Report of the Portfolio Committee on Provincial and Local Government on the Local Government: Municipal Systems Amendment Bill [B 49 - 2003] (National Assembly - sec 75), dated 3 September 2003:

The Portfolio Committee on Provincial and Local Government, having considered the subject of the Local Government: Municipal Systems Amendment Bill [B 49 - 2003] (National Assembly - sec 75), referred to it and classified by the Joint Tagging Mechanism as a section 75 Bill, reports the Bill with amendments [B 49A - 2003].

The Committee reports further, as follows:
1. The Local Government: Municipal Systems Amendment Bill deals with consequential amendments flowing from the processing of the Local Government: Municipal Finance Management Bill by the Portfolio Committee on Finance.

2. The processing of these Bills raises two questions that Parliament needs to address further at some stage:
* The need for greater co-ordination between Ministers and Departments before a Bill is introduced in Parliament so that contradictions between clauses in a Bill and sections of legislation adopted in the recent past are addressed as far as possible before the parliamentary processing of the Bill.

* The extent to which a Portfolio Committee can amend legislation processed by another Portfolio Committee through attaching a schedule to a Bill, even in circumstances where the two Portfolio Committees are able to co-operate.

3. The need to address the governance aspects of municipal entities comprehensively has resulted in a change in focus on the purposes of municipal entities. The current provisions of the Municipal Systems Act envisage municipal entities, in all its various forms, to be created to provide municipal services. Through separating the provisions dealing with municipal services from those dealing with the governance aspects of municipal entities by placing them in two different chapters, municipal entities can now be established for any function or power performed or exercised by a municipality. The expression "functions and powers" refers to all the functions and powers that a municipality is allowed to perform and exercise in terms of the Constitution and other applicable laws. Such functions and powers would include the provision of municipal services, as well as any aspect thereof, such as the reading of water consumption meters. However, this wider approach to the purposes for which municipal entities may be established, would also allow the establishment of municipal entities for functions of a municipality that do not necessarily relate to municipal services, such as the provision of information technology support to the municipality in general.

4. The Portfolio Committee believes that there is a need for more information on, and a better understanding of, the number and range of municipal entities that currently exist. The Department of Provincial and Local Government, the National Treasury and the (South African Local Government Association) (Salga) should contribute towards meeting this need.

5. Initially, significant sections of Salga had strong reservations about councillors not being allowed to be directors of the boards of municipal entities. Their concerns revolved mainly around the need to exercise effective control over these entities. Following concerted engagement with both the committees on Finance and on Provincial and Local Government, Salga agreed that councillors should not be directors on boards. The Portfolio Committees are aware of Salga's concerns and have strengthened provisions that ensure that municipal entities are accountable to councils without councillors having to serve as directors. The Portfolio Committee on Provincial and Local Government is aware that these provisions may not be adequate and will, in future, in consultation with the Portfolio Committee on Finance, consider a review of these provisions, should it be necessary to do so.

6. To facilitate reporting by municipalities to the Department of Provincial and Local Government and the National Treasury, the Portfolio Committee believes it would be useful if the two departments would provide municipalities with standardised formats in terms of which to report.

7. In processing Clause 8 of the Bill, the issue of municipal managers' remuneration was once again raised. The Committee draws attention to its "Report on Study Tour of Municipalities", adopted on 15 April 2003, and in particular section 7, part of which noted: "Some of the issues raised by municipalities in regard to the remuneration of municipal managers (and senior managers), are fair and reasonable and need to be addressed. The decision of the Ministry and DPLG Department of Provincial and Local Government) to develop firm guidelines on the remuneration of municipal managers is to be welcomed. Attention also needs to be given to whether it is constitutionally possible for the Minister to issue regulations in this regard. If so, this should be done, and, if necessary, amendments to the legislation should be effected".

8. The Committee is aware, of course, that the issue is complex. In this regard it notes:
* Local government is a specific sphere of government currently made up of 284 municipalities of three categories and different types, which differ, moreover, in terms of population size, budgets, service delivery responsibilities and other respects.

* To attract highly skilled, efficient managers, municipalities often have to compete with high private sector salaries.

* Often, the municipalities most in need of highly skilled municipal managers are the smaller and rural municipalities who can least afford them. Yet to draw the requisite skills, these municipalities have to offer high salary packages in competition with the financially better-off municipalities.

* In terms of the new model of local government, municipal managers are not appointed permanently, but on employment contracts of five years. This was a deliberate decision taken by Parliament to ensure that municipal managers are productive, effective and accountable. The employment contracts include performance contracts which set clear performance targets and indicators and often include bonus payments for municipal managers, provided they achieve the targets set. Obviously, because of this, it is difficult to provide clear and uniform national guidelines.

* Those municipalities that have not finalised employment and performance contracts with municipal mangers as yet, are urged to do so as soon as possible.

* There is a need for more information on the remuneration of municipal managers and the responsibilities they fulfil.

9. The Committee welcomes the finalisation of the report on municipal managers' remuneration commissioned by the Ministry of Provincial and Local Government. It also welcomes the proposal to discuss the findings of the report and for appropriate action to be taken after consultation with all the key stakeholders, including Salga, the municipal trade unions, the National Treasury and the Financial and Fiscal Commission.

10. The Committee requests the DPLG to present the findings of the report at a Portfolio Committee meeting within eight weeks.

11. In respect of Clause 11(b), the Portfolio Committee believes that, if municipalities request assistance from the national or provincial governments in regard to feasibility studies or service delivery agreements, national or provincial governments should provide such assistance, unless there are exceptional circumstances preventing this.

12. Salga believes that section 86A(1)(b) (i) and (ii) which deals with the Minister's right to regulate or provide guidelines on cross-subsidisation of services and equitable share allocations, should be reviewed. Salga believes that, while they may have been necessary until now, they may no longer be necessary. Salga feels that this review should be linked to a review of other aspects of the local government legislation. Such a review should be based on the practical experiences of municipalities in effecting the new model of local government. The Portfolio Committee referred to its "Study Tour Report of Municipalities", adopted on 15 April 2003, and other decisions that have communicated the need for a review of aspects of local government legislation, while ensuring that the fundamental principles and features of the new model are retained. The Portfolio Committee welcomed Salga's proposals for a review of aspects of the legislation and will take this up further with the Ministry and the Department.

13. The Portfolio Committee found it especially difficult to process this Bill in view of time constraints and other considerations. The Portfolio Committee on Finance was required, in terms of the Rules of Parliament, to confer with the Portfolio Committee on Provincial and Local Government on the Municipal Finance Management Bill. What precisely "confer" means in practice, is not altogether clear. The Portfolio Committee on Finance sought, as far as possible, to organise its meetings on the Municipal Finance Management Bill so that the Portfolio Committee on Provincial and Local Government could also participate in the processing of the bill. However, in view of the length of time it took to process the Municipal Finance Management Bill and the heavy work-loads of our respective committees we were not always able to sit together. We acknowledge our appreciation to the Portfolio Committee on Finance to the extent that it was able to co-operate with us.