inflation targets and other macroeconomic policy
objectives;
(ii) steps taken by the organ of state to improve its competitiveness or efficiency
in order to reduce costs;
(iii) any objectives or targets as outlined in any corporate or other governance
plan applicable to that organ of state;
(c) any written comments received from the National Treasury, organised local gov-
ernment or any municipalities; and
(d) an explanation of how such comments have been taken into account.
(4) The executive authority of the organ of state must table the amendment and the docu-
ments referred to in subsection (3) in Parliament or the relevant provincial legislature,
as may be appropriate.
(5) Unless approved otherwise by the Minister, an amendment to a pricing structure which
is tabled in Parliament or the relevant provincial legislature
(a) on or before 15 March in any year, does not take effect for the affected municipali-
ties or municipal entities before 1 July in that year; or
(b) after 15 March in any year, does not take effect for the affected municipalities or
municipal entities before 1 July the next year.
Finally, whenever a dispute of a financial nature arises between organs of state, the
parties concerned must, as promptly as possible, take all reasonable steps that may
be necessary to resolve the matter out of court. If the National Treasury is not a party
to the dispute, the parties must report the matter to the National Treasury; and may
request the National Treasury to mediate between the parties or to designate a person
to mediate between them: section 44 headed “Disputes between organs of state”.
ACTIVITY 8.21
• The provision of bulk resources is regulated. Briefly explain the regulations pertaining
to bulk resources.
144 FEEDBACK
8.3.2.5 Municipal debt (Chapter 6 of the MFMA)

Section 45 of the MFMA regulates municipal short-term debt, while section 46
regulates long-term debt. Short-term debt is defined as debt payable over a period
not exceeding one year, while long-term debt is defined as debt repayable over a
period exceeding one year: section 1 of the MFMA.
Please note:
It is important to take note of when a municipality may incur debt.
180
45. Short-term debt.

(1) A municipality may incur short-term debt only in accordance with and subject to the
provisions of this Act and only when necessary to bridge
(a) shortfalls within a financial year during which the debt is incurred, in expectation of
specific and realistic anticipated income to be received within that financial year; or
(b) capital needs within a financial year, to be repaid from specific funds to be received
from enforceable allocations or long-term debt commitments.
(2) A municipality may incur short-term debt only if

(a) a resolution of the municipal council, signed by the mayor, has approved the debt
agreement; and
(b) the accounting officer has signed the agreement or other document, which creates
or acknowledges the debt.
(3) For the purpose of subsection (2)(a), a municipal council may
(a) approve a short-term debt transaction individually; or
(b) approve an agreement with a lender for a short-term credit facility to be accessed as
and when required, including a line of credit or bank overdraft facility, provided that
(i) the credit limit must be specified in the resolution of the council;
(ii) the terms of the agreement, including the credit limit, may be changed only
by a resolution of the council; and
(iii) if the council approves a credit facility that is limited to emergency use, the
accounting officer must notify the council in writing as soon as practical of
the amount, duration and cost of any debt incurred in terms of such a credit
facility, as well as options for repaying such debt.
(4) A municipality
(a) must pay off short-term debt within the financial year; and
(b) may not renew or refinance short-term debt, whether its own debt or that of any
other entity, where such renewal or refinancing will have the effect of extending
the short-term debt into a new financial year.
(5) (a) No lender may willfully extend credit to a municipality for the purpose of renewing
or refinancing short-term debt that must be paid off in terms of subsection (4)(a).
(b) If a lender willfully extends credit to a municipality in contravention of paragraph (a),
the municipality is not bound to repay the loan or interest on the loan.
(6) Subsection (5)(b) does not apply if the lender

(a) relied in good faith on written representations of the municipality as to the purpose
of the borrowing; and
(b) did not know and had no reason to believe that the borrowing was for the purpose
of renewing or refinancing short-term debt.
46. Long-term debt.

(1) A municipality may incur long-term debt only in accordance with and subject to any
applicable provisions of this Act, including section 19, and only for the purpose of
(a) capital expenditure on property, plant or equipment to be used for the purpose of
achieving the objects of local government as set out in section 152 of the Constitu-
tion, including costs referred to in subsection (4); or
(b) re-financing existing long-term debt subject to subsection (5).
(2) A municipality may incur long-term debt only if

(a) a resolution of the municipal council, signed by the mayor, has approved the debt
agreement; and
(b) the accounting officer has signed the agreement or other document, which creates
or acknowledges the debt.
(3) A municipality may incur long-term debt only if the accounting officer of the municipality
(a) has, in accordance with section 21A of the Municipal Systems Act
LGL3702/1 181
(i) at least 21 days prior to the meeting of the council at which approval for
the debt is to be considered, made public an information statement setting
out particulars of the proposed debt, including the amount of the proposed
debt, the purposes for which the debt is to be incurred and particulars of any
security to be provided; and
(ii) invited the public, the National Treasury and the relevant provincial treasury
to submit written comments or representations to the council in respect of
the proposed debt; and
(b) has submitted a copy of the information statement to the municipal council at least
21 days prior to the meeting of the council, together with particulars of
(i) the essential repayment terms, including the anticipated debt repayment
schedule; and
(ii) the anticipated total cost in connection with such debt over the repayment
period.
(4) Capital expenditure contemplated in subsection (1)(a) may include

(a) financing costs, including
(i)capitalised interest for a reasonable initial period;
(ii)costs associated with security arrangements in accordance with section 48;
(iii)discounts and fees in connection with the financing;
(iv) fees for legal, financial, advisory, trustee, credit rating and other services
directly connected to the financing; and
(v) costs connected to the sale or placement of debt, and costs for printing and
publication directly connected to the financing;
(b) costs of professional services directly related to the capital expenditure; and
(c) such other costs as may be prescribed.
(5) A municipality may borrow money for the purpose of re-financing existing long-term
debt, provided that
(a) the existing long-term debt was lawfully incurred;
(b) the re-financing does not extend the term of the debt beyond the useful life of the
property, plant or equipment for which the money was originally borrowed;
(c) the net present value of projected future payments (including principal and interest
payments) after re-financing is less than the net present value of projected future
payments before re-financing; and
(d) the discount rate used in projecting net present value referred to in paragraph (c),
and any assumptions in connection with the calculations, must be reasonable and
in accordance with criteria set out in a framework that may be prescribed.
(6) A municipality’s long-term debt must be consistent with its capital budget referred to
in section 17(2).
ACTIVITY 8.22
• Define both short-term debt and long-term debt and explain under which circumstances
a municipality may incur each.
145 FEEDBACK
• To answer this question we require you to study sections 45 and 46 and then to summarise
(using your own words) the content of each of these two sections concentrating on the
definition of each and the circumstances under which a municipality may incur each
of these two forms of debt.
Under section 47 headed “Conditions applying to both short-term and long-term

debt”, a municipality may incur debt only if the debt is denominated in rand and the
182
municipality provides security. A municipality may provide security for (a) any of its
debt; (b) for any debt obligations of a municipal entity under its sole control; or for
(c) contractual obligations of the municipality undertaken in connection with capital
expenditure by other persons on property, plant or equipment to be used by the
municipality or such “other person for the purpose of achieving the objects of local
government in terms of section 152 of the Constitution”: section 48(1) of the MFMA.
ACTIVITY 8.23
• Why do you think is it important for a municipality to provide security for its debt?
146 FEEDBACK
• This is a self-evaluation activity. However, introduce your answer with the provision of
a brief explanation of what a security is.
Section 48(2) lists the security options as follows:

(a) giving a lien on, or pledging, mortgaging, ceding or otherwise hypothecating, an asset
or right, or giving any other form of collateral;
(b) undertaking to effect payment directly from money or sources that may become avail-
able and to authorise the lender or investor direct access to such sources to ensure
payment of the secured debt or the performance of the secured obligations, but this
form of security may not affect compliance with section 8(2) [section 8(2) deals with the
moneys to be paid into a municipality’s primary bank account such as, amongst others,
income received by the municipality on its investment];
(c) undertaking to deposit funds with the lender, investor or third party as security;
(d) agreeing to specific payment mechanisms or procedures to ensure exclusive or dedicated
payment to lenders or investors, including revenue intercepts, payments into dedicated
accounts or other payment mechanisms or procedures;
(e) ceding, as security, any category of revenue or rights to future revenue;
(f) undertaking to have disputes resolved through mediation, arbitration or other dispute
resolution mechanisms;
(g) undertaking to retain revenues or specific municipal tariffs or other charges, fees or
funds at a particular level or at a level sufficient to meet its financial obligations;
(h) undertaking to make provision in its budgets for the payment of its financial obligations,
including capital and interest;
(i) agreeing to restrictions on debt that the municipality may incur in future until the secured
debt is settled or the secured obligations are met; and
(j) agreeing to such other arrangements as the municipality may consider necessary and
prudent.
ACTIVITY 8.24
• Summarise the different security options to enable you to write a note of explanation
on the different security options.
147 FEEDBACK
LGL3702/1 183
Please note:
It is important to note that, prior to authorising the security by means of a resolution,
the council must determine whether the asset or right with respect to which the security
is provided, is necessary for providing the minimum level of basic municipal services
(section 48(3)(a)). If so, it must indicate the manner in which the availability of the
asset or right for the provision of that minimum level of basic municipal services will
be protected (section 48(3)(b)). If the resolution has determined that the asset or right
is necessary for providing the minimum level of basic municipal services, the party
to whom the municipal security is provided may not, in the event of a default by the
municipality, deal with the asset or right in a manner that would preclude or impede
the continuation of that minimum level of basic municipal services (section 48(4)). A
determination that an asset or right is not necessary for providing the minimum level
of basic municipal services is binding on the municipality until the secured debt has
been paid in full or the secured obligations have been performed in full (section 48(5)).
8.3.2.6 Responsibilities of mayors in terms of the MFMA (Chapter 7 of the MFMA)

Take note of the following responsibilities: (Read these responsibilities carefully.)
• The mayor must submit, within 30 days of the end of each quarter, a report to the
council on the implementation of the budget and the financial state of affairs of
the municipality: section 52(a).
• The mayor must ensure that the municipality approves its annual budget before
the start of the budget year and that the municipality’s service delivery and budget
implementation plan is approved within 28 days of the approval of the budget:
section 53(1). This necessarily means that the mayor must always be in control
of the budget and must constantly check the financial statements. This helps to
identify financial problems in its earlier stages: section 54 headed “Budgetary
control and early identification of financial problems”.
The council of a municipality, which does not have a mayor, must designate a coun-
cillor to exercise the powers and duties assigned by the MFMA to a mayor: section
57 headed “Municipalities which do not have mayors”. However, the powers and
functions that the MFMA assigns to a mayor must, in the case of a municipality,
which has an executive committee, be exercised by the mayor in consultation with
the executive committee: section 58 (“Municipalities with executive committees”).
Please note:
You must take note of the provisions of section 59 dealing with the delegation of
mayoral powers.
Bekink (p 380) summarises this power of delegation as set out in section 59(1) as
follows:
• The executive mayor in terms of section 60(1) of that Act to another member of
the municipality’s mayoral committee in the case of a municipality, which has an
executive mayor referred to in section 55 of the Municipal Structures Act [dealing
with the election of mayors]
• The council of the municipality to another member of the executive committee in the
case of a municipality, which has an executive committee referred to in section 43
of the Structures Act [section 43 deals with the composition executive committees]
• The council to any other councillor in the case of a municipality, which has
designated a councillor in terms of section 57(1)
184
The following conditions are set out before any delegation can take place, namely
the delegation must be in writing; is subject to any limitations or conditions that the
executive mayor or council, as the case may be, may impose; and does not divest
the mayor of the responsibility concerning the exercise of delegated power or the
performance of the delegated duty (section 52(2)).
8.3.2.7 Responsibilities of municipal officials (Chapter 8 of the MFMA)

Section 60 of the MFMA provides that the municipal manager of a municipality is the
accounting officer of the municipality for the purposes of the MFMA.
Please note:
In Meadow Glen Home Owners Association and Others v City of Tshwane Metropoli-
tan Municipality and Another 2015 (2) SA 413 (SCA) the Supreme Court of Appeal
summarised the, what the Court called, “numerous legislative provisions” regarding
the administration of local authorities (par 23). The Court held:
There are numerous legislative provisions regarding the person or persons respon-
sible for the administration of local authorities. Section 82 of the Local Government:
Municipal Structures Act 117 of 1998 determines that the municipality must appoint
a municipal manager as the person responsible for the administration of the mu-
nicipality and such person will also be the accounting officer of the municipality. In
terms of s 56(3) of the same Act, the executive mayor, in performing his duties must
monitor the management of the municipality’s administration in accordance with the
direction of the municipal council (s 56(3)(d)) and oversee the provision of services
to communities in the municipality in a sustainable manner (s 56(3)(e)). Section 54A
of the Local Government: Municipal Systems Act 32 of 2000 also provides that the
municipal council must appoint a municipal manager as the head of administration of
the municipal council. Furthermore, s 55 sets out the responsibilities of the municipal
manager as head of the administration, subject to the policy directions of the municipal
council. Section 55(1)(b) determines that the municipal manager is responsible and
accountable for the management of the municipality’s administration.
ACTIVITY 8.25
• Using a table format list the legislative provisions dealing with the persons responsible
for the administration of local authorities as set out in the Meadow Glen Home Owners
Association and Others decision.
148 FEEDBACK
Section 61 sets out the “fiduciary responsibilities of accounting officers”. The ac-
counting officer of a municipality must (a) act with fidelity, honesty, integrity and in
the best interests of the municipality in managing its financial affairs. He/she must
also (b) disclose to the municipal council and the mayor all material facts, which are
available to the accounting officer and which in any way might influence the decisions
or actions of the council or the mayor; and must (c) seek to prevent any prejudice to
the financial interests of the municipality (section 61(1)). An accounting officer may
not act in a way that is inconsistent with the duties assigned to accounting officers of
LGL3702/1 185
municipalities in terms of this Act; or use the position of accounting officer for personal
gain or to improperly benefit another person: section 61(2)(a)–(b).
ACTIVITY 8.26
• Briefly explain, in your own words, the responsibilities of municipal accounting officers.
149 FEEDBACK
• This is obviously a self-evaluation activity. You are in essence required to list the
responsibilities of accounting offi cers when they deal with a municipality’s financial
aff airs.
ACTIVITY 8.27
• Do you think municipal accounting offi cers have certain societal duties that other
accounting offi cers (in private practice) do not have? Give a reason for your answer.
150 FEEDBACK
• This is a self-evaluation activity. Hint: Consider the duties of a municipality in relation
to its citizens when you answer this question.
Section 62 of the MFMA regulates the financial management functions as follows:

62. General financial management functions.
(1) The accounting officer of a municipality is responsible for managing the financial admin-
istration of the municipality and for this purpose must take all reasonable steps to ensure
(a) that the resources of the municipality are used effectively, efficiently and
economically;
(b) that full and proper records of the financial affairs of the municipality are kept in
accordance with any prescribed norms and standards;
(c) that the municipality has and maintains effective, efficient and transparent systems
(i) of financial and risk management and internal control; and
(ii) of internal audit operating in accordance with any prescribed norms and
standards;
(d) that unauthorised, irregular or fruitless and wasteful expenditure and other losses
are prevented;
(e) that disciplinary or, when appropriate, criminal proceedings are instituted against
any official of the municipality who has allegedly committed an act of financial
misconduct or an offence in terms of Chapter 15; and
(f) that the municipality has and implements
(i) a tariff policy referred to in section 74 of the Municipal Systems Act;
(ii) a rates policy as may be required in terms of any applicable national legislation;
(iii) a credit control and debt collection policy referred to in section 96(b) of the
Municipal Systems Act; and
(iv) a supply chain management policy in accordance with Chapter 11.
(2) The accounting officer is responsible for and must account for all bank accounts of the
municipality, including any bank account opened for
186
(a) any relief, charitable, trust or other fund set up by the municipality in terms of
section 12; or
(b) a purpose referred to in section 48(2)(d).
ACTIVITY 8.28
• Using your own words, summarise the functions of the accounting offi cer of a
municipality.
151 FEEDBACK
• This is a self-evaluation activity. You are in fact required to list the functions of an
accounting offi cer as set out in section 62.
In addition, sections 63–66 state that the accounting officer of a municipality is re-
sponsible for the management of that municipality’s assets, liabilities, revenue and
expenditure (including expenditure on staff benefits).
63. Asset and liability management.

(1) The accounting officer of a municipality is responsible for the management of
(a) the assets of the municipality, including the safeguarding and the maintenance of
those assets; and
(b) the liabilities of the municipality.
(2) The accounting officer must for the purposes of subsection (1) take all reasonable
steps to ensure
(a) that the municipality has and maintains a management, accounting and information
system that accounts for the assets and liabilities of the municipality;
(b) that the municipality’s assets and liabilities are valued in accordance with standards
of generally recognised accounting practice; and
(c) that the municipality has and maintains a system of internal control of assets and
liabilities, including an asset and liabilities register, as may be prescribed.
64. Revenue management.

(1) The accounting officer of a municipality is responsible for the management of the
revenue of the municipality.
(2) The accounting officer must for the purposes of subsection (1) take all reasonable
steps to ensure
(a) that the municipality has effective revenue collection systems consistent with
section 95 of the Municipal Systems Act and the municipality’s credit control and
debt collection policy;
(b) that revenue due to the municipality is calculated on a monthly basis;
(c) that accounts for municipal tax and charges for municipal services are prepared
on a monthly basis, or less often as may be prescribed where monthly accounts
are uneconomical;
(d) that all money received is promptly deposited in accordance with this Act into the
municipality’s primary and other bank accounts;
(e) that the municipality has and maintains a management, accounting and informa-
tion system, which
(i) recognises revenue when it is earned;
(ii) accounts for debtors; and
(iii) accounts for receipts of revenue;
(f) that the municipality has and maintains a system of internal control in respect of
debtors and revenue, as may be prescribed;
LGL3702/1 187
(g) that the municipality charges interest on arrears, except where the council has
granted exemptions in accordance with its budget-related policies and within a
prescribed framework; and
(h) that all revenue received by the municipality, including revenue received by any
collecting agent on its behalf, is reconciled at least on a weekly basis.
(3) The accounting officer must immediately inform the National Treasury of any payments
due by an organ of state to the municipality in respect of municipal tax or for municipal
services, if such payments are regularly in arrears for periods of more than 30 days.
(4) The accounting officer must take all reasonable steps to ensure
(a) that any funds collected by the municipality on behalf of another organ of state is
transferred to that organ of state at least on a weekly basis; and
(b) that such funds are not used for purposes of the municipality.
65. Expenditure management.

(1) The accounting officer of a municipality is responsible for the management of the
expenditure of the municipality.
(2) The accounting officer must for the purpose of subsection (1) take all reasonable steps
to ensure
(a) that the municipality has and maintains an effective system of expenditure control,
including procedures for the approval, authorisation, withdrawal and payment of
funds;
(b) that the municipality has and maintains a management, accounting and informa-
tion system, which
(i) recognises expenditure when it is incurred;
(ii) accounts for creditors of the municipality; and
(iii) accounts for payments made by the municipality;
(c) that the municipality has and maintains a system of internal control in respect of
creditors and payments;
(d) that payments by the municipality are made
(i) directly to the person to whom it is due unless agreed otherwise for reasons
as may be prescribed; and
(ii) either electronically or by way of non-transferable cheques, provided that
cash payments and payments by way of cash cheques may be made for
exceptional reasons only, and only up to a prescribed limit;
(e) that all money owing by the municipality be paid within 30 days of receiving the
relevant invoice or statement, unless prescribed otherwise for certain categories
of expenditure;
(f) that the municipality complies with its tax, levy, duty, pension, medical aid, audit
fees and other statutory commitments;
(g) that any dispute concerning payments due by the municipality to another organ
of state is disposed of in terms of legislation regulating disputes between organs
of state;
(h) that the municipality’s available working capital is managed effectively and eco-
nomically in terms of the prescribed cash management and investment framework;
(i) that the municipality’s supply chain management policy referred to in section 111
is implemented in a way that is fair, equitable, transparent, competitive and cost-
effective; and
(j) that all financial accounts of the municipality are closed at the end of each month
and reconciled with its records.
Section 66 deals with “expenditure on staff benefits” such as salaries and wages;
contributions for pensions and medical aid; travel, motor car, accommodation, sub-
sistence and other allowances; housing benefits and allowances, overtime payments;
loans and advances; and “any other type of benefit or allowance related to staff ”.
188
Please note:
The accounting officer must, in a format and for periods as may be prescribed, report
to the council on all expenditure incurred by the municipality per type of expenditure
(see above the various “types” of expenditure relating to salaries and allowances).
ACTIVITY 8.29
• Write a few paragraphs explaining municipal accounting offi cers’ duties with regard
to, (a) asset and liability management, (b) revenue management and (c) expenditure
management. In your description of the duties, you also have to refer to the steps
necessary to ensure that these duties/functions are fulfi lled in each case.
152 FEEDBACK
• This is a self-evaluation activity. This activity requires you to study and to write down
the provisions of sections 63–65. Take note too of the second part of the question –
to explain the steps necessary to ensure that these duties or functions are fulfi lled in
each case.
Please note:
The accounting officer of a municipality must also assist the mayor in performing the
budgetary functions assigned to the mayor in terms of Chapters 4 and 7 and must
provide the mayor with the administrative support, resources and information necessary
for the performance of those functions (section 68 of the MFMA – “Budget prepara-
tion”). In terms of section 69, the accounting officer of a municipality is responsible
for implementing the municipality’s approved budget (section 69(1)). In doing so the
accounting officer must take “all reasonable steps” to ensure that the spending of
funds is in accordance with the budget and is reduced as necessary when revenue
is anticipated to be less than projected in the budget or in the service delivery and
budget implementation plan (subsection (1)(a)). And (b), that revenue and expenditure
are properly monitored. When necessary, the accounting officer must prepare an
adjustments budget and submit it to the mayor for consideration and tabling in the
municipal council (subsection (2)). The accounting officer must no later than 14 days
after the approval of an annual budget, submit to the mayor (a) a draft service deliv-
ery and budget implementation plan for the budget year along with (b) drafts of the
annual performance agreements for the municipal manager and all senior managers
as provided for in section 57(1)(b) Systems Act (subsection (3)).
In terms of section 70 (“Impending shortfalls, overspending and overdrafts”), the ac-

counting officer must report in writing to the municipal council shortfalls in budgeted
revenue and overspending of the municipality’s budget. The accounting officer must
also inform the council of the steps taken to prevent such shortfalls or overspending.
If the balance of a municipality’s bank account shows a net overdrawn position for a
period exceeding a prescribed period, the accounting officer of the municipality must
promptly notify the National Treasury.
Section 71 requires that the accounting officer must provide monthly budget state-
ments to the mayor in the following manner: (Read this section carefully.)
LGL3702/1 189
71. Monthly budget statements.
(1) The accounting officer of a municipality must by no later than 10 working days after the
end of each month submit to the mayor of the municipality and the relevant provincial
treasury a statement in the prescribed format on the state of the municipality’s budget
reflecting the following particulars for that month and for the financial year up to the
end of that month:
(a) actual revenue, per revenue source;
(b) actual borrowings;
(c) actual expenditure, per vote;
(d) actual capital expenditure, per vote;
(e) the amount of any allocations received;
(f) actual expenditure on those allocations, excluding expenditure on
(i) its share of the local government equitable share; and
(ii) allocations exempted by the annual Division of Revenue Act from compliance
with this paragraph; and
(g) when necessary, an explanation of

(i) any material variances from the municipality’s projected revenue by source,
and from the municipality’s expenditure projections per vote;
(ii) any material variances from the service delivery and budget implementation
plan; and
(iii) any remedial or corrective steps taken or to be taken to ensure that projected
revenue and expenditure remain within the municipality’s approved budget.
(2) The statement must include

(a) a projection of the relevant municipality’s revenue and expenditure for the rest of
the financial year, and any revisions from initial projections; and
(b) the prescribed information relating to the state of the budget of each municipal
entity as provided to the municipality in terms of section 87(10).
(3) The amounts reflected in the statement must in each case be compared with the cor-
responding amounts budgeted for in the municipality’s approved budget.
The submission of a mid-year budget is regulated by section 72 of the MFMA (“Mid-

year budget and performance”). Accordingly, the accounting officer of a municipality
must assess, by 25 January of each year, the performance of the municipality during
the first half of the financial year, considering the following into account
• the monthly statements;

• the municipality’s service delivery performance;
• the past year’s annual report and its progress on resolving problems identified in
the annual report; and, finally,
• the performance of every municipal entity under the sole or shared control of the
municipality (section 75(1)(a)).
The accounting officer must submit a report on such assessment to the mayor of
the municipality, the National Treasury and the relevant provincial treasury (section
75(1)(b)).
In terms of section 75, the accounting officer of a municipality must place the follow-
ing documents on the municipality’s website:
• the annual and adjustments budgets and all budget-related documents

• all budget-related policies
• the annual report
• all performance agreements required in respect of all service delivery agreements
• all long-term borrowing contracts
• all supply chain management contracts above a prescribed value
190
• an information statement containing a list of assets over a prescribed value that

have been disposed of during the previous quarter
• public-private partnership agreements
• all quarterly reports tabled in the council
• any other documents that must be placed on the website in terms of the MFMA
or any other applicable legislation
ACTIVITY 8.30
• Why do you think should the municipality place these documents on the website and
make it public?
153 FEEDBACK
ACTIVITY 8.31
• Does the public, in general, have any interest in the aff airs of local government?
154 FEEDBACK
• This is a self-evaluation activity. Hint: Consider the tariff s the community is required
to fork out.
The top management of a municipality’s administration consists of

(a) the accounting officer;
(b) the chief financial officer;
(c) all senior managers responsible for managing the respective votes of the municipality
“and to whom powers and duties for this purpose have been delegated in terms of sec-
tion 79 [section 79 deals with delegations]; and
(d) any other senior officials designated by the accounting officer: section 77(1) of the MFMA.
Please note:
In terms of section 78 of the MFMA (“Senior managers and other officials of munici-
palities”), each senior manager of a municipality and each official of a municipality
exercising financial management responsibilities must take all reasonable steps within
their respective areas of responsibility to ensure:
• that the system of financial management and internal control established for the
municipality is carried out diligently
• that the financial and other resources of the municipality are utilised effectively,
efficiently, economically and transparently
• that any unauthorised, irregular or fruitless and wasteful expenditure and any
other losses are prevented
• that all revenue due to the municipality is collected
• that the assets and liabilities of the municipality are managed effectively and that
assets are safeguarded and maintained to the extent necessary
LGL3702/1 191
• that all information required by the accounting officer for compliance with the
provisions of this Act is timeously submitted to the accounting officer
• that the provisions of this Act, to the extent applicable to that senior manager or
official, including any delegations are complied with
ACTIVITY 8.32
• Summarise the functions of each senior manager and each offi cial to ensure proper
financial management.
155 FEEDBACK
Section 79 of the MFMA regulates the delegation of functions. (Read this section carefully.)
79. Delegations.
(1) The accounting officer of a municipality-
(a) must, for the proper application of this Act in the municipality’s administration,
develop an appropriate system of delegation that will both maximise administra-
tive and operational efficiency and provide adequate checks and balances in the
municipality’s financial administration;
(b) may, in accordance with that system, delegate to a member of the municipality’s
top management referred to in section 77 or any other official of the municipality
(i) any of the powers or duties assigned to an accounting officer in terms of
this Act; or
(ii) any powers or duties reasonably necessary to assist the accounting officer
in complying with a duty which requires the accounting officer to take reason-
able or appropriate steps to ensure the achievement of the aims of a specific
provision of this Act; and
(c) must regularly review delegations issued in terms of paragraph (b) and, if neces-
sary, amend or withdraw any of those delegations.
(2) The accounting officer may not delegate to any political structure or political office-
bearer of the municipality any of the powers or duties assigned to accounting officers
in terms of this Act.
(b) is subject to such limitations and conditions as the accounting officer may impose
in a specific case;
(c) may be either to a specific individual or to the holder of a specific post in the
municipality;
(d) may, in the case of a delegation to a member of the municipality’s top management
in terms of subsection (1)(b), authorise that member to sub-delegate the delegated
power or duty to an official or the holder of a specific post in that member’s area
of responsibility; and
(e) does not divest the accounting officer of the responsibility concerning the exercise
(4) The accounting officer may confirm, vary or revoke any decision taken in consequence
of a delegation or sub-delegation in terms of this section, but no such variation or
revocation of a decision may detract from any rights that may have accrued as a result
of the decision.
192
8.3.2.8 Municipal budget and treasury offices (Chapter 9 of the MFMA)

Every municipality must have a budget and treasury office (section 80(1)). A budget
and treasury office consists of a chief financial officer designated by the accounting
officer of the municipality; officials of the municipality allocated by the accounting of-
ficer to the chief financial officer; and any other persons contracted by the municipality
for the work of the office (section 80(2)(a)–(c)).
Please note:
Take careful note of the duties of the chief financial officer listed below (“Role of chief
financial officer”). In terms of section 81(1), the chief financial officer of a municipality:
• is administratively in charge of the budget and treasury office

• must advise the accounting officer on the exercising of powers and duties assigned
to the accounting officer
• must assist the accounting officer in the administration of the municipality’s bank
accounts and in the preparation and implementation of the municipality’s budget
• must advise senior managers and other senior officials in the exercising of powers
and duties assigned to them or delegated to them
• must perform such budgeting, accounting, analysis, financial reporting, cash
management, debt management, supply chain management, financial management,
review and other duties as may be delegated by the accounting officer to the chief
financial officer
In terms of section 82, the chief financial officer of a municipality may sub-delegate
any of the duties to an official in the budget and treasury office; to the holder of a
specific post in that office; or to any other official of the municipality; or any person
contracted by the municipality for the work of the office.
8.3.3 Municipal entities (Chapter 10 of the MFMA)

Municipalities can decide not to outsource municipal services in which case they
can provide such services themselves – either through a dedicated department or
through corporatisation. By means of corporatisation a municipal entity is created,
which remains under the control of the municipality. Corporatisation is defined (in
the White Paper on Local Government) as the separation of service delivery units
from the council.
ACTIVITY 8.33
• (a) Define a municipal entity and (b) explain its purpose.
156 FEEDBACK
ACTIVITY 8.34
• Do you think it is a good idea for big municipalities to create municipal entities?
LGL3702/1 193
157 FEEDBACK
• This is obviously a self-evaluation activity. Remember to provide a considered opinion
– provide reasons for your answer.
8.3.3.1 Establishment
The establishment of a municipal entity and the financial implications in this regard
are regulated by section 84 (the section is headed “Financial implications for munici-
palities” [of the establishment of municipal entities) of the MFMA.
Please note:
You should study this section.
84. Financial implications for municipalities.

(1) When considering the establishment of, or participation in, a municipal entity, a mu-
nicipality must first
(a) determine precisely the function or service that such entity would perform on
behalf of the municipality; and
(b) 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
(i) the number of staff of the municipality to be transferred to the entity;
(ii) the number of staff of the municipality that would become redundant because
of the shifting of that function or service;
(iii) the cost to the municipality of any staff retrenchments or the retention of
redundant staff;
(iv) any assets of the municipality to be transferred to the entity;
(v) any assets of the municipality that would become obsolete because of the
shifting of that function or service;
(vi) any liabilities of the municipality to be ceded to the entity; and
(vii) any debt of the municipality attributed to that function or service, which the
municipality would retain.
(2) A municipality may establish or participate in a municipal entity only if

(a) the municipal manager, at least 90 days before the meeting of the municipal council
at which the proposed establishment of the entity, or the municipality’s proposed
participation in the entity, is to be approved
(i) has, in accordance with section 21A of the Municipal Systems Act
(aa) made public an information statement setting out the municipality’s
plans for the municipal entity together with the assessment which the
municipality must conduct in terms of subsection (1); and
(bb) invited the local community, organised labour and other interested
persons to submit to the municipality comments or representations in
respect of the matter; and
(ii) has solicited the views and recommendations of
(aa) the National Treasury and the relevant provincial treasury;

(bb) the national and provincial departments responsible for local govern-
ment; and
(cc) the MEC for local government in the province; and
(b) the municipal council has taken into account
(i) the assessment referred to in subsection (1);

(ii) any comments or representations on the matter received from the local com-
munity, organised labour and other interested persons;
194
(iii) any written views and recommendations on the matter received from the
National Treasury, the relevant provincial treasury, the national department
responsible for local government or the MEC for local government in the
province.
(3) For the purposes of this section, “establish” includes the acquisition of an interest in a
private company that would render that private company a municipal entity.
ACTIVITY 8.35
• Summarise (a) how to establish municipal entities and (b) what must be considered
when establishing such entities.
158 FEEDBACK
• This is a self-evaluation activity. It merely requires you to summarise how municipal
entities are established and what to consider when establishing such entities. The
activity serves as an aid to help you to remember these two aspects.
8.3.3.2 Financial governance

A municipal entity must open and maintain at least one bank account in the name of
the entity (section 85(1)). All money received by a municipal entity must be paid into
its bank account or accounts, and this must be done promptly and in accordance with
any requirements that may be prescribed (section 85(2)). Money may be withdrawn
from a municipal entity’s bank account only in accordance with requirements that
may be prescribed (section 85(4)). The accounting officer of a municipal entity must
administer all the entity’s bank accounts and is accountable to the board of directors
of the entity for the entity’s bank accounts (section 85(5)).
The accounting officer of a municipal entity must submit to the entity’s parent munici-
pality in writing the name of the bank where the account has been opened, and the
type and number of the account; and annually before the start of a financial year, the
name of each bank where the entity holds a bank account; and the type and number
of each account (section 86(1)).
Section 87 regulates the budget of a municipal entity. (Carefully read these

requirements.)
87. Budgets.
(1) The board of directors of a municipal entity must submit, for each financial year, a
proposed budget for the entity to its parent municipality no later than 150 days before
the start of the entity’s financial year or earlier if requested by the parent municipality.
(2) The parent municipality must consider the proposed budget of the entity and assess
the entity’s priorities and objectives. If the parent municipality makes any recommenda-
tions on the proposed budget, the board of directors of the entity must consider those
recommendations and, if necessary, submit a revised budget to the parent municipality
no later than 100 days before the start of the financial year.
(3) The mayor of the parent municipality must table the proposed budget of the municipal
entity in the council when the annual budget of the municipality for the relevant year
is tabled.
(4) The board of directors of a municipal entity must approve the budget of the municipal
entity no later than 30 days before the start of the financial year, taking into account
any hearings or recommendations of the council of the parent municipality.
(5) The budget of a municipal entity must
LGL3702/1 195
(a) be balanced;
(b) be consistent with any service delivery agreement or other agreement between
the entity and the entity’s parent municipality;
(c) be within any limits determined by the entity’s parent municipality, including any
limits on tariffs, revenue, expenditure and borrowing;
(d) include a multi-year business plan for the entity that
(i) sets key financial and non-financial performance objectives and measure-
ment criteria as agreed with the parent municipality;
(ii) is consistent with the budget and integrated development plan of the entity’s
parent municipality;
(iii) is consistent with any service delivery agreement or other agreement between
the entity and the entity’s parent municipality; and
(iv) reflects actual and potential liabilities and commitments, including particulars
of any proposed borrowing of money during the period to which the plan
relates; and
(e) otherwise comply with the requirements of section 17(1) and (2) to the extent that
such requirements can reasonably be applied to the entity.
(6) The board of directors of a municipal entity may revise, with the approval of the mayor,
the budget of the municipal entity, but only for the following reasons:
(a) To adjust the revenue and expenditure estimates downwards if there is material
under-collection of revenue during the current year;
(b) to authorise expenditure of any additional allocations to the municipal entity from
its parent municipality;
(c) to authorise, within a prescribed framework, any unforeseeable and unavoidable
expenditure approved by the mayor of the parent municipality;
(d) to authorise any other expenditure within a prescribed framework.
(7) Any projected allocation to a municipal entity from its parent municipality must be
provided for in the annual budget of the parent municipality, and to the extent not so
provided, the entity’s budget must be adjusted.
(8) A municipal entity may incur expenditure only in accordance with its approved budget
or an adjustments budget.
(9) The mayor must table the budget or adjusted budget and any adjustments budget of
a municipal entity as approved by its board of directors, at the next council meeting
of the municipality.
(10) A municipal entity’s approved budget or adjusted budget must be made public in sub-
stantially the same way as the budget of a municipality must be made public.
(11) The accounting officer of a municipal entity must by no later than seven working days
after the end of each month submit to the accounting officer of the parent municipality
a statement in the prescribed format on the state of the entity’s budget reflecting the
following particulars for that month and for the financial year up to the end of that month:
(a) Actual revenue, per revenue source;
(b) actual borrowings;
(c) actual expenditure;
(d) actual capital expenditure;
(e) the amount of any allocations received;
(f)actual expenditure on those allocations, excluding expenditure on allocations
exempted by the annual Division of Revenue Act from compliance with this para-
graph; and
(g) when necessary, an explanation of
(i) any material variances from the entity’s projected revenue by source, and
from the entity’s expenditure projections;
(ii) any material variances from the service delivery agreement and the busi-
ness plan; and
(iii) any remedial or corrective steps taken or to be taken to ensure that projected
revenue and expenditure remain within the entity’s approved budget.
(12) The statement must include a projection of revenue and expenditure for the rest of the
financial year, and any revisions from initial projections.
(13) The amounts reflected in the statement must in each case be compared with the cor-
responding amounts budgeted for in the entity’s approved budget.
196
(14) The statement to the accounting officer of the municipality must be in the form of a
signed document and in electronic format.
Section 88 of the MFMA headed “Mid-year budget and performance assessment”,

requires that the accounting officer of a municipal entity must submit a mid-year
budget and performance assessment. By end January of each year, the accounting
officer must assess the performance of the entity during the first half of the financial
year. The accounting officer must consider the monthly statements for the first half
of the financial year and the targets set in the service delivery, business plan or other
agreement with the entity’s parent municipality; and the entity’s annual report for the
past year; and progress on resolving problems identified in the annual report. The
accounting officer must submit a report on such assessment to the board of directors
of the entity and to the parent municipality of the entity (section 88(1)). This report
must be made public (section 88(2)).
Section 89 regulates the remuneration packages of municipal entities. Accord-

ing to this section, the parent municipality of a municipal entity must determine the
upper limits of the salary, allowances and other benefits of the chief executive officer
and senior managers of the entity; and ensure that the municipal entity reports to
the council on all expenditure incurred on directors and staff remuneration matters
(section 89(a)). The disclosure must distinguish between the following (section 89(b)):
• salaries and wages

• contributions for pensions and medical aid
• travel, motor car, accommodation, subsistence and other allowances
• housing benefits and allowances
• overtime payments
• loans and advances
• any other type of benefit or allowance related to directors and staff
The disposal of a municipal entity’s capital assets is regulated by section 90 of

the MFMA. According to this section, a municipal entity may not dispose of a capital
asset needed to provide the minimum level of basic municipal services: section 90(1).
ACTIVITY 8.36
• Can you think of an example of such a capital asset (i.e. “fi xed asset”) that is essential
for the provision of basic services?
159 FEEDBACK
• This is a self-evaluation activity. We gave you a hint by providing you with a synonym
to such an asset.
A municipal entity may dispose of a capital asset other than an asset contemplated
in section 90(1), but only after the council of its parent municipality has decided that
the asset is not needed to provide the minimum level of basic municipal services.
A municipal council may delegate to the accounting officer of a municipal entity its
power to make these determinations in respect of movable capital assets below a
value determined by the council.
LGL3702/1 197
Please note:
The Auditor-General must audit and report on the accounts, financial statements and
financial management of each municipal entity (section 92 of the MFMA).
8.3.3.3 Accounting officers

In terms of section 93, the chief executive officer of a municipal entity appointed
under the provisions of section 93J of the Systems Act is the accounting officer of
the entity. The accounting officer of a municipal entity must exercise utmost care to
ensure reasonable protection of the assets and records of the entityact with fidelity,
honesty, integrity and in the best interest of the entity in managing its financial affairs;
disclose to the entity’s parent municipality and its board of directors all material facts,
which in any way may influence the decisions or actions of the parent municipality or
the board of directors; and seek to prevent any prejudice to the financial interests of
the parent municipality or the municipal entity (section 94).
In terms of section 95 (“General financial management functions of accounting of-

ficers”), the accounting officer of a municipal entity is responsible for managing the
financial administration of the entity, and must for this purpose take all reasonable
steps to ensure that:
• the resources of the entity are used effectively, efficiently, economically and
transparently
• full and proper records of the financial affairs of the entity are kept
• the entity has and maintains effective, efficient and transparent systems
• irregular, and fruitless and wasteful expenditure and other losses are prevented
• expenditure is in accordance with the operational policies of the entity
• disciplinary or, when appropriate, criminal proceedings are instituted against any
official of the entity who has allegedly committed an act of financial misconduct
or an offence
Sections 96 (“Asset and liability management”); 97 (“Revenue management”); 98

(“Monthly reconciliation of revenue and accounts”); and, section 99 (“Expenditure
management”) of the MFMA provide that the accounting officer of a municipal entity
is responsible for the management of the assets, liabilities, revenue and expenditure
of the entity.
Please note:
Take note of the steps that the accounting officer should take to give adequate effect
to these duties.
Finally, the accounting officer of a municipal entity is responsible for implementing

the entity’s budget, including taking effective and appropriate steps to ensure that
the spending of funds is in accordance with the budget; revenue and expenditure are
properly monitored; and spending is reduced as necessary when revenue is antici-
pated to be less than projected in the budget: section 100 (“Budget implementation”).
8.3.3.4 Reports and reportable matters

According to section 101 of the MFMA, the accounting officer of a municipal entity
must report to the board of directors of the entity and to the accounting officer of the
entity’s parent municipality any financial problems of the entity, including in terms of
subsection (1)(a) any impending or actual –
198
• under-collection of revenue due

• shortfalls in budgeted revenue
• overspending of the entity’s budget
• delays in the entity’s payments to any creditors
• overdraft in any bank account of the entity for a period exceeding 21 days
In terms of subsection (1)(b), the accounting officer must report any steps taken to
rectify such financial problems. The accounting officer of the municipality must also
table a report at the next meeting of the municipal council (subsection (2)).
On discovery of any irregular expenditure or any fruitless and wasteful expenditure, the
board of directors of a municipal entity must promptly report the following to the mayor
and municipal manager of the entity’s parent municipality and the Auditor-General:
• particulars of the expenditure

• any steps that have been taken to recover the expenditure and to prevent a
recurrence of the expenditure (section 102)
The board of directors of a municipal entity must promptly report to the South African
Police Service any irregular expenditure that may constitute a criminal offence as
well as all other losses suffered by the municipal entity, which have resulted from
suspected criminal conduct: section 102(2).
8.3.3.5 Other officials of municipal entities

Section 105 (“Duties of other officials”) of the MFMA requires that each official of
a municipal entity exercising financial management responsibilities must take all
reasonable steps within that official’s area of responsibility to ensure the following:
• that the system of financial management and internal control established for the
entity is carried out diligently
• that the financial and other resources of the entity are utilised effectively, efficiently,
economically and transparently
• that any irregular expenditure, fruitless and wasteful expenditure and other losses
are prevented
• that all revenue due to the entity is collected
• that the provisions of this Act to the extent applicable to that official, including any
delegations are complied with
• that the assets and liabilities of the entity are managed effectively and that assets
are safeguarded and maintained to the extent necessary (section 105(1))
Section 106 regulates the delegation of powers and duties by accounting officers.
(Read this section carefully.)
106. Delegation of powers and duties by accounting officers.

(1) The accounting officer of a municipal entity
(a) may delegate to an official of that entity
(i) any of the powers or duties assigned or delegated to the accounting officer
in terms of this Act; or
(ii) any powers or duties reasonably necessary to assist the accounting officer
in complying with a duty which requires the accounting officer to take reason-
able or appropriate steps to ensure the achievement of the aims of a specific
provision of this Act; and
(b) must regularly review delegations issued in terms of paragraph (a) and, if neces-
sary, amend or withdraw any of those delegations.
LGL3702/1 199
(b) is subject to any limitations and conditions the accounting officer may impose;
(c) may be either to a specific individual or to the holder of a specific post in the mu-
nicipal entity; and
(d) does not divest the accounting officer of the responsibility concerning the exercise
(3) An accounting officer may confirm, vary or revoke any decision taken by an official
in consequence of a delegation in terms of subsection (1), but no such variation or
revocation of a decision may detract from any rights that may have accrued as a result
of the decision.
Please note:
A municipal entity can borrow money in terms of section 108 of the MFMA but only
in accordance with “(a) the entity’s multi-year business plan …; and (b) the provisions
of chapter 6 [chapter 6 deals with debt] to the extent that those provisions can be
applied to a municipal entity”.
Section 109 regulates the position where a municipal entity experiences financial
problems (“serious or persistent financial problems”) and the board of directors fails
to act effectively. In such a case, the parent municipality must choose to either take
appropriate steps in terms of its rights and powers over that entity; impose a financial
recovery plan; or liquidate and disestablish the entity.
8.3.4 Goods and services (chapter 11 of the MFMA)

8.3.4.1 Supply chain management
This part of the MFMA applies to the procurement by a municipality or municipal entity
of goods and services; the disposal by a municipality or municipal entity of goods
no longer needed; the selection of contractors to provide assistance in the provision
of municipal services; and the selection of external mechanisms for the provision of
municipal services (section 110(1)). However, this part of the MFMF does not apply
if a municipality or municipal entity contracts with another organ of state for these
purposes (section 110(2)). In terms of section 111 all municipalities and municipal
entities must “have and implement” a supply chain management policy.
Section 112 of the MFMA determines the prescribed framework with which the policy
should comply.
112. Supply chain management policy to comply with prescribed framework.

(1) The supply chain management policy of a municipality or municipal entity must be fair,
equitable, transparent, competitive and cost-effective and comply with a prescribed
regulatory framework for municipal supply chain management, which must cover at
least the following:
(a) The range of supply chain management processes that municipalities and mu-
nicipal entities may use, including tenders, quotations, auctions and other types
of competitive bidding;
(b) when a municipality or municipal entity may or must use a particular type of process;
(c) procedures and mechanisms for each type of process;
(d) procedures and mechanisms for more flexible processes where the value of a
contract is below a prescribed amount;
(e) open and transparent pre-qualification processes for tenders or other bids;
(f) competitive bidding processes in which only pre-qualified persons may participate;
(g) bid documentation, advertising of and invitations for contracts;
(h) procedures and mechanisms for
200
(i) the opening, registering and recording of bids in the presence of interested
persons;
(ii) the evaluation of bids to ensure best value for money;
(iii) negotiating the final terms of contracts; and
(iv) the approval of bids;
(i) screening processes and security clearances for prospective contractors on tenders
or other bids above a prescribed value;
(j) compulsory disclosure of any conflicts of interest prospective contractors may
have in specific tenders and the exclusion of such prospective contractors from
those tenders or bids;
(k) participation in the supply chain management system of persons who are not of-
ficials of the municipality or municipal entity, subject to section 117 [section 117
deals with the barring of councillors to sit on tender committees];
(l) the barring of persons from participating in tendering or other bidding processes,
including persons
(i) who were convicted for fraud or corruption during the past five years;
(ii) who willfully neglected, reneged on or failed to comply with a government
contract during the past five years; or
(iii) whose tax matters are not cleared by South African Revenue Service;
(m) measures for

(i) combating fraud, corruption, favouritism and unfair and irregular practices
in municipal supply chain management; and
(ii) promoting ethics of officials and other role-players involved in municipal
supply chain management;
(n) the invalidation of recommendations or decisions that were unlawfully or improp-

erly made, taken or influenced, including recommendations or decisions that were
made, taken or in any way influenced by
(i) councillors in contravention of item 5 or 6 of the Code of Conduct for Council-
lors set out in Schedule 1 to the Municipal Systems Act; or
(ii) municipal officials in contravention of item 4 or 5 of the Code of Conduct for
Municipal Staff Members set out in Schedule 2 to that Act;
(o) the procurement of goods and services by municipalities or municipal entities

through contracts procured by other organs of state;
(p) contract management and dispute settling procedures; and
(q) the delegation of municipal supply chain management powers and duties, includ-
ing to officials.
ACTIVITY 8.37
• Why do you think is it important for a municipality to have a policy that regulates the
procurement of goods and services?
160 FEEDBACK
• This is a self-evaluation activity. Hint: Consider amongst others the pertinent provision
of the Constitution (section 217). The point of this exercise is to make you think about
the importance of such a policy and the reason for its importance.
ACTIVITY 8.38
• Why should the process of acquiring goods and services be open and transparent?
LGL3702/1 201
161 FEEDBACK
• Once again, this is a self-evaluation activity. Hint: Consider the importance of proper
“competition” in the acquisition of goods and services. Are there any reasons you can
think of?
ACTIVITY 8.39
• Since you need to study section 112, summarise the provisions of the section to assist
you in coming to grips with the content of this section. Set out (a) the requirements for
such a chain management policy and then (b) the elements such a policy must contain.
162 FEEDBACK
The accounting officer of a municipality or municipal entity must implement the supply
chain management policy of the municipality or municipal entity. He/she must also
take all reasonable steps to ensure that proper mechanisms and separation of duties
in the supply chain management system are in place so as to minimise the likelihood
of fraud, corruption, favouritism and unfair and irregular practices (section 115 of the
MFMA (“Implementation of system”).
Please note:
A municipality or municipal entity is not obliged to consider an unsolicited bid received
outside its normal bidding process (section 113(1) – “unsolicited bids”). However, if
a municipality or municipal entity decides to consider an unsolicited bid received
outside a normal bidding process, it may do so only in accordance with a prescribed
framework (section 113(2)). The framework must strictly regulate and limit the power
of municipalities and municipal entities to approve unsolicited bids received outside
their normal tendering or other bidding processes (section 113(3)).
If a tender other than the one recommended in the normal course of implementing
the supply chain management policy of a municipality or municipal entity is approved,
the accounting officer of the municipality or municipal entity must notify the Auditor-
General, the relevant provincial treasury and the National Treasury and, in the case
of a municipal entity, also the parent municipality, of the reasons for deviating from
such recommendation (section 114 – “approval of tenders not recommended). Section
114(2) provides that subsection (1) does not apply “if a different tender was approved
in order to rectify an irregularity”.
Section 116 of the MFMA deals with “contracts and contract management” and
regulates the particulars of a contract or agreement procured through the supply
chain management system. The contract must be in writing; and must stipulate the
terms and conditions of the contract or agreement, which must include provisions
providing for the following:
• the termination of the contract or agreement in the case of non- or under-performance

• dispute resolution mechanisms to settle disputes between the parties
• a periodic review of the contract or agreement once every three years in the case
of a contract or agreement for longer than three years (section 116(1)
202
The accounting officer of a municipality must:
• ensure that a contract procured through the supply chain management policy of
the municipality is properly enforced
• monitor, on a monthly basis, the performance of the contractor
• establish capacity in the administration of the municipality to assist the accounting
officer in carrying out these duties
• report to the council of the municipality on the management of the contract and
the performance of the contractor
ACTIVITY 8.40
• Write a short paragraph explaining the required provisions in procurement contracts

and list the duties of the accounting offi cer in this regard.
163 FEEDBACK
• This is obviously a self-evaluation activity. It merely requires you to summarise the
preceding paragraph(s).
A contract procured through the supply chain management policy of the municipality
may be amended by the parties, but only after the reasons for the proposed amend-
ment have been tabled in the council of the municipality and the local community has
been given reasonable notice of the intention to amend the contract and has been
invited to submit representations to the municipality (section 116(3) of the MFMA).
Section 118 provides that no person may interfere with the supply chain management
system of a municipality, or amend or tamper with any tenders, quotations, contracts
or bids after their submission.
8.3.4.2 Public-private partnerships

Section 120 of the MFMA (“Conditions and process for public-private partnerships”)
regulates the conditions and process for the establishment of a public-private
partnership.
Section 120(1) requires that a municipality may enter into a public-private partner-
ship agreement, but only if the municipality can demonstrate that the 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
A public-private partnership agreement must comply with any prescribed regulatory

framework for public-private partnerships (section 120(2)).
Section 120(4) states that, before a public-private partnership is concluded, the municipality
must conduct a feasibility study that:
(a) explains the strategic and operational benefits of the public-private partnership for the
municipality in terms of its objectives;
(b) describes in specific terms:
(i) the nature of the private party’s role in the public-private partnership;
LGL3702/1 203
(ii) the extent to which this role, both legally and by nature, can be performed by a
private party; and
(iii) how the proposed agreement will:
(aa) provide value for money to the municipality;
(bb) be affordable for the municipality;
(cc) transfer appropriate technical, operational and financial risks to the private
party; and
(dd) impact on the municipality’s revenue flows and its current and future budgets;
(c) takes into account all relevant information; and

(d) explains the capacity of the municipality to effectively monitor, manage and enforce
the agreement.
ACTIVITY 8.41
• Summarise the contents of any feasibility study that must precede the entering into of
a public-private partnership.
164 FEEDBACK
This section further provides that, when a feasibility study has been completed, the
accounting officer of the municipality must submit the report on the feasibility study
to the council for a decision on whether the municipality should continue with the
proposed public-private partnership. Additionally, the officer must make public par-
ticulars of the proposed public-private partnership and invite the local community and
other interested persons to submit comments or representations to the municipality
in respect of the proposed public-private partnership. The officer must also solicit
the views and recommendations of the National Treasury; the national department
responsible for local government; and, if the public-private partnership involves the
provision of water, sanitation, electricity or any other service as may be prescribed,
the responsible national department as well as any other national or provincial organ
of state as may be prescribed (section 120(6)).
8.3.5 Financial reporting and auditing (chapter 12 of the MFMA)

In terms of section 121 of the MFMA (“Preparation and adoption annual reports”),
every municipality and every municipal entity must prepare an annual report in respect
of each financial year. The council of a municipality must deal with its annual report
and that of any municipal entity under its sole or shared control within nine months
of the end of a financial year (section 120(1)).
The purpose of an annual report is (section 120(2)):
• to provide a record of the activities of the municipality or municipal entity during

the financial year to which the report relates
• to provide a report on performance against the budget of the municipality or
municipal entity for that financial year
• to promote accountability to the local community for the decisions made throughout
the year by the municipality or municipal entity
The annual report of a municipality must include (section 120(3)(a)–(k)):
204
• the annual financial statements of the municipality

• the Auditor-General’s audit report on the financial statements
• the annual performance report of the municipality prepared by the municipality in
terms of section 46 of the Systems Act
• the Auditor-General’s audit report in terms of section 45(b) of the Systems Act
• an assessment by the municipality’s accounting officer of any arrears on municipal
taxes and service charges
• an assessment by the municipality’s accounting officer of the municipality’s
performance against the measurable performance objectives for revenue collection
from each revenue source and for each vote in the municipality’s approved budget
for the relevant financial year
• particulars of any corrective action taken or to be taken in response to issues
raised in the audit reports of the Auditor-General
• any explanations that may be necessary to clarify issues in connection with the
financial statements
• any information as determined by the municipality
• any recommendations by the municipality’s audit committee; and
• any other information as may be prescribed
The annual report of a municipal entity must include (section 120(4)(a)–(h)):
• the annual financial statements of the entity

• the Auditor-General’s report on those statements
• an assessment by the entity’s accounting officer of any arrears on municipal taxes
and service charges
• an assessment by the entity’s accounting officer of the entity’s performance
against any measurable performance objectives set in terms of the service delivery
agreement or other agreement between the entity and its parent municipality
• particulars of any corrective action taken or to be taken in response to issues
raised in the audit report
• any information as determined by the entity or its parent municipality
• any recommendations by the audit committee of the entity or by its parent
municipality; and
• any other information as may be prescribed
ACTIVITY 8.42
• Write a few paragraphs in which you explain (and distinguish) the required content of
(a) a municipality’s annual report and (b) a municipal entity’s annual report.
165 FEEDBACK
• This is a self-evaluation activity. This activity is aimed at assisting you to remember
that there is a difference in the content of the respective annual reports and to be able
to spell out what these differences are. That is apart from summarising the content of
these reports as part of the activity.
Section 122 (“Preparation of financial statements”) provides that every municipality

and every municipal entity must, for each financial year, prepare annual financial
statements, which fairly present the state of affairs of the municipality or entity; its
performance against its budget; its management of revenue, expenditure, assets and
liabilities; its business activities; its financial results; and its financial position as at
LGL3702/1 205
the end of the financial year (section 122(1)). A municipality, which has sole control
of a municipal entity, or which has effective control of a municipal entity, which is a
private company, must prepare consolidated annual financial statements incorporating
the annual financial statements of the municipality and of such entity (section 122(2)).
Please note:
The annual financial statements of a municipality must disclose information on any
allocations received (or made) by the municipality from an organ of state in the national
or provincial sphere of government; or a municipal entity or another municipality: sec-
tion 123 (“Disclosures on intergovernmental and other allocations”).

Section 124 (“Disclosures concerning councillors, directors and officials”) requires
that the notes to the annual financial statements of a municipality’s councillors,
directors and officials must include the following:
• particulars of the salaries, allowances and benefits of political office-bearers and

councillors of the municipality
• any arrears owed by individual councillors to the municipality for rates or services
and which at any time during the relevant financial year were outstanding for more
than 90 days
• the salaries, allowances and benefits of the municipal manager, the chief financial
officer, every senior manager and such categories of other officials as may be
prescribed
• particulars of the salaries, allowances and benefits of the members of the board
of directors of the entity; and the chief executive officer of the entity, every senior
manager and such categories of other officials as may be prescribed (section 124(1))
The notes to the financial statements of a municipality must also include (section
125 headed “Other compulsory disclosures”):
• a list of all municipal entities under the sole or shared control of the municipality
during the financial year and as at the last day of the financial year
• the total amount of contributions to organised local government for the financial year,
and the amount of any contributions outstanding as at the end of the financial year
• the total amounts paid in audit fees, taxes, levies, duties and pension and medical
aid contributions, and whether any amounts were outstanding as at the end of the
financial year (section 125(1))
Under the provisions of section 124(2) the notes to the annual financial statements of a
municipal entity must include particulars of the salaries, allowances and benefits of –
• the members of the board of directors of the entity; and

• the chief executive officer of the entity, every senior manager and such categories
of other officials as may be described (section 124(2))
The notes to the financial statements of a municipality must also include (section
125 – “Other compulsory disclosures”):
• a list of all municipal entities under the sole or shared control of the municipality
during the financial year and as at the last day of the financial year
• the total amount of contributions to organised local government for the financial year,
and the amount of any contributions outstanding as at the end of the financial year
• the total amounts paid in audit fees, taxes, levies, duties and pension and medical
aid contributions, and whether any amounts were outstanding as at the end of the
financial year (section 125(1))
206
The notes to the annual financial statements of a municipality or municipal entity must
disclose the following information (section 125(2)):
• the name of the bank where the municipality (or municipal entity) held an account
and the type of account
• year opening and year-end balances in each of these bank accounts
• a summary of all investments of the municipality or entity as at the end of the
financial year
• particulars of any contingent liabilities of the municipality or entity as at the end
of the financial year
• particulars of any material losses and any material irregular or fruitless and wasteful
expenditures, including in the case of a municipality, any material unauthorised
expenditure that occurred during the financial year, and whether these are
recoverable
• particulars of any criminal or disciplinary steps taken as a result of such losses
or such unauthorised, irregular or fruitless and wasteful expenditures; and any
material losses recovered or written off
• particulars of non-compliance with this Act
• any other matters that may be prescribed
ACTIVITY 8.43
• Write a few paragraphs explaining the required notes to the annual financial statements
of a municipality.
166 FEEDBACK
• If you are not by now sick and tired of hearing this refrain, “This is a self-evaluation
activity” we will be astounded since we are sick and tired of writing it. However, it
nevertheless is a self-evaluation activity and requires you to summarise the requirements
for the note that need to accompany the annual financial statements of a municipality.
ACTIVITY 8.44
• Write a few paragraphs explaining the required notes to the annual financial statements
of a municipal entity.
167 FEEDBACK
• Note that these requirements are not the same as those notes to the annual statements
of a municipality. Hence this question/activity. Page back to where we discuss these
requirements of notes to the annual financial statements of a municipal entity.
In terms of section 126 (“Submission and auditing of annual financial statements”),

the accounting officer of a municipality must submit the annual financial statements
(and consolidated financial statements) to the Auditor-General for auditing. The ac-
counting officer of a municipal entity must prepare the annual financial statements of
the entity and submit the statements to the parent municipality of the entity and to the
Auditor-General for auditing. The Auditor-General must audit the financial statements
LGL3702/1 207
and submit an audit report on them to the accounting officer of the municipality or
entity (section 126(3)). Once the Auditor-General has submitted an audit report to
the accounting officer, no person other than the Auditor-General may alter the audit
report or the financial statements to which the audit report relates (section 126(5)).
The accounting officer of a municipal entity must submit the entity’s annual report
for that financial year to the municipal manager of the entity’s parent municipality.
The mayor of a municipality must table the annual report of the municipality and of
any municipal entity under the municipality’s sole or shared control in the municipal
council. Immediately after an annual report is tabled in the council, the accounting
officer of the municipality must make public the annual report; invite the local com-
munity to submit representations in connection with the annual report; and submit
the annual report to the Auditor-General, the relevant provincial treasury and the
provincial department responsible for local government in the province (section 127
of the MFMA – “Submission and tabling of annual reports”).
In terms of section 129 – “Oversight reports on annual reports”, the council of a mu-
nicipality must consider the annual report of the municipality and of any municipal
entity under the municipality’s sole or shared control and adopt an oversight report
containing the council’s comments pertaining to the annual report. This must include
a statement whether the council:
• has approved the annual report with or without reservations

• has rejected the annual report
• has referred the annual report back for revision of those components that can be
revised (section 129(1)
The accounting officer must attend council and council committee meetings where
the annual report is discussed and must submit copies of the minutes of those
meetings to the Auditor-General, the relevant provincial treasury and the provincial
department responsible for local government in the province. The accounting officer
must make public an oversight report (section 129(2) of the MFMA). The meetings
of a municipal council at which an annual report is to be discussed must be open to
the public and any organs of state (section 130 – “Council meetings open to public
and certain public officials”).
Section 132 (“Submissions to provincial legislatures”) provides that the following

documents must be submitted to the provincial legislature:
• the annual report of each municipality and each municipal entity in the province
• all oversight reports on these annual reports (section 132(1))
A provincial legislature may deal with these documents in accordance with its con-
stitutional powers (section 132(4)). The National Treasury may issue guidelines on
the manner in which provincial legislatures should consider the annual reports of
municipalities. No guidelines issued in terms of this subsection are binding on a
provincial legislature unless adopted by the legislature (section 132(5)).
8.3.6 Resolution of financial problems (Chapter 13 of the MFMA)

8.3.6.1 Provincial interventions
The primary responsibility to avoid, identify and resolve financial problems in a mu-
nicipality rests with the municipality itself (section 135(1)).
Section 136 deals with “Types of provincial interventions”. If the MEC for local gov-
ernment in a province becomes aware that there is a serious financial problem in a
208
municipality, the MEC must promptly consult the mayor of the municipality to determine
the facts; assess the seriousness of the situation and the municipality’s response to
the situation; and determine whether the situation justifies or requires an intervention
in terms of section 139 of the Constitution [section 139 of the Constitution deals with
provincial intervention in local government] (section 136(1)). If the municipality, as a
result of a crisis in its financial affairs, is in serious or persistent material breach of its
obligations to provide basic services or to meet its financial commitments, or admits
that it is unable to meet its obligations or financial commitments, as a result of which
the conditions for an intervention in terms of section 139(5) of the Constitution are
met, the provincial executive must intervene in the municipality in accordance with
section 139(4) [of the Constitution] (section 136(4) of the MFMA).
Section 137 headed “Discretionary provincial interventions”, sets out the potential
provincial interventions.
Please note:
The provincial executive has the discretion to intervene.
137. Discretionary provincial interventions.

(1) If the conditions for a provincial intervention in a municipality in terms of section 139(1)
of the Constitution are met and the provincial executive decides in terms of section
136(2) of this Act to intervene in the municipality, the provincial executive may take any
appropriate steps referred to in section 139(1) of the Constitution, including
(a) assessing the seriousness of the financial problem in the municipality;
(b) seeking solutions to resolve the financial problem in a way that would be sustain-
able and would build the municipality’s capacity to manage its own financial affairs;
(c) determining whether the financial problem, singly or in combination with other
problems, is sufficiently serious or sustained that the municipality would benefit
from a financial recovery plan and, if so, requesting any suitably qualified person
(i) to prepare an appropriate financial recovery plan for the municipality;
(ii) to recommend appropriate changes to the municipality’s budget and revenue-
raising measures that will give effect to the recovery plan; and
(iii) to submit the recovery plan and any recommendations referred to in sub-
paragraphs (i) and (ii) to the MEC for local government in the province within
a period determined by the MEC; and
(d) consulting the mayor of the municipality to obtain the municipality’s co-operation
in resolving the financial problem, and if applicable, implementing the financial
recovery plan.
(2) The MEC must submit any assessment in terms of subsection (1)(a), any determination
in terms of subsection (1)(c) and a copy of any request in terms of subsection (1)(c), to
the municipality and the Cabinet member responsible for local government.
(3) This section does not apply to a provincial intervention, which is unrelated to a financial
problem in a municipality.
ACTIVITY 8.45
• Write an essay in which you explain the steps a provincial legislature can take to
intervene in the case of serious financial problems in a municipality. In your essay, you
have to mention too whether this intervention is discretionary or not.
168 FEEDBACK
• Once again, a self-evaluation activity with the same aim – to assist you to come to
grips with the preceding paragraphs.
LGL3702/1 209
Section 138 sets out the criteria for determining the seriousness of financial prob-
lems. It states that, when determining the seriousness of a financial problem for the
purposes of section 137, all relevant facts must be considered and that the following
factors may indicate a serious financial problem:
• the municipality has failed to make payments as and when due

• the municipality has defaulted on financial obligations for financial reasons
• the actual current expenditure of the municipality has exceeded the sum of its actual
current revenue plus available surpluses for at least two consecutive financial years
• the municipality has had an operating deficit in excess of five per cent of revenue
in the most recent financial year for which financial information is available
• the municipality is more than 60 days late in submitting its annual financial
statements to the Auditor-General in accordance with section 126
• the Auditor-General has withheld an opinion or issued a disclaimer due to
inadequacies in the financial statements or records of the municipality, or has
issued an opinion which identifies a serious financial problem in the municipality
• any of the above conditions exists in a municipal entity under the municipality’s
sole control, or in a municipal entity for whose debts the municipality may be
responsible, and the municipality has failed to intervene effectively
• any other material condition exists, which indicates that the municipality, or a
municipal entity under the municipality’s sole control, is likely to be unable for
financial reasons to meet its obligations
ACTIVITY 8.46
• Summarise the factors/criteria that indicate that a municipality has serious financial
problems.
169 FEEDBACK
Section 139 of the MFMA regulates the position where provincial intervention arising
from a financial crisis is required. Under these defined circumstances, intervention
by the provincial executive is mandatory.
139. Mandatory provincial interventions arising from financial crises.

(1) If a municipality, as a result of a crisis in its financial affairs, is in serious or persistent
material breach of its obligations to provide basic services or to meet its financial com-
mitments, or admits that it is unable to meet its obligations or financial commitments,
the provincial executive must promptly
(a) request the Municipal Financial Recovery Service
(i)
to determine the reasons for the crisis in its financial affairs;
(ii)
to assess the municipality’s financial state;
(iii)
to prepare an appropriate recovery plan for the municipality;
(iv)to recommend appropriate changes to the municipality’s budget and revenue-
raising measures that will give effect to the recovery plan; and
(v) to submit to the MEC for finance in the province
(aa) the determination and assessment referred to in subparagraphs (i) and
(ii) as a matter of urgency; and
(bb) the recovery plan and recommendations referred to in subparagraphs
(iii) and (iv) within a period, not to exceed 90 days, determined by the
MEC for finance; and
210
(b) consult the mayor of the municipality to obtain the municipality’s co-operation in
implementing the recovery plan, including the approval of a budget and legislative
measures giving effect to the recovery plan.
(2) The MEC for finance in the province must submit a copy of any request in terms of
subsection (1)(a) and of any determination and assessment received in terms of sub-
section (1)(a)(v)(aa) to
(a) the municipality;
(b) the Cabinet member responsible for local government; and
(c) the Minister.
(3) An intervention referred to in subsection (1) supersedes any discretionary provincial

intervention referred to in section 137, provided that any financial recovery plan prepared
for the discretionary intervention must continue until replaced by a recovery plan for
the mandatory intervention.
ACTIVITY 8.47
• Write a note in which you explain the distinction between the discretionary and mandatory
provincial interventions arising from a municipal financial crisis.
170 FEEDBACK
• This is a self-evaluation activity. The point is that you need to distinguish between the
interventions a province must undertake and those that a province has a discretionary
power (may) to undertake.
Section 140 sets out the “criteria for determining the seriousness or persistent material
breach of financial commitments”. It states that when determining whether the condi-
tions for a mandatory intervention referred to in section 139 are met, all relevant facts
must be considered (section 140(1)). The following factors may indicate that a munici-
pality is in serious material breach of its obligations to meet its financial commitments:
• the municipality has failed to make any payment to a lender or investor as and
when due
• the municipality has failed to meet a contractual obligation, which provides security
• the municipality has failed to make any other payment as and when due, which
individually or in the aggregate is more than an amount as may be prescribed
or, if none is prescribed, more than two per cent of the municipality’s budgeted
operating expenditure
• the municipality’s failure to meet its financial commitments has had an impact
on, or is likely to have an impact on, the availability or price of credit to other
municipalities (section 140(2))
ACTIVITY 8.48
• Write a note in which you explain the factors that must be present in order to be able
to state that a municipality is in serious material breach of its obligations to meet its
financial commitments.
LGL3702/1 211
171 FEEDBACK
• This is a self-evaluation activity. You merely need to summarise the preceding paragraph
to set out the factors explaining when a municipality is in so much debt that it is unable
to meet its financial commitments.
Any recurring or continuous failure by a municipality to meet its financial commitments,

which substantially impairs the municipality’s ability to procure goods, services or
credit on usual commercial terms, may indicate that the municipality is in persistent
material breach of its obligations to meet its financial commitments (section 140(3)).
In terms of section 141 of the MFMA (“Preparation of financial recovery plan”), any
suitably qualified person may, on request by the provincial executive, prepare a fi-
nancial recovery plan for a discretionary provincial intervention referred to in section
137 (section 141(1)). Only the Municipal Financial Recovery Service may prepare a
financial recovery plan for a mandatory provincial intervention referred to in section
139 (section 141(2)). The plan must be submitted to a number of parties and institu-
tions, including the municipality (section 141(3)). A notice must also be published in a
newspaper stating particulars of where the plan will be available to the public (section
141(3)(c(ii)). It should also invite the local community to submit written comments in
respect of the plan (section 141(3)(c)(ii)(bb)). Once finalised, the plan must be submit-
ted for approval to the MEC for finance in the province concerned (section 141(4)(c)).
Section 142 sets out the criteria for a financial recovery plan. (Read this section
carefully.)
142. Criteria for financial recovery plans.

(1) A financial recovery plan must be aimed at securing the municipality’s ability to meet
its obligations to provide basic services or meet its financial commitments, and such
a plan, whether for a mandatory or discretionary intervention
(a) must
(i) identify the financial problems of the municipality;
(ii) be designed to place the municipality in a sound and sustainable financial
condition as soon as possible;
(iii) state the principal strategic objectives of the plan, and ways and means for
achieving those objectives;
(iv) set out a specific strategy for addressing the municipality’s financial problems,
including a strategy for reducing unnecessary expenditure and increasing
the collection of revenue, as may be necessary;
(v) identify the human and financial resources needed to assist in resolving
financial problems and where those resources are proposed to come from;
(vi) describe the anticipated time frame for financial recovery, and milestones
to be achieved; and
(vii) identify what actions are necessary for the implementation of the plan, dis-
tinguishing between actions to be taken by the municipality and actions to
be taken by other parties; and
(b) may
(i) provide for the liquidation of specific assets, excluding those needed for the
provision of the minimum level of basic municipal services;
(ii) provide for debt restructuring or debt relief in accordance with Part 3 of this
Chapter;
(iii) provide for special measures to prevent unauthorised, irregular and fruitless
and wasteful expenditures and other losses; and
(iv) identify any actual and potential revenue sources.
(2) In addition, a financial recovery plan for a mandatory intervention

(a) must
212
(i) set spending limits and revenue targets;

(ii) provide budget parameters, which bind the municipality for a specified period
or until stated conditions have been met; and
(iii) identify specific revenue-raising measures that are necessary for financial
recovery, including the rate at which any municipal tax and tariffs must be
set to achieve financial recovery; and
(b) for a discretionary intervention may suggest for adoption by the municipality
(i) spending limits and revenue targets;
(ii) budget parameters for a specified period or until stated conditions have
been met; and
(iii) specific revenue-raising measures that are necessary for financial recovery.
On receipt of a financial recovery plan pursuant to a discretionary intervention, the

MEC for local government in the province may approve the recovery plan with or
without amendments (section 143(1) of the MFMA – “Approval of financial recovery
plans”). On receipt of a financial recovery plan pursuant to a mandatory intervention,
the MEC for finance must verify that the process set out in section 141 has been
followed and that the criteria contained in section 142 are met (section 143(2)). The
responsible MEC must submit an approved recovery plan to the municipality; the
Minister; the Auditor-General; and organised local government in the province.
Section 144 of the MFMA (“Amendment of financial recovery plans”) provides that
the MEC for local government may request any suitably qualified person or the Mu-
nicipal Financial Recovery Service to prepare an amended financial recovery plan
in accordance with the directions of the MEC (section 144(1)).
Please note:
Section 145 (“Implementation of financial recovery plans in discretionary provincial
interventions”) regulates the position if the financial recovery plan has been prepared
as part of a discretionary provincial intervention referred to in section 137. Ac-
cording to this section, the municipality must (a) implement the approved recovery
plan; and (b) report monthly to the MEC for local government in the province on the
implementation of the plan.

The financial recovery plan binds the municipality to exercising its executive author-
ity, but only to the extent that this will aid in resolving the financial problems of the
municipality (section 145(2)).
Section 146 regulates the position if the recovery plan has been prepared in a
mandatory provincial intervention referred to in section 139. In such a case, the
municipality must (a) implement the approved recovery plan; (b) take all revenue,
expenditure and budget decisions within the confines of the recovery plan; and (c)
report monthly to the MEC for finance in the province on the implementation of the
plan (section 146(1)). The financial recovery plan binds the municipality to exercising
both its legislative and executive authority, including the approval of a budget and
legislative measures giving effect to the budget, but only to the extent necessary to
achieve the objectives of the recovery plan (section 146(2)).
Please note:
It is important that you note the provisions of section 139(5) of the Constitution with
reference to a recovery plan in the event of a mandatory provincial intervention:
(5) If a municipality, as a result of a crisis in its financial affairs, is in serious or persistent
material breach of its obligations to provide basic services or to meet its financial com-
LGL3702/1 213
mitments, or admits that it is unable to meet its obligations or financial commitments,
the relevant provincial executive must
(a) impose a recovery plan aimed at securing the municipality’s ability to meet its
obligations to provide basic services or meet its financial commitments, which
(i) is to be prepared in accordance with national legislation; and
(ii) binds the municipality in the exercise of its legislative and executive authority,
but only to the extent necessary to solve the crisis in its financial affairs; and
(a) dissolve the Municipal Council, if the municipality cannot or does not approve leg-
islative measures, including a budget or any revenue-raising measures necessary
to give effect to the recovery plan [our emphasis], and
(i) appoint an administrator until a newly elected Municipal Council has been
declared elected; and
(ii) approve a temporary budget or revenue-raising measures or any other
measures giving effect to the recovery plan to provide for the continued
functioning of the municipality; or
(b) if the Municipal Council is not dissolved in terms of paragraph (b), assume respon-
sibility for the implementation of the recovery plan to the extent that the municipality
cannot or does not otherwise implement the recovery plan.
It is necessary to take note of section 139(5) of the Constitution since subsection

(3) of section 146 provides that in terms of section 139(5) [of the Constitution], the
provincial executive must either dissolve the council of the municipality … and (i)
“appoint an administrator until a newly elected council has been declared elected;
and (ii) approve a temporary budget and revenue-raising measures …”
In terms of section 147 (“Regular review of provincial interventions”), the MEC for
local government or the MEC for finance in a province must, at least every three
months, review any discretionary provincial intervention referred to in section 137 or
any mandatory provincial intervention referred to in section 139, including progress
with resolving the municipality’s financial problems and its financial recovery; and the
effectiveness of any financial recovery plan (subsection (1)(a)). The MEC must also
submit progress reports and a final report regarding the intervention to the municipal-
ity; the Minister; the Cabinet member responsible for local government; the provincial
legislature; and organised local government in the province (subsection (1)(b)).
Section 148 regulates the termination of provincial interventions.
148. Termination of provincial interventions.

(1) A discretionary intervention referred to in section 137 must end
(a) if it is terminated in terms of section 139(2)(b) of the Constitution; or
(b) when
(i) the municipality is able and willing to fulfil the executive obligation in terms of
legislation or the Constitution that gave rise to the intervention; and
(ii) the financial problem that has been caused by or has caused the failure by
the municipality to comply with that obligation is resolved.
(2) A mandatory intervention referred to in section 139 must end when

(a) the crisis in the municipality’s financial affairs has been resolved; and
(b) the municipality’s ability to meet its obligations to provide basic services or its
financial commitments is secured.
(3) When a provincial intervention ends, the MEC for local government or the MEC for
finance in the province must notify
(a) the municipality;
(b) the Minister, in the case of a mandatory intervention;
(c) the Cabinet member responsible for local government;
(d) any creditors having pending litigation against the municipality;
214
(e) the provincial legislature; and

(f) organised local government in the province.
ACTIVITY 8.49
• Write a note in which you explain the circumstances under which provincial interventions
in local government financial crises can end.
172 FEEDBACK
• This is a self-evaluation activity. Once again, it merely requires you to summarise
(in your own words) and explain when provincial interventions in local government
financial crises can end.
Please note:
National interventions are also possible in terms of section 150 of the MFMA. If
the conditions for a provincial intervention in a municipality in terms of section 139(4)
or (5) of the Constitution are met and the provincial executive cannot (or does not
or does not adequately) exercise the powers or perform the functions referred to in
that section, the national executive must consult the relevant provincial executive
and act or intervene in terms of that section in the stead of the provincial executive.
The national executive assumes for the purposes of the intervention the functions
and powers of a provincial executive in terms of the relevant sections in the MFMA;
the Minister assumes for the purposes of the intervention the functions and powers
of an MEC for finance in terms of the relevant sections of the MFMA; and all refer-
ences in the relevant sections of the MFMA to a provincial executive must be read
as a reference to the national executive; to an MEC for finance must be read as a
reference to the Minister; and to a provincial intervention must be read as a reference
to a national intervention.
ACTIVITY 8.50
• Write an essay in which you explain the different types of interventions (both provincial
and national) in the case where a municipality is in a financial crisis.
173 FEEDBACK
• Once again, this is a self-evaluation activity and no further comments are forthcoming.
ACTIVITY 8.51
• Explain the role of provincial government and the different steps, which it should take
in order to assist a municipality in financial crisis.
LGL3702/1 215
174 FEEDBACK
• This is a self-evaluation activity. However, note that this question does not deal
with types of interventions but (a) the role a provincial government plays to assist a
municipality in a financial crisis and (b) the steps to be taken by a provincial government
to afford such assistance. Note further that this activity is aimed at you thinking about
where you have encountered this discussion and upon discovering and providing the
requested information.
ACTIVITY 8.52
• Write a note in which you explain what a recovery plan is and what the requirements
are in relation to it.
175 FEEDBACK
• This is an obvious self-evaluation activity.
8.3.6.2 Debt relief and restructuring

Please note:
It is sufficient for you to read the following section carefully. You will NOT be
examined on this particular section of this lengthy learning unit.
Section 151 of the MFMA provides that the financial problems of municipalities do not
limit the legal rights of any creditor or other person having a claim against a munici-
pality. It does also not limit any person’s access to ordinary legal process in accord-
ance with the common law and relevant legislation; or the rights of a municipality or
municipal entity, or of the parties to a contract with a municipality or municipal entity,
to alternative dispute resolution mechanisms, notice procedures and other remedies,
processes or procedures.
If a municipality is unable to meet its financial commitments, it may apply to the High
Court for an order to stay, for a period not exceeding 90 days, all legal proceed-
ings, including the execution of legal process, by persons claiming money from the
municipality or a municipal entity under the sole control of the municipality (section
152 of the MFMA).
In terms of section 153, a municipality may also apply for extraordinary relief. A mu-
nicipality may apply to the High Court for an order:
• to stay, for a period not exceeding 90 days at a time, all legal proceedings, including
the execution of legal process, by persons claiming money from the municipality
• to suspend the municipality’s financial obligations to creditors, or any portion
of those obligations, until the municipality can meet those obligations (Before
issuing such an order, the court must be satisfied that the municipality cannot
currently meet its financial obligations to creditors; and all assets not reasonably
necessary to sustain effective administration or to provide the minimum level of
basic municipal services have been or are to be liquidated in accordance with
the approved financial recovery plan for the benefit of meeting creditors’ claims
(section 154 of the MFMA).)
216
• to terminate the municipality’s financial obligations to creditors, and to settle

claims in accordance with a distribution scheme referred to in section 155 (Before
issuing such an order, the court must be satisfied that the municipality cannot
meet its financial obligations to its creditors and is not likely to be able to do so in
the foreseeable future; all assets not reasonably necessary to sustain effective
administration or to provide the minimum level of basic municipal services have
been liquidated in accordance with the approved financial recovery plan for the
benefit of meeting creditors’ claims; and all employees have been discharged
except those affordable in terms of reasonably projected revenues as set out in
the approved financial recovery plan (section 155 of the MFMA).)
The Court may make any of the mentioned orders if:
• the provincial executive has intervened in terms of section 139 and a financial
recovery plan has been approved
• the financial recovery plan is likely to fail without the protection of such an order
Section 155 of the MFMA also provides that if the court issues any of the mentioned
orders, the MEC for finance in the province must appoint a trustee to prepare a dis-
tribution scheme for the proportional settlement of all legitimate claims against the
municipality as at the date of the order. Those claims must be settled against the
amount realised from the liquidation of assets.
A distribution scheme must:
• determine the amount available for distribution

• list all creditors with claims that qualify for the purposes of the distribution scheme,
indicating which of those are secured and the manner in which they are secured
• provide for the distribution of the amount available amongst creditors in the order
of preference
8.3.6.3 Municipal financial recovery service

Please note:
In terms of section 157 of the MFMA, a Municipal Financial Recovery Service, which
forms part of the National Treasury, is established as an institution within the public
service. The Minister must appoint a person as the Head of the Service and this person
will hold office in the National Treasury. The Head of the Service is responsible for the
performance by the Service of its functions and takes all decisions of the Service in
the performance of its functions and the exercising of its powers, except those deci-
sions of the Service taken in consequence of a delegation in terms of section 162.
The Head of the Service performs the functions of office subject to the directions of
the Director-General of the National Treasury.
The Municipal Financial Recovery Service’s functions are listed in section 158
as follows:
• performs the duties and exercises the powers assigned to the Service in terms
of the MFMA
• prepares a financial recovery plan for a municipality or instructs any suitably
qualified person to prepare the plan in accordance with the directions of the Service
• monitors the implementation of any financial recovery plans that it has prepared,
and recommends such amendments and revisions as are appropriate
LGL3702/1 217
• assists the municipality to identify the causes of, and potential solutions for, the
financial problems
• obtains the services of any financial expert to perform any specific work for the
Service
• collects information on municipal financial problems and on best practices in
resolving such problems
The staff of the Municipal Financial Recovery Service consists of the Head of the
Service; persons in the service of the National Treasury and designated by the
Director-General; and persons seconded from an organ of state to the Service by
agreement between the Director-General and that organ of state. In terms of section
162 of the MFMA, the Head of the Service may delegate any of the powers or duties
of the Service to a member of the staff of the Service. A delegation must be in writ-
ing and does not divest the Head of the Service of the responsibility concerning the
exercise of the delegated power or the performance of the delegated duty. The Head
of the Service may confirm, vary or revoke any decision taken in consequence of a
delegation, provided that no such variation or revocation of a decision may detract
from any rights that may have accrued as a result of the decision.
8.3.7 General treasury matters

Please note:
In terms of section 164 of the MFMA, no municipality or municipal entity may conduct
any commercial activities other than in the exercising of the powers and functions
assigned to it in terms of the Constitution or national or provincial legislation; or
outside the borders of the Republic. A municipality may also not provide a municipal
service in an area outside its jurisdiction except with the approval of the council of
the municipality that has jurisdiction in that area; or make loans to councillors or of-
ficials of the municipality; directors or officials of the entity; or members of the public.
Section 165 of the MFMA provides that each municipality and each municipal entity
must have an internal audit unit. The internal audit unit of a municipality or municipal
entity must prepare a risk-based audit plan and an internal audit programme for each
financial year; and advise the accounting officer and report to the audit committee on
the implementation of the internal audit plan and matters relating to:
• internal audit
• internal controls
• accounting procedures and practices
• risk and risk management
• performance management
• loss control
Please note:
The internal audit function may be outsourced if the municipality or municipal entity
requires assistance to develop its internal capacity and the council of the municipality or
the board of directors of the entity has determined that this is feasible or cost-effective.
Section 166 of the MFMA regulates the functions of municipalities’ audit committees.
In terms of this section, each municipality and each municipal entity must have an
audit committee. An audit committee is an independent advisory body, which must
advise the municipal council, the political office-bearers, the accounting officer and the
218
management staff of the municipality, or the board of directors, the accounting officer
and the management staff of the municipal entity, on matters relating to the following:
• internal financial control and internal audits

• risk management
• accounting policies
• the adequacy, reliability and accuracy of financial reporting and information
• performance management
• effective governance
• compliance with the MFMA, the annual Division of Revenue Act and any other
applicable legislation
• performance evaluation
The audit committee must also review the annual financial statements to provide
the council of the municipality or, in the case of a municipal entity, the council of
the parent municipality and the board of directors of the entity, with an authoritative
and credible view of the financial position of the municipality or municipal entity, its
efficiency and effectiveness and its overall level of compliance with the MFMA, the
annual Division of Revenue Act and any other applicable legislation. In addition, the
audit committee must respond to the council on any issues raised by the Auditor-
General in the audit report; carry out such investigations into the financial affairs of
the municipality or municipal entity as the council of the municipality, or in the case
of a municipal entity, the council of the parent municipality or the board of directors of
the entity, may request. The audit committee must also perform such other functions
as may be prescribed. An audit committee has access to the financial records and
other relevant information of the municipality or municipal entity.
Section 168 of the MFMA regulates the extent to which the Minister may make regula-
tions applicable to a municipality. However, the Minister must first consult organised
local government on the substance of those regulations; and publish the draft regula-
tions in the Government Gazette for public comment.
Please note:
Regulations made in terms of section 168 must be submitted to Parliament for par-
liamentary scrutiny at least 30 days before their promulgation.
168. Treasury regulations and guidelines.

(1) The Minister, acting with the concurrence of the Cabinet member responsible for lo-
cal government, may make regulations or guidelines applicable to municipalities and
municipal entities, regarding
(a) any matter that may be prescribed in terms of this Act;
(b) financial management and internal control;
(c) a framework for regulating the exercise of municipal tariff-fixing powers;
(d) a framework regulating the financial commitments of municipalities and municipal
entities in terms of public-private partnership agreements;
(e) the establishment by municipalities of, and control over
(i) municipal entities; and
(ii) business units contemplated in section 76(a)(ii) of the Municipal Systems Act;
(f) the safeguarding of the financial affairs of municipalities and of municipal enti-
ties when assets, liabilities or staff are transferred from or to a municipality or a
municipal entity;
(g) the alienation, letting or disposal of assets by municipalities or municipal entities;
(h) internal audit units and their functioning;
(i) the information to be disclosed when municipalities or municipal entities issue or
incur debt and the manner in which such information must be disclosed, including
by way of a prospectus or other document;
LGL3702/1 219
(j) the circumstances under which further or specific disclosures are required after
money has been borrowed by a municipality or municipal entity;
(k) the circumstances under which documentation or information pertaining to municipal
debt must be lodged or registered;
(l) the establishment of a registry for the registration of documentation and informa-
tion pertaining to municipal borrowing;
(m) the settlement of claims against a municipality following an order of court in terms
of section 153;
(n) the information that must be placed on the websites of municipalities;
(o) a framework regulating investments by municipal entities; and
(p) any other matter that may facilitate the enforcement and administration of this Act.
(2) A regulation or guideline in terms of this section may

(a) differentiate between different
(i) kinds of municipalities, which may, for the purposes of this section, be defined
in relation to either categories, types or budgetary size of municipalities or
in any other manner;
(ii) categories of municipal entities;
(iii) categories of accounting officers; or
(iv) categories of officials; or
(b) be limited in its application to a particular

(i) kind of municipality, which may, for the purposes of this section, be defined
either in relation to a category, type or budgetary size of municipality or in
any other manner;
(ii) category of municipal entities;
(iii) category of accounting officers; or
(iv) category of officials.
(3) No guidelines issued in terms of subsection (1) are binding on

(a) a municipality unless adopted by its council; or
(b) a municipal entity unless adopted by the council of the entity’s parent unicipality.
8.3.8 Financial misconduct (Chapter 15 of the MFMA)

Please note:
You must study the following for examination purposes.
Section 171 of the MFMA (“Financial misconduct by municipal officials”) regulates
the position where an accounting officer of a municipality commits financial mis-
conduct, while section 172 (“Financial misconduct by officials of municipal entities”)
regulates the position where an accounting officer of a municipal entity commits
financial misconduct.
171 Financial misconduct by municipal officials.

(1) The accounting officer of a municipality commits an act of financial misconduct if that
accounting officer deliberately or negligently
(a) contravenes a provision of this Act;
(b) fails to comply with a duty imposed by a provision of this Act on the accounting
officer of a municipality;
(c) makes or permits, or instructs another official of the municipality to make an un-
authorised, irregular or fruitless and wasteful expenditure; or
(d) provides incorrect or misleading information in any document which in terms of a
requirement of this Act must be
(i) submitted to the mayor or the council of the municipality, or to the Auditor-
General, the National Treasury or other organ of state; or
(ii) made public.
(2) The chief financial officer of a municipality commits an act of financial misconduct if
that officer deliberately or negligently
220
(a) fails to carry out a duty delegated to that officer in terms of section 79 or 81(1)(e);
(b) contravenes or fails to comply with a condition of any delegation of a power or duty
in terms of section 79 or 81(1)(e);
(c) makes or permits, or instructs another official of the municipality to make an un-
authorised, irregular or fruitless and wasteful expenditure; or
(d) provides incorrect or misleading information to the accounting officer for the pur-
poses of a document referred to in subsection (1)(d).
(3) A senior manager or other official of a municipality exercising financial management

responsibilities and to whom a power or duty was delegated in terms of section 79, com-
mits an act of financial misconduct if that senior manager or official deliberately or
negligently
(a) fails to carry out the delegated duty;
(b) contravenes or fails to comply with a condition of the delegated power or duty;
(c) makes an unauthorised, irregular or fruitless and wasteful expenditure; or
(4) A municipality must

(a) investigate allegations of financial misconduct against the accounting officer, the
chief financial officer, a senior manager or other official of the municipality unless
those allegations are frivolous, vexatious, speculative or obviously unfounded; and
(b) if the investigation warrants such a step, institute disciplinary proceedings against
the accounting officer, chief financial officer or that senior manager or other of-
ficial in accordance with systems and procedures referred to in section 67 of the
Municipal Systems Act, read with Schedule 2 of that Act.
172. Financial misconduct by officials of municipal entities.

(1) The accounting officer of a municipal entity commits an act of financial misconduct if
that accounting officer deliberately or negligently
(a) contravenes a provision of this Act;
(b) fails to comply with a duty imposed by a provision of this Act on the accounting
officer of a municipal entity;
(c) makes or permits, or instructs another official of the municipal entity to make an
irregular or fruitless and wasteful expenditure; or
(d) provides incorrect or misleading information in any document which in terms of
this Act must be
(i) submitted to the entity’s board of directors or parent municipality or to the
Auditor-General; or
(ii) made public.
(2) A senior manager or other official of a municipal entity exercising financial manage-
ment responsibilities and to whom a power or duty was delegated in terms of section
106, commits an act of financial misconduct if that senior manager or official deliber-
ately or negligently
(a) fails to carry out the delegated duty;
(b) contravenes or fails to comply with a condition of the delegated power or duty;
(c) makes an irregular or fruitless and wasteful expenditure; or
(3) A municipal entity must

(a) investigate allegations of financial misconduct against the accounting officer, a
senior manager or other official of the entity unless those allegations are frivolous,
vexatious, speculative or obviously unfounded; and
(b) if the investigation warrants such a step, institute disciplinary proceedings against
the accounting officer, senior manager or official in terms of Schedule 3 of the
Municipal Systems Act.
LGL3702/1 221
ACTIVITY 8.53
• Write a note in which you explain the difference between these provisions (sections
171 and 172).
176 FEEDBACK
• This is a self-evaluation activity. You need to introduce your note with an indication of
the contents of each of the two sections – section 171 deals with financial misconduct
by municipal offi cials while section 172 deals with the financial misconduct by offi cials
of municipal entities. Having done that you need to highlight the difference between
the two provisions.
ACTIVITY 8.54
• Make a list of all the offi cials mentioned in the two sections and summarise when they
will be committing an act of financial misconduct.
177 FEEDBACK
• Once again, this is a self-evaluation activity, which needs no further comment.
ACTIVITY 8.55
• Summarise the duties of both a municipality and a municipal entity upon discovering
evidence of financial misconduct on the part of their offi cials.
178 FEEDBACK
Section 173 of the MFMA regulates the various offences of which accounting offic-
ers could be found guilty.
173 Offences.
(1) The accounting officer of a municipality is guilty of an offence if that accounting officer
(a) deliberately or in a grossly negligent way
(i) contravenes or fails to comply with a provision of section 61(2)(b), 62(1), 63(2)
(a) or (c), 64(2)(a) or (d) or 65(2)(a), (b), (c), (d), (f) or (i);
(ii) fails to take reasonable steps to implement the municipality’s supply chain
management policy referred to in section 111;
(iii) fails to take all reasonable steps to prevent unauthorised, irregular or fruitless
and wasteful expenditure; or
(iv) fails to take all reasonable steps to prevent corruptive practices
(aa) in the management of the municipality’s assets or receipt of money; or
(bb) in the implementation of the municipality’s supply chain management
policy;
222
(b) deliberately misleads or withholds information from the Auditor-General on any bank
accounts of the municipality or on money received or spent by the municipality; or
(c) deliberately provides false or misleading information in any document, which in
terms of a requirement of this Act must be
(aa) submitted to the Auditor-General, the National Treasury or any other organ
of state; or
(bb) made public.
(2) The accounting officer of a municipal entity is guilty of an offence if that accounting officer
(a) deliberately or in a grossly negligent way
(i) contravenes or fails to comply with a provision of section 94(2)(b), 95(1),
96(2), 97(a) or 99(2)(a), (c) or (e);
(ii) fails to take all reasonable steps to prevent irregular or fruitless and wasteful
expenditure; or
(iii) fails to take all reasonable steps to prevent corruptive practices in the man-
agement of the entity’s assets, receipt of money or supply chain manage-
ment system;
(b) deliberately misleads or withholds information from the Auditor-General or the

entity’s parent municipality on any bank accounts of the municipal entity or on
money received or spent by the entity; or
(c) deliberately provides false or misleading information in any document, which in
terms of a requirement of this Act must be
(aa) submitted to the entity’s parent municipality, the Auditor-General, the National
Treasury or any other organ of state; or
(bb) made public.
(3) A senior manager or other official of a municipality or municipal entity exercising

financial management responsibilities and to whom a power or duty was delegated
in terms of sections 79 or 106, is guilty of an offence if that senior manager or official
deliberately or in a grossly negligent way contravenes or fails to comply with a condi-
tion of the delegation.
(4) A councillor of a municipality is guilty of an offence if that councillor
(a) deliberately influences or attempts to influence the accounting officer, the chief finan-
cial officer, a senior manager or any other official of the municipality to contravene
a provision of this Act or to refrain from complying with a requirement of this Act;
(b) interferes in the financial management responsibilities or functions assigned in
terms of this Act to the accounting officer of the municipality or delegated to the
chief financial officer of the municipality in terms of this Act;
(c) interferes in the financial management responsibilities or functions assigned in
terms of this Act to the accounting officer of a municipal entity under the sole or
shared control of the municipality; or
(d) interferes in the management or operational activities of a municipal entity under
the sole or shared control of the municipality.
(5) A councillor, an official of a municipality or municipal entity, a member of the board of

directors of a municipal entity or any other person is guilty of an offence if that person
deliberately or in a grossly negligent way
(a) impedes an accounting officer from complying with a provision of this Act;
(b) gives incorrect, untrue or misleading information material to an investment decision
relating to borrowing by a municipality or municipal entity;
(c) makes a withdrawal in contravention of section 11;
(d) fails to comply with section 49;
(e) contravenes a provision of sections 115(2), 118 or 126(5); or
(f) provides false or misleading information for the purposes of any document, which
must in terms of a requirement of this Act be
(i) submitted to the council, mayor or accounting officer of a municipality or to
the Auditor-General or the National Treasury; or
(ii) made public.
LGL3702/1 223
ACTIVITY 8.56
• Make a list of all the possible offences section 173 provides for and link them to the
pertinent offi cials involved.
179 FEEDBACK
• This is a self-evaluation activity. Note though that it is not a matter of learning all the
offences parrot-fashion. The point is to provide one or two examples of the offences
one encounters in section 173 and to link it to the particular offi cer or offi cial involved.
A person is liable, on conviction of an offence in terms of section 173, to imprisonment

for a period not exceeding five years or to an appropriate fine determined in terms of
applicable legislation (section 174).
8.4 MUNICIPAL FISCAL MANAGEMENT

Bekink (page 425–426) writes the following as regards the fiscal management of
municipalities:
In view of all the activities and functions of municipalities, it is submitted that

municipal fiscal management is a vast and complicated exercise. There are
many aspects in relation to financial management that must be fulfilled, and the
overall financial system consists of a number of distinct and important activities.
To conclude this learning unit, we briefly mention some of the numerous activities
pertaining to the municipal financial system below.
8.4.1 Municipal budgeting

Each municipal government must prepare an annual municipal budget. The municipal
budget is regarded as the foremost financial statement since it reflects the municipal-
ity’s financial capacity. The MFMA regulates most aspects of the municipal budget.
8.4.2 Financial records, auditing and financial management

All municipalities must keep financial records of their financial affairs and these re-
cords must be submitted for auditing. Parliament and the provincial legislatures must
enact legislation to deal with municipalities’ financial affairs.
8.4.3 Municipal expenditure

Municipalities use funds from their revenue to purchase certain goods and equipment
and in order to employ personnel.
8.4.4 Loan funds, stocks and capital goods

Municipalities are sometimes forced to take up loans. In order to keep record and
control over municipal loans, municipalities must prepare separate budgets for loan
funds.
224
Please note:
Municipalities are often the owners of large portions of land, which can be sold under
strict control and supervision. However, such land is public property (in that it belongs
to the public or to the residents of the municipality). Municipalities nonetheless have
a wide discretion to deal with property, namely to sell, lease, buy or even expropri-
ate property.
8.4.5 Municipal credit record and debt collection

It is obvious that municipalities must collect revenue effectively. Municipalities must
be able to measure the services that they render and bill their consumers accordingly.
Consumers must receive accurate bills for services rendered to them. Importantly,
municipalities must also establish mechanisms that would enable poor households
to apply and qualify for rebates on service charges. Municipalities must retain the
authority to discontinue certain services because of consumers’ negligence in paying
for the services rendered. In terms of the Municipal Systems Act, certain measures
have been introduced that would enhance effective credit control and municipal debt
collection. We briefly mention these measures below:
8.4.5.1 Customer care and management

In light of municipalities’ obligations regarding financial and administrative matters, as
well as their obligations pertaining to the levying of taxes and charges for municipal
fees, municipalities must make provision for and regulate certain aspects of customer
care management. These are listed in section 95(a)–(i) of the Municipal Systems Act:
95. Customer care and management.
In relation to the levying of rates and other taxes by a municipality and the charging of fees
for municipal services, a municipality must, within its financial and administrative capacity
(a) establish a sound customer management system that aims to create a positive and
reciprocal relationship between persons liable for these payments and the municipality,
and where applicable, a service provider;
(b) establish mechanisms for users of services and ratepayers to give feedback to the
municipality or other service provider regarding the quality of the services and the
performance of the service provider;
(c) take reasonable steps to ensure that users of services are informed of the costs involved
in service provision, the reasons for the payment of service fees, and the manner in
which monies raised from the service are utilised;
(d) where the consumption of services has to be measured, take reasonable steps to ensure
that the consumption by individual users of services is measured through accurate and
verifiable metering systems;
(e) ensure that persons liable for payments receive regular and accurate accounts that
indicate the basis for calculating the amounts due;
(f) provide accessible mechanisms for those persons to query or verify accounts and
metered consumption, and appeal procedures, which allow such persons to receive
prompt redress for inaccurate accounts;
(g) provide accessible mechanisms for dealing with complaints from such persons, together
with prompt replies and corrective action by the municipality;
(h) provide mechanisms to monitor the response time and efficiency in complying with
paragraph (g); and
(i) provide accessible pay points and other mechanisms for settling accounts or for making
pre-payments for services.
LGL3702/1 225
8.4.5.2 Debt collection and credit control policy
Municipalities depend on regular and timely payment for services rendered. Municipali-
ties must therefore make provision for and enforce efficient debt collection procedures.
Municipalities must also adopt and maintain credit control and debt control policies
that are consistent with their rates and tariffs policies. These policies must comply
with the provisions of the Municipal Systems Act: section 96(a)–(b). In terms of sec-
tion 97 of the Systems Act, the policies must include the following:
97. Contents of policy.

(1) A credit control and debt collection policy must provide for
(a) credit control procedures and mechanisms;
(b) debt collection procedures and mechanisms;
(c) provision for indigent debtors that is consistent with its rates and tariff policies and
any national policy on indigents;
(d) realistic targets consistent with
(i) general recognised accounting practices and collection ratios, and
(ii) the estimates of income set in the budget less an acceptable provision for
bad debts;
(e) interest on arrears, where appropriate;

(f) extensions of time for payment of accounts;
(g) termination of services or the restriction of the provision of services when pay-
ments are in arrears;
(h) matters relating to unauthorised consumption of services, theft and damages; and
(i) any other matters that may be prescribed by regulation in terms of section 104.
Importantly, a credit control and debt collection policy may differentiate between
various categories of ratepayers, users of services, debtors, taxes, services, service
standards and other matters as long as the differentiation does not amount to unfair
discrimination.
In order to give effect to the credit control and debt collection policies, municipali-
ties must adopt by-laws. These by-laws may also differentiate between categories
of debtors, provided that the differentiation does not amount to unfair discrimination
(section 98 of the Systems Act).
8.4.5.3 Supervisory and implementing authority

In terms of the Systems Act, a municipality’s executive committee or executive mayor
(or, in the absence of an executive committee or executive mayor, the municipal coun-
cil) is designated as the supervisory authority and must ensure that the municipality’s
credit control and debt collection policies are properly enforced. This supervisory
authority must also oversee and monitor the performance of the municipal manager
in implementing the municipal policies and by-laws. The supervisory authority must
also evaluate and review the policies and by-laws. In addition, regular reports re-
garding these policies and by-laws must also be submitted to the municipal council.
8.4.5.4 Regulations and guidelines in respect of credit control and debt collection
provisions
The Minister responsible for local government may make regulations regarding vari-
ous matters that are included in section 104(1)(a)–(n) of the Systems Act:
104. Regulations and guidelines.

(1) The Minister may for the purposes of this Chapter make regulations or issue guidelines
in accordance with section 120 to provide for or regulate the following matters:
226
(a) the particulars that must be contained in the municipal manager’s report in terms
of section 100(c);
(b) the identification of municipal services provided by the municipality or other
service providers to users of services where the use of the service by the user
can reasonably be determined, measured or estimated per quantity used or per
frequency of such use;
(c) the determination, measurement or estimate of the use by each user of each
service so identified;
(d) user agreements, deposits and bank guarantees for the provision of municipal
services;
(e) the rendering of accounts to ratepayers and users and the particulars to be con-
tained in the accounts;
(f) the action that may be taken by municipalities and service providers to secure
payment of accounts that are in arrear, including
(i) the termination of municipal services or the restriction of the provision of
services;
(ii) the seizure of property;
(iii) the attachment of rent payable on a property; and
(iv) the extension of liability to a director, a trustee or a member if the debtor is
a company, a trust or a close corporation;
(g) appeals against the accuracy of accounts for municipal taxes or services;
(h) the manner in and time within which such appeals must be lodged and determined
and the consequences of successful and unsuccessful appeals;
(i) extensions for the payment of arrears and interest payable in respect of such arrears;
(j) service connections and disconnections, and the resumption of discontinued
services;
(k) the combating of unauthorised consumption, connection and reconnection, and
theft of municipal services;
(l) the development and implementation of an indigent policy;
(m) the tampering with or theft of meters, service supply equipment and reticula-
tion network and any other fraudulent activity in connection with the provision of
municipal services; and
(n) any other matter that may facilitate
(i) effective and efficient systems of credit control and debt collection by mu-
nicipalities; or
ACTIVITY 8.57
• List fi ve (5) activities of a municipality relating to fi scal management.
180 FEEDBACK
• At last! This is the final self-evaluation activity and requires you merely to list at least
fi ve (5) activities of a municipality relating to fi scal management.
QUESTION 1
List and briefly explain the constitutional principles that underlie municipal financial management.
QUESTION 2
List the various aspects of municipal financial management and explain how these are inter-
linked. You should write at least one page describing the connections between them.
LGL3702/1 227
QUESTION 3
Define and contextualise the importance of municipal revenue. Further, explain this definition
with reference to the relevant sections in the MFMA.
QUESTION 4
Explain how municipal budgets function – refer to the relevant section in the MFMA.
QUESTION 5
Draw two columns and explain short and long-term debt – one in each column. Take note of
the differences between these two forms of municipal debt.
QUESTION 6
Give an extensive explanation of how municipalities go about their everyday affairs in relation
to goods and services that have to be rendered (reference to public-private relationships is
imperative). Your answer should be at least three (3) pages long and you should refer to the
relevant provisions in the MFMA. Use your own words in answering this question.
QUESTION 7
How should municipalities deal with their financial problems and with misconduct? You should
refer to the relevant provisions in the MFMA to substantiate your answer.
228
9 LEARNING UNIT 9
9 Municipal revenue
OVERVIEW
Municipalities require revenue to provide sustainable services to local communities.
This learning unit deals with the various forms of revenue that municipalities can
generate. The most important of these for a municipality is property tax (rates). The
Municipal Property Rates Act regulates this area of law and it is important to take note
of all the relevant sections of the Act. For the purposes of this module, it is imperative
that you understand how properties are valuated as well as which properties have
rates levied on them and why. It is also important to understand why property own-
ers are liable to pay their rates. In order to have an efficient property rates system,
the valuation criteria must be transparent and applied equally. There must also be a
valuation roll, which serves as a record for all rateable properties. This roll has to be
updated regularly. Rates are the most important source of income for municipalities
but there are also other forms of income, such as tariffs, that you should take note of.
• describe the importance of municipal revenue

• give a brief explanation of the different forms of municipal income
• describe property rates with reference to the MPRA
• explain the levying of rates – how this is done and why
• provide a thorough analysis of property valuations with reference to the MPRA
• describe why property owners (in general) should pay their property rates
• explain the importance of valuation rolls
• briefly describe the different forms of municipal revenue
LEARNING MATERIAL
City of Cape Town and Other v Robertson and Other [2005] (2) SA 323 (CC) paras
53 & 62
Nelson Mandela Bay Municipality v Amber Mountain Investments [2017] ZASCA 36
(SCA); 2017 (4) SA 272 (SCA) para 21
The City of Johannesburg Metropolitan Municipality v The Chairman of the Valuation
Appeal Board for the City of Johannesburg [2014] ZASCA 5 (SCA); 2014 (4)
SA 10 (SCA) paras 22–28
9.1 INTRODUCTION
Municipalities require adequate financial resources in order to render services ef-
ficiently. Municipalities can generate revenue in numerous ways. You should be able
to distinguish between own revenue sources and outside sources. Own revenue
sources refer to sources of income that a municipality can generate by itself, while
outside sources refer to revenue that is not generated by the municipality itself. An
example of the latter would be grants from provincial or national government.
Taxation is one of a municipality’s most important sources of revenue. In terms of the

White Paper on Local Government (page 133), there are four areas of local decision-
making that are important to municipal taxation, namely:
LGL3702/1 229
• the choice of tax to be imposed
• the definition of the tax base
• the choice of the tax rate
• the administration of the tax system
ACTIVITY 9.1
• Do you think it is possible for some municipalities to acquire more property tax than
others? Give a reason for your answer and explain what the government can do with
regard to municipalities that cannot generate enough property tax.
181 FEEDBACK
• This is an obvious self-evaluation activity. Return to the preceding paragraphs to guide
you to an answer. Hint: As regards the ability of some municipalities to acquire more
property tax than others think along the lines of metropolitan municipalities and their
large number of people. Can you think of other reasons bar one that merely refers to
the number of people living in a metropolitan municipality? Write them down.
9.2 PROPERTY TAXATION: AN INTRODUCTION

Property tax is also referred to as rates. Property taxation requires that owners of
property within a municipal area pay tax (based on the value of their property) to the
municipality. All tax related to immovable property (in other words, land and buildings)
is referred to as property tax.
The main reasons for arguing in favour of regarding property tax as a suitable local
revenue of income are that this form of taxation and revenue for municipalities is easy
to collect; produces a pre-determined income for municipalities; it is fixed in location;
and, it is impossible to hide.
ACTIVITY 9.2
• Explain the advantages of property tax.
182 FEEDBACK
you to an answer.
ACTIVITY 9.3
• Do you think it is unfair or unreasonable for property owners to have to pay tax on their
property, while owners of, for instance, shares are not obliged to pay any additional
tax on their property?
230
LEARNING UNIT 9: Municipal revenue
183 FEEDBACK
• This is once again a self-evaluation activity. Hint: Think along the lines of what has been
written above about the ease of raising property taxes (rates) and then write down your
considered opinion. Can you think of any other reason(s)? What role does the kind of
taxes a municipality may raise play when you consider this question?
In terms of section 229(2) of the Constitution, all municipalities have the power to
impose rates on property. It reads:
The power of a municipality to impose rates on property, surcharges on fees for

services provided by or on behalf of the municipality, or other taxes, levies or duties-
(a) may not be exercised in a way that materially and unreasonable prejudices national
Please note:
The property must first be given a value before it can be taxed and the tax levied
will be based on this value. The previous property rates system was replaced by the
Constitution and the Municipal Property Rates Act (MPRA) 6 of 2004.
In terms of the Act, municipalities may impose rates on property in their area, pro-
vided that they comply with the applicable regulations. The MPRA consists of nine
chapters, which will be dealt with briefly below.
9.3 PROPERTY TAX IN TERMS OF THE MPRA

9.3.1 Rating (Chapter 2 of the MPRA)
Section 2(1) of the MPRA provides that a metropolitan or local municipality may
levy a rate on property in its area, while a district municipality may not levy a rate on
property except on property in a district management area within the municipality
(section 2(2)(a)).
In terms of subsection (3), all municipalities must exercise their powers to levy
property rates subject to “(a) section 229 and any other applicable provisions of the
Constitution; (b) the provisions of this Act [the MPRA]; and (c) the rates policy it [the
municipality] must adopt in terms of section 3 [of the MPRA]”.
As seen above, section 3 of the MPRA regulates the adoption and contents of the
rates policy. The council of a municipality must adopt a policy consistent with the
MPRA on the levying of rates on rateable property in the municipality (subsection
(1)). A rates policy takes effect on the effective date of the first valuation roll prepared
by the municipality and must accompany the municipality’s budget for the financial
year concerned when the budget is tabled before the municipal council in terms of
section 16(2) of the Municipal Finance Management Act (subsection (2)).
Section 3(3) of the MPRA provides that a rates policy must: (You should study this
section very carefully and thoroughly.)
(a) treat persons liable for rates equitably;
(b) determine the criteria to be applied by the municipality if it
(i) levies different rates for different categories of properties;
LGL3702/1 231
(ii) exempts a specific category of owners of properties, or the owners of a specific
category of properties, from payment of a rate on their properties;
(iii) grants to a specific category of owners of properties, or to the owners of a specific
category of properties, a rebate on or a reduction in the rate payable in respect
of their properties; or
(iv) increases rates;
(c) determine, or provide criteria for the determination of

(i) categories of properties for the purpose of levying different rates as contemplated
in paragraph (b)(i); and
(ii) categories of owners of properties, or categories of properties, for the purpose of
granting exemptions, rebates and reductions as contemplated in paragraph (b)
(ii) or (iii);
(d) determine how the municipality’s powers in terms of section 9(1) must be exercised in
relation to properties used for multiple purposes;
(e) identify and provide reasons for
(i) exemptions;
(ii) rebates; and
(iii) reductions;
(f) take into account the effect of rates on the poor and include appropriate measures to
alleviate the rates burden on them;
(g) take into account the effect of rates on organisations conducting specified public benefit
activities and registered in terms of the Income Tax Act for tax exemptions because
of those activities, in the case of property owned and used by such organisations for
those activities;
(h) take into account the effect of rates on public service infrastructure;
(i) allow the municipality to promote local, social and economic development; and
(j) identify, on a basis as may be prescribed, all rateable properties in the municipality that
are not rated in terms of section 7(2)(a) [section 7(2)(a) relates to property not to be rated].
ACTIVITY 9.4
• Write a note explaining all the requirements for a rates policy as required in terms of
the provisions of the MPRA.
184 FEEDBACK
• This is once again a self-evaluation activity. Return to the preceding paragraph to
guide you to an answer. In fact, the activity requires you to summarise section 3(3)
MPRA in full to help you to come to grips with the content of this particular subsection.
When considering the criteria to be applied in respect of any exemptions, rebates and
reductions on properties used for agricultural purposes, section 3(4) of the MPRA
requires that a municipality take into account:
• the extent of services provided by the municipality in respect of such properties

• the contribution of agriculture to the local economy
• the extent to which agriculture assists in meeting the service delivery and
development obligations of the municipality
• the contribution of agriculture to the social and economic welfare of farm workers
Any exemptions, rebates or reductions referred to in a rates policy must comply and
be implemented in accordance with a national framework that may be prescribed after
consultation with organised local government (subsection (5)). No municipality may
grant relief in respect of the payment of a rate to a category of owners of properties,
232
or to the owners of a category of properties, other than by way of an exemption, a

rebate or a reduction provided for in its rates policy (and granted in terms of section
15 of the MPRA) [section 15 deals with “exemptions, reductions and rebates”]; or to
the owners of properties on an individual basis (section 3(6)).
Before a municipality adopts its rates policy, it must follow a process of community
participation in accordance with Chapter 4 of the Systems Act (section 4(1)). The
municipal manager must display the draft rates policy for a period of at least 30 days
at the municipality’s head and satellite offices and libraries (section 4(2)(a)(i)) and on
its website (if it has an official website) (section 4(2)(a)(ii)). The manager must also
place in the media a notice stating that a draft rates policy has been prepared for
submission to the council and is available for public inspection (section 4(2)(b)(i)).
The aim is to invite the local community to submit comments to the municipality within
a period specified in the notice “which may not be less than 30 days” (section 4(2)(b)
(ii) of the MPRA headed “Community participation”).
Section 5 requires that a municipal council must review its rates policy annually and,
if necessary, amend it.
Please note:
The municipality must adopt by-laws in order to give effect to its rates policy. The
by-laws may differentiate between different categories of properties and different
categories of owners.
ACTIVITY 9.5
• Why is it important to involve the community before a municipality finalises its rates
policy?
185 FEEDBACK
ACTIVITY 9.6
• On what basis, do you think, can the rates policy differentiate between categories of
properties and categories of owners?
186 FEEDBACK
• This is an obvious self-evaluation activity. Hint: Consider the variables in income, and
when one looks around one in a particular community.
9.3.2 Levying of rates

A municipality must levy rates on all rateable property in its area or, in the case of a
district municipality, on all rateable property in the district management area (sec-
LGL3702/1 233
tion 7(1)). A municipality is not obliged to levy rates on some excluded properties,
including properties that municipality owns (section 7(2)(a)(i)) and on public service
infrastructure (section 7(2)(a)(ii)). In terms of subsection (2)(a)(iii), a municipality is
also not obliged to levy rates on property as defined in paragraph (b) of section 1 of
the Act headed “Definitions”. Paragraph 1(b) reads:
Property means –
…
(b) a right registered against immovable property in the name of a person, excluding a
mortgage bond registered against that property …
Under the provisions of section 7(2)(a)(iv), a municipality is further not obliged to levy
rates on properties in respect of which it is unreasonably difficult to establish a market
value because of legally insecure tenure resulting from past racially discriminatory laws
or practices (section 7 of the MPRA – “Rates to be levied on all rateable property”).
A municipality may levy different rates for different categories of property (section
8 of the MPRA – “Differential rates”), which may include categories determined ac-
cording to subsection (1)(a) the use of the property; (b) permitted use of the property;
or (c) geographical area in which the property is situated. These categories include
the following (see subsection (2)):
• residential properties
• industrial properties
• business and commercial properties
• farm properties used for agricultural, commercial or residential purposes
• farm properties not used for any purpose
• smallholdings used for agricultural, residential, industrial, business or commercial
purposes
• state-owned properties
• municipal properties
• public service infrastructure
• privately-owned towns serviced by the owner
• formal and informal settlements
• communal land
• state trust land
• protected areas
• properties on which national monuments are proclaimed
• properties owned by public benefit organisations
Please note:
In terms of section 10, a rate on property, which is subject to a sectional title scheme,
must be levied on the individual sectional title units in the scheme and not on the
property as a whole.
Rates levied by a municipality on property must usually be based on the market value
of the property. Rates levied by a municipality on properties with a market value below
a prescribed valuation level may be levied at a uniform fixed amount per property
(section 11 of the MPRA – “Amount due for rates”).
A municipality must levy a rate in respect of a financial year. A municipality must review
annually, at the time of its budget process, the amount in rand brought in by the rates
it currently levies in line with its annual budget for the next financial year (section 12
of the MPRA – “period for which rates may be levied”). A municipality levies a rate
234
in terms of a resolution passed by the municipal council with a supporting vote by a

majority of its members.
Please note:
In Nelson Mandela Bay Municipality v Amber Mountain Investments [2017] ZASCA
36 (SCA); 2017 (4) SA 272 (SCA) the Supreme Court of Appeal had to decide on the
question whether “following upon the sale of immovable property, the property owner
is liable to pay the total rates on the property determined for the financial year or only
the rates calculated until the property is transferred” (par 1). The question flows from
the legislative requirement (in terms of section 118 of the Systems Act) that before
transfer of the property, the respondent required a rates clearance certificate from
the appellant, the municipality. (The municipality’s financial year commences on 1
July in a year and ends on 30 June the following year.) The municipality demanded
that the respondent (Amber Mountain Investments) pay the total rates due on the
property, whilst the respondent argued to the contrary.
The Court stated that to answer the question, sections 12 and 13(1) (section 13(1)
deals with the “commencement of rates”) of the MPRA require particular attention –
apart from enquiries into the Systems Act and Financial Management Act (paragraphs
7–10). In dismissing the appeal, the Court held in favour of the respondent that the
municipality was not entitled to withhold the property rates clearance certificate until
it had received payment of the property rates for the entire financial year (paragraph
27). The Court held in this regard (par 21):
It is rule of statutory construction that provisions, which interfere with protected rights,
should be narrowly interpreted. It is clear that the municipality’s requirement for rates
to be paid for a full year, as a condition for the issue of a clearance certificate in terms
of s 118 of the Systems Act, adversely affects the rights of property holders to alienate
their property. In my view s 13(1)(a) of the Rates Act should therefore be interpreted
narrowly to mean that the word ‘payable’ only fixes the rate for the financial year, but
does not mean that rate is also due at the same time. (The Court relied on City of
Cape Town v Real People Housing (Pty) Ltd 2010 (5) SA 196 (SCA) para 9.)
ACTIVITY 9.7
• Summarise the facts of this decision briefly and indicate whether you agree with the
justice. Provide reason(s) for your opinion.
187 FEEDBACK
you to an answer.
Under the provisions of section 14, headed “Promulgation of resolutions levying rates”
a resolution levying rates in a municipality (passed by the municipal council with a
supporting vote of a majority of its members – subsection (1)) must be promulgated
through being published in the Provincial Gazette (subsection (2)). The municipal
manager must “conspicuously” display the resolution for a period of at least 30 days
at the municipality’s head and satellite offices, its library and on its website (should it
have one) (subsection (3)(a)). The manager must also place an advertisement in the
media stating that a resolution levying a rate on property has been passed and that
the resolution is available for public inspection (subsection (3)(b)).
LGL3702/1 235
Section 15 of the MPRA regulates “exemptions, reductions and rebates”. According
to this section, a municipality may, in line with its policy, exempt a specific category
of owners of properties, or the owners of a specific category of properties, from pay-
ment of a rate levied on their properties; or grant to a specific category of owners
of properties, or to the owners of a specific category of properties, a rebate on or a
reduction in the rates payable in respect of their properties. Such categories may
include any of the following:
• indigent owners
• owners dependent on pensions or social grants for their livelihood
• owners temporarily without income
• owners of property situated within an area affected by a disaster, as defined by
the Disaster Management Act 57 of 2002
• owners of residential properties with a market value lower than an amount
determined by the municipality
• owners of agricultural properties who are bona fide farmers
The municipal manager must, annually, table before the council of the municipality
a list of all exemptions, rebates and reductions granted during the previous financial
year (subsection (3)(a)); and a statement reflecting the income foregone by the mu-
nicipality during the previous financial year by way of such exemptions, rebates and
reductions (subsection (3)(b)).
Section 16 deals with “Constitutionally impermissible rates”. It states that in terms of

section 229(2)(a) of the Constitution (quoted above), a municipality may not exercise
its power to levy rates on property in a way that would materially and unreasonably
prejudice national economic policies; economic activities across its boundaries; or
the national mobility of goods, services, capital or labour. In terms of section 16(5)
the Minister, after consultation with the Minister of Finance, may, by notice in the
Gazette, issue guidelines to assist municipalities in exercising their powers to levy
rates consistent with section 16(1).
Section 17 of the MPRA determines other impermissible rates (rates that a municipal-
ity may not levy). These include the following:
• on the first 30% of the market value of public service infrastructure

• on any part of the seashore as defined in the Seashore Act, 1935
• on any part of the territorial waters of the Republic as determined in terms of the
Maritime Zones Act, 1994
• on any islands of which the state is the owner
• on a special nature reserve, national park or nature reserve
• on mineral rights
• on a property belonging to a land reform beneficiary or his or her heirs, provided
that this exclusion lapses ten years from the date on which such beneficiary’s title
was registered in the office of the Registrar of Deeds
• on the first R15 000 of the market value of a property assigned in the valuation
roll or supplementary valuation roll of a municipality to a category determined
by the municipality for residential properties; or for properties used for multiple
purposes, provided that one or more components of the property are used for
residential purposes
• on a property registered in the name of and used primarily as a place of public
worship by a religious community, including an official residence registered in the
name of that community which is occupied by an office-bearer of that community
who officiates at services at that place of worship
236
ACTIVITY 9.8
• Summarise the “other” impermissible rates – those rates municipalities may NOT levy
to ensure you know these exclusions should you be asked a question on this provision
of the MPRA.
188 FEEDBACK
you to an answer.
Section 20 of the MPRA (“Limits on annual increase of rates”) determines as indicated

the limits of annual rates increases. Accordingly, the Minister (with the concurrence
of the Minister of Finance) and by notice in the Gazette may set an upper limit on the
percentage by which rates on property categories or a rate on a specific category
of properties may be increased (section 20(1)(a)); or the total revenue derived from
rates on all property categories or a rate on a specific category of properties may be
increased (section 20(1)(b)).
Please note:
Different limits may be set for different kinds of municipalities or different categories
of properties (see subsection (2)).
A rate levied on newly rateable property must be phased in over a period of three
financial years (section 21(1)(a)), while a rate levied on newly rateable property owned
and used by organisations conducting specified public benefit activities must be phased
in over a period of four financial years (section 21(1)(b)). Section 21 – “Compulsory
phasing-in of certain rates” also determines the various discounts applicable during
these phasing-in periods (section 21(2)).
In terms of section 22 of the MPRA (headed “Special rating areas”), a municipality

may, by resolution of its council, determine an area within that municipality as a special
rating area; levy an additional rate on property in that area for the purpose of raising
funds for improving or upgrading that area; and differentiate between categories of
properties when levying an additional rate.

Under the provisions of section 23 headed “Register of properties” a municipality
must draw up and maintain a register of properties in respect of properties situated
within that municipality.
23. Register of properties

(1) A municipality must draw up and maintain a register in respect of properties situated
within that municipality, consisting of a Part A and a Part B.
(2) Part A of the register consists of the current valuation roll of the municipality, including
any supplementary valuation rolls of the municipality prepared in terms of section 78.
(3) Part B of the register must specify which properties on the valuation roll or any sup-
plementary valuation rolls are subject to
(a) an exemption from the rate in terms of section 15;
(b) a rebate on or a reduction in the rate in terms of section 15;
(c) a phasing-in of the rate in terms of section 21; or
(d) an exclusion referred to in section 17(1)(a), (e), (g), (h) and (i).
LGL3702/1 237
(4) The register must be open for inspection by the public during office hours. If the mu-
nicipality has an official website or another website available to it, the register must be
displayed on that website.
(5) A municipality must at regular intervals, but at least annually, update Part B of the
register. Part A of the register must be updated in accordance with the provisions of
this Act relating to the updating and supplementing of valuation rolls.
9.3.3 Liability for rates (Chapter 3 of the MPRA)

Section 24 headed “Property rates payable by owners” deals with the liability of
owners to pay their rates. A rate levied by a municipality on a property must be paid
by the owner of the property (subsection (1)). Joint owners of a property are jointly
and severally liable for the amount due for rates on that property (subsection (2)(a)).
A rate levied by a municipality on a sectional title unit is payable by the owner of the
unit in terms of the provisions of section 25 of the MPRA.
Section 26 deals with “Method and time of payment”. A municipality may recover a
rate on a monthly basis (section 26(1)(a)) or annually, as may be agreed to with the
owner of the property (section 26(1)(b)). If a rate is payable in a single amount annu-
ally, it must be paid on or before a date determined by the municipality (subsection
(2)(a)). If a rate is payable in instalments it must be paid on or before a date in each
period determined by the Municipality (subsection (2)(b)). Payment of a rate may be
deferred, but only under special circumstances (subsection (3)).
In terms of section 27 (“Accounts to be furnished”), a municipality must furnish each

person liable for the payment of a rate with a written account specifying (subsection
(1)(a)):
• the amount due for rates payable

• the date on or before which the amount is payable
• how the amount was calculated
• the market value of the property
• details regarding any phasing-in discount or additional rate
Please note:
A person is liable for payment of a rate whether or not that person has received a
written account in terms of subsection (1). If such a person has not received a writ-
ten account, that person must make the necessary inquiries at the municipal offices
(section 27(2)).
Section 28 deals with the “recovery of rates in arrears from tenants and occupiers”.
If an amount due for rates levied in respect of a property is unpaid by the owner of
the property, the municipality may recover the amount in full or in part from a tenant
or occupier of the property, but only after it has served written notice on the tenant
or occupier (subsection (1)). The amount a municipality may recover from the tenant
or occupier of a property is limited to the amount of the rent due, but not yet paid,
by the tenant or occupier to the owner of the property (subsection (2)). Any amount
a municipality recovers from the tenant or occupier of the property must be set off
by the tenant or occupier against any money owed by the tenant or occupier to the
owner (subsection (3)). The tenant or occupier of a property must, on request by
a municipality, furnish the municipality with a written statement specifying all pay-
ments to be made by the tenant or occupier to the owner of the property for rent, or
other money payable on the property during a period determined by the municipality
(subsection 28(4)).
238
ACTIVITY 9.9
• Summarise the provisions of section 28 dealing with the requirements set out to recover
rates in arrears payable by tenants and occupiers.
189 FEEDBACK
you to an answer. Note though that you need to read the activity very carefully since
you are not required to discuss the liability for the payment of rates in general but only
the requirements set out for the recovery of rates in arrears.
The same principle (regarding the payment of rates in arrears) applies to the owner’s
agent in the sense that the municipality may recover the amount due for rates on
property from the agent of the owner (section 29(1)). (Section 29 is headed “Recov-
ery of rates from agents”.) The amount a municipality may recover from the agent is
limited to the amount of any rent or other money received by the agent on behalf of
the owner, less any commission due to the agent (section 29(3)).
9.3.4 Valuation of rateable property (Chapter 4 of the MPRA)

In general, a municipality intending to levy a rate on property must cause a general
valuation to be made of all properties in the municipality and a valuation roll of all
properties to be prepared (section 30(1)). All rateable properties in the municipality
must be valued during a general valuation, including all properties fully or partially
excluded from rates (section 30(2) of the MPRA – “General valuation and prepara-
tion of valuation rolls”).
Section 31 deals with the “date of valuation”. For the purposes of a general valuation,
a municipality must determine a date that may not be more than 12 months before
the start of the financial year in which the valuation roll is to be first implemented
(subsection (1)). The general valuation must reflect the market value of properties
determined in accordance with market conditions, which applied as at the date of
valuation and any other provisions of the Act (subsection (2)(a)–(b)).
Section 32 determines the commencement and validity of valuation rolls. A valuation

roll takes effect from the start of the financial year following completion of the public
inspection period and generally remains valid for one or more subsequent financial
years as the municipality may decide, but in total for not more than four financial
years (subsection (1)(a)–(b)).
Importantly, section 33 regulates “municipal valuers”. In terms of this section, a mu-

nicipality must, before the date of valuation, designate a person as municipal valuer. A
municipality may designate either one of its officials or a person in private practice in
this role (subsection (1)). Subsection (2) states that if a municipality decides to secure
the services of a person in private practice as its municipal valuer, it must (a) follow
an open, competitive and transparent process “in accordance with Chapter 11 of the
Municipal Finance Management Act” (Chapter 11 deals with “goods and services”
and was discussed in learning unit 8) and (b) designate the successful bidder as its
municipal valuer by way of a written contract setting out the terms and conditions of the
designation. A municipality may withdraw the designation of a person as its municipal
valuer, but only on the grounds of (a) misconduct; incapacity or incompetence; (b)
LGL3702/1 239
non-compliance with a provision of the MPRA; (c) under-performance; or (d) breach
of contract (in the case of the appointment from private practice (subsection (4)).
Municipal valuers are required to do the following (section 34 of the MPRA):
• value all properties in the municipality

• prepare a valuation roll of all properties in the municipality
• sign and certify the valuation roll
• submit the valuation roll to the municipal manager within a prescribed period
• consider and decide on objections to the valuation roll
• attend every meeting of an appeal board when that appeal board hears an appeal
against a decision of that valuer; or reviews a decision of that valuer
• prepare a supplementary valuation roll whenever this becomes necessary
• assist the municipality in the collection of postal addresses of owners where such
addresses are reasonably determinable by the valuer when valuing properties
• generally, provide the municipality with appropriate administrative support incidental
to the valuation roll
Please note:
In terms of section 35(1) of the MPRA, headed “Assistant municipal valuers” the
municipal manager may designate officials of the municipality or persons in private
practice as assistant municipal valuers to assist the valuer of the municipality with
the performance of any of the functions set out in section 34.
Section 36 (“Data collectors”) provides that the municipal manager may designate
officials of the municipality or persons who are not officials of the municipality as
data-collectors to assist the valuer of the municipality with the collection of data and
other related work (subsection (1)).
Section 37 deals with “delegations by municipal valuers”. The valuer of a municipality

may also delegate to an assistant municipal valuer any powers or duties reasonably
necessary to assist the municipal valuer to exercise a power or to comply with a duty
assigned to a municipal valuer (subsection (1)(a)(i)); or to a data collector any powers
or duties reasonably necessary to assist the municipal valuer in the collection and
processing of data (subsection (1)(a)(ii)). The valuer must regularly review delegations
and, if necessary, amend or withdraw any of those delegations (subsection (1)(b)). A
delegation must (a) be in writing; (b) be subject to such limitations and conditions as
the municipal valuer may impose in a specific case; and (c) not divest the municipal
valuer of the responsibility concerning the exercise of the delegated power or the
performance of the delegated duty (subsection (2)). The municipal valuer may con-
firm, vary or revoke any decision taken in consequence of a delegation in terms of
this section, but no such variation or revocation of a decision may detract from any
rights that may have accrued because of the decision (section 37(3)).
Please note:
A municipality may enter into an agreement with another municipality or other mu-
nicipalities to designate a single municipal valuer and to share the costs of preparing
valuation rolls (section 38 headed “Municipal partnerships”).

In The City of Johannesburg Metropolitan Municipality v The Chairman of the Valu-
ation Appeal Board for the City of Johannesburg [2014] ZASCA 5 (SCA); 2014 (4)
SA 10 (SCA), the importance of the role of the valuer was emphasised. Study the
following paragraphs carefully (paragraphs 22–28):
240
[22] In the scheme of these proceedings, the function of the municipal valuer is of considerable
importance. In order to determine the market value of property, valuers should have regard
to various factors in order to determine what a notional willing buyer would probably pay to
a willing seller in the open market. These include comparable sales of similar properties in
the open market; the extent to which the parties to previous transactions acted voluntarily
and negotiated on equal terms or acted under compulsion; the motivation of the respective
parties in previous transactions to buy and sell; restrictions on the use of the property and
the possibility of their removal; the improvements on the land and the depreciation of those
improvements; the potential uses to which the land may be put; and the income that may be
derived from the property (this list is not meant to be exhaustive) [footnote omitted]. …
[23] This remains as true today as it did then. As was more recently commented, correctly in
my view: “The valuation process consequently calls for skill and experience, without which a
valuer would find it difficult to arrive at a logical deduction from the facts ... A valuer’s awareness
of existing market conditions and trends, together with his knowledge of the circumstances
and the facts relating to the property concerned, enable him to understand how the buying
and selling public think, and through his skill and experience he should be able to recognise
the elements most likely to influence intending purchasers.” [Ellenberger The Valuer (2 ed)
Part 6 (Published by the South African Institute in the Valuers’ Valuation Manual)]
[24] Valuation is accordingly not an exact science. The market value of a property can only
be estimated and not precisely determined, [footnote omitted] and a valuer is called on to
exercise professional skill and expertise in a specialised field by expressing an opinion on the
market value in monetary terms [footnote omitted].
[25] In order to do so, a municipal valuer needs to be appropriately qualified. Section 39(1)
(a) of the Act requires a municipal valuer to be a person registered as “a professional valuer
or professional associated valuer” under the Property Valuers Profession Act 47 of 2000 (the
Valuers Act) whilst an assistant municipal valuer must be similarly registered (although in
his or her case, registration as a “candidate valuer” will suffice). But in order to be registered
under the Valuers Act, a valuer needs to satisfy the South African Council for the Property
Valuers Profession [footnote omitted] (the council) that he or she has passed the necessary
examinations and has “gained practical experience in property valuation … of the prescribed
scope, variety, nature and standard” as contained in the rules published by the council [footnote
omitted]. (Qualification requirements in respect of candidate valuers are also prescribed but
are unnecessary to consider for purposes of this judgment.)
[26] In addition, but most importantly, valuers function not as arbitrators but as estimators
of value and, as such, are called on to exercise an honest judgment and to be influenced by
neither who has engaged them nor the purpose for which their valuations are required [foot-
note omitted]. Simply put, valuers should be impartial in the opinions they express [footnote
omitted]. Any doubt about this is dispelled by clause 5(d) of the Code of Conduct for persons
registered under the Valuers Act, drawn up by the council under s 28 of the Valuers Act
[http://www.sacpvp.co.za/Portals/0/downloads/SACPVP_Code_of_Conduct.pdf]. It prescribes
that any person registered under that Act shall “act with the strictest independence, objectivity
and impartiality in performing a property valuation”.
[27] As already mentioned, s 39(1) requires the municipal valuer to be registered as a pro-
fessional valuer or professional associated valuer under the Valuers Act. That being so, the
municipal valuer is duty bound to comply with the norms of independence, objectivity and
impartiality outlined in this code. That this is the case is reinforced by the further provisions
in s 39, which provide that a municipal valuer or an assistant municipal valuer may not be a
councillor of the relevant municipality.
[28] The object of all of this is clear. The legislation envisages that the valuation of rateable
property is not only to be done by an impartial person, but that it be seen to be so done. Thus
the appointment of an independent valuer, together with the right of objection against such
valuer’s compilation of the valuation roll and the right of appeal to the valuation appeal board
against any decision made by the municipal valuer in respect of an objection, provides a bul-
wark between the interests of the municipality on the one hand and the owner of the rateable
property on the other. It results in the municipality being able to levy rates against the value
of a property only where the valuation had been done impartially and after the voice of the
taxpayer has been heard.
In order to valuate properties, section 41 of the MPRA – (“Inspection of property”)

determines that, subject to any legislation that restricts or prohibits entry to any spe-
cific property, the valuer of a municipality, assistant municipal valuer, data collector
or other person authorised by the municipal valuer in writing, may (a) between 07:30
LGL3702/1 241
and 19:00 on any day except a Sunday or public holiday, enter any property in the
municipality that must be valued in terms of the MPRA and (b) inspect that property
for the purpose of the valuation (subsection (1)).
In terms of section 42 (“Access to information”) a municipal valuer may (a) require the
owner (tenant, occupier or agent) of a property which the valuer must value to give the
valuer access to any document or information in possession of the owner and which
the valuer reasonably requires for the purpose of valuing the property (subsection
(1)). The valuer is also entitled to make extracts from any such document or informa-
tion (subsection (1)(b)); and in writing require the owner to provide the valuer with
particulars regarding the property which the valuer reasonably requires for valuing
the property (subsection (1)(c)).
Section 44 deals with “protection of information” and provides that a municipal valuer,
assistant municipal valuer or data collector may not disclose to any person any in-
formation obtained whilst exercising a power referred to in section 41 or 42, except
(a) within the scope of that person’s powers and duties in terms of the MPRA; (b) for
the purpose of carrying out the provisions of the MPRA; (c) for the purpose of legal
proceedings; or (d) in terms of a court order (subsection (1)(a)–(d)).
ACTIVITY 9.10
• Write a note in which you set out (a) the functions and (b) duties of municipal valuers.
190 FEEDBACK
• This is once again an obvious self-evaluation activity. Return to the preceding paragraphs
to guide you to an answer. Note though that the activity requires you fi rst to distinguish
carefully between the valuer’s functions, followed by the valuer’s particular duties.
Note too that his/her duties are varied. Please try to remember at least fi ve of them.
ACTIVITY 9.11
• Write a note in which you explain why “the function of the municipal valuer is of
considerable importance” as set out in the decision of The City of Johannesburg
Metropolitan Municipality v The Chairman of the Valuation Appeal Board for the City
of Johannesburg.
191 FEEDBACK
you to an answer. No further comment is warranted.
ACTIVITY 9.12
• Carefully read City of Cape Town and Other v Robertson and Other 2005 (2) SA 323
(CC) and study paragraphs 53 and 62. (The importance of the decision is that is clarifies
242
and confi rms the powers, duties and status of municipalities – specifi cally their power
to levy property rates.) Having read the decision, write down the facts followed by a
summary of the two prescribed paragraphs.
192 FEEDBACK
• Once again, this is an obvious self-evaluation activity. This case is part of your prescribed
material. The additional material is to provide the facts of the decision before you turn
to the next part of the activity – to summarise what the court held in paragraphs 53
and 62 (the prescribed study material).
9.3.5 Valuation criteria (Chapter 5 of the MPRA)

Property must be valued in accordance with generally recognised valuation prac-
tices, methods and standards, and the provisions of the MPRA in terms of section
45(1). (Section 45 is headed “Valuation”.) Physical inspection of the property to be
valued is optional (subsection (2)(a)); and comparative, analytical and other systems
or techniques may be used, including aerial photography and computer-assisted
mass appraisal systems or techniques, taking into account changes in technology
and valuation systems and techniques (subsection (2)(b)). If the available market-
related data of any category of rateable property is not sufficient, such property may
be valued in accordance with any mass valuation system or technique approved by
the municipality concerned (section 45(3)).
Section 46 provides the general basis of valuation.

46. General basis of valuation.
(1) Subject to any other applicable provisions of this Act, the market value of a property
is the amount the property would have realised if sold on the date of valuation in the
open market by a willing seller to a willing buyer.
(2) In determining the market value of a property, the following must be considered for
purposes of valuing the property:
(a) The value of any licence, permission or other privilege granted in terms of legisla-
tion in relation to the property;
(b) the value of any immovable improvement on the property that was erected or
is being used for a purpose which is inconsistent with or in contravention of the
permitted use of the property, as if the improvement was erected or is being used
for a lawful purpose; and
(c) the value of the use of the property for a purpose which is inconsistent with or in
contravention of the permitted use of the property, as if the property is being used
for a lawful purpose.
(3) In determining the market value of a property, the following must be disregarded for
purposes of valuing the property:
(a) Any building or other immovable structure under the surface of the property which
is the subject matter of any mining authorisation or mining right defined in the
Mineral and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002);
(b) any equipment or machinery which, in relation to the property concerned, is im-
movable property, excluding
(i)a lift;
(ii)an escalator;
(iii)an air-conditioning plant;
(iv) fire extinguishing apparatus;
(v) a water pump installation for a swimming pool or for irrigation or domestic
purposes; and
(vi) any other equipment or machinery that may be prescribed; and
(c) any unregistered lease in respect of the property.
LGL3702/1 243
(4) In determining the market value of a property used for agricultural purposes, the value
of any annual crops or growing timber on the property that have not yet been harvested
as at the date of valuation must be disregarded for purposes of valuing the property.
9.3.6 Valuation rolls (Chapter 6 of the MPRA)

Section 48 deals with the “contents of valuation rolls”. Subsection (1) requires that a
valuation roll must list all properties in the municipality. The valuation roll must reflect
the following particulars in respect of each property as at the date of valuation, to the
extent that such information is reasonably determinable:
• the registered or other description of the property

• the category into which the property falls
• the physical address of the property
• the extent of the property
• the market value of the property
• the name of the owner, and
• any other prescribed particulars (section 48((2)(a)–(g))
Section 49 requires the “public notice of valuation rolls”. Under the provisions of
section 49(1) the valuer of a municipality must submit the certified valuation roll to
the municipal manager and the municipal manager must, within 21 days of receipt of
the roll, publish (a) in the prescribed form in the Provincial Gazette and (b) advertise
in the media once a week two consecutive weeks a notice (i) stating that the roll is
open for public inspection. Further, in terms of subsection (1)(a)(ii) every person who
wishes to lodge an objection in respect of any matter in the roll, or omission from
the roll is invited to do so. The municipal manager must also serve on every owner
of property listed in the valuation roll a copy of the notice, together with an extract of
the valuation roll pertaining to that owner’s property (subsection (1)(c)). The notice
and the valuation roll must also be published on the municipality’s website (should it
have an official website (subsection (2) of the MPRA).
In terms of section 50 (“Inspection of, and objections to, valuation rolls”) any person
may (a) inspect the roll during office hours; (b) on payment of a reasonable fee request
the municipality during office hours to make extracts from the roll; and (c) lodge an
objection with the municipal manager against any matter reflected in the roll (sub-
section (1)(a)–(c)). An objection must be in relation to a specific individual property
and not against the valuation roll as such (subsection (2)). A municipal council may
also lodge an objection with the municipal manager concerned against any matter
reflected in the roll, or omitted from the roll (subsection (4)). The municipal manager
must inform the council of any matter reflected in, or omitted from, the roll that affects
the interests of the municipality. A municipal manager must submit all objections to
the municipal valuer, who must promptly decide upon and dispose of the objections
(subsection (5)).
Please note:
Section 51 deals with the “processing of objections” whilst section 52 makes provi-
sion for the “compulsory review of decisions of municipal valuer”. In terms of section
51 a valuer must promptly (a) consider objections in accordance with a prescribed
procedure; (b) decide objections on facts, “including the submissions of an objector,
and, if the objector is not the owner, of the owner”; and (c) adjust or add to the valu-
ation roll in accordance with any decision taken.
Subsection (1)(a) of section 52 provides that the valuer must give written reasons
to the municipal manager (if a valuer adjusts the valuation of a property in terms of
244
section 51(c) by more than 10% upwards or downwards) and in terms of subsection
(1)(b) the municipal manager must promptly submit to a valuation appeal board the
valuer’s decision, the reasons for the decision and all relevant documentation, for
review. Under subsection (2) an appeal board must (a) review any such decision; and
(b) either confirm, amend or revoke the decision. In terms of subsection (3), should
the appeal board amend or revoke the decision, the chairperson of the appeal board
and the valuer must ensure that the valuation roll is adjusted in accordance with the
decision of the appeal board.
Section 53 of the MPRA – “Notification of outcome of objections and furnishing of

reasons” provides that a municipal valuer must, in writing, notify every person who
has lodged an objection, and also the owner of the property concerned if the objec-
tor is not the owner, of the valuer’s decision regarding that objection (subsection (1)
(a)). These parties must also be informed about (b) any adjustments made to the
valuation roll in respect of the property concerned and (c) whether section 52 applies
to the decision. The objector or owner may apply to the municipal manager for the
reasons for the decision – such application must be accompanied by a prescribed
fee (subsection (2)).
An appeal to an appeal board against a decision of a municipal valuer in terms of

section 51 may be lodged in the prescribed manner with the municipal manager
concerned by (a) a person who has lodged an objection and who is not satisfied with
the decision of the municipal valuer; (b) an owner of a property who is affected by
such a decision, if the objector was not the owner; or (c) the council of the municipal-
ity concerned, if the municipality’s interests are affected (section 54 of the MPRA
– “Right of appeal”).
9.3.7 Valuation appeal boards (Chapter 7 of the MPRA)

The establishment of valuation appeal boards, their functions, composition and
procedures of appeal boards are extensively dealt with in Chapter 7 of the MPRA.
Section 56 deals with the “establishment of valuation appeal boards”. Section 56(1)
reads:
The MEC for local government must, by notice in the Provincial Gazette, establish
as many valuation appeal boards in the province as may be necessary, but not fewer
than one in each district municipality and each metropolitan municipality.
The functions of an appeal board are set out in section 57. They are (a) to hear and
decide appeals against the decisions of a municipal valuer concerning objections
to matters reflected in the valuation roll of a municipality in the area for which it was
established; and (b) to review decisions of a municipal valuer.
The composition of a valuation appeals board is set out in section 58. It states:
58 Composition
(1) An appeal board consists of –
(a) ……… a chairperson, who must be a person with legal qualifications and sufficient
experience in the administration of justice; and
(b) ……… not fewer than two and not more than four other members with sufficient
knowledge or experience in the valuation of property, of which at least one must
be a professional valuer registered in terms of the Property Valuers Profession
Act 2000 (Act 47 of 2000).
LGL3702/1 245
(2) The chairperson and other members of an appeal board must be appointed by the MEC
for local government in the province, taking into account the need for representivity,
including gender representivity.
(3) The MEC for local government must follow a transparent process complying with any
prescribed norms and standards when making appointments to an appeal board.
Please note:
An appeal board may determine its internal procedures to dispose of appeals and
reviews subject to any procedures that may be prescribed (section 67 – “Procedures”).
Section 69 deals with “decisions affecting valuation rolls”. The chairperson of an

appeal board and the valuer of the municipality must ensure that the valuation roll
is adjusted or added to in accordance with the decisions taken by the appeal board
(subsection (1)).
Section 72 deals with the “inspection of property”. Subject to any legislation that
restricts or prohibits entry to any specific property, a member of, or any other person
authorised by, an appeal board may, (a) between 07:30 and 19:00 on any day except
a Sunday or public holiday, enter any property that is the subject of an appeal or
review; and (b) inspect that property for the purpose of the appeal or review (subsec-
tion (1)(a)–(b)).
ACTIVITY 9.13
• Summarise the provisions dealing with the establishment of valuation appeal boards,
their functions, composition and procedures of valuation appeal boards.
193 FEEDBACK
guide you to an answer.
9.3.8 Updating of valuation rolls (Chapter 8 of the MPRA)

A municipality must regularly, but at least once a year, update its valuation roll by
causing (a) a supplementary valuation roll to be prepared or (b) the valuation roll to
be amended under the provisions of section 77 headed “General”.
Supplementary valuations are regulated in section 78 as follows:
78. Supplementary valuations.

(1) A municipality must, whenever necessary, cause a supplementary valuation to be
made in respect of any rateable property
(a) incorrectly omitted from the valuation roll;
(b) included in a municipality after the last general valuation;
(c) subdivided or consolidated after the last general valuation;
(d) of which the market value has substantially increased or decreased for any reason
after the last general valuation;
(e) substantially incorrectly valued during the last general valuation;
(f) that must be revalued for any other exceptional reason; or
(g) of which the category has changed;
246
(2) For the purposes of subsection (1), the provisions of Part 2 of Chapter 4 and, Chapters
5, 6 and 7, read with the necessary changes as the context may require, are applicable,
except that
(a) a municipal valuer who prepared the valuation roll may be designated for the
preparation and completion of the supplementary valuation roll; and
(b) the supplementary valuation roll takes effect on the first day of the month follow-
ing the completion of the public inspection period required for the supplementary
valuation roll in terms of section 49 (as read with this section), and remains valid
for the duration of the municipality’s current valuation roll.
(3) Supplementary valuations must reflect the market value of properties determined in
accordance with
(a) market conditions that applied as at the date of valuation determined for purposes
of the municipality’s last general valuation; and
(b) any other applicable provisions of this Act.
(4) Rates on a property based on the valuation of that property in a supplementary valu-
ation roll become payable with effect from
(a) the effective date of the supplementary roll, in the case of a property referred to
in subsection (1)(a), (e) or (f);
(b) the date on which the property was included in the municipality, in the case of a
property referred to in subsection (1)(h);
(c) the date on which the subdivision or consolidation of the property was registered
in the Deeds Office, in the case of a property referred to in subsection (1)(c);
(d) the date on which the event referred to in subsection (1)(d) has occurred; or
(e) the date on which the change of category referred to in subsection (1)(g) occurred.
A municipality must regularly cause its valuation roll to be amended to reflect any
changes to the particulars on the roll, except that changes to the roll in circumstances
where section 78 applies, may only be effected through a supplementary roll in ac-
cordance with that section (section 79 – “Amendment of valuation rolls”).
ACTIVITY 9.14
• Do you think it is important for municipalities constantly to update their property

valuations? Provide reason(s) for your opinion.
194 FEEDBACK
• This is an obvious self-evaluation activity. Note though that you are required to provide
reason(s) for your opinion. Hint: Consider, for example, the role of market conditions.
9.4 FEES, SERVICE CHARGES AND TARIFFS

In terms of section 229 of the Constitution, municipalities are empowered to impose
taxes, levies and duties apart from property rates. Nevertheless, income tax, general
sales tax and value added tax are excluded from the levies and duties that munici-
palities may raise.
Bekink defines a “charge” as a “once-off payment for something to be done”. He uses

the example of the once-off payment of an electricity or a water connection (page 465).
A “tariff ” refers to a continuing fee or charge for a service rendered “on a continuous
basis”. Bekink provides as examples tariffs for the supply of water and electricity; refuse
removal as well as the provision of public transport such as a bus service (page 465).
LGL3702/1 247
Bekink states that fees, tariffs and service charges are often “divided into different
categories” (page 465–466). According to him a distinction is made between “trading
services, necessary services and social services [his emphasis]. See p 466. One
should therefore distinguish between the following:
• trading/utility services: municipalities do not make profits from these services

(examples are the provision of water and electricity services). The reason advanced
by Bekink for municipalities not making any profit on these services rendered is
that “it could be oppressive to poor households” (page 466).
• necessary services/charges or fees: usually relate to sewerage, refuse removal
and associated services.
• social services: refers to clinics, building control, libraries, markets, halls, parks
and recreational facilities.
Please note:
The following are guidelines that are intended to guide tariff policies:
• payment in proportion to the amount consumed – Bekink explains, “as far as is

practically possible, consumers should pay in proportion to the number or services
consumed” (page 466).
• full payment of service costs – “All households, with the exception of the indigent,
should pay the full costs of the services consumed” (Bekink page 466).
• ability to pay – “Municipalities should develop a system of targeted subsidies to
ensure that poor households have access to at least a minimum level of basic
services” (Bekink page 466).
• fairness – “Tariff policies should be fair, in that all people should be treated
equitably” (Bekink page 466).
• transparency – “Tariff policy should be transparent to all consumers and any
subsidies and concessions which exist must be visible and understood by all
consumers” (Bekink page 466).
• local determination of tariff levels – “Municipalities should have the flexibility to
develop their own tariffs in keeping with the above principles” (Bekink page 466).
• consistent tariff enforcement – “A consistent policy for dealing with non-payment of
tariffs needs to be developed. This must be targeted and enforced with sensitivity
to local conditions” (Bekink page 466).
• ensuring that local economies are competitive – “Local tariffs must not unduly
burden local business through higher tariffs, as these costs affect the sustainability
and competitiveness of such businesses and firms” (Bekink page 466).

Local government usually participates in trading enterprises as well. These enterprises
are associated with activities such as the provision of water and electricity, transport
and fresh produce. You should also take note of the Regional Service Council levies
(RSC levies) and inter-governmental transfers (IGT). Municipalities are entitled to an
equitable share of national revenue, which means that IGTs have become important.
The following three types of transfers are in use:
• agency payments paid by provincial governments for services rendered by

municipalities
• direct grants from the other two government spheres to subsidise the capital costs
of investment in municipal infrastructure
• grants to support the operating budgets of municipalities (see the White Paper on
Local Government page 139)
248
The new system of IGTs must address both vertical and horizontal divisions of revenue.
Horizontal division of revenue refers to the division of revenue between municipalities
inter se (Bekink page 467).
Municipalities can also raise loans for capital or current expenditure, although there
are strict requirements in this regard. See the provisions of section 230A of the Con-
stitution in this regard.
In addition, municipalities can raise funds through the issuing of municipal stock.
This refers to a fixed amount of money invested by an individual or institution and is
also a form of loan.
ACTIVITY 9.15
• Write a note in which you explain in detail the various categories of fees, tariff s and
service charges. In your note you also need to set out the guidelines that are intended
to guide tariff policies.
195 FEEDBACK
you to an answer.
QUESTION 1
Explain, in one paragraph, the importance of municipal revenue.
QUESTION 2
Give an extensive analysis of property rates. In your answer you should refer to the relevant
provisions of the MPRA. Make use of the following sub-headings:
2.1 Rating
2.2 Levying
2.3 Liability
QUESTION 3
In order for municipalities to levy rates on properties, such properties must first be valued.
Explain, in two pages, the functions of municipal valuers; how the valuation criteria operate; and
the purpose of valuation rolls. Refer to the relevant provisions of the MPRA where applicable.
QUESTION 4
Explain, in your own words, the importance of an efficient valuation system.
QUESTION 5
Briefly list the forms of municipal revenue other than property rates. Give a brief description
of each form of revenue.
LGL3702/1 249
10 LEARNING UNIT 10
Municipal public administration, public
10
participation and development planning
OVERVIEW
This final learning unit deals with the public administration of local government,
which includes public relations. It deals with the relationship between the local
decision-makers (including their political decisions) and the public at large. Good
public relations depend on effective service delivery, openness and accountability.
Public participation also forms part of this relationship since the new dispensation
requires the community to be involved in municipal decision-making. The Consti-
tution also requires that government officials should be held accountable for their
actions. This principle supports the overarching principles of transparency and
openness. In order to ensure that municipalities give effect to their constitutional
and legislative commitments, to the best of their abilities, the law requires that they
reflect on their performance and monitor their performance. Municipal performance
management and capacity building form an essential part of this ideal. Municipalities
should also plan their actions in line with the Systems Act, which requires municipal
planning development.
On completion of this unit, you should be able to:
• define municipal public administration and explain the importance of good public
relations
• contextualise public participation as a key principle in the new constitutional
dispensation
• thoroughly explain the importance of municipal accountability
• analyse the success of municipalities’ performance management systems
• define municipal development planning as regulated in the Systems Act
LEARNING MATERIAL
Others 2006 (1) SA 47 (CC) paras 71–73
Doctors for Life International v Speaker of the National Assembly and Others 2006
(6) SA 416 (CC) paras 118–129; 204
Others 2007 (1) BCLR 47 (CC) paras 36–40; 45
and Others 2008 (5) SA 171 (CC) paras 42–61 (read these paragraphs carefully)
10.1 MUNICIPAL PUBLIC ADMINISTRATION

“Administration” (including municipal administration) “refers to the overall manage-
ment of the public affairs of a specific organisation” (Bekink page 471). In the local
government sphere, public administration refers to the relationship between politics
(with the politicians “concerned with the uses of power”) and the administration/
250
LEARNING UNIT 10: Municipal public administration, public participation and development planning
administrative organs concerned with “translating the political decisions into practi-
cal implementation” (Bekink page 472). To emphasise: Administration is therefore
concerned with converting (“translating”) political decisions into practical actions (the
implementation phase). Municipal administration forms part of public administration.
Public administration includes the following:
• policy
• decisions
• staffing matters
• organising
• planning
• resource allocations
Please note:
Bekink reminds us that although municipal administration forms part of the public
administration, municipal administration also has a “more distinctive importance”
which he summarises as follows (page 472):
• municipal administration operates in a political field

• it operates within the context of democratic notions of an open, responsive and
accountable government institution
• it is decentralised, and to a certain degree, self-financing
• it is the part of government, which is closest to the citizens of the state
10.2 MUNICIPAL PUBLIC RELATIONS

The public should be sensitive about the performance of political office-bearers and
administrative staff. The reason being that local authorities provide essential goods
and services, which affect people directly (see Bekink page 472). The public rela-
tions activities of public institutions are generally approached from the viewpoint of
promoting general welfare and public functionaries should generally aim to maintain
high ethical standards.
Please note:
All actions of politicians and staff representatives affect municipal public relations.
These politicians and representatives should thus aim to conduct their activities in
a manner that displays their commitment to the general welfare of the public. The
state of public relations therefore depends on the performance of the functionaries
involved in the public administration.
10.2.1 The constitutional values governing public administration

Please note:
The constitutional values to be discussed below are important not only to the public
administration as such, but they are obviously applicable to municipal administration
as well or, as Bekink explains, these values/principles are important “also [to] the
public services throughout all three spheres of government” (page 473). It is also
important to remember that these values/principles must be complied with, as they
are obligatory.
The constitutional values/principles that underlie public administration are provided

for in section 195 of the Constitution:
LGL3702/1 251
195. Basic values and principles governing public administration
(1) Public administration must be governed by the democratic values and principles en-
shrined in the Constitution, including the following principles:
(a) A high standard of professional ethics must be promoted and maintained.
(b) Efficient, economic and effective use of resources must be promoted.
(c) Public administration must be development-oriented.
(d) Services must be provided impartially, fairly, equitably and without bias.
(e) People’s needs must be responded to, and the public must be encouraged to
participate in policy-making.
(f) Public administration must be accountable.
(g) Transparency must be fostered by providing the public with timely, accessible and
accurate information.
(h) Good human resource management and career development practices, to max-
imise human potential, must be cultivated.
(i) Public administration must be broadly representative of the South African people,
with employment and personnel management practices based on ability, objectiv-
ity, fairness, and the need to redress the imbalances of the past to achieve broad
representation.
(2) The above principles apply to
(a) administration in every sphere of government;
(b) organs of state; and
(c) public enterprises.
(3) National legislation must ensure the promotion of the values and principles listed in
subsection (1).
(4) The appointment in public administration of a number of persons on policy considera-
tions is not precluded, but national legislation must regulate these appointments in
the public service.
(5) Legislation regulating public administration may differentiate between different sectors,
administrations or institutions.
(6) The nature and functions of different sectors, administrations or institutions of public
administration are relevant factors to be taken into account in legislation that regulates
public administration.
ACTIVITY 10.1
• Give a brief explanation regarding the importance of municipal public relations.
196 FEEDBACK
• You will be so well acquainted with the sentence by now – “this is a self-evaluation
activity”. This is obviously yet another one of such activities. Once again, you need to
return to earlier paragraphs for an answer.
ACTIVITY 10.2
• Why do you think municipal public relations are important in a democratic society?
197 FEEDBACK
• Once again, this is a self-evaluation activity so use the preceding paragraphs to assist
you. Should you be able to think of any other reasons write them down.
252
Please take note:

Municipalities must also strive to achieve the objects as set out in section 152 of the
Constitution (section 152 was discussed earlier in the study guide dealing with the
“objects” of local government); comply with the duties of local government (in general);
and establish and organise their administrations in a manner that would enable them
to comply with all their administrative and financial obligations. These obligations/
requirements are listed in section 51 of the Systems Act as follows:
51. Organisation of administration
A municipality must within its administrative and financial capacity establish and organise its
administration in a manner that would enable the municipality to
(a) be responsive to the needs of the local community;
(b) facilitate a culture of public service and accountability amongst its staff;
(c) be performance orientated and focused on the objects of local government set out in
section 152 of the Constitution and its developmental duties as required by section 153
of the Constitution;
(d) ensure that its political structures, political office-bearers and managers, and other staff
members align their roles and responsibilities with the priorities and objectives set out
in the municipality’s integrated development plan;
(e) establish clear relationships, and facilitate co-operation, co-ordination and communi-
cation, between
(i) its political structures and political office-bearers and its administration;
(ii) its political structures, political office-bearers and administration and the lo-
cal community;
(f) organise its political structures, political office-bearers and administration in a flexible
way in order to respond to changing priorities and circumstances;
(g) perform its functions
(i) through operationally effective and appropriate administrative units and mecha-
nisms, including departments and other functional or business units; and
(ii) when necessary, on a decentralised basis;
(h) assign clear responsibilities for the management and co-ordination of these administra-
tive units and mechanisms;
(i) hold the municipal manager accountable for the overall performance of the administration;
(j) maximise efficiency of communication and decision-making within the administration;
(k) delegate responsibility to the most effective level within the administration;
(l) involve staff in management decisions as far as is practicable; and
(m) provide an equitable, fair, open and non-discriminatory working environment.
10.3 PUBLIC PARTICIPATION

The aim of the new constitutional dispensation is to establish a democratic government
founded on the following principles: accountability, openness and responsiveness.
The principles of accountability and participation are also central to local government.
Participation entails communities and individuals having “a real say” in the decisions
that affect their lives.
See Matatiele Municipality and Others v President of the Republic of South Africa and
Others 2006 (5) SA 47 (CC) paras 71–73; Doctors for Life International v Speaker of
the National Assembly and Others 2006 (6) SA 416 (CC) paras 118–129; 204; and
Others 2007 (1) BCLR 47 (CC) paras 36–40; 45 as examples.
Individuals should be able to take part in the decision-making processes of local

government. In order to give effect to this ideal of public participation, open channels
of communication should be developed. Take note of the following channels of com-
munication available to individuals:
LGL3702/1 253
• as voters (through the process of taking part in elections as voters)
• as consumers of services (through their use of and payment for municipal services)
• as an organised interest group (such as a ratepayers association)
• through specialised structures (such as ward committees)
ACTIVITY 10.3
• How does the principle of municipal public relations fit with public participation?
198 FEEDBACK
• Once again, this is a self-evaluation activity so use the preceding paragraphs to guide
you to an answer. Hint: Consider this relationship by way of comparison as a system
of two-way traffi c – the one way cannot operate optimally without the assistance of
the other.
In terms of the Systems Act, municipalities must develop a culture of municipal govern-
ance, which includes a system of participatory governance. The Systems Act provides
that the local community should be able to participate in the affairs of local govern-
ment by means of certain mechanisms. Municipalities must provide for the following
(section 17(2)(a)–(e) of the Systems Act) – you should read this section carefully:
17. Mechanisms, processes and procedures for community participation.

(1) Participation by the local community in the affairs of the municipality must take place
through
(a) political structures for participation in terms of the Municipal Structures Act;
(b) the mechanisms, processes and procedures for participation in municipal govern-
ance established in terms of this Act;
(c) other appropriate mechanisms, processes and procedures established by the
municipality;
(d) councillors; and
(e) generally applying the provisions for participation as provided for in this Act.
(2) A municipality must establish appropriate mechanisms, processes and procedures to
enable the local community to participate in the affairs of the municipality, and must
for this purpose provide for
(a) the receipt, processing and consideration of petitions and complaints lodged by
members of the local community;
(b) notification and public comment procedures, when appropriate;
(c) public meetings and hearings by the municipal council and other political structures
and political office-bearers of the municipality, when appropriate;
(d) consultative sessions with locally recognised community organisations and, where
appropriate, traditional authorities; and
(e) report-back to the local community.
(3) When establishing mechanisms, processes and procedures in terms of subsection (2)
the municipality must take into account the special needs of
(a) people who cannot read or write;
(b) people with disabilities;
(c) women; and
(d) other disadvantaged groups.
(4) A municipal council may establish one or more advisory committees consisting of
persons who are not councillors to advise the council on any matter within the coun-
cil’s competence. When appointing the members of such a committee, gender repre-
sentivity must be taken into account.
254
10.4 MUNICIPAL ACCOUNTABILITY

Accountability refers to the need to explain or defend certain actions (or even failures
to act). This principle ensures that individuals in power will be held accountable for
their decisions. It also guarantees a democratic system with checks and balances –
local residents should be able to hold their representatives accountable. However,
accountability includes liability in the sense that government officials can (and will)
be held liable for their actions.
Please note:
Bekink provides a diagram of the way in which municipalities are accountable not only
to the local community, but also to the local government institution itself (page 482
and available on e-reserves). The latter refers to accountability within the municipal
administration. In addition, there should be accountability between the executive
authority and the municipal council; the council and the administration should be
accountable to each other; accountability should exist between the municipality as
employer and organised labour; and there should be accountability between the dif-
ferent spheres of government.

Various initiatives have been implemented to ensure accountability. Bekink provides
the following examples (pages 483–484):
• codes of conduct (Such codes were drafted for councillors, traditional leaders and
officials. The function of these codes is to ensure that the individuals mentioned
act in the interest of the communities that they serve and that they are accountable
for their actions (p 483).)
• the appointment of full-time councillors (Full-time councillors will have more time
to fulfil their functions, which “should improve effectiveness and accountability”
(page 483).)
• new structures and functionaries (The office of the executive mayor and the office of
the municipal manager are examples and they have “specifically allocated powers,
responsibilities and functions and should also play an important role in ensuring
municipal compliance to all its duties and objectives” (page 484).)
• performance management (Municipal performance is measured against key
performance indicators (KPI). KPIs should be set up in consultation with the public
and other “stakeholders and should encourage participation and accountability
through regular monitoring” (page 484).)
• public rights and responsibilities (Residents of municipalities have both rights and
responsibilities/obligations. This reality requires a “balanced approach” and “should
also enhance municipal accountability and effectiveness” (p 484).)
10.5 MUNICIPAL PERFORMANCE MANAGEMENT

In order to create a local government system that is more efficient and customer-
orientated, proper performance management within municipal administrations is
essential. Performance management is defined as “a strategic tool that can encour-
age new attitudes, skills and competencies” in local government (Bekink 484). It is a
process through which municipalities continually seek to improve their functioning.
Performance is also regularly assessed to determine whether the municipality is
giving effect to its constitutional and legislative obligations.
The Systems Act now requires all municipalities to establish and develop performance
management systems (PMS).
LGL3702/1 255
Please note:
The following provisions in the Systems Act are important as regards a PMS:
38. Establishment of performance management system.

A municipality must
(a) establish a performance management system that is
(i) commensurate with its resources;
(ii) best suited to its circumstances; and
(iii) in line with the priorities, objectives, indicators and targets contained in its inte-
(b) promote a culture of performance management among its political structures, political
office-bearers and councillors and in its administration; and
(c) administer its affairs in an economical, effective, efficient and accountable manner.
39. Development of performance management system.

The executive committee or executive mayor of a municipality or, if the municipality does not
have an executive committee or executive mayor, a committee of councillors appointed by
the municipal council must
(a) manage the development of the municipality’s performance management system;
(b) assign responsibilities in this regard to the municipal manager, and
(c) submit the proposed system to the municipal council for adoption.
41. Core components.

(1) A municipality must in terms of its performance management system and in accord-
ance with any regulations and guidelines that may be prescribed
(a) set appropriate key performance indicators as a yardstick for measuring perfor-
mance, including outcomes and impact, with regard to the municipality’s develop-
ment priorities and objectives set out in its integrated development plan;
(b) set measurable performance targets with regard to each of those development
priorities and objectives;
(c) with regard to each of those development priorities and objectives and against
the key performance indicators and targets set in terms of paragraphs (a) and (b)
(i) monitor performance; and
(ii) measure and review performance at least once a year;
(d) take steps to improve performance with regard to those development priorities
and objectives where performance targets are not met; and
(e) establish a process of regular reporting to
(i) the council, other political structures, political office-bearers and staff of the
municipality; and
(ii) the public and appropriate organs of state.
(2) The system applied by a municipality in compliance with subsection (1)(c) must be de-
vised in such a way that it may serve as an early warning indicator of under-performance.
43. General key performance indicators.

(1) The Minister, after consultation with the MECs for local government and organised
local government representing local government nationally, may
(a) by regulation prescribe general key performance indicators that are appropriate
and that can be applied to local government generally; and
(b) when necessary, review and adjust those general key performance indicators.
(2) Key performance indicators set by a municipality must include any general key per-
formance indicators prescribed in terms of subsection (1), to the extent that these
indicators are applicable to the municipality concerned.
In light of these legislative requirements, two elements are noteworthy – the first is
that each municipality must identify those areas where performance improvement
is required. The second key element is performance assessment. An objective per-
256
formance assessment is essential for the efficient maintenance of local government

performance management systems.
Please note:
Performance management systems contain six core elements and they “function” as
follows (Bekink page 489–490):
• performance measurement – “[m]easurement is achieved by setting performance

indicators and linking them to performance targets”
• performance monitoring and evaluation – “monitoring and evaluation are processes
aimed at assessing the performance of municipalities and the people who work
for them”
• performance reporting – this function entails that all municipalities “are obliged to
submit annual performance reports to the public” as well as the other spheres of
government. Bekink submits that this requirement “should significantly enhance
public participation and municipal accountability and should therefore be strictly
enforced” (page 490)
• capacity building – without the necessary capacity, municipalities will be unable to
exercise their power or perform their function (“perform and fulfil their duties and
responsibilities”). Bekink defines capacity building as a “process of developing
the ability for improved performance within municipalities” (p 490)
• intervention – although the Constitution allows and demands intervention in the
affairs of local government when necessary, such interventions “should be based
on accurate diagnostic results … and should be undertaken on an objective basis”
(page 490)
• performance incentives – Bekink writes in this regard: “[g]ood performance should
be rewarded whilst poor performance should be penalised” and mentions examples
of incentives such as “fiscal and political motivators, rewards, competitions and
individual motivational schemes” (page 490)
ACTIVITY 10.4
• Briefly explain the importance of municipal performance management. Also, show how
effect is given to this principle.
199 FEEDBACK
• Once again, this is a self-evaluation activity so use the preceding paragraphs to guide
you to an answer.
10.6 CAPACITY BUILDING

The post-1994 constitutional dispensation requires that municipalities discharge certain
duties. In order for municipalities to succeed, they must develop the required capac-
ity to ensure compliance with the demands of the Constitution. Efficient municipal
capacity would result in the following advantages being realised:
• services being delivered as required

• powers being delegated to the municipal sphere
• better investment opportunities being created
LGL3702/1 257
Please note:
Municipalities have introduced training systems to assist in capacity building. Bekink
refers to one particular example flowing from the adoption of the Skills Development
Act 97 of 1998. This Act requires a “Sector Education Training Authority” (“SETA”) to
be established in every sector of the South African workforce to develop skills (page
494). The LGSETA is made up of representatives of both organised labour such as
SAMWU (“South African Municipal Workers’ Union”) and IMATU (“Independent Mu-
nicipal and Allied Trade Union”) as well as organised employer organisations, which
are represented under SALGA (“South African Local Government Association). Bekink
lists a number of “specific functions” envisaged for the LGSETA to fulfil (page 494).
They are (and we quote):
• Preparing a Local Government Skills Plan.

• Implementing the Local Government Skills Plan by
(a) Establishing learnerships
(b) Approving workplace skills plans
(c) Allocating grants to employers, education and training providers and workers
(d) Monitoring local government education and training in the sector.
• Promoting learnerships by
(a) identifying workplaces for practical work experience
(b) supporting the development of learning materials
(c) improving the facilitation of learning
(d) assisting in the conclusion of learnership agreements.
• Registration of learnership agreements.

• Applying to SAQA [South African Quality Assurance] for accreditation as an
Education and Training Quality Authority (ETQA).
• Collecting Skills Development Levies and disbursing them to municipalities.
• Reporting on income and expenditure and the implementation of its sector skills
plan to the Director-General of Labour.
• Appointing staff for the performance of its functions.
10.7 MUNICIPAL DEVELOPMENT PLANNING

The Systems Act requires that local government planning must be developmentally
orientated. The following sections regulate this area of local government law:
Please note:
You should merely take note of sections 23–25 quoted. You will NOT be ex-
amined on them.
23. Municipal planning to be developmentally oriented.

(1) A municipality must undertake developmentally oriented planning to ensure that it
(a) strives to achieve the objects of local government set out in section 152 of the
Constitution;
(b) gives effect to its developmental duties as required by section 153 of the Constitu-
tion; and
(c) together with other organs of state contribute to the progressive realisation of the
fundamental rights contained in sections 24, 25, 26, 27 and 29 of the Constitution.
(2) Subsection (1) must be read with Chapter I of the Development Facilitation Act, 1995
(Act No. 67 of 1995).
258
24. Municipal planning in co-operative government.

(1) The planning undertaken by a municipality must be aligned with, and complement, the
development plans and strategies of other affected municipalities and other organs of
state to give effect to the principles of co-operative government contained in section
41 of the Constitution.
(2) Municipalities must participate in national and provincial development programmes as
required in section 153(b) of the Constitution.
(3) If municipalities are required to comply with planning requirements in terms of national
or provincial legislation, the responsible organs of state must
(a) align the implementation of that legislation with the provisions of this Chapter; and
(b) in such implementation
(i) consult with the affected municipality; and
(ii) take reasonable steps to assist the municipality to meet the time limit men-
tioned in section 25 and the other requirements of this Chapter applicable
to its integrated development plan.
(4) An organ of state initiating national or provincial legislation requiring municipalities
to comply with planning requirements, must consult with organised local government
before the legislation is introduced in Parliament or a provincial legislature, or, in the
case of subordinate legislation, before that legislation is enacted.
25. Adoption of integrated development plans.

(1) Each municipal council must, within a prescribed period after the start of its elected term,
adopt a single, inclusive and strategic plan for the development of the municipality which
(a) links, integrates and co-ordinates plans and takes into account proposals for the
development of the municipality;
(b) aligns the resources and capacity of the municipality with the implementation of
the plan;
(c) forms the policy framework and general basis on which annual budgets must be
based;
(d) complies with the provisions of this Chapter; and
(e) is compatible with national and provincial development plans and planning require-
ments binding on the municipality in terms of legislation.
(2) An integrated development plan adopted by a municipal council in terms of subsection
(1) may be amended in terms of section 34 and remains in force until an integrated
development plan is adopted by the next elected council.
(3) (a) A newly elected municipal council may, within the prescribed period referred to in
subsection (1), adopt the integrated development plan of its predecessor, but before
taking a decision it must comply with section 29(1)(b)(i), (c) and (d).
(b) A newly elected municipal council that adopts the integrated development plan
of its predecessor with amendments must effect the amendments in accordance
with the process referred to in section 34(b).
(4) A municipality must, within 14 days of the adoption of its integrated development plan
in terms of subsection (1) or (3)
(a) give notice to the public
(i) of the adoption of the plan; and
(ii) that copies of or extracts from the plan are available for public inspection at
specified places; and
(b) publicise a summary of the plan.
Please note:
You need to study the provisions of section 26 quoted below. The section reads:
26. Core components of integrated development plans.

An integrated development plan must reflect
(a) the municipal council’s vision for the long-term development of the municipality with
special emphasis on the municipality’s most critical development and internal trans-
formation needs;
LGL3702/1 259
(b) an assessment of the existing level of development in the municipality, which must include
an identification of communities, which do not have access to basic municipal services;
(c) the council’s development priorities and objectives for its elected term, including its local
economic development aims and its internal transformation needs;
(d) the council’s development strategies which must be aligned with any national or pro-
vincial sectoral plans and planning requirements binding on the municipality in terms
of legislation;
(e) a spatial development framework, which must include the provision of basic guidelines
for a land use management system for the municipality;
(f) the council’s operational strategies;
(g) applicable disaster management plans;
(h) a financial plan, which must include a budget projection for at least the next three
years; and
(i) the key performance indicators and performance targets determined in terms of sec-
tion 41.
ACTIVITY 10.5
• Summarise (using your own words) the “core components” of these integrated
development plans as provided for in section 26 of the Systems Act.
200 FEEDBACK
• This is the final activity of the literally hundreds in this dense study guide. Once again,
this is a self-evaluation activity so use the preceding paragraphs to guide you to an
answer.
QUESTION 1
Write a short paragraph in which you explain the concept: “good public relations”. In your
answer, you should also define the notion of “public administration”.
QUESTION 2
Why is public participation an important principle in local government law? How does this
principle link up with local government officials’ duty to act in line with the provisions of the
Constitution and legislation? You should also explain accountability in order to give a complete
(and accurate) answer.
QUESTION 3
Give an extensive legislative examination of performance management systems. Do you
think that these systems will (or can) enhance better service delivery and improve the general
wellbeing of all South African citizens?
QUESTION 4
Municipalities should adopt integrated development plans. Explain (in your own words) the
core components of integrated development plans.
260

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LEARNING UNIT 1: Introduction to local government law 2

LEARNING UNIT 2: The impact of the Constitution on local government 18

LEARNING UNIT 3: The operational forms of municipalities (including the

LEARNING UNIT 4: The governance structure of a municipality 57

LEARNING UNIT 5: Municipal public administration 88

LEARNING UNIT 6: Powers and functions 105

LEARNING UNIT 7: Municipal service delivery 127

LEARNING UNIT 8: Municipal ﬁnance and ﬁscal management 156

LEARNING UNIT 9: Municipal revenue 230

LEARNING UNIT 10: Municipal public administration, public participation and

LGL3702/1/2020 –2025 (iii)

• The composition and election of municipalities are analysed in order to aid

• Municipal administration is described and critically evaluated with speciﬁc reference

• Original and assigned municipal powers are distinguished and analysed.

• Municipal budgeting is described in light of the relevant constitutional and legislative

PRESCRIBED STUDY MATERIAL

The following pages are prescribed:

Please note further:

City of Johannesburg Metropolitan Municipality v Blue Moonlight Properties 39 (Pty)

• Local Government: Municipal Demarcation Act 27 of 1998;

RECOMMENDED STUDY MATERIAL

Please note further:

A BRIEF NOTE ON KEEPING A “LEARNING JOURNAL”

whatever comes to mind as you read course materials, participate in discussions,

The second form of assessment is referred to as “summative assessment”. The

• Short, straightforward questions in terms of which you are required to brieﬂy

HOW TO ANSWER PROBLEM/APPLICATION-TYPE QUESTIONS

Good luck with your studies in local government law!

Your lecturers for LGL3702

On completion of this learning unit you should be able to:

• deﬁne local government in the new constitutional dispensation

1.1 DEFINING AND CONTEXTUALISING LOCAL GOVERNMENT

• Local Government: Municipal Demarcation Act 27 of 1998

To better your understanding of the current local government system, it is imperative

1.2 PRE-1994 LOCAL GOVERNMENT

1.2.2 Features of pre-1994 local government

Study the following paragraph very carefully:

Under the pre-constitutional dispensation, municipalities owed their existence to and

Study the following paragraphs very carefully:

1.3 THE CERTIFICATION JUDGMENTS AND THE CONSTITUTION

1.3.1 The First and Second Certiﬁcation judgments

• Certification of the Amended Text of the Constitution of the Republic of South

1.3.2 Local government in terms of the Constitution

1.3.2.1 Section 40 (“Government of the Republic”)

1.3.2.2 Section 151 (“Status of municipalities”)

1.3.2.3 Section 156 (“Powers and functions of municipalities”)

(a) that matter would most eﬀectively be administered locally; and

Section 139(1) (“Provincial intervention in local government”)

• How can provincial government promote the capacity of local government?

1.3.2.4 Section 152 (“Objects of local government”)

(a) to provide democratic and accountable government for local communities;

(e) to encourage the involvement of communities and community organisations in the

1.3.2.5 Section 67 (“Participation by local government representatives” [in the

1.4 IMPLEMENTATION OF THE CONSTITUTIONAL TEXT: THE

1.4.1 The White Paper

… local government committed to working with citizens and groups within

1.4.1.1 Four key characteristics of developmental local government

• Municipal powers and functions should be exercised to maximally impact on social

1.4.1.2 Developmental local government outcomes

• the provision of household infrastructure and services