New rules will allow South Africa’s municipalities to spend more without needing tenders

The National Treasury has published a draft amendment to the Municipal Finance Management Act (MFMA) which will give increased spending powers to South African municipalities.

The draft amendments, which are currently out for public comment, provide guidelines around supply chain processes and when the municipalities must issue a tender.

Under the current supply chain regulations, municipalities are limited to non-tendered procurements below a transaction value of R200,000.

The draft regulations propose increasing this to R300,000 for local municipalities and R200,000 for a district municipality. The proposed limit for larger metropolitan municipalities is R750,000.

The draft bill also proposes that a supply chain management policy must provide for the procurement of goods and services by way of:

  • Petty cash purchases, up to a transaction value of R2,000 (VAT included);
  • Written or verbal quotations for procurements of a transaction value over R2,000 up to R10,000 (VAT included).

Municipalities are a mess

The amendment’s come less than a week after parliament’s Portfolio Committee on Cooperative Governance and Traditional Affairs (Cogta) has raised concerns about the general state of municipalities in Gauteng, where water and power bills go unpaid, and wasteful spending is piling up with little oversight.

The committee on Tuesday (13 October) highlighted a host of issues with local councils – from high vacancy rates for senior manager positions and dysfunctional municipal public accounts committees, to high water and electricity losses and investigations and consequence management into unauthorised, irregular, fruitless and wasteful expenditure.

“The general picture of functionality of municipalities in the province is concerning, and impacts directly on the ability of municipalities in providing quality services to the people of the province,” it said.

Regarding the high vacancy rate, the committee noted that of the 11 municipalities, four municipal manager positions are vacant. However, the high vacancy rate of supporting senior manager posts is much worse, it said.

In the City of Johannesburg there is a 42% vacancy rate, Sedibeng has a 50% vacancy rate, Lesedi and West Rand are at 33% vacancy rate, and Merafong is standing at 42%.

“This rate can be attributed to the lack of strategic direction and lack financial prudence in those municipalities. While the committee acknowledges challenges in recruiting adequately skilled personnel for those positions, it believes these challenges can be overcome,” it said.


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New rules will allow South Africa’s municipalities to spend more without needing tenders