Implications/interpretation/assessment of the Municipal Cost Containment Regulations of June 2019

On the 7th of June 2019, the Minister of Finance, Tito Mboweni in concurrence with the Minister of Cooperative Governance Nkosazana Dlamini-Zuma gazetted the municipal cost containment regulations, which the National Treasury says are aimed at ensuring that the resources of municipalities and municipal entities are used effectively, efficiently and economically. Furthermore, the cost containment measures are also intended to eliminate the wastage of public resources on non-service delivery mandates. The regulations are an extension of cost containment measures that are already being implemented and the national and provincial spheres.

The regulations came into effect on July 1 2019. The containment regulations  are in line with the spirit of section 168(1)(b) and (p) of the Municipal Finance Management Act (MFMA) which dictates that the Minister of Finance may regulate financial management and internal controls and any other matters that may facilitate the enforcement and administration of the Act. The National Treasury highlighted that a well-managed municipality or entity should already have in place a municipal council approved cost containment policy as part of its budget. Such a policy is a minimal measure to ensure good governance. The gazetted regulations merely require those municipalities or entities that did not have such a policy in place to do so. Below are some of the provisions contained in the municipal cost containment regulations.

Use of consultants

Municipalities or municipal entities may only appoint consultants in the event that the municipality or the municipal entity does not have the skills or resources in their full-time employ to perform such functions. The remuneration for these consultants should be determined by guidelines prescribed by various bodies regulating the profession/s of the consultants. Contracts with the consultants are also supposed to include a fee retention or penalty clauses for poor performance. These and other provisions on the use of consultants are put in place to curb the amounts of money that the local government spent on consultants.

Vehicles used for political office-bearers

Local governments have been known to overspend when purchasing vehicles for politicians. Most recently, the bankrupt Govan Mbeki Local Municipality set aside R2.244 million in its budget to buy a new car for its mayor. The municipal cost containment regulations now impose a threshold limit for vehicle purchases. Now the vehicle purchases relating to official use by political office-bearers must not exceed R700 000 or 70% (VAT inclusive) of the total annual remuneration package for the different grades of municipalities. In addition to that, vehicles for official use by political office bearers can only be replaced after the completion of 120 000 kilometres unless the vehicles have serious mechanical problems or are in poor condition (this is subject to obtaining a detailed mechanical report by the vehicle manufacturer or an approved dealer). Therefore, according to these regulations, municipalities like the Govan Mbeki Local Municipality will not be permitted to overspend on the purchase of vehicles.

Travel and subsistence

All officials or political office bearers are to fly with economy class tickets where the flying time for the flights is five hours or less. Flying business for all officials or political office bearers is reserved for flights exceeding five hours or for officials and political office bearers with disabilities or medically certified conditions. Furthermore, the cost containment policy limits international travel to meetings or events that are considered critical. Accommodation costs are also regulated by amounts determined through notices by the National Treasury. The municipality or the municipal entity must also utilise all discounts and negotiated rates available to them. In as far as domestic accommodation is concerned, overnight accommodation may only be booked in instances where the return trip exceeds 500 kilometres.

Conferences, meetings and study tours

Neither officials nor political office bearers can attend conferences, meetings and study tours within and outside borders of South Africa at will. An accounting officer must establish policies and procedures to manage applications to attend conferences, meetings and study tours. Therefore, before the officials or political office bearers can attend the above, they would need to first comply with the policies. This helps against municipalities or municipal entities overspending on conferences, meeting and study tours that may not necessarily benefit them.

Credit cards

Under the regulations, no official or political office bearer can be issued with credit cards or debit cards linked to the bank account of a municipality or a municipal entity. This also extends to members of the board of directors of municipal entities. In the event that political office bearers or officials incur expenditure because of municipal activities, such officials and political office bearers must use their own personal credit cards, cash and request (in accordance with the written approved policy and processes) to be reimbursed by the municipality or municipal entity. 

Sponsorships, events and catering

The municipal cost containment regulations proscribe the incurring of catering expenses for meetings which are only attended by employees of the municipality or municipal entity unless prior approval is attained from the accounting officer. Moreover, catering expenses are now only extended to functions or proceedings exceeding a duration of five hours. Spending towards entertainment, alcohol, social events and team building exercises has also been restricted under these new regulations.

Communication

Advertising municipal related events, as far as possible on the municipality or municipal entity’s website instead of advertising in magazines or newspapers is prescribed to save on spending. Electronic media is also the future in respect of newspapers and other related publications for office use. The paper-based publications are to be discontinued on expiry of existing contracts or supply orders, unless they are required in that format for professional purposes and are unavailable in electronic format.

Conclusion

With the municipal cost containment regulations coming into effect in July, if enforced, oversight over local government will most likely improve. The tightening of controls would help cut wasteful and dishonest spending, ensuring that the municipal revenues are used to improve the lives of the ordinary people.

© 2016 Dullah Omar Institute
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