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									                                          OPINION
     MUNICIPAL STRUCTURES ACT, 1998: REPEAL OF SECTION 84 (3)
                                          NOTICES


                                               1.
        During December 2000 municipalities covering the whole of the territory of the
Republic were established by the MECs for local government in the provinces by notices
issued in terms of section 12 of the Local Government: Municipal Structures Act, 1998.
These notices also disestablished all the existing municipalities and provided for the
transfer of staff, assets and liabilities from the disestablished municipalities to the
superseding municipalities.


                                               2.
        Section 14 lays down the guiding principles according to which staff, assets and
liabilities of existing municipalities must be allocated to superseding municipalities.
More particularly, in terms of the proviso to section 14 (2) a transfer of staff, assets and
liabilities to superseding district and local municipalities must be effected in a way that
would enable the superseding municipalities to perform the functions assigned to them
in terms of section 84 (1) or (2). Section 84 (1) and (2) provides for a division of powers
and functions between district and local municipalities and spells out which functions
must go to district municipalities and which must go to local municipalities. These
principles were, in so far as I can judge, incorporated into the section 12 notices, and in
the normal course of implementing the section 12 notices, staff, assets and liabilities
attached to functions mentioned in section 84 (1) would have devolved on the district
municipalities.


                                               3.
        However, before the section 12 notices became effective, the Minister of
Provincial and Local Government on 28 November 2000 issued notices under section 84
(3) which authorised local municipalities to perform in their respective areas certain
functions which section 84 (1) assigns to district municipalities. These authorisations
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covered all the section 84 (1) (b), (c), (d) and (i) functions to the extent that they were
performed in the previous dispensation by the former Transitional Local Councils and
Transitional Rural Councils. The section 84 (3) notices also stated that staff, assets and
liabilities attached to these functions must be transferred to the local municipalities
authorised by the notices to perform those functions.


                                                  4.
        The section 84 (3) notices had the effect of undercutting the section 12 notices
and diverting the transfer of the relevant staff and assets away from district municipalities
to local municipalities. The result was that the section 12 notices never accomplished the
stated goal of transferring to the district municipalities staff and assets attached to the
section 84 (1) (b), (c), (d) and (i) functions.


                                                  5.
        The reason for the section 84 (3) notices is not far to find. At the time of the
establishment of the new municipalities the division of functions between district and
local municipalities was fraught with practical, logistical and other problems, the main
problem being that with the available capacity physically located at local council (TLC
and TRC) level it was virtually impossible to capacitate district councils within the short
period of time available. The immediate aim of the section 84 (3) notices, therefore, was
to put the transfer of staff and assets to district councils on hold and to maintain the status
quo until these implementation problems could be sorted out. The intention never was,
and never could have been, to transfer district functions, and the staff and assets attached
to those functions, permanently to local municipalities in order to undo the division of
functions as laid down in section 84 (1) and (2) of the Act.


                                                  6.
        The aim of the notices as a mechanism to maintain the status quo and to leave
staff and assets for the time being where they were physically located immediately before
the establishment of the new municipalities, is borne out by the fact that the notices
authorised local councils to perform the relevant district functions “to the extent that
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they were performed by the transitional local councils and the transitional rural
councils” immediately before the establishment of the new municipalities. This was also
the official explanation given by the Minister of Provincial and Local Government at the
time of publication of the notices.


                                              7.
       As transitional measures, the repeal of the section 84 (3) notices will have to be
considered at some point in the future. Anticipating this the Municipal Demarcation
Board now seeks advice on the legal consequences of the repeal of these notices and
posed the following questions in this regard:
       (a)     If the Minister decides to repeal these notices, would the Minister be
               obliged, in terms of section 84 (3) read with section 14 (2) of the
               Structures Act, to deal specifically with assets, liabilities and staff attached
               to the functions concerned?


       (b)     If the Minister would decide to repeal the notices without dealing with
               assets, liabilities and staff in the repealing notice, what would the legal
               consequences of such action be? Would the assets, liabilities and staff by
               operation of law vest in the district municipality responsible for the
               function, or would the assets, liabilities and staff remain with the local
               municipalities?


       (c)     Could a district municipality not be regarded as the “authority” for a
               section 84 (1) function, and the local municipality as the “provider” with
               -       the staff, assets and liabilities remaining at local council level;
               -       the local municipality continuing to provide the service; and
               -       the district municipality, as the “authority” remaining in control of
                       the function?


                                              8.
                                                 4


        Ad Question (a): The ordinary rule is that the same authority that promulgates
subordinate legislation in terms of a statutory provision can undo or amend that
subordinate legislation whether or not an express power to that effect is contained in the
enabling provision (see section 26 (3) of the Interpretation Act). Consequently, the
Minister has the power to repeal the section 84 (3) notices despite the absence of an
express enabling provision to this effect in section 84 (3). But the question, though, is
not whether the Minister can repeal the notices, but how to relocate the relevant staff,
assets and liabilities to the district municipalities when he repeals the notices. It is unclear
whether the Minister could regulate the transfer of the relevant staff, assets and liabilities
to the district councils in a notice repealing the section 84 (3) notices, though it does
make sense to read into section 84 (3) a reverse power to undo what was initially done
when the authorisations were issued. However, the problem in this particular case is that
the staff, assets and liabilities were never taken from the district councils; they just never
got what they were entitled to in terms of the section 12 notices had the Minister not
authorised the local councils to perform district council functions. I would accordingly be
reluctant to advise that the Minister, when repealing the notices, could in terms of section
84 (3) redirect the transfer of staff, assets and liabilities to district councils.


                                                9.
        Ad Question (b): A mere repeal of the section 84 (3) notices would not have the
effect of relocating by operation of law the staff, assets and liabilities to the district
municipalities. They would simply remain where they are, i.e. with the local
municipalities. The section 12 notices, in their present format, are not helpful as they link
the transfer of staff, assets and liabilities to an historic date, i.e. the “effective date” which
was the date on which the election of the new councils were declared. It follows that the
provisions of the section 12 notices, as they currently read, cannot be construed as
applying to the transfer of staff and assets from local municipalities to district
municipalities.
                                                5


                                               10.
        I think the answer to the problem lies in the provisions of section 14 of the Act
which in no uncertain terms lay down binding guidelines as to which superseding
municipality is entitled to which staff, assets and liabilities of the disestablished
municipality. In terms of section 14 (1) (c) both the district and local municipalities must
be regarded as superseding municipalities, and they become the successors in law of the
disestablished municipality. Staff, assets and liabilities of the disestablished municipality
must be allocated “in terms of the relevant section 12 notice”. Subsection (2) (b)
stipulates that the section 12 notice, “or an amendment to the section 12 notice”, must
regulate the legal, practical and other consequences of the disestablishment of the
existing municipality, including the transfer of staff, assets and liabilities to the
superseding municipalities. The whole of subsection (2) (b) is then qualified by the
following proviso:
        “Provided that, if the superseding municipality is a district or local municipality a
        transfer ….(of staff, assets and liabilities)…must be effected in a way that would
        enable the superseding municipality to perform the functions ……assigned to it in
        terms of section 84 (1) or (2).”
The effect of the proviso is that district municipalities must be capacitated to perform the
section 84 (1) functions and local municipalities must be capacitated to perform the
section 84 (2) functions. This proviso is mandatory and must be given effect to in the
section 12 notice or, as indicated above, by way of an amendment to the notice.


                                               11.
        The section 84 (3) notices thwarted compliance with these mandatory provisions,
but upon the repeal of the notices and with the “obstacle” out of the way, it would seem
that section 14 would have to be complied with. The section 84 (3) notices could not have
had the effect of annulling the duty on the MEC to comply with section 14; at most it
delayed compliance with the duty. If the Minister now decides to repeal the section 84 (3)
notices, there would appear to be a duty on the MECs to amend their section 12 notices
and to provide for the transfer of the affected staff, assets and liabilities to the district
councils as required by section 14.
                                               6




                                              12.
       Ad Question (c): In terms of section 76 of the Local Government: Municipal
Systems Act, 2000 (Act No. 32 of 2000), a municipality may provide a municipal service
either through an internal mechanism, such as a department within its administration, or
through an external mechanism which includes another municipality. See the list of
permissible internal and external service providers in section 76. Section 77 identifies the
occasions when municipalities must review and decide on a mechanism to provide a
municipal service, whilst section 78 determines the criteria which municipalities must
apply and the process which they must follow when deciding on an appropriate
mechanism for the provision of a service. If a municipality decides on an external
mechanism to provide the service, it may in terms of section 80 conclude a service
delivery agreement with the chosen external mechanism. Different processes are
prescribed by the Act depending on the type of external mechanism. If a municipality ops
for another municipality to perform the service, it may in terms of section 80 (1) (a)
negotiate and enter into a service delivery agreement with that other municipality without
going through a formal process of competitive bidding.


                                              13.
       From these provisions of the Systems Act it is clear that a district municipality
may appoint a local municipality to provide a municipal service on its behalf. From
section 81 it is equally clear that the district municipality must retain responsibility for
the service, including the authority to implement its tariffs policy and to ensure
uninterrupted delivery of the service. To this extent the district municipality could be
regarded as “in control” of the service whilst the local municipality as service provider
performs the physical delivery of the service. Much, however, will depend on the terms
and conditions of the service delivery agreement. In this regard section 81 (2) provides
for a wide range of matters to be dealt with in service delivery agreements which, in my
view, are broad enough to achieve the aims listed in question (c). This section is self
evident and reads as follows:
                                     7


      “(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, reporting and financial control
              determined by the municipality, subject to applicable municipal
              finance management legislation;
      (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;
(b)   may pass on to the service provider, through a transparent system that
      must be subject to performance monitoring and audit, funds for the
      subsidisation of services to the poor;
(c)   may in accordance with applicable labour legislation, transfer or second
      any of its staff members to the service provider, with the concurrence of
      the staff member concerned;
(d)   must ensure continuity of the service if the service provider is placed
      under judicial management, becomes insolvent, is liquidated or is for any
      reason unable to continue performing its functions in terms of the service
      delivery agreement; and
(e)   must, where applicable, take over the municipal service, including all
      assets, when the service delivery agreement expires or is terminated.”
                                               8




                                              14.
       Although specific provision is made in paragraph (c) of subsection (2) for the
transfer or secondment of staff to the local municipality as the service provider, the
subsection is silent on assets that may be required for the purpose of the service. In my
view the absence of a such a provision would not prevent the parties from including
provisions in the service delivery agreement to enable the service provider to utilise these
assets for the provision of the service. (But see clause 13 of the latest published version
of Municipal Finance Management Bill which restricts municipalities from permanently
transferring assets needed to provide minimum essential municipal services.)


                                              15.
       Although the Systems Act appears to be wide enough for the implementation of
the scheme contemplated in question (c), I must point out that such a scheme cannot be
imposed on district and local municipalities either by the national or the provincial
government. A decision on the appointment of a mechanism for the delivery of a service
falls wholly within the discretion of the district municipality. If it elects to appoint a
local municipality for the delivery of the service, the two municipalities must first reach
consensus on the terms of the service delivery agreement before the suggested scheme
could be implemented. Also, in order to reach the point of negotiating a service delivery
agreement with a local municipality, the district municipality will have to go through the
elaborate process spelled out in the relevant provisions of the Systems Act.


                                              16.
       To implement the scheme envisioned in question (c) in a way that would cause
the least possible disruption, especially for staff, would require proper co-ordination
between the Minister, the MECs and the affected district and local municipalities. In this
regard I can offer the following advice:
       (a)     The repeal of a section 84 (3) notices, the amendment of the
               corresponding section 12 notices and the signing of service delivery
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             agreements between the affected district and local municipalities should
             be effected simultaneously, or preferably take effect on the same day.
      (b)    Sufficient time should be allowed for the district and local municipalities
             to comply with the Systems Act before a relevant section 84 (3) notice is
             repealed and the corresponding section 12 notice amended.
      (c)    On the appointed day when a relevant section 84 (3) notice is repealed, the
             section 12 notice should effect the transfer of staff and assets to the district
             municipality and the service delivery agreement should redirect those staff
             and assets needed by the local municipality for the delivery of the service,
             back to the local municipality.




Gerrit Grove S. C                                                    30 November 2001

								
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