Louise Muller President IMFO South Africa

1. Louise MullerPresidentIMFOSouth Africa Legislation and Regulatory Requirements of Municipal and Utility Entities

2. Presentation outline • Guiding Legislation in South Africa • National Government Principles • Oversight Responsibilities • Role of the Regulator and Regulatory Responsibilities • Establishing a Municipal Entity in South Africa • Essential Facets of Good Governance

3. Guiding Legislation • Supreme Legislation - The Constitution • Companies Act • National Government Legislation - PFMA • Suite of Local Government Legislation – MStrucA; MSA, MFMA, MPRA, MFPFA, etc • Sector Legislation – Water, Electricity, etc • King III – Good governance principles • GOAL: Sound & sustainable management of available resources

4. National Government Principles • Enabling legislation – Legislature grants authority to take certain actions. For example, enabling acts often establish government agencies to carry out specific government policies • Integrated development planning (IDP) – Municipal strategic planning • strong emphasis on community participation, • planning to be development orientated and • in the spirit of co-operative government • Corporate performance management system

5. National Government Principles (2) “Batho Pele” (“People First”) -“We belong, we care, we serve” - defines service delivery ethos with principles of: • Consultation • Known service standards • Redress where these are not met • Equal access • Courtesy • Information • Openness and transparency • Value for money

6. Oversight Responsibilities • Department of Cooperative Government & Traditional Affairs have overarching responsibility of strengthening cooperative governance • Water Affairs, Mineral Resources, Energy, Transport and Human Settlements have a direct role in monitoring sector-specific outcomes & service delivery • Regulatory Roles – NERSA, Water Boards, etc.

7. Oversight Responsibilities (2) • Section 139 of Constitution provides for provincial government intervention in local government when needed to: • Maintain national security • Maintain economic unity • Maintain essential national standards • Prevent a municipality from taking unreasonable action that could be prejudicial to the interests of the other province or municipality • Maintain minimum standards required for rendering services

8. Oversight Responsibilities (3) Often there are: • sector-specific regulators, • general regulators (such as competition authorities), and • special agencies or • ministries charged with specific tasks that all share common duties.

9. Role of the Regulator • Regulator mandate established in Constitution • Responsibilities clarified in national legislation- e.g Welcome to the National Energy Regulator of South Africa The National Energy Regulator (NERSA) is a regulatory authority established as a juristic person in terms of Section 3 of the National Energy Regulator Act, 2004 (Act No. 40 of 2004). NERSA’s mandate is to regulate the Electricity, Piped-Gas and Petroleum Pipeline industries in terms of the Electricity Regulation Act, 2006 (Act No. 4 of 2006), Gas Act, 2001 (Act No. 48 of 2001) and Petroleum Pipelines Act, 2003 (Act No. 60 of 2003). The structure of the Energy Regulator consists of nine members, five of whom are part-time and four are full-time, including the CEO. The Energy Regulator is supported by a secretariat under the direction of the CEO. http://www.nersa.org.za/

10. Regulatory Responsibilities • Total freedom sometimes leads to unfair business practices, cartelization and so on – especially where there is a single supplier/ monopoly. • A balance has to be struck – referee between players. • A Regulator is set up by the government to ensure that the ordinary citizen gets desired services at a reasonable cost.

11. Regulatory Responsibilities (2) • Regulators, guided by the policy of the government, • must obtain the views of all the stakeholders; • work within the framework of the law, • should not be hampered by government interference and • should not be manipulated by powerful private enterprises. • The Regulator would then establish: • Reasonable return on investment and • Roll-out needs or continuous development of the infrastructure to meet future needs when • The pricing policy and service standards are set.

12. Regulatory Responsibilities (3) May conclude that, when diligently and correctly carried out, the Role of the Regulator is essential to ensure: • Supply reliability • Continuous investments • Reasonable pricing • Proper market behaviour • Maintenance of service standards, etc

13. Establishing a Municipal Entity in South Africa When considering the establishment of, or participation in, a municipal entity, a municipality must first assess: • Direct and indirect costs and benefits associated if the service is provided through an internal mechanism taking into consideration the expected effect on environment, human health, well-being and safety; • Municipal organisational administrative and human capacity and potential future capacity to furnish skills, expertise and resources; • Impact on development, job creation and employment patterns and views of organised labour.

14. Establishing a Municipal Entity in South Africa (2) If the Council decides that an external mechanism then: • Notify the community of intentions; • Assess all the options before – just also considering the capacity of prospective service providers to furnish the skills, expertise and resources; and • Conduct a feasibility study including: • Clear identification of the service to be rendered; • Timeframe envisaged for the provision of the service(s); • Outputs to be achieved;

15. Establishing a Municipal Entity in South Africa (3) • Assessment on how this will provide • Value for money; • Address the needs of the poor; • Be affordable for the municipality and the residents; • Transfer appropriate technical, operational and financial risk. • Projected impact on municipal staff, assets and liabilities • Projected impact on the municipal Integrated Development Plan (IDP); • Projected impact on budget including revenue impact, expenditure, borrowing, debt and tariffs. Council then determines if an external mechanism should be further considered.

16. Establishing a Municipal Entity in South Africa (4) When considering the establishment of, or participation in, a municipal entity, a municipality must first: • determine precisely the function or service that such entity would perform on behalf of the municipality; and • make an assessment of the impact of the shifting of that function or service to the entity on the municipality's staff, assets and liabilities, including an assessment of: • the number of staff of the municipality to be transferred to the entity; • the number of staff of the municipality that would become redundant because of the shifting of that function or service;

17. Establishing a Municipal Entity in South Africa (5) • the cost to the municipality of any staff retrenchments or the retention of redundant staff; • any assets of the municipality to be transferred to the entity; • any assets of the municipality that would become obsolete because of the shifting of that function or service; • any liabilities of the municipality to be ceded to the entity; and • any debt of the municipality attributed to that function or service which the municipality would retain. • Section 78 of Municipal Systems Act, Act 32 of 2000 AND • Section 84 of Municipal Finance Management Act, Act 56 of 2003

18. Establishing a Municipal Entity in South Africa (6) • External delivery mechanism can be: • A municipal entity • A private company • A service utility (within municipal jurisdiction) • A multi-jurisdictional service utility • Another municipality • An organ of state • A community based organisation of non-governmental organisation • Any other legally competent institution, entity or person

19. Good Governance Generally and globally accepted attributes, ingredients and characteristics of good governance include: • transparency • accountability • responsibility (obligation to give explanation, responsiveness, interaction between press and offices) • legitimacy • independent judiciary • rule of law

20. Good Governance (2) • effective management of public and private sectors • Participation • administrative integrity • vibrant civil society • respect for individual liberty and freedom (respect for human rights) • decentralization and local governance.

21. Good Governance (3) The seven Nolan Principles of good governance: • Selflessness: professional decisions should benefit the public, not themselves, • Objectivity: not favor one public or private group over another, • Integrity: not beholden to improper influence, • Honesty: not just telling the truth, disclose relationships with the potential for a conflict of interests • Accountability: for own actions and actions of staff • Openness: Transparent reporting • Leadership: practice the above principles and enforce them amongst their staff

22. Good Governance Whatever principles used, whether: • King III, • Nolan Principles • Other Governance Principles The Bottom line is - Good governance is highly associated with political and bureaucratic accountability to public needs, transparency in finance, auditing and decision making, a fair and reliable judicial system, freedom of information and expression, with civil expression, effective and efficient public sector management and cooperation with civil society organizations (UNDP, 1995:22; Dahal, 1996:6)

23. Thank you Dankie Enkosi Any Questions?