SOME TECHNICAL COMMENTS BY NATIONAL TREASURY

  1. ISSUE NO 1

    2. The proposed definition of ownership control needs to be reduced, by roving sub-point (b) on the appointment or removal of the CEO – given that this is the decision of the Board, it does not fit into the ownership control definition. This specific clause only applies to SARS, where the Commissioner has the powers rather than the Board of SARS, given the nature of the Receiver of Revenue.

    A second recommendation is to change the name of the concept from "ownership control" to "effective control" as the definition of "ownership control" will differ in the PFMA and MFM Bill, and some clauses in the MFM Bill will refer to ownership control for an entity shared with the national and provincial organs of state.

    Consequential amendments are necessary, as for eg, in clause 86D. However, in s86D, it is proposed that we be clearer about the fact that the private sector may have a minority share in the municipal entity – the proposed new wording does this in a very indirect way.

    CLAUSE 1

    1. On page 2, in line 29, to omit paragraph (h) and to substitute:

    (h) the substitution for the definition of "ownership control" of the following definition:

    "effective control’, in relation to a private company, means the power of a shareholder in the company –

    (a) to appoint or remove at least the majority of the board of directors of the company; or

    (b) to control at least the majority of the voting rights at a general meeting of the company;".

    2. On page 3, in line 13, to omit paragraph (g) and to substitute:

    (g) the insertion after the definition of "ownership control" of the following definition:

    " ‘parent municipality’ –

    (a) in relation to a municipal entity which is a private company [wholly owned by] in respect of which effective control vests in a single municipality, means [the] that municipality [which wholly owns the entity];

    (b) in relation to a municipal entity which is a private company [owned by more than one municipality or by one or more municipalities and one or more national or provincial organs of state] in respect of which effective control vests in two or more municipalities collectively, means [the municipality which has an interest in the company] 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;";

    CLAUSE 86D

    1. On page 11, in line 32, to omit subsection (2) and to substitute:

    "(2) A municipality may in terms of subsection (1) (a) or (b) either acquire or hold full ownership of a company or acquire or hold a lesser interest in a company. A municipality may [only] acquire or hold [an] such a lesser interest in a private company [in terms of subsection (1)] only if –

    (a) all the other interests are held by—

    (i) another municipality or municipalities; [or]

    (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).

    (2A) A municipality may, despite subsection (2), acquire or hold

    an interest in a private company in which an investor other than

    another municipality or a national or provincial organ of state has an interest, but only if effective control in the company vests in that municipality, in another municipality or in that municipality and another municipality collectively.

  2. ISSUE NO 2: TECHNICAL DIFFICULTIES RELATED TO ASSIGNMENT PROCESS

Adv Grove believes that there are serious technical difficulties as the current scope of clause 9 is very broad. He will raise this issue in the Committee. It is also proposed that we cross-reference to the assignment provision now in the FFC Bill, particulary in clause 4.

CLAUSE 3

1. On page 4, in line 46, to omit clause 3 and to substitute:

"Assignment of [additional] functions and powers to specific municipalities in terms of legislation or by agreement

10. If [an additional] a function or power is assigned to a specific municipality in terms of a power contained in an Act of Parliament or a provincial Act, or by agreement in terms of section 99 or 126 of the Constitution, the organ of state assigning the function or power must, before assigning the function or power –

(a) comply with section …..of the Financial Fiscal Commission Act,…….; and

(b) submit to the Minister and the National Treasury a memorandum –

(i) giving at least a three year projection of the financial implications of that function or power for the municipality; and

(ii) disclosing any possible financial liabilities or risks after the three year period; and

  1. indicating how any additional expenditure by the municipality will be funded.".

 

  1. ISSUE NO 3: EXTERNAL MECHANISMS
  1. Can we really exclude a municipal entity with a private share in section 80(1)(a) of the MSA from Part 3 (ie the competitive bidding process)?
  2. What agreement will cover a municipal entity that provides a function that is not a municipal service – it will not be a service delivery agreement, but will be another procurement agreement which should be similar to the procurement service delivery agreement. This issue needs to be covered in the MFM Bill in the chapter on procurement.
  3. How do we regulate a municipal entity that is an external mechanism for a non-parent municipality? Do we want to restrict a municipal entity to the boundary of its parent municipalities only?

D)_ ISSUE NO 4: TECHNICAL CORRECTIONS TO CLAUSE 86B (2) & (3)

Wording needs to be clearer for these 2 sub-clauses on allowed corporate entities

  1. TRANSITION ARRANGEMENTS AND DATE OF EFFECT
  1. Should not all entities that are exempted, as they are trusts or s21 companies, not also be listed in some way by a certain date?
  2. Will the exemption apply to the type of entity only, and not to composition of the Board etc and other provisions in the two Acts?
  3. Should we not be more enabling on all types of conversions (eg to private companies as well)?
  4. Should we not make all municipal councils to assess all their current entities, and make decisions on their future, and governance arrangements etc?
  1. Should not all regulations in terms of MSA and MFM be for the concurrenc eof both Ministers, and be required for tabling in Parliament before they can be finalised to take effect?

 

E) Does section 46(!)(c) make sense for annual performance reports, given that it will only be published 6 months into the following year. In any case, the info requested is tabled in the annual budget.